Anderson v. Douglas & Lomason Co.
540 N.W.2d 277 (1995)
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Rule of Law:
An employee handbook does not create an enforceable unilateral contract if it includes a clear and unambiguous disclaimer stating that the handbook is not intended to create any contractual rights.
Facts:
- On his first day of employment with Douglas & Lomason Company (DLC), Terry Anderson received a 53-page employee handbook.
- The handbook contained a multi-step progressive discipline policy for offenses such as unauthorized possession of company property.
- Anderson acknowledged receiving the handbook but admitted to only reading the first few pages and not the progressive discipline section.
- After three years of employment, Anderson was stopped while leaving the company plant and a search of his truck revealed a box of company pencils.
- A subsequent search of Anderson's home revealed no other company property.
- On the same day as the search, DLC asked Anderson to resign, and when he refused, he was immediately fired.
- The progressive discipline policy for a first offense of unauthorized possession of company property stipulated a written warning, not immediate discharge.
- The last page of the employee handbook contained a paragraph stating, 'This Employee Handbook is not intended to create any contractual rights in favor of you or the Company.'
Procedural Posture:
- Terry Anderson filed a breach-of-contract lawsuit against Douglas & Lomason Company (DLC) in the district court, which is the trial court of first instance.
- DLC filed a motion for summary judgment, arguing the employee handbook did not constitute a contract.
- The district court granted DLC's motion for summary judgment.
- Anderson, as the appellant, appealed the district court's grant of summary judgment to the Supreme Court of Iowa.
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Issue:
Does an employee handbook create an enforceable contract requiring an employer to follow its progressive discipline procedures when the handbook contains a disclaimer stating it is not intended to create any contractual rights?
Opinions:
Majority - Ternus, Justice
No, the employee handbook does not create an enforceable contract because the disclaimer negates any intent by the employer to form a binding offer. While an employee handbook can form a unilateral contract if its terms are sufficiently definite to constitute an offer, it is communicated to the employee, and the employee provides consideration by continuing to work, the analysis fails at the offer stage. The court first established a narrow exception to traditional contract theory, holding that an employee need not have read the specific handbook provisions to accept them; receiving the handbook is sufficient communication for a standardized agreement. However, the court then determined that the handbook, when viewed objectively, did not constitute a valid offer. A valid offer requires a manifestation of willingness to be bound, which is lacking here. The presence of a clear disclaimer stating the handbook 'is not intended to create any contractual rights' demonstrates that the employer did not intend to be bound by its terms. The court rejected the need for a special 'clear and conspicuous' standard for disclaimers, instead analyzing it as part of the handbook's overall text. Because a reasonable person reading the disclaimer would understand that no contract was intended, the handbook as a whole is not definite enough to be an offer, and no contract was formed. Therefore, Anderson remained an at-will employee who could be terminated without adherence to the progressive discipline policy.
Analysis:
This decision solidifies the power of disclaimers in employee handbooks, providing employers with a clear method to avoid creating contractual obligations through their policies. By rejecting a special 'conspicuousness' test and instead focusing on the objective meaning of the disclaimer's text, the court simplifies the analysis but places a heavy burden on employees. The case also establishes a notable, albeit ultimately moot, point of law in Iowa: an employee can be bound by and benefit from handbook provisions they haven't read. This ruling effectively allows employers to maintain at-will employment while still publishing detailed policies, as long as a clear disclaimer is included.
