Employee Handbook and Policies (Part I—Legal Considerations)

August 30, 2016

Employee handbookAlmost from the very beginning each company intentionally and unknowingly develops a set of policies and practices relating to its relationship with its employees.  Unwritten rules and customs evolve regarding employee conduct and these are eventually supplemented by formally established policies, such as published rules and procedures regarding working hours and recording work time, overtime, holidays and vacations, pay and benefits, disciplinary actions and termination.  Since employees are obviously essential to any business, companies typically try and avoid misunderstanding by laying out the rules of their relationship with their employees through personnel handbooks, which are also called “employee handbooks”, that supplements verbal explanations of company rules and policies given to new employees upon orientation; provides a ready reference on rules and procedures for all employees, even those who have been with a the company for a significant amount of time; and ensures that all employees receive essential information regarding the company and the respective rights and obligations of the company and its employees in a complete, accurate, and standardized form.  In addition, a properly-written employee handbook can reduce disputes and help protect employers from costly litigation, build a sense of company identify among employees, and showcase reasons why the company should be considered a good place to work.  This is the first of three posts this week on how business counselors can assist their clients in preparing employee handbooks and policies.

Employers are not required to have a handbook. However, if they do, they’re generally free to pick the rules to include in their handbook. Typically, personnel handbooks describe the employer-employee relationship, from hiring until termination; tell employees what is expected from them; and tell employees what they may expect from the employer.  If employers adopt a handbook, they must train their managers about their rules and the procedures for implementing those rules. Unless the policies are enforced as written, they are just “good intentions.”  Besides handbooks, some employers also have a written personnel policy manual. Policy manuals are usually designed only for managers and used to guide them about implementing company policies. In contrast, personnel handbooks are usually given to all employees.

When creating and administering employee handbooks and policies it is important to understand the relevant legal considerations, strategies for formatting and contents, equal opportunity policies, pay and benefits policies, methods for laying out standards of conduct, time off and leave policies, “on the job” policies, safety and health policies and Internet use and social networking policies.  In order for employee handbooks and policies to be effective, the drafter must have a good working knowledge of the fundamental legal principles associated with the employer-employee relationship and law and practice in specific areas such as recruitment and hiring, discipline and termination, and discrimination and harassment.  In addition, it is not sufficient to write and distribute handbooks and policies; the contents of those documents must have practical and “real world” meaning in the workplace and should be followed by executives, managers and other supervisors.  Plans should always be made to educate and train anyone in a supervisory role about their responsibilities under employee handbooks and policies.

Gutterman WLEC bannerWhile employee handbooks and policies can, and often do, relate to issues other than laws and regulations, such as organizational culture and communications among employees, most of the documents are indeed written to support compliance with equal employment opportunity laws, laws and cases pertaining to sexual harassment, the Americans with Disabilities Act, the Occupational Safety and Health Act, wage and hour laws, the National Labor Relations Act and recordkeeping requirements.  Other legal issues of concern in the workplace context include prevention of workplace violence, protecting the principle of “at will” employment and workplace privacy and confidentiality.  All of the information in employee handbooks and policies must conform to the law and be presented in a way that satisfies any specific legal requirements as to form and/or manner of distribution.  Reference should made to the language included in statutes regarding the contents of notices that must be provided to employees regarding various aspects of the employment relationship and a review of relevant cases should also be made since judges are often asked to comment on the sufficiency of employer policies and procedures when deciding employment-related claims.

While there is no standard form of employee handbook, and employers have substantial latitude in selecting the policies and rules that will be included in their handbooks, the provisions that are included in the handbook must comply with the current version of applicable laws and address all of the issues that are relevant to the company’s specific line of business. Employment laws and regulations, as well as general norms and expectations regarding the workplace environment, are constantly changing and this means that employers must continuously review their handbooks to make sure they are up to date and, if necessary, make appropriate modifications.  As noted above, employers are not required to have an employment handbook and the decision as to whether or not to have one should be made after considering various advantages and disadvantages.  First of all, employers should not create a handbook unless they are committed to writing it properly and supporting it through training and leadership from the top of the organization.  A poorly written handbook is arguably worse than having no handbook at all since it can only lead to problems that result in unnecessary expense for the company and undermining of employee morale.  Employees that do use well-written employee handbooks will have employees who sense that the employer is fair and treats all employees equally, that know what is expected from them and what they should expect from the employer, and that will be less likely to assert that they were unaware of workplace rules and their legal obligations.  Employee handbooks are an opportunity for employers to showcase their benefits package and explain company policies to employees in a clear and concise manner that will hopefully reduce misunderstandings and provide both the employer and employees with a benchmark from which disciplinary actions can be taken and objective decisions can be made about interpretations of the policies.

However, employee handbooks will raise serious issues for the company if the handbook contains rules that are confusing or ambiguous, implies that employees intended to be “at will” have some form of job security, or fails to reserve the right to discipline or terminate employees or modify the handbook at any time.  In addition, of course, the value of an employee handbook depends upon company managers following the rules that have been laid out in the handbook.  For example, if violations of company policies have been ignored by managers, most courts will probably determine that the policy has been waived and find that the employee was unjustly disciplined or dismissed unless the policy is formally “reinstated” by a firm and clear warning.  In addition, if policies are applied in a discriminatory manner by company managers this will also result in adverse legal results to the employer.

The next post will discuss the content and format of employee handbooks and policies. For much more about preparing effective employee handbooks and policies, including a large library of examples, see Gutterman, Business Transactions Solution: Employee Handbooks and Policies (§§174:1 et seq.) on Westlaw.  You can also learn more about preparing employee handbooks and policies by listening to the Business Counselor Institute program on that topic available on demand from West Legal Ed Center.  Go to  https://westlegaledcenter.com/program_guide/course_detail.jsf?videoCourseId=100120308

Titles by Alan Gutterman