Handbook Provisions Can Be Enforced in Court Despite At-Will Statements and No-Contract Disclaimers

In Braun v. Wal-Mart Stores, Inc., 24 A. 3d 875 (2011), the Pennsylvania Superior Court recently affirmed a jury award in favor of a class of employees, holding that the company's failure to pay employees who worked through paid rest breaks provided for in a handbook gave rise to a claim for breach of an implied-in-fact contract as well as a claim for unpaid fringe benefits under the Pennsylvania Wage Payment and Collection Law (WPCL).

The handbook contained policies stating that employees would receive one or two paid 15 minute breaks, depending on the number of hours worked, uninterrupted time off for meal breaks, and prohibited employees from working without being paid. The court characterized these policies as providing that employees could work for 37.5 hours and be paid for 40 hours.

The handbook expressly stated that the employees were employed at-will and contained an acknowledgment page the employees were required to sign that stated, "The policies presented in this handbook are for your information only and do not constitute terms and conditions of employment ... This handbook is not a contract."

A class of employees sued the company seeking compensation for having worked through their paid breaks without receiving any additional pay. The court upheld a jury verdict in favor of the employees.

The court reasoned in pertinent part that (1) the at-will language in the handbook related only to the duration of an employee's employment and not the pay to be provided for the employee's work, and (2) notwithstanding the disclaimer stating that the handbook was informational only and did not constitute a contract, the employees reasonably interpreted the handbook as an offer to provide paid breaks, which they accepted by continuing to work for the company, thereby creating an implied-in-fact contract that bound the company to provide the paid breaks or compensate the employees for the loss of those breaks.

The court also ruled that, by breaching its contractual obligation to provide the paid breaks, the company deprived the employees of fringe benefits in violation of the WPCL. Therefore, the court upheld an award of liquidated damages and attorneys' fees under the WPCL that ultimately exceeded the principal amount the company owed to the employees for the unpaid breaks.

The Braun decision is important for several reasons. First, the decision shows that while at-will statements and no contract disclaimers are useful, they will not necessarily prevent employees from being able to enforce handbook provisions, especially those relating to compensation. Second, because such claims can also be pursued under the WPCL, which imposes significant penalties, employers need to be extra cautious when non-compliance with a handbook compensation provision is alleged. Third, the decision emphasizes the importance of carefully crafting handbook policies and insuring that the employer's practices are in line with its policies.