Employment-at-Will and Employee Handbooks: Distinguishing Employee Contractual Rights and Company Workplace Policies

Many employers have promulgated employee handbooks addressing such topics as wages, hours, seniority, illness, vacations, discipline, discharge and severance pay. A “handbook” in this sense refers to a booklet, a policy manual, a memorandum that the employer circulates or posts for its employees or, for some public employees, an ordinance or statute that contains the terms of employment.[1] With such a document, the employer often gets the benefit of an orderly, cooperative and loyal work force and the employee characteristically obtains the peace of mind associated with job security and the conviction that he will be treated fairly.[2] For these reasons, employee handbooks can significantly benefit employers and employees.

Where the employer discharges the employee or denies him a job-related benefit, the focus in a dispute often turns on the binding nature of the handbook. Does it represent employee contractual rights or company workplace policies? The answer depends primarily on the wording of the handbook and the surrounding employer-employee relationship, thereby making each case fact-specific. Because the great majority of workers in our state operate on employment-at-will, most of the litigated cases in Tennessee (and elsewhere) on employee handbooks arise with plaintiffs in at-will status.[3] Indeed, many employment-at-will employees work under an oral agreement and, in these circumstances, the handbook could be the major, or even the sole, source of possible contractual terms.

This article will consider the legal status of employee handbooks in regulating employment-at-will in Tennessee. After reciting the basics of employment-at-will, the article will consider employee handbooks and mutual assent, handbook interpretation (including the effect of employer disclaimers), and employer unilateral handbook modifications. The article also will offer practical suggestions and strategies for counsel representing either employers or employees. Interestingly, while there are more than 100 decided cases in Tennessee on this subject, the Tennessee Supreme Court has yet to weigh in on employee handbooks. Accordingly, practitioners may wish to consider the principles discussed in this article when a handbook dispute reaches the high court.

I. Employment-at-Will Basics

An employment relationship is essentially contractual.[4] When an employer hires a person for a general or indefinite term, as compared with a definite or specified period, the transaction is presumed to create an employment at the will of either party.[5] This employment-at-will arrangement is an enforceable unilateral contract regarding those services the employee has actually performed.[6]

As stated numerous times by the Tennessee Supreme Court, absent a violation of a clear public policy, as evidenced by an unambiguous constitutional, statutory, or regulatory provision,[7] either party to an at-will employment relationship may terminate the employment at any time for good cause, bad cause, or no cause without being liable for a legal wrong.[8] Tennessee courts have vigorously enforced this policy to facilitate the free flow of commerce; the Tennessee Supreme Court has commented that “[a]n employer’s ‘ability to make and act upon independent assessments of an employee’s abilities and job performance as well as business needs is essential to the free-enterprise system.”[9] The Tennessee Court of Appeals also has linked this pro-employer policy to its views of handbooks as contracts.[10] Accordingly, the discharged at-will employee — either private or public — generally may not recover for breach of contract against the employer.[11] On similar reasoning, the at-will public employee does not possess a property interest in continued employment and cannot maintain a cause of action for a procedural due process violation incident to his termination.[12]

II. Employee Handbooks and Mutual Assent

An employee handbook, by itself, is not an employment contract.[13] To qualify as a binding contract right, an employee handbook must satisfy the prerequisites for a contract, including the need for mutual assent.[14] The Tennessee Court of Appeals’ 1981 decision in Hamby v. Genesco Inc.[15] was the first case holding that a handbook was part of an employment contract and a limited number of decisions have followed suit.[16]

When the handbook has contractual status, the theory of mutual assent is that the handbook is the communicated offer and the employee’s services will be the acceptance.[17] Thus, as with employment-at-will generally, the parties to the handbook are bound on the theory of a unilateral contract — the employee manifests acceptance to the handbook not by a counter promise, as would be true for a bilateral contract, but by his actions in continuing to work for his employer, which activity also provides the consideration for the offer.[18] Manuals issued after the employment begins can also become part of the employment contract.[19]

Tennessee courts have repeatedly explained the linchpin for contractual assent in this area. The employer’s intent to be bound must be expressed in the form of a guarantee or a binding commitment and must be determined by reference to the specific language of the handbook along with any other relevant material, such as an employment application.[20] Another factor is whether the employee had relied on the handbook as a promise.[21] The more general the handbook language, the less likely it will be that a court will find a contract right.[22] The employee has the burden to show that the employer breached a handbook with contractual status that would overcome the presumption of employment-at-will.[23]

The employee has a difficult burden of proof regarding the binding nature of the employer’s representations. Where Tennessee courts have found the handbook to be sufficiently definitive to express mutual assent, they have employed a “high standard”: the handbook contained the mandatory terms “shall” and “will” with “unequivocal language” demonstrating the employer’s intent to be bound.[24] Thus, in one decision, a Tennessee federal district court found nonbinding as against the employer certain handbook language that the employer “shares[s] a commitment with ... employees to work honestly, ethically and legally.”[25] In another case, the Tennessee Court of Appeals deemed insufficient a provision that “an employee may reasonably expect uninterrupted employment year in and year out. Any employee doing his work in a satisfactory manner and working for the good of the organization has little to fear about job security.”[26] In a third line of decisions, Tennessee state courts have held that references to a progressive, or seniority, system in a handbook do not affect the at-will employment relationship because these terms are simply a set of guidelines or a source of employee information.[27] Furthermore, Tennessee courts are more willing to enforce an employee handbook “[w]hen the provisions affect an employee’s right to receive benefits, as opposed to an employer’s right to terminate its employees.”[28]

A close question exists on whether this “high standard” rule for contractual certainty correctly reflects general Tennessee contract law. On the one hand, it must always be remembered that to ensure the free flow of commerce, the Tennessee Supreme Court with limited exceptions strongly favors the employment-at-will doctrine.[29] Counsel for employers may therefore emphasize the weighty public policies supporting employment-at-will in arguing whether a handbook reflects mutual assent. On the other hand, counsel for employees may argue that in contrast with the “high standard” rule for handbooks, and its emphasis on the provisions “shall” and “will,” the Tennessee Supreme Court has ruled in another context that “[t]he proper construction of a contractual document is not dependent … on any single provision of it.”[30] Also, an employee’s counsel may contend that “the law leans against the destruction of contracts for uncertainty, especially where one of the parties has performed his part of the contract.”[31] Another possible critique available to an employee’s counsel is the “high standard” for mutual assent departs from established concepts that (1) Tennessee contract law does not seek perfect clarity or total certainty but inquires only whether the terms are so unclear that there is no basis to decide whether the agreement has been kept or broken,[32] and (2) “[t]he existence of a contract must be proven by a preponderance of the evidence.”[33] Both sides of the argument have merit. Therefore, this issue of mutual assent awaits resolution by the Tennessee Supreme Court.

III. Handbook Interpretation — General Principles

Courts generally employ the same interpretive rules used to construe handbooks with contractual status as with other contracts. Accordingly, the Tennessee decisions focus on the four corners of the handbook and the other employment-related documents. They also will give the terms their natural and ordinary meaning and will construe these terms in the context of the entire agreement.[34]

The cardinal rule in construing employee handbooks when they express contractual rights is to ascertain the intention of the parties and to give effect to that intention consistent with legal principles.[35]  One such rule of construction equally applicable to handbooks is that courts will not make a new contract for the parties who have spoken for themselves and will not relieve parties of their obligations because these requirements later prove to be burdensome or unwise.[36] A second rule is that where the handbook constitutes a contract, the employee’s failure to read it in the entirety is rarely a defense.[37] A third precept is the title of the document is relevant, but not controlling, on whether the manual is contractual.[38] An authority split exists in the Tennessee Court of Appeals, however, on whether an employment-at-will with contractual status  includes the implied duty of good faith and fair dealing.[39]

The standard rules on the resolution of contract ambiguities apply equally to employee handbooks.[40] Where the handbook is ambiguous, the “rule of practical construction” permits the courts to consider the parties’ conduct and statements regarding the disputed provision as guides in construing and enforcing the contract.[41] However, case law also provides  that if the handbook is plain and unambiguous, its meaning is a question of law and the court’s function is to interpret the document as written according to its plain terms.[42] When the handbook is free from interpretive doubt, summary judgment is common in these cases.[43]

Other doctrines may come into play on handbook interpretation. Thus, for example, even where the parties work under employment-at-will, and the handbook preserves the employer’s free right of discharge, the handbook can still support an express contract regarding other terms of employment, such as wages and hours.[44] Alternatively, an employer may make the handbook partially binding, most commonly regarding an arbitration agreement with the employee.[45]

Considering that courts interpreting handbooks use the standard principles of contract construction, how successful have employees been in arguing their position?  Consistent with the strong policies supporting employment-at-will, nearly all decisions have rejected the employee’s attempted reliance on the handbook as a contractual promise. The Tennessee Court of Appeals has observed, “Our research has revealed few instances in which appellate courts of this state have concluded that the language of an employee handbook was binding on an employer.”[46]

Interestingly, however, where an employer relies on the handbook in bringing the action to discipline the employee or to deny  employee benefits, the courts typically bypass any contractual analysis. In this setting, courts routinely enforce handbook provisions against the employee without first assessing whether the handbook actually created contractual rights in the employer.[47] Thus, for example, where the employer has relied on the handbook, Tennessee courts generally have omitted any contract analysis in cases dealing with such issues as employee termination,[48] overtime pay,[49] leave of absence[50] and absence with pay.[51] 

Based on these last-mentioned decisions, it can be argued that the courts in bypassing this analytical step are being too liberal in favor of employers in handbook cases. Deciding whether the handbook also binds the employer is crucial because as one decision properly observes, “If the employer is not bound by the handbook, the employee is not either.”[52] Consistent with the rule that courts favor neither party in contract interpretation,[53] counsel for employees should argue that an equal need exists for a standard contractual analysis where the employer relies upon the handbook against the employee. 

IV. Handbook Interpretation — Effect of Disclaimers

Tennessee courts have held repeatedly that where an employee handbook specifically disclaims that it is not a contract or reserves to the employer the unilateral right to amend the handbook’s provisions, then the handbook, as a matter of law, is not part of the employment contract.[54] If the handbook contains language that sufficiently preserves the employer’s unilateral right to alter or modify the handbook, such a disclaimer will negate mutual assent and support the presumption of employment-at-will.[55] Counsel for employers when advising their clients should always ensure that any disclaimer is complete, consistent and unambiguous.

Numerous decisions have considered whether the disclaimer adequately preserved the employer’s unilateral right of modification. Thus in one case, the handbook provided that its policies were “subject to change by management, unilaterally and without notice.”[56] In a second decision, the handbook said it “[w]as not an employment contract and that the company reserved the unilateral right to change or revise policies and procedures whenever such action is warranted.”[57] In a third case, the handbook reserved to the employer the “right to change and abolish policies, procedures, rules and regulations.”[58] Courts appropriately observe that language to this effect clearly indicates “that the handbook simply constitute[s] a set of guidelines or a source.”[59]

Employee disclaimers take many forms, however, and the terms might not reflect careful drafting. Where the handbook contains an unclear or ambiguous disclaimer, the courts commonly construe the document in the light most favorable to the employee. The reason goes back to the nature of handbooks in general. The Tennessee Court of Appeals has recognized that standard form employee handbooks are adhesive in nature because the person wishing to obtain or retain employment is typically faced with a “take it or leave it” choice on whether to accept the handbook.[60] Thus, courts take the nuanced view and consider the effect of the disclaimer in full context of the handbook with the surrounding circumstances and construe any ambiguities against the employer as drafter.[61]

The leading case on this point is Reed v. Alamo Rent–A–Car Inc.[62] In Reed, the Tennessee Court of Appeals ruled that even though the handbook specifically reserved to the employer the right to revise the handbook’s provisions periodically, it still bound the employer. The reason was the ambiguity created by other statements that the handbook was the parties’ “entire agreement of employment” and employer made the specific promise to “abide by all its terms and conditions.” The Reed approach is sound because it follows the general rule that a contract containing ambiguities will be construed most strongly or strictly against the party that drafted it and liberally in favor of the other party.[63]

Our courts are also more lenient with employees when the disclaimer is inconspicuous. These decisions follow the nuanced approach that the presence of exculpatory language alone is not conclusive on the question of contractual intent. Instead, as discussed below, courts will read disclaimers in the context of the handbook taken as a whole viewed from the perspective of a person of reasonable intelligence.

A Tennessee federal district court case followed this nuanced approach in Davis v. Conn. Gen. Life Ins. Co.[64] In Davis, the employer’s disclaimer was on the final page of a fifty-two page standard form handbook. The Davis court found nothing to distinguish these two paragraphs from the rest of the text or to highlight these paragraphs as being important. The disclaimer paragraphs were not preceded by a heading. The court also observed that these paragraphs had a smaller font that made them inconspicuous. The employer did not require the employee’s specific acceptance of the disclaimer. Therefore, the Davis court found the disclaimer ineffective under Tennessee’s “circle of assent” doctrine of contract interpretation, which holds that some language within standard form contracts will not be binding if that language is hidden, not pointed out, and that a person of ordinary intelligence and experience would not expect to find such a provision within the contract.[65]

By contrast, even where the disclaimer is ineffective because it is ambiguous or inconspicuous, the court must still decide whether the handbook binds the employer. Thus, a federal district court in one case found that even though the disclaimer was deficient, the handbook language still was not specific enough to establish a definite term of employment. Accordingly, the court allowed the employer to discharge the employee without cause in accordance with the presumption of employment-at-will.[66]

VI. Employer Handbook Modifications

Where the handbook constitutes a contract, what constraints apply to an employer’s right to revise the handbook’s terms? For example, assume that a handbook contains a specific and binding employer guarantee that no layoffs will occur absent compelling economic conditions but the employer without employee assent wishes to change this policy to the lesser standard that the employer may impose layoffs in the best interests of the company.

Basic principles of contract law are relevant on this topic. In Tennessee, as the United States Court of Appeals for the Sixth Circuit has observed, the parties to an existing contract can modify its terms at any time.[67] However, as the Sixth Circuit also stated, an existing contract cannot be unilaterally modified. Rather, a valid modification requires “the same mutuality of assent and meeting of the minds as required to make a contract” in the first instance.[68] Therefore, because the parties must exchange new consideration to effect a valid modification of an existing contract, the argument can be made that, absent compliance with these rules, the employer may not unilaterally revise a handbook term having contractual status.

Few cases touch upon this issue in Tennessee. Several federal district courts observe that the standard rules of contractual consideration will control for handbook modifications, for example, the rule that a promise by an employer or an employee under a subsisting contract to do more or to take less than that contract requires is invalid unless the other party provides new consideration.[69] In another federal district court case where the employer under the handbook retained unfettered discretion to decide whether to alter or to amend the handbook, even assuming the employer believed the change is for the employee’s benefit, the court struck down this provision as an illusory promise, lacking in mutuality of obligation.[70] These decisions accord with general Tennessee contract law because they require a handbook revision to satisfy all the standard elements for contract modifications, including mutual consent and new consideration.

Other jurisdictions have grappled with this issue in various ways. Because the employer typically creates the handbook unilaterally, most courts have concluded that an employer may similarly unilaterally terminate or modify a handbook policy after a reasonable time period where the employer has notified the employee and where the modification does not interfere with vested employee benefits.[71] These jurisdictions also reason that “[e]mployers must have a mechanism which allows them to alter the employee handbook to meet the changing needs of both business and employees.”[72]

Based on the few cases in Tennessee, referenced above, our courts generally appear to be aligned with the minority of jurisdictions holding that an employer cannot terminate or modify a handbook contractual right without the employees’ express knowledge and consent.[73] These jurisdictions also reason that any termination or modification of a unilateral employment contract requires additional consideration and acceptance by the affected employees, because the employees’ unfair choices in light of a pending termination are to resign or to continue working.[74]

The propriety of unilateral handbook modifications is another close question in this area of contract law. Accordingly, counsel for both employers and employees should become familiar with the competing out-of-state lines of authority on this category of handbook modifications because the Tennessee decisions have not definitively addressed this question.[75]

Conclusion

Although there are some legal issues open to legitimate dispute, the Tennessee employee handbook cases generally have marked clear boundaries between employee contract rights and employer workplace guidelines. Chief among these legal principles is the requirement for a specific employer guarantee to constitute a binding commitment and the effect of a clear, complete and unambiguous employer disclaimer. These doctrines support the important public policies underlying employment-at-will and the legitimate business interests of employers in our state. At the same time, even for employees-at-will, when the handbook contains a binding offer, and the other contractual prerequisites are present, Tennessee courts have not hesitated to enforce handbook rights in favor of the employee as with any other contractual promise.

Notes

  1. See Shelby v. Delta Air Lines Inc., 842 F. Supp. 999, 1006 (M.D. Tenn. 1993), aff’d, 19 F.3d 1434 (6th Cir. 1994); Harris v. Maury County, 2010 WL 960331 (Tenn. Ct. App 2010).
  2. Toussaint v. Blue Cross & Blue Shield, 292 N.W.2d 880, 892 (Mich. 1980).
  3. See generally George L. Blum, Annot., “Effectiveness of employer’s disclaimer of representations in personnel manual or employee handbook altering at-will employment relationship,” 17 A.L.R. 5th 1 (1994); Thomas G. Fischer, Annot., “Sufficiency of notice of modification in terms of compensation of at-will employee who continues performance to bind employee,” 69 A.L.R. 4th 1145 (1989); Theresa L. Kruk, Annot., “Right to discharge allegedly at-will employee as affected by employer’s promulgation of employment policies as to discharge,” 33 A.L.R. 4th 120 (1984 & Supp. 2012). For the practical aspects of employee handbooks, see Kurt H. Decker, “Handbooks and Employment Policies as Express or Implied Guarantees of Employment-Employer Beware!,” 5 J.L. & Com. 207 (1985); Allan A. Ryan Jr., “Proving the Contractually Binding Effect of a Personnel Manual Provision as to Discharge Only for ‘Good Cause,’” 32 Am. Jur. Proof of Facts 3d 229 (1995).
  4. Hamby v. Genesco Inc., 627 S.W.2d 373, 375 (Tenn. Ct. App. 1981).
  5. Brown v. City of Niota, 214 F.3d 718, 721 (6th Cir. 2000); Bonastia v. Borman Bros. Inc., 914 F. Supp. 1533, 1537 (W.D. Tenn. 1995); Bennett v. Steiner–Liff Iron and Metal Co., 826 S.W.2d 119, 121 (Tenn. 1992).
  6. Wagner v. Sperry Univac, 458 F. Supp. 505, 520 (E.D. Pa. 1978), aff’d mem., 624 F.2d 1092 (3d Cir. 1980). A “unilateral contract” is a contract that consists of a promise for an act; the acceptance consists of the performance of the act requested, rather than the promise to perform it. Black’s Law Dictionary 325 (6th ed. 1990).
  7. See Crews v. Buckman Labs Int’l Inc., 78 S.W.3d 852, 858 (Tenn. 2002); Stein v. Davidson Hotel Co., 945 S.W.2d 714, 716-17 (Tenn.1997)). See also Clanton v. Cain–Sloan Co., 677 S.W.2d 441 (Tenn.1984) (watershed decision allowing suit for retaliatory discharge where cause of discharge was employee’s exercise of rights under the workers’ compensation law).
  8. Shelby, 842 F. Supp. at 1006; Crews, 78 S.W.3d at 857.
  9. Crews, 78 S.W.3d at 858; see also Payne v. Western & Atlantic R.R. Co., 81 Tenn. 507 (1884) overruled on other grounds, Hutton v. Watters, 179 S.W. 134, 138 (Tenn. 1915). For an economic and ethical critique of employment-at-will, see Donald C. Carroll, “At-Will Employment: The Arc of Justice Bends Towards the Doctrine’s Rejection,” 46 U.S.F. L. Rev. 655 (2012). Compare Note, “Limiting the Right to Terminate At Will — Have the Courts Forgotten the Employer?” 35 Vand. L. Rev. 201 (1982). ). For valuable Tennessee commentary, see Chad E. Wallace, “Tennessee’s Employment At-Will Doctrine and The Need for Change,” 39 Tenn. B.J. 18 (Apr. 2003).
  10. See Rose v. Tipton County Public Works Dept. 953 S.W.2d 690, 694 (Tenn. Ct. App. 1997); Whittaker v. Care-More Inc., 621 S.W.2d 395, 396 (Tenn. Ct. App. 1981).
  11. See Gregory v. Hunt, 24 F.3d 781, 785 (6th Cir. 1994); Forrester v. Stockstill, 869 S.W.2d 328, 330 (Tenn. 1994).
  12. Brown, 214 F.3d at 722.
  13. Fontaine v. Weekly Homes L.P., 2003 WL 21946721 at *1 (Tenn. Ct. App. 2003).
  14. See Norberry v. Life Ins. Co. of North America, 2009 WL 259371 at *11 (M.D. Tenn. 2009); Bowman v. PHP Companies Inc., 2005 WL 2993902 at *5 (E.D. Tenn. 2005); Adcock v. Firestone Tire & Rubber Co., 616 F. Supp. 409, 418 (W.D. Tenn. 1985), vacated in part on other grounds, 822 F.2d 623 (6th Cir. 1987).
  15. 627 S.W.2d 373 (Tenn. Ct. App. 1981).
  16. See, e.g., England v. Andrews, 2005 WL 2209542 (M.D. Tenn. 2005); Hooks v. Gibson, 842 S.W.2d 625 (Tenn. Ct. App. 1992); Williams v. Maremont Corp., 776 S.W.2d 78 (Tenn. Ct. App. 1988).
  17. Davis v. Connecticut General Life Ins. Co., 743 F. Supp. 1273, 1278 (M.D. Tenn. 1990); Adcock, 616 F. Supp. at 418.
  18. See Seawright v. American General Financial Services Inc., 507 F.3d 967, 972 (6th Cir. 2007); Fisher v. GE Medical Systems, 276 F. Supp. 2d 891, 895 (M.D. Tenn. 2003); see also Adcock, 616 F. Supp. at 418. For extensive discussion of this unilateral contract theory, which is not well-developed in the Tennessee handbook decisions, see Hoffman-La Roche Inc. v. Campbell, 512 So. 2d 725 (Ala. 1987); Jason A. Walters, Comment, “The Brooklyn Bridge Is Falling Down: Unilateral Contract Modification and the Requirement of the Offeree’s Assent,” 32 Cumb. L. Rev. 375 (2001).
  19. Hooks, 842 S.W.2d at 627.
  20. Rose, 953 S.W.2d at 692. See also Claiborne v. Frito–Lay Inc., 718 F. Supp. 1319, 1321 (E.D. Tenn. 1989).
  21. Rose, 953 S.W.2d at 694.
  22. See Lieber v. Union Carbide Corp., Nuclear Div., 577 F. Supp. 562 (E.D. Tenn. 1983).
  23. See Claiborne, 718 F. Supp. at 1321. Some states rely on promissory estoppel doctrine as a theory of enforcement against the employer, even with a handbook disclaimer, e.g., McDonald v. Mobil Coal Producing Inc., 789 P.2d 866 (Wyo. 1990), on reh’g, 820 P.2d 986 (Wyo. 1991), but this result is unlikely to succeed in Tennessee, which narrowly construes promissory estoppel to the extent that courts may prevent the perpetration of a fraud. See Engenius Entertainment Inc. v. Herenton, 971 S.W.2d 12, 19-20 (Tenn. Ct. App. 1997).
  24. Brown, 214 F.3d at 721 (citing Tennessee decisions).
  25. Dade Intern. Inc. v. Iverson, 9 F. Supp. 2d 858, 861 (M.D. Tenn.1998).
  26. Whittaker, 621 S.W.2d at 397.
  27. Sudberry v. Royal & Sun Alliance, 344 S.W.3d 904, 914 (Tenn. Ct. App. 2008).
  28. See Rose, 953 S.W.2d at 694 (citing cases).
  29. See supra Section I.
  30. Aetna Cas. & Sur. Co. v. Woods, 565 S.W.2d 861, 864 (Tenn.1978). See also Cocke County Bd. of Highway Com'rs v. Newport Utilities Bd., 690 S.W.2d 231, 237 (Tenn. 1985) (“universal rule [is] that a contract must be viewed from beginning to end and all its terms must pass in review, for one clause may modify, limit or illuminate another”).
  31. Book-Mart of Florida Inc. v. Nat’l Book Warehouse Inc., 917 S.W.2d 691, 694 (Tenn. Ct. App. 1995).
  32. See People’s Bank of Elk Valley v. ConAgra Poultry Co., 832 S.W.2d 550, 553-54 (Tenn. Ct. App. 1991); see also Jamestowne on Signal Inc. v. First Federal Sav. & Loan, 807 S.W2d 559, 564 (Tenn. Ct. App. 1990)(contract must be “sufficiently definite” and “reasonably certain”).  
  33. See Next Generation Inc. v. Wal-Mart Inc., 49 S.W.3d 860, 864 (Tenn. Ct. App. 2000).
  34. Vargo v. Lincoln Brass Works Inc., 115 S.W.3d 487, 491-93 (Tenn. Ct. App. 2003).
  35. Gee v. Federal Exp. Corp., 710 F.2d 1181, 1186 (6th Cir. 1983).
  36. Vargo, 115 S.W.3d at 491.
  37. Allen v. Tenet Healthcare Corp., 370 F. Supp. 2d 682 (M.D. Tenn. 2005).
  38. Reid v. Express Logistics Inc., 2001 WL 1516980 (Tenn. Ct. App. 2001) (document had the noncontractual title, “Sales Overview”).
  39. See Goot v. Metropolitan Government of Nashville and Davidson County, 2005 WL 3031638 (Tenn. Ct. App. 2005)(analyzing decisions). Compare Kimberly-Clark Corp., 2012 WL 4863158 at *5 (E.D. Tenn. 2012)(no independent cause of action for breach of implied duty of good faith and fair dealing).
  40. See Bonastia, 914 F. Supp. at 1536-38; see also Cummings Inc. v. Dorgan, 320 S.W.3d 316, 332-33 (Tenn. Ct. App. 2009) (good general summary).
  41. Vargo, 115 S.W.3d at 494.
  42. Bowman, 2005 WL 2993902; Vargo, 115 S.W.3d at 490. But see Rose, 953 S.W.2d at 692 (handbook must be read with any other relevant material, such as an employment application); Abbott v. Kellwood Co., 1985 WL 661896 at *1 (Tenn. Ct. App. 1985) “(whether any terms are part of a contract is a question of fact”).
  43. E.g., Bringle v. Methodist Hosp., 701 S.W.2d 622 (Tenn. Ct. App.1985); Graves v. Anchor Wire Corp. of Tenn., 692 S.W.2d 420 (Tenn. Ct. App.1985).
  44. Hooks, 842 S.W.2d at 628.
  45. Allen v. Tenet Healthcare Corp., 370 F. Supp. 2d 682, 685 (M.D. Tenn. 2005); Johnson v. Long John Silver’s Restaurants Inc., 320 F. Supp. 2d 656, 667 (M.D. Tenn. 2004).
  46. Flowers v. Memphis Housing Authority, 1997 WL 327628 at *3 (Tenn. Ct. App. 1997) (analyzing decisions).
  47. For a rare exception, see Gaines v. Response Graphics Inc., 1992 WL 319441 (Tenn. Ct. App. 1992)(court refused to enforce noncontractual employee handbook allowing forfeiture of a terminated employee’s unused vacation days).
  48. Auton v. Interstate Management and Inv. Corp., 2011 WL 353671 (E.D. Tenn. 2011); Jackson v. Hayes, 1993 WL 248046 (Tenn. Ct. App. 1993).
  49. Woods v. AHF/Central States Inc., 2011 WL 336382 (M.D. Tenn. 2011).
  50. Hodge v. Henry County Medical Center, 341 F. Supp. 2d 968 (W.D. Tenn. 2003).
  51. Wooley v. Madison County, Tennessee, 209 F. Supp. 2d 836 (W.D. Tenn. 2002).
  52. Gaines, 1992 WL 319441. See also Savage v. Spur Distrib. Co. Inc., 228 S.W.2d 122, 124 (Tenn. Ct. App. 1949) (in the employment context, “[i]t is a general principle that unless both parties are bound neither is bound”).   
  53. See Vargo, 115 S.W.3d at 492 (stating general rule).    
  54. Id. at 491; Adcox v. SCT Products, 1997 WL 638275 at *3 (Tenn. Ct. App. 1997). See generally Stephen Befort, “Employee Handbooks and the Legal Effect of Disclaimers,” 13 Indus. Rel. L.J. 326 (1991/1992).
  55. Norberry, 2009 WL 259371 at *11; Adcox, 1997 WL 638275 at **2-3.
  56. Gregory, 24 F.3d at 786, citing Pratt v. Brown Machine Co., 855 F.2d 1225, 1233 (6th Cir. 1988).
  57. Adcox, 1997 WL 638275, at *3.
  58. Bringle, 701 S.W.2d at 624.
  59. Claiborne, 718 F. Supp. at 1321.
  60. Cf. Vargo, 115 S.W.3d at 492. Counsel for employers should consider arguing this statement inappropriately omits the requirement that there must be a standardized form contract  offered to “[c]onsumers of goods and services.”  Buraczynski v. Eyring, 919 S.W.2d 314, 320 (Tenn. 1996) (defining adhesion contracts). Here, the employee is not a consumer but is a provider of services.
  61. Vargo, 115 S.W.3d at 492 (stating that adhesion contracts are construed against the drafter; employee handbook case).
  62. 4 S.W.3d 677, 688 (Tenn. Ct. App. 1999).
  63. See Leonard v. Clear Channel Communications, I., 1997 WL 581439, at *4 (W.D. Tenn. 1997); see also Hanover Ins. Co. v. Haney, 425 S.W.2d 590, 592 (Tenn.1968). But see Deiters v. Home Depot Inc., 1992 WL 113447 (Tenn. Ct. App. 1992)(enforcing a concededly ambiguous manual because the document did not say that the company was abandoning its employment-at-will policy).
  64. 743 F. Supp. at 1279. Compare AmeriGas Propane Inc. v. Crook, 844 F. Supp. 379, 387 (M.D. Tenn. 1993) (enforcing disclaimer using contextual approach).
  65. See Board of Directors v. Southwestern Petro., 757 S.W.2d 669 (Tenn. Ct. App.1988); Parton v. Pirtle Oldsmobile–Cadillac–Isuzu Inc., 730 S.W.2d 634 (Tenn. Ct. App. 1987) (stating doctrine) (cited in Davis, 743 F. Supp. at 1280). See generally Robert M. Lloyd, “The ‘Circle of Assent’ Doctrine: An Important Innovation in Contract Law,” 7 Transactions: Tenn. J. Bus. L. 237 (2006).
  66. Davis, 743 F. Supp. at 1280-81.
  67. Baptist Physician Hosp. Organization Inc. v. Humana Military Healthcare Services, 481 F.3d 337, 350 (6th Cir. 2007).
  68. Id.
  69. See Bonastia, 914 F. Supp. at 1539; Adcock, 616 F. Supp. at 420.
  70. Pruett v. Travelers Ins. Co., 2000 WL 33249826 at *2 (E.D. Tenn. 2000)(employer’s choice of arbitral forum).
  71. See Asmus v. Pacific Bell, 999 P.2d 71, 76-78 (Cal. 2000)(citing cases).
  72. Id.
  73. Id. at 77-78 (analyzing minority rule).
  74. Id.
  75. See generally Brian T. Kohn, Note, “Contracts of Convenience: Preventing Employers from Unilaterally Modifying Promises Made In Employee Handbooks,”
    24 Cardozo L. Rev. 799 (2003).

Steven Feldman STEVEN W. FELDMAN is an attorney advisor with the U.S. Army Engineering and Support Center in Huntsville, Ala. He received his law degree from Vanderbilt University and is a member of the Tennessee Bar. He is the author of Vols. 21 & 22, Tennessee Practice Series: Contract Law and Practice (2006 & Supp. 2012) among other publications on Tennessee topics.