Minnesota: Handbook Disclaimers May not Preclude PTO Policy from Forming a Contract

In Hall v. City of Plainview, the Minnesota Supreme Court reviewed whether general disclaimers contained in the employer’s handbook would be sufficient to prevent a PTO policy from forming a contract with employees.

The City of Plainview’s employee handbook contained a detailed PTO policy that included information such as the PTO accrual schedule, permissible usage for PTO, and procedures for rolling over or cashing out PTO.  The handbook also contained general disclaimers stating that the handbook should not be construed as contract terms and was not intended to create an express or implied contract of employment.  In Hall, a former employee sued for breach of contract when he was terminated and his request for PTO payout denied.  The ex-employee claimed that the PTO policy contractually obligated the City to pay out his accrued and unused PTO.

Upon review, the Minnesota Supreme Court said that a “general reservation of an employer’s ability to modify a handbook or depart from the handbook’s procedures does not prevent the formation of a unilateral employment contract.” There, the PTO program included in the handbook contained sufficiently definite and detailed terms as to create an offer for a unilateral contract for PTO. The Court narrowly looked at the questions at issue and did not address the impact of a general disclaimer on non-compensation conditions of employment. It even went so far to say that “well-drafted, specific, disclaimers can prevent the formation of contractual rights stemming from employee handbook provisions, including provisions concerning  PTO.”

Ultimately, the Court remanded the case to the district court to determine whether a contract existed, and whether the City owes the former employee a payout pursuant to its own PTO policy.  Employers should review disclaimers in handbooks and ensure that they are appropriately written to achieve the desired results.

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