Straight from the handbook Featured

8:00pm EDT July 26, 2009

There are several valuable reasons an employer would want to have an employee handbook from practical, legal and organizational standpoints. While they are good reference tools for employees and managers, Sheri L. Giger, an attorney with Jackson Lewis LLP, says employee handbooks serve other purposes, as well.

“A handbook establishes legal compliance with various laws with which an employer must comply,” Giger says. “It also provides an employer an opportunity to disseminate its operational policies and maintain a level of consistency within the organization. It’s also a good opportunity for an organization to communicate its corporate culture and let employees know what the employer’s expectations are regarding their employment.”

Smart Business spoke with Giger about how handbook mistakes can result in litigation, and how to avoid that risk.

What main points do employers need to cover in their employee handbooks?

An employer should include any operational policies as well as basic information, such as general compensation practices, leaves of absences available to employees, such as under the FMLA, and policies including safety and company resources for employees. The average employee handbook could have between 20 and 50 different policies in it, depending on the size of the employer. Two of the most important policies that should be placed near the beginning of the handbook are its Equal Employment Opportunity (EEO) and its anti-harassment policies.

What are some common mistakes employers make with their handbooks that can hurt them?

One of the biggest mistakes an employer can make is to inadvertently turn an employee handbook into an implied contract of employment if the employer has at-will employees. If a handbook does not have effective disclaiming language in it, then an employee could argue that he or she detrimentally relied on the handbook, turning it into an implied contract.

Another mistake is including ‘just cause’ language in a disciplinary policy or a termination policy. That means you’ll see policies — usually older policies that haven’t been updated in a long time — like ‘ABC Company will terminate employees for just cause.’ That language itself might provide a basis for an implied contract of employment claim, even if there is other disclaiming language at the beginning of the handbook. At the least, it becomes a factual issue in a lawsuit. This issue can come back to hurt employers later on.

Another mistake employers can make is to not train their managers on the policies. If managers don’t know or aren’t familiar with the policies and practices in the handbook, that can lead to inconsistency in practice, which can lead to employee relations issues and claims of disparate treatment among employees becoming a legal issue, as well.

What consequences can occur if employers make those mistakes?

The main result is litigation over such discrepancies. That’s always what employers want to avoid, whether it’s an implied contract of employment lawsuit or disparate treatment under one of the anti-discrimination statutes or a claim for benefits.

How can employers make sure their handbooks don’t contain mistakes?

If an employee handbook hasn’t been updated in the last several years, it is probably overdue because of the changes in employment laws that have occurred. For example, there are new amendments to the Americans with Disabilities Act. Some regulatory requirements have changed under the federal Fair Labor Standards Act, and there are the new Family Medical Leave Act regulations that went into effect earlier this year.

An employer should generally review its handbook every year-and-a-half to two years. Knowing when to update and knowing what to update is a matter of having someone keep his or her ear out for new developments, changes or amendments to the laws. Usually, this falls within the responsibility of human resources. HR people tend to be in tune with new and pending legislation, but that information has to be communicated to the rest of management, as well.

Also, if an employer is updating and changing a policy — such as changing how vacation is accrued — an employer needs to be aware that there may be requirements that the employer needs to provide prior notice to employees about the change.

In Pennsylvania, for example, an employer must give prior notice to employees if there is a policy change in how vacation is paid out, under the wage payment law. Employers have to provide notice about any changes in not only wages but also fringe benefits prior to the time the change is put in place.

What advice do you have for employers starting a handbook from scratch?

Employers initially should take a global approach and determine which aspects of the company culture it wants to come through as well as what the past practices have been. Then employers have to develop specific policy language to reflect culture and company practices.

Because of how legalistic this area has become (the HR and policy area), I always recommend a review by the company’s counsel just to make sure that everything is in compliance and nothing is incorrectly worded.

Once an employer has a solid handbook in place, it really helps to make administration of the day-to-day workplace much easier and it allows employees to be able to know what standards they are required to work under — what leaves are available, how much vacation they’re eligible for, etc. It all helps in running operations smoothly.

Sheri L. Giger is an attorney with Jackson Lewis LLP. Reach her at (412) 232-1983 or gigers@jacksonlewis.com.