Minnesota Supreme Court Allows Contract Claim Based on Employee Handbook

Today Godwin Dold obtained a significant Minnesota Supreme Court victory in Hall vs. City of Plainview. The Supreme Court overruled decades of Court of Appeals case law that had previously held that a general disclaimer in an employee handbook prevents employees from relying upon those terms to create contractual rights. This decision fundamentally changes the legal effect of incorporating a disclaimer in nearly every Minnesota company’s employee handbook.

In this case, the City had refused to compensate its former employee for a significant amount of earned paid time off (“PTO”) following the end of his employment. The City argued that a disclaimer in its handbook meant that it did not have to live up to any of the promises that the handbook contained, including earned PTO. Rejecting that argument, the Supreme Court held that an employee handbook, while not a contract itself, can create contractual rights running to the employee if the promises are sufficiently definite.

We are pleased with the Court’s decision which is Godwin Dold’s second victory at the Minnesota Supreme Court in the past five months. This ruling also significantly changes the status of employee handbooks under Minnesota law, and every company that has adopted a handbook should review its terms in light of the impact this decision may have on their business.