September 26, 2022

Volume XII, Number 269


September 23, 2022

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Michigan Court of Appeals Decision Cautions Need for Review of Arbitration Agreements in Employee Handbooks

On June 23, 2022, the Michigan Court of Appeals ruled that an arbitration agreement contained in a personnel manual was not enforceable because the associated disclaimer indicated that the manual did not create a “contract of employment.” This decision is a reminder that employers should use free-standing agreements related to certain employee obligations (e.g., arbitration, non-competition, confidentiality), to maintain their enforceability.

Two former employees of Catholic Charities of Shiawassee and Genesee Counties (“Catholic Charities”) sued the organization and their supervisor, alleging race-based employment discrimination and retaliation. The trial court dismissed, finding that the parties had entered into binding arbitration agreements.

The Catholic Charities personnel policy manual contained an arbitration “agreement,” signed by both plaintiffs, which stated an intent to arbitrate employment-related claims and specified the rules and procedures that would apply. The provisions outlining the arbitration procedure included a disclaimer, providing that “[t]he provisions of this arbitration procedure does [sic] not create any contract of employment, express or otherwise, and does not, in any way, alter the ‘at-will’ employment relationship between the parties.” Plaintiffs argued that the parties were not bound by their arbitration agreements because the disclaimer demonstrated that defendants did not intend to be bound. Defendants countered that the arbitration agreement was a separate agreement distinct from the rest of the policy manual.

The Court of Appeals emphasized that, under Michigan law, a relevant consideration in determining whether employees are bound by an employment manual’s arbitration provision is whether the manual contains a disclaimer expressing that its provisions do not form any contractual relationship. Analogizing these facts with one of its prior decisions, the Court of Appeals ruled that the disclaimer’s language providing that the manual did not create any “contract of employment,” was "a manifestation of defendants" intent not to be bound by the arbitration agreements.” The Court of Appeals reversed the trial court’s decision granting summary disposition.

While this unpublished decision does not signal a change under Michigan law, it is a cautionary reminder that merely including arbitration-related provisions in employee handbooks might not be sufficient. As in Catholic Charities, such “agreements” could be construed as non-binding policies or general communications, especially where the handbook contains the common disclaimer that it is not a binding contract. 

© 2022 Miller, Canfield, Paddock and Stone PLC National Law Review, Volume XII, Number 214

About this Author

Erica L. Jilek Labor & Employment Attorney Miller, Canfield, Paddock and Stone Detroit, MI

Erica Jilek is an associate in Miller Canfield's Employment and Labor Group. She graduated with honors from Wayne State University Law School, where she was Senior Articles Editor of the Wayne Law Review, and a member of both the Women's Law Caucus and the Student Chapter of the American Civil Liberties Union. She earned her B.S. with honors in Political Science from Central Michigan University.

Jennifer L. Sabourin Employment Attorney Miller Canfield

Jennifer Sabourin advocates on behalf of employers in every step of the employment relationship. She makes it a priority to learn her clients' business in order to find the right balance of advice and counsel that allows them to meet their business needs, while also remaining compliant with state and federal employment laws. Jennifer defends employers in litigation and agency matters across the country.

She is experienced in providing national training for hourly, management, and executive-level employees; drafting employee handbooks, policies...

Brian Schwartz Employment Attorney Miller Canfield Law Firm

Brian Schwartz represents management in various aspects of labor and employment counseling and litigation.

His practice focuses on defending single-plaintiff and class-action lawsuits involving retiree health benefit disputes, employment discrimination (race, gender, and disability discrimination), harassment, and retaliation claims, as well as wage and hour claims, FMLA claims, ERISA disputes, Title IX claims, Freedom of Information Act and due process lawsuits. He also counsels employers on drafting enforceable non-competition, non-solicitation and confidentiality...