Does Your Employee Handbook or Policy Manual Create a Right to Continued Employment?

In a recent decision, the Seventh Circuit Court of Appeals found that a right to continued employment following completion of a probationary period cannot be inferred from silence in an employee handbook or policy statement. In Cromwell v. City of Momence, the court held that a right to continued employment can only be found where handbook or policy provisions meet the traditional required elements for contract formation, including “mutually explicit understandings of continued employment.” When those elements are present, a court may then find that a handbook or policy creates an enforceable promise of continued employment sufficient to overcome the presumption of at-will employment.

Factual Background of Court’s Decision

Cromwell, a lieutenant in the City of Momence Police Department, filed suit after being discharged for an incident of alcohol-related misconduct, claiming that the City violated his constitutional right to due process when it terminated him. Because a constitutional right to due process arises only when an employee has a protected property interest, the Court first examined whether Cromwell had a property interest in continued employment with the Police Department.

Cromwell claimed he had a property interest in continued employment based upon certain provisions in the Police Department’s Rules and Regulations. Both Cromwell and the Police Department analogized the Department’s Rules and Regulations to employee handbooks or policy statements, which most employers maintain. The provisions at issue were the Department’s probationary period provision and employee discipline provision. The probationary period provision stated that probationary officers could be “fired for any reason” during the probationary period. The employee discipline provision applied to those who completed the probationary period and stated that any officer who violated the Department’s Rules was subject to discipline, which could be instituted by the chief of police or the police committee. The employee discipline provision also set forth procedures for the police committee should the committee institute discipline proceedings and determine that an officer’s rule violation warranted discharge.

Cromwell compared and contrasted the above two provisions, noting that the probationary period provision allowed the Department to terminate officers “for any reason,” but that this language was missing from the disciplinary provision for non-probationary officers. Cromwell asserted that the absence of this language from the disciplinary provision implied all non-probationary officers had tenure with the Department because they could not be terminated “for any reason.”

The Court’s Rejection of Cromwell’s Argument

The Court found that while promises made in employee handbooks or policy statements can create promises of continued employment, they only do so when all traditional requirements for contract formation are present, including mutually explicit understandings of continued employment. An example of such an understanding is a “for cause” termination provision. The Court held that nothing in the Police Department’s Rules created a clear promise of continued employment. Specifically, the Court held that the “mere presence of a probationary period does not by implication create an enforceable property right to continued employment for non-probationary employees.” Accordingly, the mere absence of language reserving the right to terminate a non-probationary officer “for any reason” was insufficient to give Cromwell a property interest in continued employment as a police officer.

Significance of Court’s Decision

This decision affirms that the existence of a probationary period does not automatically create a right to continued employment for those who complete this period. The court did note, however, that probationary language coupled with other language in the handbook may create an expectation of continued employment. For example, provisions stating that employees who complete the probationary period achieve “permanent employee status” or are subject to termination for “just cause” are sufficient to alter the employee’s at-will status.

While this court decision is helpful to employers, Robbins Schwartz recommends that employee handbooks include disclaimers negating any perceived contractual or other right to continued employment, and preserving the at-will status of the affected employees. If you need assistance with or are uncertain about the provisions in your handbook or policies, please contact your counsel for guidance.

Amanda T. Collman, an associate in the firm’s Chicago office, prepared this Law Alert.