1. Does a small or medium-sized business always require an employee handbook?
A handbook is not required, but it is generally a good idea to have one because it requires the employer to consider, in advance, how it wants to handle a wide range of employment-related issues. If drafted properly, they can promote good will among employees, provide guidance to managers and employees, thereby reducing disputes with employees, and provide valuable legal protection. If drafted poorly, they can create problems with employees and subject employers to unforeseen legal liability.
Some employers have stated that a handbook takes away the discretion they want to operate their business. Handbooks can be written, however, to retain substantial discretion, while also providing a baseline of what the employer will do in the majority of cases.
2. What are the nuts and bolts of a solid handbook?
Before drafting a handbook, the employer should collect and review all its written and unwritten policies and procedures to determine which policies it wants to retain or delete, and what needs to be changed or added. There are certain policies that should be included in every handbook.
These include an introductory section setting forth the purpose of the handbook (and covering such things as employment at will and changes or modifications to the handbook), an equal opportunity clause prohibiting discrimination on the basis of every protected classification in regard to every term or condition of employment, an anti-harassment policy, a complaint/open door policy, and the employer’s basic pay practices (e.g., what is the regular work week, pay period, and deductions from pay).
Next, there are many issues which should be addressed in a handbook if the employer has a specific policy on that issue. This might include such topics as attendance, an alternate dispute resolution program, discipline, insurance coverage, holidays, vacations, sick pay, leaves of absence and other benefits provided by the employer, lunch breaks/rest periods, time cards, premium pay (e.g., shift differential, working more than eight hours per day or on weekends), e-mail and internet usage, and safety. For example, the sections on vacations, sick pay and leaves of absence should describe what employee must do to take the time off (e.g., be employed for a certain period of time, or bringing in a doctor's excuse, etc.), how much time the employee can take, whether the time off is paid or unpaid, and whether benefits continue during period of leave.
Finally, there are a large number of policies which may be included in a handbook depending upon the employer. These might include a welcome letter from the CEO, performance evaluations, drug and alcohol use, the employer's position regarding unions, classification of employees (i.e., if pay, benefits or layoff/recall depends upon status of employee, handbook should define the different types of classifications, such as probationary, temporary, part time, full-time, regular, etc.), layoff policy, smoking, security issues, employee suggestion programs, expense dress code, outside activities, gifts from customers, etc.
The employer should also prepare an acknowledgment form to be signed by each employee receiving a handbook. This form should reiterate the nature of the handbook (e.g., that it constitutes guidelines, not a binding contract), and confirm that the employee has received and read the handbook.
Once a draft of the handbook has been prepared, it should be reviewed by legal counsel. This is because, as set forth below, there can be legal ramifications arising from an employee handbook.
3. Are there any traps if a business should create an employee handbook?
Once a handbook is issued, employees and outside entities will expect the employer to comply with it. The most common “trap,” therefore, is the employer who knowingly or unknowingly fails to comply with a policy in the handbook. For example, the employer with the best of intentions may draft a disciplinary policy which calls for progressive discipline, and then find itself in a position where it wants to terminate an employee for a single incident. Another example is the employer which wants to fill a position of an employee on a leave of absence only to find out that the policy says the employee’s position will be held open. Most of these types of “traps” can be eliminated by proper planning and drafting.
4. What sort of legal liability does a handbook create?
If it is properly drafted, a handbook should not create any liability. On the other hand, if the handbook says that the employer “promises” or “guarantees” that something will be handled in accordance with the policy, an employee may be able to claim that the handbook creates a binding contract. Even if a handbook is not binding, it can create liability indirectly. For example, if the handbook says that the pay period is Sunday to Saturday, the Department of Labor will rely upon that statement in determining whether the employer has properly paid overtime to its employees. In addition, an employee may rely on any deviation from a policy as evidence in support of some other claim (e.g., that the employee was discriminated against on the basis of some protected classification).