A. Flexibility to Alter Benefits

Companies with written personnel policies should always reserve the right to alter or amend promises of benefits at any time, with or without notice, for maximum protection. Such a disclaimer should appear in bold, conspicuous language in all manuals and written policy statements.

The advantages of following this strategy can be great. In one recent case, a federal appeals court upheld the validity of a "reserva- tion clause" in an employee handbook that allowed company-wide discretion to alter benefits without notice. A trial court had decided the case in the employee's favor, ruling that the company's change of a policy one day before it would have benefited a terminated worker violated ERISA. However, the appeals court reversed the decision in favor of the company, stating that although employees have the right to rely on statements concerning health benefits in company handbooks and manuals, nothing in ERISA prevents a company from changing such benefits, even suddenly, when the manual specifically reserves the right to do so.

TIP: A petition was filed seeking a rehearing of the case and its application to your company depends on the unique facts of each situation. However, legal precedent suggests that employers may change benefits provided this is made clear beforehand in a company manual. Speak to competent legal counsel and review your company handbook or policy manual immediately before inserting useful language where necessary.

Counsel Comment #39: Reserve the right to make policy changes in manuals before a change is announced. The more rights reserved in the manual, the better. For example, it is best to state that management reserves the right, in its sole discretion, to determine vacation time and employees must give advance notice, not less than one month, before vacations can be granted. However, avoid making any changes in bad faith (e.g., the temporary suspension of a discharge-for-cause policy to facilitate the firing of a particular employee in contravention of that policy) because the right to amend policies in bad faith or other non-justifiable situations may not be acceptable.