UNDERSTANDING THE VALUE OF AN EFFECTIVE EMPLOYEE HANDBOOK – AVOIDING THE PITFALLS THAT MAY TAKE THAT VALUE AWAY

Posted: 09/27/2010 in Member Experts

Masud Labor Law GroupMany employers underestimate the value of an employee handbook.  A well-drafted employee handbook provides written documentation of a company’s policies and procedures.  In addition, a well-drafted handbook includes critical policies based on state and federal labor and employment laws that require mandatory compliance.  Some state and federal laws, in fact, require a policy based upon the statute to be included in any employer handbook.  For example, all employers must comply with the Social Security Number Privacy Act, including having a statutorily mandated policy covering the act contained in their employee handbook if they have one.

The value that a well-drafted employee handbook contributes is significant.  First, an employee handbook helps hold employees accountable for their conduct.  The handbook should set forth the employers expectations and the consequences for employees that fail to comply.  Second, a well-drafted handbook consistently applied and enforced sets the stage for defending an employer from potential liability.  An example is where an employer’s EEO policy requires an employee to file any complaint of discrimination or harassment internally.  Filing an internal complaint gives the employer the opportunity to investigate, address, and eliminate any discrimination and/or harassment that may be confirmed.  If an employee fails to follow the employer’s policy, the employer may use the employee’s failure to do so as an affirmative defense in a subsequent discrimination and/or harassment lawsuit. 

There are several pitfalls that can de-value a handbook that employers should avoid:

1. Using or copying another company’s handbook.  When an employer uses or copies another company’s employee handbook, there is no guarantee that the handbook is legally compliant, especially if the handbook is from another state.  Each state has its own statutes that may or may not be the same or similar to another state’s laws.  Moreover, a well-drafted employee handbook must be tailored to the needs and procedures of the company for whom it is drafted in order to truly reflect how the company operates. 

2. Not including necessary provisions.  A well-drafted employee handbook has certain provisions that should be included, such as a contractual disclaimer, an employment at-will statement for those employees not subject to just cause termination, and an anti-discrimination/harassment policy, to name a few.  Failure to include necessary provisions can subject an employer to potential liability and limit the effectiveness of the handbook.

3. Not using clear language.  An employee handbook must be clear to the reader.  If the handbook provisions are vague or ambiguous, too complicated to understand, or too technical, not only will managers have a difficult time administering its policies, but employees will avoid reading and following its provisions.

4. Failing to have a well-organized handbook.  Again, an employee handbook must be user-friendly.  An effective employee handbook should have a table of contents with applicable page numbers, and should be organized in a manner that allows users to easily find the policy or procedure that they are looking for.  If an employee cannot do so, they will become frustrated and not use the handbook as a reference.

5. Failing to have policies and procedures that can be easily administered.  If the policies and procedures are too complicated to administer, supervisors will become frustrated, not use the handbook, and will not administer the handbook or enforce its terms.

6. Failing to distribute or make available a copy of the employee handbook to all employees.  Policies and procedures that employees have never seen, or do not know exist, are useless.  An employer must ensure that every employee has received a copy of the employee handbook or, at a minimum, has had a copy made available to them on-line or through some other similarly valid means.

7. Failing to have every employee sign and return a written acknowledgement of receipt.  To document that an employee has received a copy of the policies, or is aware that the company’s policies exist, every employee must sign an acknowledgment form.  The acknowledgement should also confirm that the employee understands their obligation to comply with the company’s policies and procedures and the consequences for failing to do so.  It is not advisable that an acknowledgement form state that the employee has read the employee handbook, because such a statement may be untrue.

8. Failing to train supervisors and staff on how to effectively use the employee handbook.  Once the employee handbook has been well-drafted, reviewed by labor and employment counsel for legal compliance, and has been distributed to all employees, it is imperative that the company train all supervisors and staff on the contents of the handbook and how the provisions will be administered and enforced.  This training ensures that all supervisors have the same understanding of the provisions and will administer and enforce the policies and procedures consistently.

9. Failing to consistently apply the provisions of the employee handbook.  A discrimination lawsuit can easily be built based on unequal treatment when a protected class is involved.  Treating employees equally by consistently applying the company’s policies and procedures can help prevent discrimination claims, or at a minimum, provide a compelling defense.

10. Failing to update the handbook.  Companies change and so do state and federal laws.  It is imperative that employee handbooks are updated as new employment laws are enacted or as old laws are amended.  Similarly, as companies change, whether by increasing or decreasing employees or by changing their procedures, the handbook must reflect those changes.  At a minimum, an employer should have their employee handbook reviewed for legal compliance every two years.

11. Failing to have the handbook reviewed by a labor and employment attorney.  To ensure that the policies and procedures contained in an employee handbook comply with applicable state and federal laws, a labor and employment law attorney should review its provisions and administration.  Some things that may seem innocuous may have significant labor and/or employment law implications.  For example, many employers include in their handbooks that employees may not discuss the amount of their pay with other employees.  This policy is illegal because it interferes with an employee’s right to organize under the National Labor Relations Act.  Likewise, some employers’ policies state that employees must take an unpaid break.  However, the Fair Labor Standards Act requires that all breaks of twenty minutes or less must be paid.

Most recently, effective, well-drafted employee handbooks have earned added value as a strong defense tool in unemployment cases that have increased significantly over the past few years.  Defending unemployment cases when an employee has been terminated for misconduct requires specific employer proofs.  The evidence necessary includes a showing that the employee violated a company policy, the employee knew of the policy, and knew that violating the policy could result in discipline up to and including termination.  In many cases, the employer must also demonstrate that the employee received prior verbal or written warnings based on policy violations.  Thus, clearly written handbook policies can also be used to support employee discipline.   

When employers understand the benefits that a well-drafted employee handbook can provide, employers will understand the value of ensuring that the handbook is legally compliant, distributed to all employees, and consistently administered and enforced.

For more information on employee handbooks or any other labor and employment law matter, contact Masud Labor Law Group at 989-792-4499.   
About the Author

Elizabeth Peters PhotographElizabeth L. Peters graduated from Thomas M. Cooley Law School with an emphasis in labor and employment law.  She holds Bachelor of Science and Master of Arts degrees from Michigan State University.  After graduating from law school, Elizabeth began her labor and employment career with the Masud Labor Law Group where she remained until she became in-house counsel for labor and employment litigation at U.S. Steel in Pittsburgh, Pennsylvania.  As in-house counsel, Elizabeth litigated numerous employment cases across the country.  Elizabeth also served as a U.S. Steel negotiations and arbitration staff attorney, where she was involved in hundreds of grievance disputes and participated in the bargaining of two national collective bargaining agreements.  Elizabeth is admitted to practice in all state courts in Michigan and Pennsylvania, and is admitted to various federal courts, including the Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuit Courts of Appeal.
This article is published by the Masud Labor Law Group, and is intended as general information only.  This article is not intended to provide legal advice or opinion, as such advice may only be given when related to specific fact situations.  Questions or comments concerning this article should be directed to the Masud Labor Law Group, 4449 Fashion Square Blvd., Ste. 1, Saginaw, Michigan, 48603, (989) 792-4499.  E-Mail:  mps@masudlaborlaw.com.  ©Masud Labor Law Group 2010.  All rights reserved.  Reproduction of this article in whole or in part, without express permission from the Masud Labor Law Group is prohibited.

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