Employee handbooks or carefully drafted policies and procedures can be an effective shield for employers. However, if improperly drafted, they can be used by employees against the company.
Some employers prefer a “policies and procedures manual” rather than a “handbook,” believing that a “policies and procedure manual” comprised of separate and distinct policies and procedures on a variety of workplace-related topics may be revised and updated as needed without revising the entire manual. However, a properly drafted “Handbook” does not preclude such revisions.
Regardless of the format of the employer’s policies, decisions should be made early in the process as to the content, form and tone of the handbook or policies and procedures manual. There are also certain “necessary” policies that should be included in any handbook and some policies that should be avoided. Finally, because policies in themselves are not effective without implementation, a plan or set of guidelines for implementation is an important step in the creation of any employee handbook or manual.
Although employee handbooks are not generally enforceable as contractual commitments, they are an effective way to communicate company policies and procedures to employees. However, a poorly drafted handbook may put an employer at risk for unanticipated liability. They can also create new legal obligations by the employer if they are in-artfully drafted.
Thus, the first question an employer should ask is whether it makes sense to have a handbook at all. Smaller companies especially may find that it is just as effective to post and distribute a few necessary policies. And, it may be better to avoid giving employees a handbook that was obviously a “cut-and-paste” job taken from some dissimilar business. The larger the company, the more sense it makes to have a handbook, but even in companies with standardized policies and procedures, it is critical that any handbook reflect the unique circumstances of the particular workplace and the culture of the company. The goal is to be concise with clear language that will assist both the employee and employer in knowing how to operate and interact. This is an area where “one size fits none.” Assuming an employer concludes that having a handbook is in the company’s best interest, the following chapter outlines a recommended process for drafting or revising an employer’s handbook or policies.
Employee handbooks are not required by any federal or state law. An employer has discretion to decide whether it wants to create a handbook or distribute separate policies and procedures when they become advisable. Below, there is discussion on various policy topics often covered in a handbook with explanation of why an employer would or would not include certain topics and how those topics should be incorporated.
Decisions should be made early in the process as to the content, form and tone of the handbook. There are also certain “necessary” policies that should be included in any handbook and some policies that should be avoided. This chapter will discuss issues facing employers with regard to other “recommended” policies that are often found in handbooks, as well as other “optional” policies that employers may choose to include in their policies and procedures manual based upon the needs of the particular company. Finally, because policies are not effective without implementation, a plan or set of guidelines for implementation is an important step in the creation of any employee handbook or manual.
One of the first decisions the employer will need to make is how many policies the handbook will have and how detailed those policies will be. Some employers choose to create a handbook that contains only the bare minimum of policies that are required by the law. Such handbooks provide the employer with some protection in the event of a lawsuit, but are not much use to the company’s employees or managers on a day-to-day basis. Other employers develop lengthy handbooks that contain detailed policies on every subject that affects employees. These handbooks provide managers as well as employees with extensive guidance on company policies. However, the company may find it difficult to keep these detailed policies current and disgruntled employees will find it easier to point out times when the company failed to follow some detail of its policies and argue the employer breached a contract with the employee or argue that the employer’s not following its own policies shows some “pretextual” reasoning in a discrimination case.
Most employers fall somewhere in the middle of these two extremes, issuing handbooks that include policies on a number of personnel issues that are important to the employer (standards of conduct, at-will employment) and to employees (leave, vacation and benefits). In deciding which type of handbook is right for the company, the company management should consider the motivating purpose for the manual and how that purpose is served by the various choices.
All employers must comply with both federal and state employment laws. Whether certain laws apply is often dependent on the number of employees within a particular state or locality. For instance, the Family and Medical Leave Act (FMLA) only applies to employers who employ 50 or more employees each working day during 20 or more weeks in the current or preceding calendar year.
If the employer’s handbook is to apply to multiple states, the employer will have to make some difficult decisions as to the extent that the handbook addresses the laws of the various states. There are three main approaches that employers operating in multiple states use:
Employers must decide whether the handbook will cover the conduct and benefits of managers and executives, as well as nonexempt employees. Will both unionized and non-unionized employees be subject to the handbook (which could raise significant legal concerns if intended for union employees but not negotiated with the union)? To which subsidiaries, affiliates and divisions will the handbook apply? If the employer operates in different states or has different operations (such as a plant, a corporate office and a retail branch) that have very different conditions of work, requirements and benefits, it may make sense to develop separate handbooks for the various locations and/or operations. Of course, separate handbooks are more difficult for the company to administer (especially if it has a centralized human resources organization) and may create perceptions of inequity.
Some state and federal employment laws explicitly require employers to insert particular language in their employee handbooks. In addition, court decisions have made it extremely advisable for employers to include certain policies and language in handbooks that communicate information about the terms and conditions of employment to employees (for instance, policy against discrimination and harassment).
At the beginning of the handbook, most employers include an introductory statement that welcomes employees and explains the purpose and scope of the handbook. It is important that this introduction contain a clear statement that the employee handbook does not create a contract of employment between the employer and any employee and that nothing in the employee handbook alters the at-will status of the company’s employees. This disclaimer is important because courts in some states have held that a handbook can alter the at-will status by creating a contract of employment. To avoid or minimize the likelihood of such a finding, the handbook must contain a prominently placed, heavily emphasized disclaimer.
Note: This disclaimer language also means that the employer cannot expect an employee to be contractually bound by policies either. For instance, assume an employer includes in the handbook some covenant not to compete language or some requirement that an employee pay back some employee benefit (like relocation expenses) if the employee leaves in the initial year of employment. These provision would not be enforceable against the employee because, as the handbook says, it is not a “contract of employment.” Such provisions would need to be put in separate agreements with the employee to be enforceable.
An introductory statement should also explain that the employee handbook contains only basic guidelines for employee conduct and benefits and does not set forth the specific details of each such policy. The introduction will also usually state that the policies in the handbook will be interpreted by the company in its sole discretion and that the company retains the right to apply these policies with some flexibility. Finally, it is a good idea to include language in the introduction that states that this handbook supersedes and replaces all prior written and unwritten policies of the company.
The employer should include an equal employment opportunity statement that it is committed to making all employment decisions without regard to any protected classification, such as race, age and gender. It is important to make sure that all of the classes of employees that are protected under both federal and state employment statutes are listed in this policy. “Service in the uniformed services” is a classification that is often omitted and “disability” should not be referred to by the more dated term of “handicap.” In addition, many employers choose to include the language “and other classifications protected by law” at the end of the list of classifications. This will help protect the employer in the event that a classification is inadvertently omitted, the laws change before the handbook can be amended or the handbook is used in states that protect other classifications of employees.
Every employer should develop and distribute a strong and comprehensive policy prohibiting “unlawful harassment” (as opposed to only sexual harassment) to its employees that:
The harassment policy should prohibit harassment based upon any protected characteristic, including, but not limited to, sex, pregnancy, age, disability, religion, military service, national origin and race. A comprehensive harassment policy that addresses all types of workplace harassment will provide an employer with better protection than a limited sexual harassment policy.
Employers should not promise that complaints of harassment or discrimination will be kept completely confidential. Total confidentiality may not be possible because the company may have to disclose the nature of the allegations (and even the identity of the alleged victim) to the accused or to witnesses in order to investigate those allegations fully. For this reason, the policy should only promise that complaints will be kept confidential “to the extent possible.”
Finally, a harassment policy should give employees at least two different avenues of reporting complaints of harassment. A policy that requires employees to report all complaints of harassment or discrimination to their immediate supervisor could be problematic if the immediate supervisor is the individual who is engaging in the harassment or discrimination. A better approach would be to ask the employee to report such complaints to his or her supervisor or to a specified person in human resources.
In the not-too-distant past, employees were told that they could report unlawful harassment to any supervisor or manager, ensuring that many alternative reporting opportunities were available. Under the current state of the law, however, a better practice is to limit the reporting to a relatively small number of persons, all of whom are trained specifically for receiving and addressing such complaints. Thus, a policy should suggest that an employee report any such complaint to his or her immediate supervisor (the person with whom the employee has the most contact and therefore may feel most comfortable) or to another individual or small group of individuals, trained specifically for that purpose.
Additionally, companies that have operations in several states may want to provide employees with a toll-free number they can call to report complaints of harassment or discrimination.
Although a good employee handbook will explain employees’ at-will status in its introduction, it is a good idea to include a separate “employment at-will policy” as well. In addition to stressing that the handbook does not change the at-will nature of the employment relationship, this policy should also state that no oral or written statements will create a contract of employment.
Social media provisions are fairly new to employers. Given the increasing use of social media and other electronic communications both in and out of work, it is important for employers to set out their requirements and expectations on social media access and use during company time and on company-issued devices (even outside the workplace). Many employers are using social media and other platforms for communicating company information to consumers and the public. These actions can blur the lines on what is appropriate and what is expected.
Employers should inform employees that they do not have a right to privacy if they access social media sites and services on devices provided to them by their employer or on employer accounts. Employers should disclaim the reasonable expectation of privacy in policies or the employee handbook. Education programs are important.
Computers play an integral role in today’s business operations. With the use of computers and other devices in the workplace, employers should clearly state company policies on employee use of employer computers, printers and other electronic equipment for personal reasons, both during and after business hours. Handbooks should explicitly state that employees do not have a reasonable expectation of privacy regarding their activities or the data they use if they access websites, software applications, media platforms or other electronic information on company equipment.
Employee handbooks should include a provision explaining the “No Smoking Law.” For more information, please see Chapter 41: Drugs, alcohol and tobacco.
The Department of Labor’s regulations interpreting the Family and Medical Leave Act (FMLA) states that an employer is not required to have an employee handbook, but if it does have such a handbook, the handbook must include a statement of the employer’s policy on FMLA leave. Of course, this requirement only applies to employers who are covered under the FMLA – employers who have 50 or more employees each working day during 20 or more workweeks in the current or preceding calendar year.
While the FMLA does not outline the specific language that employers should use in their FMLA policy, some important elements of an effective FMLA policy are as follows:
It is particularly important for the FMLA policy to specify the method for calculating the 12-month period in which the 12 weeks of leave may be taken. If the employer fails to specify which method is to be used, an employee may select the method that is most beneficial to him or her.
It may also be a good idea for an employer to include a statement that it does not discriminate on the basis of pregnancy. Discrimination based on pregnancy involves treating a woman (applicant or employee) unfavorably because of pregnancy, childbirth or a medical condition related to pregnancy or childbirth. For more information, see Chapter 12: Discrimination.
In accordance with the Uniformed Services Employment and Reemployment Rights Act (USERRA), employers must grant employees time off for military service or training. During military leave, employees retain the rights to health insurance coverage at the employee premium for themselves and previously covered dependents. Vacation, sick or personal days will not accrue while an employee is out on military leave and the employer is not required to continue to pay the employee while on leave.
If an employee satisfactorily completes his or her military service (honorable discharge) and provides timely and appropriate notice of the intent to return to work, the employer must re-employ the individual in his or her former position, the position that the person would have attained but for the military service or training or a position of like seniority, status and pay. If the military leave is between 30 and 180 days, the employer cannot discharge the employee without cause within six months of re-employment. If the military leave is more than 180 days, the employer cannot discharge the employee without cause within one year of the re-employment.
No law requires that an employee handbook contain a list of prohibited types of employee misconduct, but this usually is one of the main reasons many employers develop employee handbooks in the first place. A typical policy should list the common types of misconduct that will result in discipline, but it should also stress that the list is not all-inclusive. The policy should also state that misconduct will result in discipline, up to and including termination, at the employer’s discretion.
One of the most important parts of an employee handbook is an acknowledgment form. This form is usually included at the end of the handbook and is designed to be read by employees, signed and returned to the company to be retained in the employee’s personnel file. A good acknowledgment form will contain the same disclaimers found in the introduction about how the handbook does not create an employment contract or any other type of contract. The acknowledgment form should also reiterate that the policies may change occasionally and will be interpreted by the company in its sole discretion.
Most employers take one of two approaches to attendance and tardiness in their employee handbook – they may spell out a very formal policy of how many days (or portions of days) may be missed during a particular time period or they may set forth only a very general policy that states that attendance and punctuality are important and tardiness and absenteeism may lead to discipline, up to and including discharge. The more general policy carries with it both the benefit and the risk that different managers may interpret this standard differently or on an ad-hoc basis, leading to differential (and possibly discriminatory) treatment of employees.
Most attendance and punctuality policies contain a statement that employees are expected to be present and on-time. Such policies should generally define excused and unexcused absences – stressing that failure to give proper notice of an absence may result in an absence being considered unexcused. The policy should state that an employee will be disciplined for “excessive, unexcused absences.” Guidelines regarding the amount of notice an employee must give for the absence to be excused are also typical. Finally, many attendance and punctuality policies include a statement that an employee will be considered to have resigned if he or she fails to show up for work for two or three consecutive days, unless the absence was excused and the employee gave proper notice.
If references are made in various policies to benefits, vacation or leave given to different classifications of employees, those classifications of employees need to be defined at the beginning of the handbook.
Employees are often classified by whether they are:
These terms may be defined in different ways by different employers. However, in general terms, a temporary employee is brought in for a short duration, often from a service. This person works for a limited period to fulfill a short-term need. A probationary employee is a person who is tested for a period to determine whether the person is suitable for long-term employment. Many employers deem all new hires probationary employees or have a defined probation period for all new workers. A probationary period may last 60 days, 90 days or some other span of time that is appropriate to the business needs of the employer, which allows for review and consideration of job performance and skills and allows for any necessary training or acclimation. There, of course, may be different expectations, duties and obligations for each of these categories of workers. To maintain employee-at-will status for employees who do not have a contract with a specific duration term, employers should avoid the use of the term “permanent employee” when defining categories of employees. Many employers choose to insert a provision that states that none of these classifications change the at-will employment status of the company’s employees.
While workplace drug and alcohol use are often included on the list of prohibited types of employee conduct, many employers prefer to have a separate policy on substance abuse. This is particularly important if the company intends to comply with a state drug-free workplace statute. Some states will give an employer a discount on its workers’ compensation insurance if the employer implements a drug free workplace program. These programs generally govern the procedures an employer may use to test an employee for use of illegal substances and may also specify what types of testing are required, permitted or prohibited and what language must be included in a policy statement on substance abuse.
If the company wants to implement a substance use/abuse policy, it must be careful to comply with any state or local statutes regarding such testing. Generally, however, a substance abuse policy should specify what types of substance abuse or use is prohibited (such as illegal drugs, alcohol use on premises, abuse of prescription drugs). In addition, the policy should set forth any standards for testing, such as:
The employee handbook must not conflict with the benefit plan documents or the summary plan descriptions. The nature of the benefits and the eligibility requirements may change. If there is a detailed description of these matters in the employee handbook, the company should be careful to change the handbook descriptions, as well as the plan documents and the summary plan descriptions. A safer practice would be to list the different types of employee benefit plans that the company currently offers to employees and to refer employees to the plan documents for more information. In addition, a general employee benefit plans policy should contain a statement that the company reserves the right to modify or eliminate these benefits at any time.
In most states, employers are required to excuse any employee (with the exception of employees who have been employed on a temporary basis for less than six months) from employment while serving as a juror in any U.S. court or state court..
Many states have regulations in place requiring employers to provide a reasonable amount of time for employees to vote on electin day. Employers are advised to check state laws prior to drafting a time off for voting policy.
Employers should include a policy regarding overtime work and pay in their employee handbooks. An overtime policy can explain that employees will only be paid time and a half for hours that they work over 40 in a workweek – reiterating that paid time off for vacation, sick leave, holidays, etc. does not count towards the 40 hours. An important element of any overtime policy is an instruction that an employee must obtain permission from his or her supervisor before working overtime. In addition, employers should advise employees that they may not start work early, work through lunch or work late without permission. The policy also should inform employees that there might be occasions when they will be required to work overtime and the failure to work such overtime may result in discipline.
Each company’s sick leave policy is very different and must be crafted to meet the needs of the company and the nature of its workforce. However, there are a few basic guidelines that apply to all such policies. First, the policy must explicitly state how much leave is given to each classification of employees and how the leave will be managed. The policy should also make it clear whether the leave will be paid or unpaid and it should outline any notice requirements for employees. Finally, the sick leave policy needs to be checked to make sure that it does not violate the Americans with Disabilities Act (ADA) or the Family and Medical Leave Act (FMLA). For instance, the sick leave policy should not state that employees will automatically be terminated if they exceed the permissible number of sick days, because both the ADA and the FMLA may require an employer to give an employee additional unpaid time off to recover from a disability or a serious health condition.
As with sick leave policies, vacation policies differ widely from employer to employer. The key thing to remember in drafting a vacation policy is that if employees accrue vacation on a monthly or yearly basis, the accrual process needs to be clearly explained. In particular, employers often do not adequately explain how accrual will work during the first year (or partial year) of employment.
Will employees be given a lump amount or accrue on a proportionate basis based on the amount of time worked or on a monthly basis? Many employers also make the mistake of trying to draft a complicated formula for accrual, when it may be simply easier to include a chart or table with the length of service and amount of vacation listed (especially where the accrual rate changes at certain threshold levels, such as after five or 10 years).
Other issues a company should consider in drafting a vacation policy are whether employees will be required to wait for a period of time before accruing vacation, whether vacation may be carried over from year to year (and if so, whether there is a maximum) and whether employees will be paid for accrued but unused vacation upon their resignation or termination.
The National Labor Relations Board (NLRB) has been active rendering opinions on common policies found in many handbooks. Many of these policies have been utilized without question by employers for years. The basis for the scrutiny has been that some of these policies interfere with rights to protected concerted activity under Section 7 of the National Labor Relations Act (NLRA). These decisions are important because they do not apply merely to union workplaces. Employers should consider the implications before adopting policies and also before taking disciplinary action against an employee for a violation of such a policy.
Section 7 of the NLRA, in effect since 1935, offers employees the right to engage in protected concerted activity for their mutual aid or protection concerning the terms and conditions of their employment. An employee may prove a violation by establishing one of the following:
More discussion of the NLRA is available in Chapter 38: Unions.
The NLRB has called these types of policies into question:
The NLRB has found that some confidentiality policies can be overbroad. While employers have a legitimate, business interest in restricting the improper disclosure of propriety information, a policy may violate Section 7 if confidential information is defined too broadly. This violation could happen if the definition prevented an employee from discussing the terms or conditions of employment. For instance, a prohibition against disclosing personnel information to any person outside the business when the employee could face legal action or firing is too broad because is prohibits employees from talking about their own personal wages or job conditions.
The majority of states are at-will employment states. Many employers adopt policies making clear that employees are employed at-will. The NLRB has ruled that policy language saying that the at-will employment relationship cannot be modified or altered would violate the NLRA because employees may request to change at-will status. The NLRB Acting General Counsel (AGC) then released Advice Memoranda reviewing at-will employment clauses from two employee handbooks, noting that both were lawful under the NLRA.
Whether in the context of harassment, bullying, social media or communications, policies that restrict comments made on social media may have a chilling effect on an employee’s Section 7 rights. Policies that have zero tolerance language are ripe for concern. The comments or communications by the employee may constitute concerted activity if they are for the purpose of mutual aid or protection. If the comments are made as a step toward group action to defend workers, then the action may be protected.
A policy that restricts employees from making statements that supposedly may damage the business, defame another employee or individual or damage another person’s reputation could be overbroad because it could prevent an employee from engaging in protected communications including those critical of the employer or its representatives. Policies against malicious, abusive or unlawful behavior are not objectionable.
Changes are in process with the NLRB and its approach to employment policies. In December 2017, the NLRB overturned a 2004 opinion that had previously set out a test for when a policy of any employer – unionized or not – would violate the NLRA. This rule required a determination of whether employees would reasonably construe the policy’s language as prohibiting protected, concerted activity. This was the rule that had been applied to find certain social media and confidentiality policies addressed previously as violating the NLRA. Employers should watch in the coming months for more NLRB opinions to see where newly defined lines are drawn for employment policies.
As of January 1, 2007, the Deficit Reduction Act of 2005 (DRA) requires that any organization that receives or makes annual Medicaid payments of five million dollars or more (a “covered entity”) must inform its employees and those of its agents and contractors, about both:
The DRA amends the state Medicaid requirements in the Social Security Act to require covered entities to:
The written policies should explain, at a minimum, the following fundamentals regarding the applicable federal law, the False Claims Act (FCA):
If the court finds a whistleblower was terminated or otherwise mistreated for filing a qui tam lawsuit, the employee is entitled to reinstatement at the same level, two times the back pay owed plus interest and compensation for any “special damages” sustained as a result of the discrimination, such as attorneys’ fees.
The written policies must include, in similarly detailed terms, descriptions of any state false claims laws that may apply.
The written policies must detail the covered entity’s policies and procedures for reporting, detecting and preventing fraud, waste and abuse. These mechanisms, including, for instance, employee fraud hotlines and periodic audits or risk assessments, already should be in place as part of the covered entity’s formal compliance program. If the covered entity does not already have any such policies or procedures, this amendment provides yet another reason to adopt them without delay.
The challenge to covered entities will be to apprise employees of the statutorily requisite information in a manner that effectively conveys the information, while not unduly emphasizing it in a manner that encourages frivolous reporting of claims or fraud.
The following policies are ones that employers may choose to include in their handbooks or policies and procedures manuals. Employers should check applicable employment laws to be sure the policies comply with any state or federal requirements in these areas:
The handbook must also be effectively distributed to employees and consistently enforced. Many employee lawsuits hinge on the employer’s lack of consistently enforcing policies. If an employer does not consistently enforce a policy, except in a few particular instances, its deviation from its own policy seems suspect and likely motivated by discriminatory or retaliatory reasons. These issues have been addressed in many legal cases involving all aspects of a company’s business, from workers’ compensation to discrimination claims to safety policies. Consistent enforcement supports a defense for the employer. It is important managers are familiar with and understand policies and procedures. Surveying managers on application of policies can be helpful in reviewing consistency. The inquiry can focus on managers’ understanding of policies, how many employees have been disciplined for a particular policy violation and how the employees were disciplined.
It is not enough for an employer to simply develop a comprehensive employee handbook. To be sure that company managers will be willing and able to enforce the policies contained in the handbook, it is probably a good idea to have a few key managers at each level review a draft of the handbook before it is finalized. These managers may be able to tell the employer whether the handbook accurately reflects current practices, whether it sets realistic standards and what employee reaction will be to changes.
When the employer is ready to present the handbook to employees, it should be rolled out with some degree of fanfare to ensure that all employees are aware of the new policies. Often, the President/CEO of the company will issue a formal announcement and/or draft a welcome letter to be included with the handbook. If the handbook represents significant changes from the company’s previous policies, training sessions should be held for managers who will have to implement and enforce the policies. The Human Resources Department should also be prepared to receive a large number of questions from employees and managers during the initial weeks and months the new handbook is in effect.
The most important part of the implementation process is having employees sign the acknowledgment forms found at the end of the handbook and returning them to the company for filing. As explained above, the handbook will not provide the employer with much protection in the event of a lawsuit or other dispute if the company cannot demonstrate that the employee received and read it. The employer may want to keep a list of all employees and check each employee’s name off as it receives a signed acknowledgment form from that employee. Managers will also need to be educated in the importance of such forms and the processing of such forms may need to be added to the new-hire process. The signed acknowledgment forms should be kept in the employees’ individual personnel files.
Finally, the implementation of an employee handbook is not complete until the company schedules a time to review and revise the employee handbook again. Periodic reviews should be conducted every year or two in order to ensure that the handbook reflects any changes in the law and the handbook reflects the company’s current practices. Each time the handbook or particular policies are updated, human resources should keep several copies of the old handbook or policies in a file. These may be needed to manage an employee with disciplinary problems under a prior version of a policy or if a lawsuit is later filed concerning events that occurred under a previous version of the handbook.
There is no set pattern that must be followed in establishing a handbook. Each handbook should be tailored to the needs and expectations of the employer. The specificity and scope of topics will vary, as will the depth of coverage. The handbook should provide the level of clarity needed for a particular workforce or a particular industry employer. In general terms, there are a number of items that should be addressed within or considered for every handbook. This checklist of considerations includes:
Policies and Forms
Chapter 07: Policies and procedures manuals