Employee handbooks are so commonplace and have become so standardized that many employers have fallen into the trap of sticking them in a drawer and forgetting about them. The problem is that labor and employment laws continue to change and your handbooks need to keep pace.
The Seventh Circuit's decision in Peters v. Gilead Sciences, Incorporated, 2008 U.S. App. LEXIS 14894 (7th Cir. 2008) is a very recent example of why we are encouraging employers to dust off their handbooks. Peters suffered a shoulder injury while he was employed by Gilead. During his leave of absence, Gilead filled his position with another employee. When Peters returned to work, Gilead offered him a different position. Peters declined and Gilead terminated his employment.
Peters filed suit alleging a violation of the FMLA and an Indiana common law claim for "promissory estoppel" (an equitable remedy that permits enforcement of a promise that lacks the elements of a contract but still induces actual and reasonable reliance on the part of a plaintiff). The FMLA claim was dismissed because Gilead employed less than 50 employees within 75 miles of Peters' worksite. However, the "promissory estoppel" claim survived because Gilead's handbook and letters it sent to Peters stated that family and medical leave would be provided to "all employees" who were employed with Gilead for at least 12 months with a minimum of 1,250 hours worked during the prior 12 months; neither the handbook nor the letters contained any reference to the 50/75 exception. The Court held that there is no reason employers cannot offer FMLA-like leave benefits using eligibility requirements less restrictive than those in the FMLA and that is what Gilead did.
The moral of this story is simple. The "no contract" disclaimer in your handbook is great. But statements in your handbook and other communications to employees should be reviewed by legal counsel in order to minimize your exposure to a variety of common law, quasi-contract theories like "promissory estoppel."