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Warning: an employee handbook can be considered an employment contract



When is an employee handbook not an employee handbook? When it’s an employment contract. In certain limited situations, an employee handbook can constitute a type of employment contract.

Generally speaking, employment relationships in Iowa are presumed to be “at-will,” — that is, either party (the employee or the employer) may terminate the employment relationship at any time, for any reason, or for no reason at all. In legal circles, this is called the “employment-at-will” rule. Of course, like any general rule (especially in the law), there are exceptions.

One such exception exists in cases where an employee handbook is sufficiently definite to create an employment contract. Most employers, however, are mindful of the expense of litigation, and have inserted appropriate disclaimers in their employee handbooks. A disclaimer can prevent the formation of a contract by clarifying the intent of the employer not to enter into a contract. For example, your disclaimer might read as follows:

This Employee Handbook does not create any contractual rights in favor of you or The XYZ Firm. You are an employee-at-will. The XYZ Firm reserves the right to change the terms of this handbook at any time.

Iowa courts generally hold that a reasonably clear disclaimer, such as the one above, will prevent formation of a contract. Without such a disclaimer, however, an employee handbook can actually become an employment contract.

EMPLOYEE HANDBOOK TIP: Have your employee handbook reviewed by an attorney to make certain it contains an appropriate disclaimer.