General handbook disclaimer may not defeat PTO rights upon termination in MN

The Minnesota Supreme Court recently issued an employment law decision that will have a significant impact on HR policies across the state. Even when an employee handbook contains a general disclaimer stating no parts of the manual should be construed as a contract, provisions covering paid time off (PTO) or other forms of compensation may still be binding against the employer without a more specific disclaimer, according to the court’s ruling.

Background: employee handbooks as unilateral contracts

While not all employee handbooks are binding contracts, in Pine River v. State Bank (a 1983 case), the Minnesota Supreme Court held a handbook can form a unilateral contract if the terms are sufficiently definite, communicated to the employee, and accepted by the individual. Employees need not explicitly accept the handbook’s terms for it to be binding. By beginning to work after receiving the handbook, they implicitly accept its terms if they’re reasonable. Furthermore, portions of a handbook may be contractually binding even if other sections are not.

In search of more certainty about what constitutes a “sufficiently definite” contract, employers started including disclaimer language in employee handbooks stating they don’t otherwise create an enforceable contract to reduce the risk of being bound by them. Until recently, most Minnesota courts seem to have taken the disclaimers at face value. The latest supreme court ruling, however, may change the paradigm.

Facts and findings