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Disclaimer in Employee Handbook Negates $555,000 Jury Verdict

Published by on December 20, 2012

Disclaimers in employee handbooks are still effective under Maryland law.  On November 27, 2012, the U.S. Court of Appeals for the Fourth Circuit overturned a jury verdict for $555,000 based on a well-drafted disclaimer that employee handbook provisions do not create contractual obligations.  More after the break. The case arose when Jennifer Scott sued Merck […]

Disclaimers in employee handbooks are still effective under Maryland law.  On November 27, 2012, the U.S. Court of Appeals for the Fourth Circuit overturned a jury verdict for $555,000 based on a well-drafted disclaimer that employee handbook provisions do not create contractual obligations.  More after the break.

The case arose when Jennifer Scott sued Merck and Company Incorporated for terminating her employment after she reported to Merck management allegedly unethical behavior of her supervisor. Scott claimed that Merck was liable for wrongful termination because Merck’s employee handbook included a policy against retaliation for reporting concerns important workplace issues.  Scott argued that the handbook policy created a contractual right in her favor.

Merck appealed the jury verdict, arguing that Scott’s status as an “at-will” employee and the handbook disclaimer precluded the formation of contractual obligations.  In the opinion overturning the verdict, the Fourth Circuit noted that handbook policies do not create contractual obligations where the employee cannot justifiably rely upon the policy.  To prevent an employee from justifiably relying on a policy statement, disclaimer language must clearly and conspicuously inform the employee that employment is at-will.  In Scott’s case, the handbook disclaimer did so by stating:

Employment at Merck is at-will, which means that employees are not hired for a specific duration of time and either Merck or the employee may sever the employment relationship at any time, for any reason with or without notice.

As an added measure, the disclaimer stated that the handbook policies and procedures created no contractual right.  The disclaimer was effective even though it appeared in a different location in the handbook from the retaliation policy.

The court’s opinion can be found here.

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