Legal Insight: The Employee Handbook

January 5, 2012
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How can it legally protect and improve your business?





“Point 1 - Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.” – W. Edwards Deming



Similar to a quality manual, an employee handbook can improve employee relations and efficiency, ensure consistent treatment of personnel and legally protect an organization.

Employees (and independent contractors) want to know what managers expect of them, what their rights are and what is prohibited. By clearly communicating their expectations to personnel, managers are more likely to obtain compliance.

Within an organization, important policy information may be scattered throughout a variety of interoffice memoranda, e-mails, bulletins, newsletters and pamphlets. New employees will not have access to all of the old materials. Employees may not have access to policy information provided to managers. One department may not have access to information provided to another. This creates misunderstanding.

Without a guide, employees will ask repetitive questions about company policy, forcing managers and personnel departments to answer similar questions. The answers may be inconsistent. If policies aren’t written down, managerial and employee turnover results in a loss of institutional knowledge. Some employees may be too embarrassed or intimidated to ask questions. Thus, some employees resort to using their best judgment. They may simply do what they perceive everyone else to be doing. This can lead to further inconsistency and serious problems.

Creating a handbook does not have to be difficult. A skilled attorney can help managers develop one that meets the organization’s workplace needs. The process of drafting a handbook forces managers to think critically about jobs and employment relationships. They should consider which personnel policies work and which should be improved. Soliciting employee ideas and feedback through interviews and questionnaires can be valuable.

Top executives and managers make a handbook authoritative by explicitly endorsing it with their signatures and creating a culture that uses and follows it. The handbook must describe its purpose. Management then outlines all important personnel policies including those with respect to: hiring; hours; compensation and incentives; benefits; vacation and personal time; performance; training; workplace behavior; privacy; trade secrets; and grievances, among others.

Handbooks also legally protect employers. Some labor and employment laws require employers to provide employees with certain information. Handbooks are an obvious place to include these policies.

Management should include a disclaimer that the handbook is not a contract and does not create one. Nearly every state recognizes the doctrine of “employment at will,” which gives employers the right to terminate employment at any time for any reason. (Montana provides employees with special protections against severance. In all states, employees may always quit because the 13th amendment to the Constitution prohibits involuntary servitude.)

On the other hand, if an employee and employer have a contract, the employer cannot simply fire the employee. Severing an employee before the expiration of the contract would result in a breach of the contract, thereby making the employer liable for damages. A poorly drafted handbook may inadvertently create an implied contract by promising that employees will not be severed without a legitimate business reason or if they are doing good work. Unrealistic promises, even if well-intentioned, can create legal and business problems for organizations.

For a handbook to be effective, an organization must consistently use it. If it remains on the bookshelf gathering dust, it won’t do any good. It must be written in plain English so employees and managers understand what the policies mean. In a misguided attempt to save money, some organizations simply copy another company’s handbook and change the title page. To be effective, a handbook must be tailored to a company’s specific needs. It also must be periodically audited and updated. It will evolve with the needs of the organization and improve it.



Disclaimer: This column is for informational purposes and does not constitute legal advice.



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