Employee Handbooks: 9 Mistakes That Cost Employers Big $$

Written by Joanna Morrow

Joanna Morrow, Principal and Founder of Employer Benefits & Advice, is an employer consultant and advocate who has worked in the employee benefits industry for over two decades. She works diligently to help employers overcome obstacles in their business by sharing her expertise in Human Resources, Benefits & Compensation, Process Mapping, Risk Management and ERISA/DOL/IRS compliance. She is a licensed life and health insurance professional in the State of Arizona and is an active member of the National Association of Health Underwriters (NAHU).

Employee Handbooks: 9 Mistakes That Cost Employers Big $$

No employer wants to be sued by a disgruntled employee. Unfortunately in our ever-evolving litigious society the likelihood of that happening continues to grow.

Once in court there are a select number of employer-created documents that form the foundation of the company’s defense. Among the most important is the Employee Handbook.

The Employee Handbook is the document that establishes and communicates to employees your various workplace policies.

However, in the event of a lawsuit, poorly drafted employee handbooks will hurt employers more than they will help.

To avoid that, here are 9 of the most important rules employers should follow when drafting or updating their Employee Handbook:

1 – Lead With a Disclaimer

Employee handbooks are meant only to educate employees on an employer’s policies and standards. They are not intended to create legal obligations. However, if not drafted carefully, employee handbooks may form an unintended contractual relationship between employers and their employees.

Sample Disclaimer Language:

“This handbook contains only general information and guidelines. It is not intended to be comprehensive or to address all of the possible applications of, or exceptions to, the general policies and procedures described. For that reason, if you have any questions concerning eligibility for a particular benefit or the applicability of a policy or practice to you, you should address your specific questions to the Human Resources Department.”

2 – Explain the At-Will Employment Relationship

Your handbook needs to be explicit about the at-will employment relationship – that both employer and employee have the right to terminate employment at any time, with or without cause.

Ensure you don’t have other policies that undermine this one, such as probationary periods (which can sound like employment is guaranteed for at least as long as the period) or progressive discipline policies (which may not clarify that an employee may be terminated at any time).

Sample At-Will Employment Statement:

“Neither this handbook nor any other document confers any contractual right, either expressed or implied, to remain in Company XYZ’s employ. Nor does it guarantee any fixed terms and conditions of your employment. Your employment is not set for any specific time and may be terminated at will, with or without cause and without prior notice by Company XYZ, or you may resign for any reason, at any time. While there may be a disciplinary process in place, in certain situations, Company XYZ may make the decision to terminate you without first taking these disciplinary steps.”

3 – Define Exempt and Non-Exempt Classification

Wage, hour, and overtime complaints are among the most common legal actions taken by existing and former employees. Be sure your handbook is clear in the distinction of exempt and non-exempt, and that all employees are classified properly.

Also make sure that your overtime policy complies with state and federal laws.

If you have a policy stating that overtime must be approved, you cannot mandate that unapproved overtime will not be paid – you are legally required to pay it. You can, however, otherwise discipline employees for violating such a policy.

4 – Define Employee Rights

Many handbooks make the mistake of outlining employer rights but glossing over the rights of employees. Some employers fear that including employee rights will encourage more employees to file lawsuits, but in actuality, omitting them can increase your liability.

The court views favorably employers who have written policies in place and who dispense handbooks to their employees. If a legal action arises, having a handbook demonstrates that the employer has made a good faith effort to establish and uniformly enforce policies and procedures.

5 – Explain Computer/Data Ownership

Your handbook should make clear that the company owns its computers, email, and all data, and that nothing on a company computer is private. You should also have clear policies if your employees have other electronic company devices such as tablets or smart phones.

6 – Follow Through

Providing a comprehensive, compliant handbook is only the first step – your company must always follow through with the policies outlined. You can have the best policies and training in the world, but if supervisors fail to follow the policies and/or properly apply the training, the company is left vulnerable.

Create opportunities for managers and supervisors to test their knowledge and periodically review the Employee Handbook to ensure an understanding of the company policies they are charged with enforcing.

7 – Choose Your Words Carefully

To ensure that managers have flexibility in interpreting and applying policies, an employee handbook should avoid statements that bind an employer to particular courses of action.

Use general language (such as “typically,” “usually” and “may”). Leave as much flexibility as possible.

Don’t describe procedures in detail and never use specific wording to outline exactly what the company will do in any certain event.

An employee handbook should make clear that the employer reserves the right to deal with situations as they arise and to use discretion when choosing the appropriate remedy for each situation. Make sure to note that managerial discretion will be taken into account when policies are applied.

8 – Update Regularly

It is vital that you update your handbook regularly to comply with new and changing laws, both federal and state. In addition, you should provide employees with all handbook updates (or notify them if the handbook is published online).

Have all employees sign acknowledgement forms that verify that each employee understands and accepts any and all changes to the handbook each time they’re completed.

9 – Review with an Employment Attorney

Even though many companies have their employee handbooks prepared by a payroll provider or benefits broker, the best practice is to have an employment lawyer review the final document before making it available to employees.

The National Labor Relations Board (NLRB) has recently claimed that many employer policies relating to employee conduct and social media use infringe upon employees’ rights under Sections 7 and 8(a)(1) of the National Labor Relations Act (NLRA). Given this recent activity, having an attorney review the handbook can help an employer avoid costly litigation.

Getting Started

Click on the links below for sample resources to get you started.

For additional resources, questions or guidance on drafting a bullet-proof employee handbook, contact me at 602-903-4047 or email me at jmorrow@employerbenefitsandadvice.com.

Employee Handbook Checklist

Sample Employee Acknowledgement Form