New York Law Review

Tag: Employee Handbook

  • Lobosco v. New York Telephone/NYNEX, 96 N.Y.2d 313 (2001): Employee Handbook Disclaimers and At-Will Employment

    96 N.Y.2d 313 (2001)

    An express disclaimer in an employee handbook, stating that the handbook does not create contractual rights and that employment is at-will, is enforceable and prevents an employee from claiming breach of contract based on handbook provisions.

    Summary

    Anthony Lobosco sued New York Telephone/NYNEX for breach of contract, alleging he was fired for refusing to testify untruthfully and for reporting a fellow employee’s misconduct. His claim was based on a provision in NYNEX’s employee manual (Code of Business Conduct) assuring protection against reprisal for reporting violations. However, the manual also contained a disclaimer stating it was not a contract and that employment was at-will. The New York Court of Appeals held that the disclaimer was enforceable, preventing Lobosco from claiming a contractual right to continued employment based on the manual’s no-reprisal provision, thus reaffirming at-will employment principles.

    Facts

    Anthony Lobosco was employed by NYNEX for 27 years. He became a party-witness for NYNEX in a litigation. Lobosco alleged that NYNEX counsel instructed him to limit his testimony and pressured him to testify untruthfully. He also claimed he reported a fellow employee’s concealment of documents. Subsequently, NYNEX fired Lobosco, ostensibly for having unreported communications with the adversaries’ principals. NYNEX distributed a “Code of Business Conduct” to employees, which included a section assuring protection against reprisal for reporting violations. The Code also included a disclaimer stating it was not a contract of employment and could be modified at any time without notice.

    Procedural History

    The Supreme Court initially dismissed all of Lobosco’s claims except for the breach of contract claim, holding that the no-reprisal provision superseded the general disclaimer. The Appellate Division reversed, dismissing the entire complaint, finding that Lobosco failed to plead or assert reliance on the manual. The Court of Appeals affirmed the Appellate Division’s decision, but on different reasoning, focusing on the enforceability of the disclaimer.

    Issue(s)

    Whether an express disclaimer in an employee handbook negates any contractual obligations that might otherwise arise from the handbook’s provisions, thereby preserving the at-will employment relationship.

    Holding

    Yes, because the explicit disclaimer of a contractual relationship contained in the employee manual clearly preserves NYNEX’s right to maintain an at-will employment relationship with its employees.

    Court’s Reasoning

    The Court of Appeals relied on the principle that employment for an indefinite period is presumed to be at-will, terminable by either party at any time for any reason. While New York recognizes an exception for breach of contract when an employer provides an express written policy limiting discharge rights and the employee relies on that policy (Weiner v McGraw-Hill, Inc.), this exception does not apply when a clear disclaimer exists. The court emphasized that routinely issued employee manuals should not lightly be converted into binding employment agreements, especially when conspicuous disclaiming language is present. The court stated: “An employee seeking to rely on a provision arguably creating a promise must also be held to reliance on the disclaimer.” The Court found that the disclaimer prevented the creation of a contract, negating any protection from termination Lobosco may have inferred from the manual’s no-reprisal provision. The Court also noted that the Code itself contained a procedure wherein the at-will employment relationship can be modified – and that is by written agreement signed by both parties. The Court specifically stated, “To the extent that Waldman v NYNEX Corp. suggests otherwise, it should not be followed.”

  • Maas v. Cornell University, 94 N.Y.2d 87 (1999): Limits on Breach of Contract Claims Against Universities

    Maas v. Cornell University, 94 N.Y.2d 87 (1999)

    An employee cannot bring a breach of contract action against a university for failing to follow its internal procedures for resolving disputes, absent evidence of an express agreement or detrimental reliance.

    Summary

    Professor Maas sued Cornell University, alleging breach of contract for failing to adhere to its internal procedures when handling sexual harassment claims against him. The New York Court of Appeals held that Maas could not maintain a plenary breach of contract action. The Court reasoned that universities are best suited to handle internal matters and that the University’s adherence to its own procedures does not create a contractual relationship that is subject to judicial review in a plenary action. The proper avenue for judicial review is a CPLR Article 78 proceeding, which Maas initially opposed.

    Facts

    James Maas, a tenured psychology professor at Cornell University, was accused of sexual harassment by four students in 1994. The University processed the complaints under its internal procedures. Following an investigation and hearings, the Professional Ethics Committee found that Maas had engaged in unprofessional conduct and sexual harassment. The Dean of the College upheld the Committee’s determination, and an appeal to the Provost was rejected. Maas remained a tenured faculty member.

    Procedural History

    Maas filed suit against Cornell, alleging multiple causes of action, including breach of contract and negligence. The Supreme Court dismissed most of the claims, refusing to convert the action into a CPLR Article 78 proceeding. The Appellate Division affirmed. After remittal, the Supreme Court granted summary judgment to Cornell on the remaining negligence claims. The Appellate Division affirmed again, rejecting Maas’s request for CPLR Article 78 conversion because he had previously opposed it. The New York Court of Appeals granted Maas leave to appeal.

    Issue(s)

    1. Whether a university’s internal regulations and procedures create a contractual relationship with its employees, such that a violation of those procedures can form the basis for a breach of contract action.

    2. Whether the lower courts erred in refusing to convert Maas’s plenary action into a CPLR Article 78 proceeding.

    Holding

    1. No, because administrative decisions of educational institutions involve specialized professional judgment, and these institutions are generally better suited to make final decisions concerning internal matters.

    2. No, because Maas initially opposed the conversion to a CPLR Article 78 proceeding and cannot now seek such relief after his plenary action was dismissed.

    Court’s Reasoning

    The Court emphasized that universities are best suited to resolve internal disputes, and courts should exercise restraint in applying traditional legal rules to academic matters. The Court stated, “In these so-called ‘university’ cases, CPLR article 78 proceedings are the appropriate vehicle because they ensure that the over-all integrity of the educational institution is maintained and, therefore, protect more than just the individual’s right to employment.”

    The Court found that Maas’s breach of contract claim failed because he did not demonstrate that Cornell intended its internal procedures to become part of his employment contract. The Court distinguished the case from wrongful termination disputes, where detrimental reliance on an employer’s written policies can create contractual obligations. The Court reasoned that “Cornell cannot be held to have contractually bound itself to follow these internal rules when it hired Maas.”

    The Court also cited Restatement (Second) of Contracts § 4, noting that an implied-in-fact contract requires mutual agreement and an intent to promise, which were not present in this case. The Court noted that “the concept of handbooks as part of a contract with commitments and expectations on both sides’ is not universally accepted”.

    The Court distinguished Tedeschi v. Wagner College, stating that while universities must substantially observe their procedures for suspension or expulsion, the legal theory underlying that rule is not well-defined and does not necessarily create a contract. The Court concluded that Maas failed to plead a cognizable breach of contract action and affirmed the lower courts’ decisions.

  • Sabetay v. Sterling Drug, Inc., 69 N.Y.2d 329 (1987): Enforceability of Policy Manuals in At-Will Employment

    69 N.Y.2d 329 (1987)

    Under New York law, an employee handbook or corporate policy does not create an enforceable contract limiting an employer’s right to terminate an at-will employee unless there is an express agreement to that effect, demonstrating explicit limitations on the employer’s right of discharge.

    Summary

    Sabetay, an at-will employee, alleged he was wrongfully discharged for refusing to participate in illegal activities and reporting them. He argued that Sterling’s employee manual and corporate policies created an implied contract guaranteeing job security. The court held that absent an express agreement limiting the employer’s right to terminate at-will employment, corporate policy manuals do not create enforceable contractual obligations. The decision reinforces the importance of clear, explicit language when attempting to create contractual limitations on at-will employment in New York.

    Facts

    Alexander Sabetay was a director of financial projects at Sterling International Group, a division of Sterling Drug, Inc., from June 1972 to December 1984. He managed the dissolution of Sterling’s Greek manufacturing facility. After the liquidation was completed, Sabetay was recalled to New York in February 1984 and terminated in July 1984 because no suitable position could be found within Sterling or its subsidiaries. Sabetay claimed his discharge stemmed from his refusal to engage in tax avoidance schemes and the maintenance of slush funds related to the Greek facility liquidation, and because he reported these activities internally.

    Procedural History

    Sabetay filed a complaint asserting four contract and three tort causes of action based on wrongful discharge. Sterling moved to dismiss the complaint. The Supreme Court dismissed the tort actions but upheld the contract causes of action. The Appellate Division affirmed the dismissal of the tort claims and also dismissed the contract claims. Sabetay appealed to the Court of Appeals, challenging only the dismissal of the contract causes of action.

    Issue(s)

    1. Whether a statement in a corporate personnel policy manual, which enumerates grounds for termination, creates an implied promise that those are the only grounds for termination, and whether a termination without cause amounts to a breach of that implied agreement.
    2. Whether various corporate accounting policies, requiring employees to refrain from and report illegal or unethical activities, constitute an employment agreement precluding termination for refusing to participate in allegedly improper activities.

    Holding

    1. No, because New York law presumes at-will employment, terminable at any time by either party, absent an express agreement establishing a fixed duration or limiting the employer’s right to discharge.
    2. No, because these policies, coupled with a statement on the employment application requiring compliance with company rules, do not create an express agreement not to dismiss an employee for acting in accordance with those policies; rather, they suggest standards for employee performance which, without more, are not actionable.

    Court’s Reasoning

    The Court of Appeals reaffirmed New York’s adherence to the at-will employment doctrine, allowing employers to terminate employees for any reason or no reason, unless expressly limited by agreement. The court distinguished the case from Weiner v. McGraw-Hill, Inc., where an express agreement was found in the employer’s handbook and employment application, coupled with assurances made to the employee during hiring. The court emphasized that Sabetay failed to demonstrate an express limitation on Sterling’s right to terminate his employment. The court cited Murphy v. American Home Products Corp. to reject the notion of an implied covenant of good faith in employment contracts, stressing that such an implied obligation would be inconsistent with the employer’s unrestricted right to terminate at will. The court stated that the language in Sterling’s personnel handbook and Accounting Code did not amount to an express agreement limiting Sterling’s right to discharge at will. The court underscored that significant alterations to employment relationships are best left to the legislature, as stability and predictability in contractual affairs is a highly desirable jurisprudential value.

  • Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (1982): Enforceability of “Just Cause” Termination Policies in Employment Handbooks

    Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (1982)

    An employer’s promise of job security in a personnel handbook, coupled with an employee’s reliance on that promise by leaving a prior job and rejecting other offers, can create an enforceable contract requiring just cause for termination, even in the absence of a fixed employment term.

    Summary

    Walton Weiner left his previous employment at Prentice-Hall to work for McGraw-Hill after being assured that McGraw-Hill’s policy was to terminate employees only for “just cause,” as stated in its personnel handbook. Weiner signed an application referencing the handbook. He alleged he relied on this assurance, forfeiting benefits and a raise at Prentice-Hall. After eight years, McGraw-Hill fired Weiner for “lack of application.” Weiner sued for breach of contract. The Court of Appeals held that Weiner stated a cause of action because the promise of job security, combined with Weiner’s reliance, could create an enforceable contract modifying the at-will employment presumption.

    Facts

    In 1969, McGraw-Hill recruited Walton Weiner from Prentice-Hall. McGraw-Hill’s representative assured Weiner that the company’s policy was to terminate employees only for “just cause,” as detailed in its personnel handbook. The handbook stated dismissal would occur “for just and sufficient cause only, and only after all practical steps toward rehabilitation or salvage of the employee have been taken and failed.” Weiner signed an employment application referencing the handbook. Weiner alleges he relied on these assurances, leaving Prentice-Hall, forfeiting accrued fringe benefits, and turning down a salary increase offered by Prentice-Hall to stay. After eight years of employment, Weiner was fired in February 1977 for “lack of application.”

    Procedural History

    Weiner sued McGraw-Hill for breach of contract. The Supreme Court (Special Term) upheld the complaint. The Appellate Division reversed, holding that because Weiner was an at-will employee, he could be terminated arbitrarily. Justice Kupferman dissented. The Court of Appeals reversed the Appellate Division, reinstating the Special Term order.

    Issue(s)

    Whether an employer’s promise of job security in a personnel handbook, coupled with an employee’s reliance on that promise, can create an enforceable contract requiring just cause for termination, despite the employee not being hired for a fixed term.

    Holding

    Yes, because the promise of job security, incorporated in the employment application and relied upon by the employee in leaving prior employment and rejecting other offers, presents a question for trial as to whether the employer was bound not to discharge the employee without just and sufficient cause and an opportunity for rehabilitation.

    Court’s Reasoning

    The Court of Appeals reasoned that the traditional at-will employment rule is a rebuttable presumption, not an absolute bar to contractual obligations. The court emphasized that “mutuality” (coextensive promises) is not always necessary for a binding contract; consideration, which can be a benefit to the promisor or a detriment to the promisee, is the key. Here, Weiner’s leaving his prior employment and rejecting other offers in reliance on McGraw-Hill’s promise of job security constituted sufficient consideration. The court stated, “[i]t is enough that something is promised, done, forborne or suffered by the party to whom the promise is made as consideration for the promise made to him.” The court found sufficient evidence of a contract and breach based on four factors: (1) inducement to leave prior employment with assurances of discharge only for cause, (2) incorporation of those assurances into the employment application, (3) rejection of other job offers in reliance, and (4) internal enforcement of handbook procedures for subordinate dismissals. The court also noted that the trier of fact should consider the parties’ course of conduct, writings, and negotiations to determine if the at-will presumption was overcome. As the court stated, it is “the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain”, which will control.