International Society of Primerus Law Firms

Employee Handbook Did Not Create an Implied Contract Between Employer and Employee

Written By: Thomas Paschos, Esq.

Thomas Paschos & Associates, P.C.

Haddonfield, NJ

In Torres v. Riverstone Residential, 2011 WL 4056209 (D.N.J. September 12, 2011), Plaintiff Doris Torres was terminated from her employment as an assistant property manager with defendant Riverstone Operating Company, Inc. (“Riverstone”). She then brought this action, alleging, among other things, that in firing her, Riverstone committed a breach of contract.

Torres began working for Riverstone in 2002, and in August 2006, she became a property manager for the Riverstone-managed Curling Club Apartments. She never signed an employment contract with Riverstone, and she conceded that her employment with Riverstone was at will.  She did, however, receive an Associate Handbook (“Handbook”) and sign an Associate Handbook Acknowledgment Form (“Acknowledgment”). The Acknowledgment contains the following language:

By signing this Acknowledgment, I hereby agree that I am an “at will” Associate…. [T]he Company and I both have the right to terminate the employment relationship at any time, for any reason, with or without cause or notice.

I understand that the Associate Handbook is a general guide only and that the provisions of the Handbook in no way constitute an employment contract or guarantee employment. I also understand that any contracts relating to my employment must be in writing and signed by the Chief Executive Officer of the Company.

Torres’s responsibilities at the Curling Club included managing the property and employees, keeping track of budgeting and expenses and dealing with tenants.  In 2008 and 2009, there were several complaints about Torres’ conduct from her superiors, co-workers, and Curling Club residents.  In addition, in the summer of 2009, Torres scored below the required benchmark 90% in several “audio shop” exercise and audits of her work.

In September 2009, Torres accepted the lesser position of assistant property manager at the Curling Club after being told “that she was not fulfilling the needs as a Property Manager and not hitting the benchmarks that Riverstone set forth.”  One month later, Torres completed another audio shop and scored an 81.3%.  On October 21, 2009, Torres was terminated from her employment with Riverstone based on her audio shop score and she was advised that the score was “just barely over the passing mark … and the contents failed to meet company standards on how to handle a prospective resident sale.”

Torres filed a complaint in the Superior Court of New Jersey alleging, among other things, a breach of contract, stating that “defendants breached plaintiff’s employment contract and wrongfully failed to judge plaintiff on the basis of merit and ability and wrongfully and without cause terminated Plaintiff.”  Plaintiff also alleged a breach of the implied covenant of good faith and fair dealing. Riverstone removed on diversity grounds, and subsequently filed motions for summary judgment.

In support of its motion, Riverstone argued that Torres was an at-will employee, subject to termination at any time, with or without notice or cause. Torres, however, contended that the Handbook contained a promise that Riverstone’s employees could not be fired after scoring higher than an 80% on an audio shop. Riverstone countered that the Handbook made no such promise and that it clearly and conspicuously disclaimed any promise of continued employment.

The court found that Torres had correctly pointed out that under certain circumstances “[a]n employment manual may alter an employee’s at-will status by creating an implied contract between an employer and employee.”  The Court set forth the test for determining whether an employment manual creates an enforceable obligation, stating that “[t]he basic test for determining whether an employment contract can be implied turns on the reasonable expectation of the employees.”  The court noted that an employer may shield itself from implied obligations by including a “clear and prominent disclaimer.”

Here, the court held that the breach of contract claim failed because no reasonable juror could conclude that defendant’s handbook created an enforceable obligation restricting its right to discharge plaintiff at will where both the handbook and the acknowledgement that she signed contained clear and conspicuous disclaimers that defeat the creation of any enforceable right. As such, the breach of the covenant of good faith and fair dealing claim failed in the absence of a contract.

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