Privacy Policy Lessons from Handbook Cases

Just as the hottest practical topic in contract law during the 1990s was whether corporate employee handbooks could be enforced as contracts, among today’s hot practical contract law topics is whether corporate policy statements, especially on the internet, can be enforced as contracts.  We’re in the beginning of a struggle on that point, whose dynamic echoes that of the handbook cases of two decades ago—and we might learn something from them.

Before the 1980s, the common law of contracts was clear that employee handbooks weren’t offers to form contracts and wouldn’t be binding anyway for lack of consideration. Policy statements about employee retention, even those promising not to discharge employees except for cause, weren’t enforceable.

As human resources departments spruced up those handbooks through the late 1980s and early 1990s, to express firmer commitments in seductive language, and the documents proliferated nationally, the doctrine shifted. The handbooks could, if reasonably manifesting such a signal, be offers to form unilateral contracts with employees. By reporting for work every day, employees could be seen to take the action necessary to form a unilateral contract on the handbook’s terms, supplying requisite consideration.

From this shifting legal landscape, employers got the message and took care in handbooks to say what they meant and to mean what they said. The glossy boastful brochures returned to the form of practical utilitarian guides, not dangling inducements of job security that might, for example, discourage unionization.

Courts struggled during this process of changing the landscape with traditional doctrines used to evaluate whether to enforce promises as contracts. That meant new encounters with old contract law tools of offer, acceptance, consideration, mutual assent, definiteness, consideration, even questions about whether employees incurred cognizable damages by staying employed. Contract law’s tools worked because the employee manuals common before the 1980s didn’t warrant enforcement as contracts, but many of the 1990s did.

An eerily similar shift is afoot concerning corporate policies about privacy, especially on-line. The same tools are in play: statements that don’t look like offers law’s seen before; trouble evaluating how they’d be accepted or relied on; difficulty finding sufficient definiteness or requisite consideration; and doubt about whether damages result. Thus courts have classified corporate policies as lacking manifestations of willingness to enter into a bargain (so they’re not offers); not signaling by reading them an intention to form a bargain (so acceptance doesn’t occur); terms too vague for a bargain (lacking mutual assent and insufficiently definite); terms not bargained for (lack of consideration) or relied upon (people don’t read them); and damages are elusive or conjectural (what’s the economic value of lost privacy, anyway?)

As courts struggle with this, they are forging pathways to recognize policies as part of contracts, appreciating that reliance can exist even without reading the fine print, and, perhaps unwittingly, exposing vividly the relation between the old handbook battles and today’s privacy disputation.  As the stakes rise, and damages become more obvious, and it becomes easier to see that policy-posters do intend to induce particular and valuable behavior, you’ll see contract law’s grand tools come to the rescue.   But courts will need a nudge, and I think they’re getting it.

A harbinger of the path forward appears in Meyer v. Christie, No. 07-2230, 2007 WL 3120695 (D.Kan.  2007) (including distinguishing leading 1976 handbook case, followed in the mid-1990s struggle).  Other cases supporting various assertions in this post are: Smith v. Trusted Universal Standards in Electronics Transactions Inc., 2010 WL 1799456 (D. N.J. 2010) (policies part of contract but no breach occurred); Cherny v. Emigrant Bank, 604 F.Supp.2d 605 (S.D.N.Y. 2009) (a contract maybe, but no damages); In re Jetblue Airways Corp. Privacy Litig., 379 F.Supp.2d 299, 325 (E.D.N.Y. 2005) (reliance possible without insisting on literacy); Dyer v. Northwest Airlines Corp., 334 F.Supp.2d 1196 (D.N.D. 2004) (old-fashioned myopia of the possibility).

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