Nasir Pasha, Esq.

Why Do I Need an Employee Handbook?

Let’s be frank. No one reads the employee handbook, at least not voluntarily. As communication goes, many fall quite short. On the other hand, your small business needs one to define employee expectations and minimize the risk of legal liability for employment discrimination or the wrongful acts of employees. It’s risky because an employee handbook may also create unintended legal obligations. Since you have to have it, wouldn’t it be great to also be able to use it to build company culture?

In a swirl of competing and contradictory goals, employee handbooks tend to become cumbersome documents, full of legalese. To make your employee handbook into a user-friendly tool, it may be best to keep it as simple as possible and supplement it with regular training.

Setting Expectations

If you want employees to be at work by 9 am, wear yellow on Wednesday and treat each other with respect, you can put it in the employee handbook. The real constraints are practical because the rules have to be (a) enforecable, (b) actually enforced and (c) in a non-discriminatory way.

  • Announced expectations can provide a basis for employee evaluation and discipline, especially if they can be objectively measured.
  • Aspirational goals, on the other hand, are difficult to monitor and can leave employers wide open to accusations of favoritism.
  • Seemingly arbitrary rules, like wearing yellow on Wednesday, may be fine unless the conduct called for is illegal or unethical or the rules are applied to some employees but not others.

Spotty enforcement is far more likely to get an employer into trouble for employment discrimination than the expectations themselves. This is one reason some employers choose to keep the “employee rules” section of the handbook fairly minimal.

Complying With Employment Law

A number of federal and state laws affect the relationship between employers and employees, either mandating or prohibiting certain kinds of conduct. Think about minimum wage and overtime laws, prohibitions on racial, sexual, religious and other forms of discrimination, laws governing certain kinds of leave or drug testing policies.

The employee handbook presents an opportunity for employers to declare an intention to comply with these laws, add some detail about what compliance entails, and to describe a grievance procedure for employees who feel that they have been unfairly treated. The prohibition on sexual harassment should probably be spelled out in greater detail, since it can also affect employee conduct.

Avoiding Vicarious Liability

One of the most important functions of the employee handbook is to insulate employers from liability (termed “vicarious liability”) for the wrongful acts of employees (and occasionally independent contractors). Employers may be legally responsible for harm done by an employee in the course of employment, unless the employee was clearly acting on his or her own in violation of company policy.

If, for example, a fork-lift driver injures a customer in a big box hardware store because he was driving the forklift too fast, the hardware store may be on the hook unless it had adopted standards for forklift operation and trained the driver. Often these standards and policies are not written into an employee handbook, but incorporated by reference to other documents.

The Risk of Creating an Employment Contract

Although the provisions of an employee handbook can protect employers from legal liability for employment discrimination and wrongful acts of employees, they can also inadvertently create contractual obligations. The general rule in the U.S. is that employment is at will.  Employers may terminate employees for good reason, bad, reason or no reason at all.  Employees who are working under a contract, however, may have greater rights as specifically spelled out in the agreement.

Courts have occasionally found that statements in an employee handbook along the lines of, “You can expect to have a long career at XYZ Corporation, as long as your annual performance reviews are satisfactory,” are enough to create an enforceable obligation. In this situation, an employee who is fired despite satisfactory ratings may have a breach of contract claim. It may be better to confine motivational statements like these to informal conversations about what company experience has typically been.

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Communicating Content

Your employee handbook may be an admirable document, a tour-de-force of legally correct readability, clearly destined for the New York Times Bestseller list. But remember, we began with the assumption that nobody is going to read it, unless perhaps they’re thinking about suing you.

All of this careful thought about clearly defined rules and legal compliance actually has to be communicated to employees. Some employers ask new employees to certify that they have read the employee handbook. It’s a defensive gesture that does not have much to do with communicating content.

A better approach may be to hold frequent, brief, informal training sessions that reinforce handbook provisions and invite questions. Fifteen minutes with a small group in a conference room talking about what does and does not constitute sexual harassment can be far more meaningful than a page and a half in the handbook. The same goes for dress code issues, appropriate use of social media at work or working from home.

The point of an employee handbook is to set a baseline for communication about workplace issues, not to be sum of it.

Building Company Culture

By itself, the handbook cannot carry the burden of making a workplace more harmonious, exciting or productive. It can build company culture by creating a sense of clarity. Everyone appreciates clearly defined rules, benchmarks and goals.  It can also convey the employer’s intentions to comply with federal and state employment law and it may protect the business from discrimination claims and vicarious liability.

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