Wheeler v. Phoenix Co. of Chicago
213 Ill. Dec. 62, 658 N.E.2d 532, 276 Ill.App.3d 156 (1995)
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Rule of Law:
An employee handbook creates an enforceable contract when it contains a clear promise of specific disciplinary procedures, and any disclaimer intended to negate that promise must be conspicuous to be effective.
Facts:
- On June 13, 1990, The Phoenix Company of Chicago hired Michelle Anne Wheeler as an inside salesperson.
- Wheeler received an employee handbook stating the company would use a 'progressive disciplinary procedure' and listing five specific infractions that could lead to immediate dismissal.
- Wheeler signed an acknowledgment stating she had read the handbook and understood she could be 'discharged at any time, with or without notice for violation of any of the rules in the handbook.'
- In January 1991, Wheeler mishandled several requests from a key client, Pennstock, despite being spoken to by company president, Michael Machura.
- On January 30, 1991, Machura instructed Wheeler to ensure an urgent order was shipped to Pennstock the next day and to reverse the shipping charges so the company would pay them.
- On January 31, 1991, Wheeler called in sick and did not complete the task regarding the Pennstock order, nor did she arrange for a coworker to handle it.
- On February 1, 1991, Phoenix terminated Wheeler's employment.
- Machura later testified that Wheeler was not terminated for any of the five specific reasons for immediate dismissal listed in the handbook.
Procedural Posture:
- Michelle Anne Wheeler filed a complaint for breach of employment contract against The Phoenix Company of Chicago in the trial court.
- The case proceeded to a bench trial.
- The trial court found in favor of Wheeler, concluding the employee handbook created a contract that Phoenix had breached.
- The trial court entered judgment for Wheeler.
- The trial court denied Phoenix's post-trial motion.
- Phoenix (appellant) filed a timely appeal to the appellate court, with Wheeler as the appellee.
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Issue:
Does an employee handbook create an enforceable contract requiring an employer to follow a progressive disciplinary policy when the handbook contains some language suggesting at-will employment but lacks a conspicuous disclaimer stating it is not a contract?
Opinions:
Majority - Justice Hutchinson
Yes, an employee handbook creates an enforceable contract under these circumstances. The court found that the handbook's promise of a progressive disciplinary policy was a clear offer which the employee accepted by continuing to work, thus forming a contract under the Duldulao test. The court held that any language intended to disclaim this contractual promise must be conspicuous. Here, the at-will language in the handbook and the acknowledgment form was not conspicuous—it was not highlighted, in capital letters, or otherwise set apart from the rest of the text. Drawing an analogy to the Uniform Commercial Code's requirements for warranty disclaimers, the court reasoned that a conspicuousness requirement protects employees from surprise and unexpected negations of promises that induced their employment. Since the disclaimer was not conspicuous and any ambiguity must be construed against the drafter (the employer), the promise of a progressive disciplinary policy was binding. Furthermore, Phoenix breached this contract because it did not provide a written warning and did not terminate Wheeler for one of the five enumerated reasons that would justify immediate dismissal.
Analysis:
This decision solidifies the 'conspicuous disclaimer' requirement for employee handbooks to negate contractual promises in Illinois employment law. By importing a concept from commercial law (the UCC's conspicuousness standard for warranty disclaimers), the court significantly strengthens employee protections against employers who make procedural promises in handbooks. After this case, employers can no longer rely on buried or ambiguous at-will language to override specific disciplinary policies. To maintain a purely at-will relationship, an employer must now include a prominent and unequivocal statement, such as 'THIS IS NOT A CONTRACT,' to effectively disclaim contractual obligations arising from the handbook's text.
