Employee Handbook
A well developed and maintained employee handbook can protect the best interests of the company. Used to communicate important company policies and procedures including the company’s legal obligations, the handbook, in clear language, sets out the company’s expectations for employees and the benefits and support the employees can expect from the company. The handbook tells the story of the company and introduces employees to the company’s culture, core values, mission, and market served, and helps employees understand their place in the organization. It sets the standard for the employer-employee relationship by communicating employer and employee responsibilities, the company’s legal obligations, and the protections of employee rights.
The handbook provides guidelines to address a variety of employment issues to consistently apply appropriate actions to ensure all employees are treated equally and fairly in accordance with company policies, practices and applicable laws.
A legally compliant, current employee handbook can provide a first line of defense against employee lawsuits, such as claims of wrongful termination, discrimination and harassment. The handbook can show how the employer exercised reasonable care to inform employees of the company’s policies and practices and made available company support resources to help employees with questions, concerns, and assistance. Employees in turn acknowledged receipt of the handbook, their understanding of company policies and procedures, and agreed to follow terms and conditions of employment as set by the company.
There can be a possible risk that an employee handbook can create a legal issue for employers and employees. The issue is whether employee handbooks are legally binding. If the language in the handbook can be interpreted as promises or guarantees made to employees, employers could be legally bound to those promises whether or not that was the intention of the employers.
Employers should ensure the employee handbook contains specific language that the handbook is not to be considered a binding contract. If the handbook does not directly address the issue of contract, then the employee handbook could potentially be considered a legally binding document between employer and employee. Due diligence by employers is required to determine if there is applicable state law on this matter and how it is addressed.
The language used in the handbook to detail company policies and procedures can affect the interpretation of those policies and the employer’s intent regarding those policies. The choice of words used in policy statements could be the difference in determining whether the policies are considered legally binding. For example, the words “will”, “shall” or ““must” are definitive by nature and can be interpreted quite differently than words such as “may”, “could”, or “might”. The latter choice of words is more suggestive of a best practice of the company without implying a contractual obligation to perform a certain task.
Employers should review the language used in the handbook and revise the language accordingly for clarification of employer intent. Without the proper language, an employer could be vulnerable to employee lawsuits alleging that the employee handbook is indeed a legally binding contract. Legal consultation for document review and revision may be an appropriate best practice to protect the company from this potential risk. It is always a recommended best practice to have a legal professional review a company’s employee handbook before it is published and distributed to employees.
There is a difference between a business policy and a business contract. Business contracts are legal documents detailing terms and conditions of an agreement between the business and a client/employee. Business policies are rules and regulations drafted to govern business operations in a consistent manner.
The difference between business policies and business contracts is also a matter of enforceability. If a party to a contract breaches the contract, the breeching party can be held liable for damages. A policy is regarded as a proposed course of action, not a law. Unless a business policy has been designated as an essential term of a business contract, a policy is generally not legally enforceable.
The use of disclaimers in employee handbooks adds to clarification of company policies and procedures and can help prevent liability claims, or misunderstandings by employees. The issue of at-will employment should be stated in the employee handbook to make sure employees are noticed regarding company policy. The statement may use language such as: “either the company or employee can terminate the relationship at any time, with or without notice, with or without reason, to the extent allowed by law.” Employers may want to check with a legal professional to ensure correct and appropriate language and notification requirements.
Many employee handbooks include a disclaimer that the handbook is not to be construed as a legally binding employment agreement. The handbook is a reference manual of company policies, key procedures, benefits and guidelines and does not make any promise for continued employment. The handbook does not create a contract, either express or implied, between the employer and any employee and does not guarantee employment for any specific term.
An employee handbook may have a disclaimer regarding previous policy documents. The disclaimer may use language to the effect that this employee handbook supersedes and replaces all previous policies and procedures. This may include but is not limited to all written policies or memoranda that may have been issued on subjects covered in this handbook.
It is important to note in a disclaimer that the policies and procedures in the handbook may be subject to change as new laws are issued and current laws revised. To that end, the policies included in the handbook are guidelines only and are subject to change as the company deems necessary and appropriate. Employees will receive notifications from time to time of new policies or modified policies, procedures, benefits, or programs.
To protect the business, it is important that employees are required to acknowledge receipt of the employee handbook. This is done by their signature and date on an acknowledgement page. The signed acknowledgement should be kept in the employee’s personnel file. The employee by signature and date also acknowledges that he/she is aware that the referenced employee handbook contains the policies and procedures by which the company conducts its business. The acknowledgement should also state that the employee understands his/her responsibility to read the handbook, familiarize himself/herself with the contents, and follow all policies and procedures, terms and condition of the employer as set forth in this handbook or elsewhere.
As new policies are created and old ones revised or deleted, the handbook should be updated to reflect the changes. Whether the handbook format is a hard copy or online digital file, the entire handbook should be reviewed at least annually, revised as needed, and re-issued as applicable. All employees should receive training on updates to the handbook for new and revised policies and procedures as well as new and revised employment laws. Each employee should sign a new acknowledges of receipt of changes to the handbook and the acknowledgement filed accordingly in the employee’s file.
Employment law frequently changes and updating rules and regulations at the federal, state and local level is important to reduce liability risk and financial harm from employee claims. Outdated or incomplete company policies can also create liability regarding legal compliances.
A key point for employers in drafting an employee handbook is that the handbook needs to reflect the scope and manner in which company conducts business. If an issue related to business operations is important to the company, there should be a company policy that addresses that issue, including how that policy will be enforced.
The employee handbook provides employees with the information they need to perform their work, utilize company benefits, and protect their legal rights. The employee handbook documents the company’s commitment to meet legal obligations and provide a safe workplace for employees with fair, equal, non-discriminatory policies and procedures.