Handbook Anti-Retaliation Policy Does Not Create An Enforceable Contract Right Where Handbook Affirms At-Will Employment

In the case of Scott  v. Merck & Co, Incorporated (Fourth Circuit, Nov 2012), an employee made an internal ethics complaint against her supervisor, claiming that he had violated company business standards by issuing unwarranted performance evaluations and improvement plans.  As part of its published code of conduct, Merck had a policy that stated: “[anyone] who raises a business practice issue will be protected from Retaliation,” and “[t]he fact that an employee has raised concerns in good faith, or has provided information in an investigation, cannot be a basis for denial of benefits, termination, demotion, suspension, threats, harassment or discrimination.” Following her termination, the employee claim that she was terminated in retaliation for reporting business ethics concerns, as protected by the company’s policies.

Notably, the employee did not claim violations of specific whistle-blower, discrimination or or anti-retaliation laws.  Rather, she asserted that the express terms of the company policy created an contractual right not to be subjected to retaliation.   Merck countered that its non-contract disclaimer and affirmations of at-will employment defined the employment relationship, precluding any assertion that company policies create enforceable contract rights.

The U.S. District Court in Maryland initially agreed with the employee, upholding a substantial jury verdict in her favor.  However, on appeal, the Fourth Circuit now reverses, holding that Merck’s handbook’s disclaimers and affirmations of at-will employment control the nature of the employment relationship.  The ruling emphasizes the importance of using clear and unambiguous disclaimers in conjunction with the publication of any employer handbook or policy, affirming an at-will relationship and reserving the right to change or modify policies at the employer’s discretion.