Employee handbooks: Personalize personnel policies or prepare to pay the piper

Editor’s Note: Mr. Still is a member of the Labor and Employment Section of Ward and Smith, P.A.

Any employer needs to seriously consider creating an employee handbook to establish and communicate to employees the employment policies by which the employer will operate. Doing so can establish the employer's expectations of the employee from the employee's first day of employment. More importantly, it also can potentially assist the employer in protecting itself from a variety of personnel problems that often arise.

What Purposes Do Employee Handbooks Serve?

Employee handbooks serve a number of important purposes, all relating to the management and utilization of an employer's work force. One purpose is communication. Employee handbooks generally are given to employees at the beginning of their employment, and, thus, they allow the employer to communicate its expectations, philosophies, goals and policies to its employees. This exposes the employees to the culture of the company from the very beginning. Including policies relating to leave and vacation, equal employment opportunity, pay and other benefits, time records, disability accommodation, and discipline both establish necessary parameters and, as described below, assist in avoiding potential liability.

In some cases, the handbook fulfills the employer's legal obligations to provide employees with a written statement on certain matters. For example, under North Carolina law, in order for an employee to lose leave that has not been taken, the employee must have been provided with written notice. Without such notice, the employer must pay the employee for untaken leave. Providing a leave forfeiture clause in an employee handbook is sufficient notice to the employee to ensure that the employer will not have to pay all of the employee's unpaid leave under the circumstances of the policy.

Employee handbooks also set expectations about what will occur under certain circumstances and give supervisors who enforce the personnel policies a reference guide to ensure consistency. Consistent handling of personnel issues is a vital necessity for any employer. Inconsistency in dealing with employees often can lead to charges of discrimination and disparate treatment, even when the inconsistency is wholly unintentional on the part of the supervisor. Defending such discrimination claims is time consuming and expensive. Maintaining consistency through the utilization of and compliance with an employee handbook is a much cheaper method to protect against discrimination claims. As discussed below, even if a discrimination claim is brought under such circumstances, an employee handbook can assist in defending such a claim.

How Do Handbooks Assist in Defending Against Claims?

If a disgruntled employee ever files a lawsuit relating to his or her employment, the dispute likely will involve one or more of the employer's personnel policies. An employee handbook which includes all of the policies that a court or government agency would expect an employer to have in place will greatly enhance the employer's defense. For example, assume a female employee files a complaint with the U.S. Equal Employment Opportunity Commission ("EEOC"), alleging male employees were allowed to take vacation in situations where she was not. She also claims that she was disciplined at work for activities for which men were not disciplined. In response, the EEOC generally will request, among other information and documentation, all of the employer's written policies on discrimination, leave, and discipline. Maintaining an up-to-date employee handbook is a good way for an employer to know that its policies conform to what the EEOC expects. The failure of an employer to have written policies on these topics can be interpreted by the EEOC as proof that the employer did, in fact, treat employees differently. On the other hand, if the employer is able to produce written policies relating to these subjects, this will be at least some evidence of good faith on the part of the employer.

What Risks are Associated with having an Employee Handbook?

Proceeding hand-in-hand with having good policies in place is the requirement that the employer consistently follow and enforce the policies set out in the employee handbook. There is a significant risk in having policies in the handbook and then failing to consistently apply or enforce them. Although the existence of the handbook may provide proof that the employer knew the law, the employer's failure to comply with its own policy could be just as damaging as not having a policy at all.

An employer also must keep the policies in its employee handbook consistent with current law. Federal and state employment laws change constantly. For example, Congress significantly amended the Family and Medical Leave Act earlier this year, and the United States Supreme Court accepted over 15 employment-related cases this term that have the potential to change significantly the law relating to employment. Employers must keep abreast of these changes to avoid unnecessary and costly litigation resulting from their application of obsolete laws or regulations.

Can't We Just Use a Form Handbook from the Internet?

A separate serious risk arises from having a poorly drafted employee handbook, which could unnecessarily expose the employer to liability or more obligations than the law requires. Such handbooks may have been copied from a form found on the Internet or from the handbook of another business, or prepared by a service which offers handbook drafting. However, one size does not fit all. Such rubber-stamp drafting can create the following problems:

• Inclusion of policies inconsistent with the actual policies of the employer and that the employer does not want and is not required to have

• Inadvertent creation of contractual rights for the employee that would allow a court to interpret the handbook policies to be promises from the employer to the employee that the employer did not intend to make

• Omission of policies required to comply with federal or state laws

• Incorrect description of the employer's legal obligations

• Description of the employer's legal obligations that goes well beyond the employer's actual legal obligations

• Inadequate flexibility to address personnel and business issues as they arise

Improperly drafted handbooks can severely limit the way an employer interacts with its employees in areas such as continued employment, discipline, and benefits, a result that is the exact opposite of the intended goal of employee handbooks. An employee handbook ideally should provide the employer with the maximum amount of flexibility allowed under applicable federal, state, and local laws in handling personnel matters. This allows an employer to have discretion in addressing business and personnel issues appropriately as they arise, rather than locking the employer into a given practice long before it knows the exact nature of a problem.

Conclusion

Employee handbooks have the potential to provide significant benefits to interactions between an employer and its personnel. Handbooks provide supervisors with the knowledge and understanding they need to properly assist in personnel management within the confines of applicable laws. Often these supervisors do not actually know the extent of the employer's legal obligations regarding employees until the employer completes an employee handbook.

Nevertheless, great care should be taken to ensure that all personnel policies in the employee handbook conform to current law and do not unnecessarily create a contract of employment. If prepared correctly, however, employee handbooks can go a long way toward establishing a good relationship between an employer and its employees, assisting in the protection of the employer should the employment relationship turn sour, and providing enough flexibility to allow the employer a chance to remain profitable.


© 2008, Ward and Smith, P.A.

Ward and Smith, P.A. provides a multi-specialty approach to the representation of technology companies and their officers, directors, employees, and investors. Kyle R. Still practices in the Labor and Employment Section, where he has represented clients before the U.S. Equal Employment Opportunity Commission, the Employment Security Commission of North Carolina, and the North Carolina Industrial Commission. Comments or questions may be sent to ks@wardandsmith.com.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.