Minnesota Employment Law Report - Observations on labor and employment law from FLFV

In Barker v. County of Lyon, --- N.W.2d ----, 2012 WL 1570133 (Minn. Ct. App. May 7, 2012), the Minnesota Court of Appeals recently held that it is unreasonable as a matter of law for an employee to rely on provisions of a personnel handbook if the handbook also contains a disclaimer warning that the employer can modify or eliminate any of the policies at any time.

The case involved the Lyon County personnel manual, which had been altered numerous times over the years.  In 1985, the manual guaranteed retiring employees certain benefits.  In 1991, the manual was amended to include a provision stating that the county reserved the right “to change any of these policies, after notice to and input from employees.” In 1995, the county added a clause on the front of the manual in large, bold-face capital letters stating, “THIS POLICY MANUAL IS NOT AN EMPLOYMENT CONTRACT.” 

In 1999, the manual was amended yet again to cut off the retirement benefit for employees hired after May 1, 1997.  Finally, in 2009, another change to the manual capped the retirement benefit for all employees, including those hired before May 1, 1997. 

Several current and former employees who lost benefits as a result of the amendments brought suit based on the theory of promissory estoppel, which is a legal term meaning “detrimental reliance.”  To succeed with such a claim, the employees needed to show that (1) the county made a “clear and definite promise”; (2) the county intended to induce the employees to rely on the promise; (3) the employees reasonably relied on the promise to their detriment; and (4) the promise must be enforced to prevent injustice.

Like the district court, the appellate court ruled against the employees, finding that their reliance on the pre-2009 versions of the manual was unreasonable because of the disclaimer.  The court further rejected the employees’ argument that they could rely on oral promises made by county representatives.  The court reasoned that “any reliance on oral promises that contradicted provisions in the policy manual was, as a matter of law, unreasonable” because such representations explicitly contradicted the manual’s disclaimer.

Bottom Line

The Barker decision appears to be the first published decision arising from Minnesota's state courts declaring that it is unreasonable as a matter of law for an employee to rely on a provision contained in an employee handbook where the handbook contains a disclaimer warning it can be changed at any time.  If you haven’t already, employers should consider adding a similar disclaimer to their handbooks and manuals.

Employees generally don't become "problem employees" overnight.  Typically, employers have some indication that the employee is going to be a "problem" from the beginning.  As a famous Minnesota employer recently demonstrated, it is best to address those issues as soon as possible.

The New (Old) "Problem Employee"

In October, the Minnesota Vikings completed a trade bringing back wide receiver Randy Moss, who starred for the Purple for seven years before being traded in 2005.  The move was widely praised and Moss was hailed by many as the potential savior for Minnesota’s struggling offense.

Moss has always balanced unparalleled speed and skill on the field with maddeningly erratic and selfish behavior off the field.  His most recent stint with the Vikings featured mostly the latter, including allegations that he loafed through parts of games, influenced younger players into bad practice habits, and ranted mercilessly about the team’s buffet lunch.  His most outlandish act was a bizarre televised post-game press conference where he asked and answered his own questions, criticized Vikings coach Brad Childress and heaped praise on the coach and team that had just beaten them (which just happened to be the team that had just traded him to the Vikes).  A day later, Coach Childress cut Moss from the team.

Swift Action is Effective Action

The effectiveness of Childress’s coaching has been debated substantially throughout the season. His decisiveness in dismissing Moss only a month after obtaining him, however, is a good lesson for other Minnesota employers. 

We have every reason to expect new employees (or returning ones, for that matter) to put their best foot forward in their early days with the employer.  We should anticipate that they will want to show us how happy they are to have joined our organization and how committed they are to our success.  If in those first few weeks or months a new employee doesn’t hustle, or if they criticize management or embarrass the employer publicly, the situation is not likely to improve with time, and swift action is necessary.

Bottom Line

Don’t make the mistake of thinking that the employee will “grow up” or “settle down.”  Certainly we might expect some learning time regarding new skills and job tasks, but negative attitudes, critical comments and poor work habits do not bode well for the future.

If your organization has a probationary period in a union contract or employee handbook, put them to good use by quickly identifying and dismissing your Randy Moss.  Even in the absence of such policies, you can move decisively by determining that a new employee displaying unacceptable work habits or a difficult demeanor should not be allowed to remain on the team and bring everybody down with them.

What can happen when an employer makes and then rescinds a job offer?  Ask the University of Minnesota and Gophers’ basketball coach Tubby Smith, who recently had a jury call a $1.25 million foul on them.

Upon being named head men’s basketball coach in 2007 for the University of Minnesota, Tubby Smith contacted Jimmy Williams, assistant coach at Oklahoma State University, and former Gophers assistant coach in the 1970’s and 80’s.  After a personal interview and a follow-up telephone call with Smith, Williams quit at Oklahoma State, put his house on the market and got ready to return to Minnesota. 

The next day, Athletic Director Joel Maturi told Smith not to hire Williams because of his involvement in 15 major NCAA rule violations as a Gophers coach.  Smith informed Williams, who was then left without a job at either school.  He eventually sued the University and Coach Smith for promissory estoppel, which addresses the following circumstances:

1. Party One makes a promise which should reasonably be expected to induce reliance by Party Two;
2. Party Two actually relies on the promise; and
3. Injustice can be avoided only by enforcing the promise.

Coach Smith claimed he knew nothing about the violations and was disappointed that Williams had not disclosed them.  In addition, both he and Maturi denied that an offer was made since Maturi had the final say.  Williams countered that it was customary in the coaching industry for the head coach to have full authority to hire assistants.  Thus, Williams reasonably relied on Coach Smith’s offer.

The jury decided that Smith did not fairly represent the extent of his hiring authority. 

They found that it was reasonable for Williams to rely on Smith’s representations, and that such reliance caused harm requiring $1.25 million in damages.    Not surprisingly, the University is considering an appeal.

Despite the big time college athletics setting, all Minnesota employers can learn these lessons:

1.  Be precise when communicating a job offer, disclosing any limitations or contingencies (e.g. background check, drug test); 
2. Send an offer letter or document the proposal in some other fashion to be sure that there is no misunderstanding about the terms. 
3. Finally, know the limits of your authority.  Don’t promise more than you can deliver and anticipate that applicants will rely on what you say.