The Peters' Principle: Handbooks Speak Louder than Words

This month, the U.S. Court of Appeals for the Seventh Circuit (Indiana, Illinois and Wisconsin) handed down a potentially far-reaching decision for employers to strongly consider. Bottom line: what you don't say in your employee handbook can and will be used against you.

In Peters v. Gilead Sciences, Inc., our Seventh Circuit determined that FMLA eligibility language in an employee handbook may be sufficient to create an enforceable contract under Indiana law. The handbook provision at issue in this case stated that an employee is eligible for family and medical leave once that employee works atleast 1,250 hours during the previous 12-month period. No mention was made of the statutory FMLA requirement that the employer employ at least 50 employees working within 75-miles of the worksite. Gilead Science was based in California and Mr. Peters worked out of his home in Indianapolis. Because the 50/75 requirement was not met, Peters was ineligible for leave as a statutory matter but that is not what the handbook policy stated.

Eligible or not, Mr. Peters took his medical leave per the handbook policy, but he was replaced while on leave. Gilead informed Peters of this action and offered him a job as a senior sales analyst in California. Gilead terminated Peters when he failed to respond to the job offer. Mr. Peters filed suit and the U.S. District Court below granted summary judgment to Gilead on all claims. Mr. Peters then appealed.

The Seventh Circuit reversed and remanded the case back to the lower court to consider whether the FMLA handbook policy created a binding contract under Indiana law. In doing so, the Seventh Circuit found Indiana law lacking on the subject. Again, bottom line: review at a minimum the FMLA language in your handbook or employee manual to ensure it is not more generous than required. Second, consider tightening the language in your policy manual's introduction so as to avoid what may become known as the "Peters' Principle," i.e., what you don't say in your employee handbook can and will be used against you.

Mark W. Ford is a partner in the Labor & Employment group of Ice Miller. His primary areas of practice are in employment discrimination and defense, collective bargaining, arbitration, and personnel advice.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.