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Use of Employee Handbooks/Personnel Manuals when Litigating Sexual Harassment, Discrimination and Contract Claims

John D. Winer, Esq.

San Francisco, California


The use of employee handbooks/personnel manuals can help make or break a plaintiff’s sexual harassment, discrimination and breach of contract claim. Both sides will generally find useful information in these documents; however, the defense is obviously at an advantage because it created the handbook. Still, it is imperative that a plaintiff’s attorney closely examine handbooks and manuals and, when relevant, consider hiring an expert to critique the policies and procedures contained in the manuals.


You should ask a potential client to bring to the initial interview any and all employee handbooks and personnel manuals. If you do not ask, rarely will a potential client think to bring a handbook or manual to an initial interview. Frequently, clients will not even remember reading a handbook or manual and almost as frequently, they will have misplaced them over time.

If a client does not have in his or her possession a handbook, but believes that he or she did have one at one time, you should ask the client to obtain a copy from a friend or this should be one of the first items you ask for in discovery if you bring a lawsuit.


It is entirely possible that a handbook, manual or some similar document will contain a signed pre-employment arbitration clause. If the arbitration clause is fair and not unconscionable, you may not be entitled to bring your case in superior court. Some cases, particularly sexual harassment and discrimination cases, may have far lower value in arbitration than in a jury trial; thus, it is critical that you learn of the existence of an arbitration agreement right away so that you can decide whether the case is worth handling at all, and you can make sure that the case is litigated in the proper venue.


Plaintiff attorneys need to carefully examine handbooks and manuals to ascertain if there is any language which would give rise to or help maintain an implied contract claim or provide a basis for a claim of the breach of the implied covenant of good faith and fair dealing.

Typically, plaintiff attorneys will want to look for language essentially guaranteeing job security, language which would indicate that an employee could only be terminated for good cause, or language assuring that there will be some form of progressive discipline and warning before termination. The California Supreme Court in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 at 681-682, made it clear that “the trier of fact can infer an agreement to limit the grounds for termination based on the employee’s reasonable reliance on the company’s personnel manual or policies.”

The California Supreme Court conceded in Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317 that “when an employer promulgates formal personnel policies and procedures in handbooks, manuals and memoranda disseminated to employees, a strong inference may arise that the employer intended workers to rely on these policies as terms and conditions of their employment, and that employees did reasonably so rely. … For these reasons, logic suggests that the employer may intend, and employees may understand, such generally promulgated policies as a systematic approach to personnel relations, providing a clear and uniform alternative to haphazard practices, understandings and arrangements within the company. Therefore where the employer has chosen to maintain such written policies, the terms they describe must be a central focus of the contractual analysis.”

Therefore, information contained in employee handbooks and manuals can provide powerful evidence of implied contract.

However, two California Supreme cases decided in 2000 limit the effectiveness of the utilization of employee handbooks to establish an implied contract.

First, Guz, cited above, in a complicated ruling, basically found that language of job security contained in a personnel manual did not, in and of itself, create a contract that would prevent defendant employer from terminating an employee for reasons which would be consistent with other company policies. The court states at page 347 “We conclude that … Bechtel’s written personnel documents – which, as we have seen, are the sole source of any contractual limits on Bechtel’s rights to terminate Guz – impose no restrictions on the company’s prerogatives to eliminate jobs or work units, for any or no reason, even if this would lead to the release of existing employees such as Guz.”

In the Guz case, Bechtel had a written personnel policy stating that “Bechtel employees have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel.” Typically, employers rely on this type of language, or even more direct “at will” language to take the position that they have the absolute right to terminate any employee at any time for any non-discriminatory reason. However, in Guz, the California Supreme Court found that this language, in and of itself, did not prevent the possibility of the finding of an implied contract based upon other language contained in policies and handbooks. The Guz Court states:

“Moreover, the specific language of Bechtel’s disclaimer, stating that employees had no contracts “guaranteeing … continuous service” and were terminable at Bechtel’s “option” did not foreclose an understanding between Bechtel and its workers that Bechtel would make its termination decisions within the limits of its written personnel rules. Given these ambiguities, a fact finder could rationally determine that despite its general disclaimer, Bechtel had bound itself to the specific provisions of these documents.”

Another significant California Supreme Court case limiting the effectiveness of the use of employee handbooks/personnel manuals to establish implied contract claims was Asmus v. Pacific Bell (2000) 23 Cal.4th 1.

The Asmus case involved a 1986 Pacific Bell policy memorandum entitled the “Management Employment Security Policy,” which stated:

“It will be Pacific Bell’s policy to offer all management employees who continue to meet our changing business expectations employment security through reassignment to and retraining for other management positions, even if their present jobs are eliminated. This policy will be maintained so long as there is no change that will materially affect Pacific Bell’s business plan achievement.”

In January 1990, Pacific Bell notified its managers that industry conditions could force it to discontinue its management employees’ security policy.

Nearly two years later, in October 1991, Pacific Bell announced it would terminate its Management Employment Security Policy on April 1, 1992 so that it could achieve more flexibility in conducting its business and compete more successfully in the marketplace.

Plaintiffs in the Asmus case were 60 Pacific Bell management employees who chose to remain with the company after the policy changed in 1992 and eventually were separated from the company.

The California Supreme Court ruled that under contract theory, an employer could terminate a unilateral contract of indefinite duration, so long as its action occurred after a reasonable time and was subject to prescribed or implied limitations, including reasonable notice and preservation of vested benefits.

The Court concluded that plaintiffs enjoyed the benefits of the policy for a reasonable time period, and defendant gave its employees reasonable notice of its intent to terminate the policy and the employees preserved their vested benefits.

Thus, when handling an employment case, plaintiff’s attorney must not only look for the original handbook and personnel manual, but must receive copies of all subsequent written policy declarations.


Ground zero in any sexual harassment or discrimination case involving a large company will be the no tolerance sexual harassment and/or discrimination policies located in almost every employee handbook.

The defense will inevitably claim that the policies contained in its handbook were, one, sufficient to prevent a hostile environment from occurring; two, if the perpetrator had complied with the terms of the sexual harassment/discrimination policy, there would never have been a problem; and, three, if plaintiff had followed reporting policies contained in the handbook, there would not have been a problem or the problem would have been quickly solved. There is no question but that employers, their attorneys and human resources departments have improved the language contained in the no tolerance sexual harassment/discrimination policies over time. Particularly, the language of “what constitutes” sexual harassment or discrimination has been fine tuned by most companies to keep up with California and Federal law.

However, often the policies are flawed and plaintiff can consider hiring a human resource expert to help point out the flaws to a trier of fact.

Frequently the policies are extraordinarily inadequate when it comes to “the reporting” requirements and procedures.

Sometimes, the written policies do not guarantee confidentiality, nor they do guarantee confidentiality, but the company breaches its policy in its investigation by not maintaining the victim’s confidentiality.

Large problems can result from policies which require the victim to report the harassment/discrimination to his/her supervisor or his/her supervisor’s supervisor. This method of reporting is grossly inadequate when the supervisor or sometimes even the supervisor’s supervisor is perpetrating the harassment/discrimination. Further, employees are generally terrified of the prospect of reporting the misconduct of their supervisor to his/her supervisor’s boss. They almost always feel that the supervisor’s supervisor will protect the supervisor over the employee and oftentimes they will perceive the supervisor and his/her boss as being “buddies” who will protect each other.

Also, we have seen many cases in this reporting system in which the employee does properly report to the supervisor or supervisor’s supervisor and the complaints are downplayed or ignored, because, inevitably, managers have received very little if any sexual harassment/discrimination training and are busy with other matters.

Many handbooks require reporting of sexual harassment/discrimination to the human resource department. This is a better, but not always effective policy.

First of all, in many geographically decentralized companies there are no local human resource departments, so that an employee would be required to report sexual harassment/discrimination to a faceless person in corporate headquarters whom they have never met. In many companies, employees do not even know that there is a human resource department at corporate headquarters. If they are aware of the existence of a human resource department, employees will often think that the HR department handles only pay and vacation issues and there will not be a perception that human resources handles personnel issues.

Even when a company has local human resource personnel, frequently they are lower level employees, often lower level than the victim himself/herself, and victim feels that the human resource personnel would not be capable of protecting them against a perpetrator who is higher up in management.

Unfortunately, most companies do not want to spend a great deal of money on highly paid human resource executives because the human resources department does not produce revenue for the company. Thus, the effectiveness of anti-sexual harassment/discrimination policies, their dissemination and enforcement, as well as the effectiveness of a human resource department can frequently be called into question by plaintiff in a sexual harassment or discrimination case. (1)

1. For a discussion of litigation techniques and principles in sexual harassment and discrimination cases, see the following articles previously published by this author:

  • How to Build a Seven-Figure Sexual Harassment Verdict or Settlement,” Consumer Attorneys of California 35th Annual Tahoe Syllabus (2000)
  • How to achieve a Significant Verdict in a Sexual Harassment Case,” Consumer Attorneys of California Forum Magazine, May/June (2000)
  • Estimating and Proving Employment Damages — Trial of the Sexual Harassment Case,” Consumer attorneys of California 38th Annual Convention Syllabus (1999)
  • Trial of a Sexual Harassment Case,” Alameda/Contra Costa County Trial Lawyer Employment Law Syllabus (1999)
  • Trial of a Sexual Harassment Case,” Consumer Attorneys of California 33rd Annual Tahoe Syllabus (1998)
  • Issues Relating to Sexual Harassment from a Plaintiff’s Attorney’s Perspective,” Northern California Fraud Investigators Association Annual Training Seminar Syllabus (1998)
  • Trial of a Sexual Harassment Case,” San Francisco Trial Layers Association Employment Law Syllabus (1997)
  • Ten Factors in Analyzing Damages in Sexual Harassment, Therapist Abuse and Employment Discrimination Cases,” CAOC 32nd Annual Tahoe Seminar Syllabus (1997)
  • Arguing Damages Flowing From Sexual Torts,” San Francisco Trial Lawyers “Sexual Tort” Syllabus (1997)
  • Arguing Damages Flowing From Sexual Torts and Mild Traumatic Brain Injuries,” Consumer Attorneys of California 36th Annual Convention (1997)
  • Maximizing Emotional Distress in Employment Cases,” Sexual Harassment and Discrimination Reporters (1996)

This article was authored by John D. Winer. Winer, Burritt & Scott, LLP specializes in catastrophic physical, psychological injury cases and wrongful death cases. The firm handles a significant number of catastrophic injury, traumatic brain injury, elder abuse, sexual abuse and harassment, post traumatic stress disorder and psychotherapist abuse cases. Please visit for more information or for a free online consultation.

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