Employment law has become a major segment of legal practice. It was not always so. The subject has sprouted only in the past couple of decades. Until then, it was a fairly desultory discipline. In fact, for years, employment law was the province of few practitioners, largely confined to a smattering of statutes. Now, the topic consumes about one-third of the civil filings in federal court and a large segment of the state court proceedings, too.

The proliferation of employment law is due to several factors, including volatile economic conditions and the enactment of more workplace-related legislation, such as the Americans with Disabilities Act (ADA), the Family Medical & Leave Act, (FMLA), and state whistleblower statutes, among other measures. But the triggering event in Minnesota that turned employment law from a backwater area into a stream of litigation was a decision by the Minnesota Supreme Court, Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983), decided on April 29, 1983.

Pine River recognized the doctrine of employment handbooks or manuals as a basis for contractual claims by employees who are discharged or otherwise disciplined by their employers. It unleashed a torrent of litigation relating to employment handbooks or manuals as well as spawning a large body of workplace litigation in general.

The case, which is marking its 20th anniversary next month, brought about changes in the way employers and employees interact in the workplace and in the courtroom. Its history reflects both the rise and retrenchment of rights of employees and obligations of employers regarding handbooks and similar workplace-related materials. The passage of two decades since the landmark decision furnishes an opportune time to review the case and the ripple effects it has had on employment law in Minnesota.

Manual Labor

Pine River changed the course of employment law in Minnesota. Until its pronouncement two decades ago, nearly all Minnesota employees who worked in the private sector and were not members of labor unions were at-will employees. As such, they could be discharged or otherwise disciplined at the unilateral discretion of their employers.1

Under this doctrine, general affirmations of workplace conditions or job security were insufficient to convert the at-will relationship into a contractual one. The at-will mantra was that employers have the right to take any action they deem fit "at any time and without cause."2

The reluctance of courts to intervene in the process was premised on the judicial hesitancy, in the words of the 8th Circuit Court of Appeals, to become a "super-personnel department."3

But that changed as a result of the Pine River ruling. The case was brought by a bank loan officer in a small northern Minnesota town. After he was discharged due to poor performance, he sued, claiming that the facility failed to comply with the terms of the handbook that had been given to him and other employees. The manual included disciplinary and "job security" provisions that required two reprimands before suspension or dismissal and allowed dismissal only if, following a factual review according to the bank's executive office procedures (that were not followed in the firing), the employee's post-reprimand work did not improve.

The claim was rejected by the Cass County District Court, which ruled that the employment manual did not dictate a deviation from the at-will employment doctrine. But the Supreme Court reversed, holding that the employment manual constituted a binding agreement and the bank's noncompliance with the disciplinary provision entitled the employee to sue for breach of contract.

The reasoning of the Supreme Court was simple and lucid: the employer's dissemination of the handbook constituted an offer of employment with job security provisions, the employee's continued work represented acceptance and, thus, the employer was contractually required to follow the specified procedures regarding reprimands and dismissals. As it concluded: disciplinary and job security provisions in an employment manual are "enforceable, whether they are proferred at the time of the original hiring, or later, when the parties have agreed to be bound thereby."4

Right Retrenched

Pine River opened the floodgates of employment manual litigation. It also led to a subsequent retrenchment of the contractual right recognized in the case.

Crafty employers and their counsel, aided by the courts, found ways to maneuver around the handbook ruling. Rather than backing off from the use of employment manuals, as a few employers did, the bulk of employers continued to find the handbooks helpful in establishing parameters of workplace expectations. Accordingly, rather than dispensing with them altogether, they devised ways to restrict their legal impact.

Three major limitations have been placed on Pine River. They consist of limiting language, tepid terminology, and constricted circulation of the handbooks.

Disclaimers. The use of disclaimers was the principal way that obligations were obviated under the Pine River doctrine. Disclaimers generally aver that an employment manual is subject to change, not binding on the employer, and should not be relied upon by the employee. The effect of inserting a disclaimer into a handbook is that the employee is prevented from claiming legally enforceable contractual rights.

For example, the Court of Appeals rejected a wrongful discharge Pine River claim based on the following disclaimer language:

The policies described here are not conditions of employment, and the language is not intended to create a contract between (the employer) and its employees.5

Other Pine River claims have sunk due to a handbook provision that retained management's discretion to "make any changes at any time by adding to, deleting, or changing any existing policy," a declaration that the handbook is "not necessarily all-inclusive," and a clause intended to reserve the right of management to "vary from the policies (in the handbook) if, in its opinion, the circumstances require."6

A conventional employment manual claim was served up with a new, but unsuccessful twist in Erickson v. Cannon Valley Co-operative, 1999 WL 262124 (Minn. App. May 4, 1999) (unpublished). A terminated employee claimed that his employer, as in the seminal Pine River case, failed to follow progressive discipline procedures set forth in the handbook.

The employee was unable to overcome the disclaimer stating that the employment was at will, that the manual was not a contract, that management reserved discretion in administering discipline, and that employees are not "guaranteed the right to progressive discipline." However, he argued that the employer was estopped from denying that the manual constituted a unilateral contract.

The court did not accept the claim of equitable estoppel, noting that the disclaimers were so explicit and stark that the employee "could not reasonably rely" on the progressive discipline terms in the handbook.

A claim of promissory estoppel also was rejected because the employee had not "turned down any job offers." His mere "continued employment" did not constitute the type of reliance upon which estoppel may be predicated, another illustration of the difficulty of establishing estoppel.

Indefinite Language. Indefinite language became a cousin of disclaimers in eviscerating claims based on employment manuals. In Hunt v. IBM Mid America Employees Federal Credit Union, 384 N.W.2d 853 (Minn. 1986), the Supreme Court held that the vague disciplinary and discharge language in the company's handbook fell "far short of the specificity necessary for a contractual offer under principles enunciated in Pine River."7 For instance, the manual did not define what "serious offenses" warranting discipline were and failed to provide any sort of detailed disciplinary procedures. Thus, the Court held that the handbook was too indefinite to meet the requirements of an enforceable legal contract.

A few years later, in Ward v. Employee Development Corp., 516 N.W.2d 198 (Minn. App. 1994), the appellate court held that a company's employee handbook was too indefinite to form a binding contract.8 Part of the court's finding of unenforceable vagueness hinged on the fact that the handbook did not contain any definitions or detailed procedures.

Limited Distribution. The courts also restricted the Pine River ruling by focusing on the scope of the distribution of the documentation. In Tobias v. Montgomery Ward, 362 N.W.2d 380 (Minn. App. 1985) the appellate court held that an employment manual that had not been widely disseminated to employees did not give rise to contractual obligations. Since the handbook was given only to managers and not to employees, it did not meet the Pine River standard.

In Jacques v. Real Estate Equities, Inc., 1991 Minn. App. LEXIS 964 (Minn. App. 1991) (unpublished), the appellate court also held that an employment manual that had not been widely disseminated to employees did not constitute a communicated offer. The court reasoned that the handbook was not "communicated" to the employees because it was located in a central file cabinet and not handed out to the individual employees.

Another unsuccessful effort to invoke a handbook and manual for imposition of contractual liability occurred in a case arising out of an altercation at the Mall of America in Nickelson v. Mall of America Co., 593 N.W.2d 723 (Minn. App. 1999). An employee at the mall sued the facility for improper security after the employee was injured in an altercation with a shoplifter at the shopping center.

The Court of Appeals rejected the injured employee's contention that a handbook on safety and security distributed to tenants created a contractual duty to protect tenants and employees from harm.

Rather than creating new law, the court fell back on well-established handbook limitations. It noted that the handbook did not constitute a contract because it was not accepted by the tenant or the employer, nor was there any consideration given for the handbook. Further, the terms of the handbook, which called for a tenant to contact mall security and await the arrival of police if an incident arose, did not constitute a sufficiently "clear, definite" promise to warrant imposition of contractual liability. A related security manual also did not constitute a contract because there was no indication that the document was distributed to the injured employee or her employer, a limitation that has been fatal in many employment handbook cases.

Tattered Topic

As a result of these rulings, the employment manual became a tattered topic for many workplace claimants. Rather than springing a cascade of employee rights, the Pine River doctrine broke into multiple rivulets over a legal sandbar on which many employment-related cases came to grief.

Despite the difficulties that evolved from Pine River, some employees still managed to successfully maintain handbook-related claims. For example, in Perkins v. Feges, 483 N.W.2d 701 (Minn. 1992), the Supreme Court held that an employer was bound by the disciplinary procedures of the employment contract. The Court rejected multiple defenses raised by the employer, including one which alleged that the handbook was not disseminated widely enough to fall within the Pine River doctrine. The Court also ruled that a disclaimer in a later handbook did not override the terms of an earlier binding manual given to the employee.

In Campbell v. Leaseway Customized Transport, 484 N.W.2d 41 (Minn. App. 1992), an employee brought suit after he was fired without receiving any warnings or a hearing as set forth in his employment manual. After the trial court directed a verdict for the employer, the Minnesota Court of Appeals reversed, holding that whether the manual had been sufficiently distributed was a jury issue. In addition, the court further held that the provisions of the handbook, coupled with the company's prior practice, may have been sufficiently precise to create an enforceable contract under the Pine River doctrine.

School Saga

The saga of handbooks has played out somewhat differently in school settings. The Minnesota courts have been leery of allowing handbooks furnished to students at academic institutions to have Pine River-like effect.

In Abrariao v. Hamline University School of Law, 258 N.W.2d 180 (Minn. 1977), the Court rejected claims of a former law school student who was expelled for poor academic performance. He asserted that the school bulletin, a form of handbook, guaranteed that if his grades were poor, he would be given private tutorials, which the school failed to furnish. The Court recognized that some "elements" of contract law have been applied to the "student-university relationship" but was skeptical whether the document comprised a contract. Even if it did, the Court noted, the handbook included a disclaimer which noted that "all provisions within this bulletin are subject to change without notice."9 The Court also rejected common law and constitutional Due Process claims. The same reluctance to extend Pine River analysis at the university level was reflected in Ross v. University of Minnesota, 439 N.W.2d 28, 34 (Minn. App. 1989) rev. denied (Minn. App. July 12, 1989.

Students also have not faired as well in asserting handbook claims at lower rungs of the academic ladder. In Zellman v. Ind. Sch. Dist. No. 2758, 594 N.W.2d 216 (Minn. App. 1999) rev. denied (Minn. July 28, 1999), the appellate court, in a case of first impression in Minnesota, held that student handbooks distributed to pupils in public high schools are not binding on school administrators. The case was brought by a student who received a "zero grade" for plagiarism on a project in a high school history class. The student claimed the school failed to follow the disciplinary provisions in its student handbook, an argument rejected by the appellate court.

The court reasoned that the "complex relationship" between the state, parents and students "dictates against expanding the scope of Pine River handbook claims to their context."10 The court concluded that "a student handbook provided by public school districts does not form a unilateral contract between the student and the school district."11

The rationale of these cases also doomed a private college student's handbook claim after he was expelled for sexual harassment in Rollins v. Cardinal Stritch, 626 N.W.2d 464 (Minn. App. 2001). The court ruled that deviations from disciplinary procedural provisions in the student handbook were not actionable because the "student handbook ... did not constitute a contract between the school and the student that required strict compliance with every provision."12

Recent Rulings

In the new millennium, the Pine River doctrine has come into question in several cases. These recent rulings reflect the continued ambivalence of the courts about Pine River.

For example, in Ries v. SEI Electronics LLC, 2000 Minn. App. LEXIS 703, at ¦3 (Minn. App. 2000) (unpublished), the court rejected a terminated employee's Pine River claim for multiple reasons. The court determined that the employee did not have contractual rights because the handbook included explicit disclaimers and had not been widely disseminated; the employer only gave it to a certain group of employees.

The vice of vagueness reared its head in Martens v. Minnesota Mining & Manufacturing, 616 N.W.2d 732 (Minn. 2000), where the Supreme Court determined that the handbook language was too indefinite and consequently rejected the argument that it constituted a contract. The case involved a claim by a pair of long-term employees that their employer failed to follow oral and written statements regarding promotion and compensation commensurate with the status of administrative personnel. The Court deemed the terms of the handbook too imprecise, lacking "specifics of how an individual employee's pay, benefits, or promotion is to be determined ... [lacking] criteria to determine when rights to such benefits have been breached, or what standards to apply to enforce them."13 Because the various printed materials constituted "nothing more than expressions of a general concept of equivalence of opportunity," the handbook materials were "too vague and indefinite to constitute" an enforceable workplace contract.14

In contrast, the Court of Appeals, in Kotera, Inc. v. Natrogas, 2000 Minn. App. LEXIS 886 (Minn. App. 2000) (unpublished) held that a jury was justified in finding that an employer breached its Pine River employment contract with a terminated employee. In Koteras, the employer was adjudged liable after summarily dismissing an employee without following the progressive disciplinary provisions in the employer's handbook.

The unusual route that Pine River has followed in its 20-year history is best reflected in a recent federal court ruling upholding the enforceability of a handbook provision against an employee but striking one of its clauses. In Gooden v. Village Green Management Co., 2002 wl 31557689 (D. Minn. 2002), the U.S. District Court for the District of Minnesota refused to accept in evidence a handbook provision compelling arbitration and requiring that an employee pay half the costs of the proceeding. Deeming the fee-splitting an unfair "hardship" upon an employee suing for wrongful discharge and discrimination, U.S. District Judge John Tunheim invalidated the clause, a ruling consistent with a decision several weeks earlier by the 8th Circuit Court of Appeals striking a fee-splitting clause in an ERISA case, Bond v. Twin Cities Carpenters Pension Fund, 307 F.3d 704 (8th Cir. 2002). But Judge Tunheim did not invalidate the arbitration clause, severing the fee-splitting clause and allowing the employer to compel arbitration conditioned upon its agreement to pay all of the arbitration expenses of the proceedings.

River Raft

There has been a raft of cases decided by the Minnesota courts since the landmark Pine River ruling 20 years ago.

Pine River cases continue to flow, notwithstanding the difficulties that claimants have faced in navigating the rocky shoals that have developed in the past two decades.

The law is likely to ebb and flow as long as employers in Minnesota promulgate handbooks for their workforce and employees are grieved at treatment in the workplace.

Notes
1 Boe v. Polk County Library Bd., 217 N.W.2d 208, 209 (Minn. 1974); Skagerberg v. Blandin Paper Co., 266 N.W. 872, 874 (Minn. 1936).

2 Cederstrand v. Lutheran Brotherhood, 117 N.W.2d 213, 221 (Minn. 1962).

3 Dorsey v. Pinnacle Automation Co., 278 F.3d 830, 837 (8th Cir. 2002); Wilking v. County of Ramsey, 153 F.3d 869, 873 (8th Cir. 1998).

4 333 N.W.2d at 630.

5 Audette v. Northeast State Bank of Minneapolis, 436 N.W.2d 125, 126 (Minn. App. 1989).

6 Simonson v. Meader Distrib. Co., 413 N.W.2d 146, 147 (Minn. App. 1987).

7 384 N.W.2d at 857.

8 516 N.W.2d at 203.

9 258 N.W.2d at 114.

10 564 N.W.2d at 220.

11 Id.

12 Id. at 471.

13 616 N.W.2d at 744.

14 Id.

The author acknowledges with thanks the assistance of Jody Nahlovsky, a law clerk with the firm, who aided in preparation of this article.

MARSALL H. TANICK is an attorney with the law firm of Mansfield, Tanick & Cohen, P.A. in Minneapolis and St. Paul. He is certified as a Civil Trial Specialist by the Minnesota State Bar Association.