HR professionals and in-house counsel are often faced with the challenging task of getting out from under commitments in old employee handbooks, such as promises of progressive discipline, discharge only “for cause” or tenured employment. The Illinois Supreme Court and the U.S. Court of Appeals for the Seventh Circuit ruled in the late 1990s that an employer could not revoke such “employment contracts” by unilaterally implementing a revised handbook containing “atwill” disclaimers. Nor would the mere continuation of employment under a revised handbook provide sufficient consideration for conversion to at-will employment status.
These decisions did not provide Illinois employers with much help as to what kind of consideration would be necessary to bind the employee. However, the Illinois Appellate Court has just ruled that an employer must provide “bargained for” consideration in order to convert an employment contract to an at-will employment relationship. Ross v. May Co. d/b/a Marshall Field’s & Co., Case No. 1-06-0239 (November 13, 2007).
In Ross, the plaintiff claimed that Marshall Field’s breached his employment contract when it terminated him without following the progressive discipline policy contained in a 1968 employee handbook (which did not have an at-will employment disclaimer) in effect when he was hired. Marshall Field’s later revised the handbook to include disclaimers, but the court held that those subsequent disclaimers could not modify the employment contract created by the 1968 handbook because the plaintiff received no consideration to support his conversion to at-will employment. The court held that no consideration existed even though Marshall Field’s continued to employ the plaintiff with new benefits because the new benefits were available to all eligible employees. The court said that Marshall Field’s should have bargained with the employees bound by the old handbook and obtained their consent to at-will status in exchange for consideration over and above continued employment.
What does this decision mean for Illinois employers? First, it affects only employers who have modifi ed or are considering modifying a handbook that previously created an employment contract. Second, while the court said that Marshall Field’s was “exaggerating” the “logistical nightmare” scenario of trying to individually bargain with each employee, we now know that something more than continued employment or a workforce wide rollout of new benefi ts is needed to support a conversion to at-will status. So, when deciding, for example, to implement an individualized bonus, employment arbitration agreement, stock option or incentive plan, consider tying those new benefi ts to a written acknowledgement of “at will” employment status. Creative thinking and careful drafting will be required.