Employee Handbooks and Policies

Almost from the very beginning each company intentionally and unknowingly develops a set of policies and practices relating to its relationship with its employees.  Unwritten rules and customs evolve regarding employee conduct and these are eventually supplemented by formally established policies, such as published rules and procedures regarding working hours and recording work time, overtime, holidays and vacations, pay and benefits, disciplinary actions and termination.  Since employees are obviously essential to any business, companies typically try and avoid misunderstanding by laying out the rules of their relationship with their employees through personnel handbooks, which are also called “employee handbooks”, that supplements verbal explanations of company rules and policies given to new employees upon orientation; provides a ready reference on rules and procedures for all employees, even those who have been with a the company for a significant amount of time; and ensures that all employees receive essential information regarding the company and the respective rights and obligations of the company and its employees in a complete, accurate, and standardized form.  In addition, a properly-written employee handbook can reduce disputes and help protect employers from costly litigation, build a sense of company identify among employees, and showcase reasons why the company should be considered a good place to work.

Employers are not required to have a handbook. However, if they do, they’re generally free to pick the rules to include in their handbook. Typically, personnel handbooks describe the employer-employee relationship, from hiring until termination; tell employees what is expected from them; and tell employees what they may expect from the employer.  If employers adopt a handbook, they must train their managers about their rules and the procedures for implementing those rules. Unless the policies are enforced as written, they are just “good intentions.”  Besides handbooks, some employers also have a written personnel policy manual. Policy manuals are usually designed only for managers and used to guide them about implementing company policies. In contrast, personnel handbooks are usually given to all employees.

When creating and administering employee handbooks and policies it is important to understand the relevant legal considerations, strategies for formatting and contents, equal opportunity policies, pay and benefits policies, methods for laying out standards of conduct, time off and leave policies, “on the job” policies, safety and health policies and Internet use and social networking policies.  In order for employee handbooks and policies to be effective, the drafter must have a good working knowledge of the fundamental legal principles associated with the employer-employee relationship and law and practice in specific areas such as recruitment and hiring, discipline and termination, and discrimination and harassment.  In addition, it is not sufficient to write and distribute handbooks and policies; the contents of those documents must have practical and “real world” meaning in the workplace and should be followed by executives, managers and other supervisors.  Plans should always be made to educate and train anyone in a supervisory role about their responsibilities under employee handbooks and policies.

While employee handbooks and policies can, and often do, relate to issues other than laws and regulations, such as organizational culture and communications among employees, most of the documents are indeed written to support compliance with equal employment opportunity laws, laws and cases pertaining to sexual harassment, the Americans with Disabilities Act, the Occupational Safety and Health Act, wage and hour laws, the National Labor Relations Act and recordkeeping requirements.  Other legal issues of concern in the workplace context include prevention of workplace violence, protecting the principle of “at will” employment and workplace privacy and confidentiality.  All of the information in employee handbooks and policies must conform to the law and be presented in a way that satisfies any specific legal requirements as to form and/or manner of distribution.  Reference should made to the language included in statutes regarding the contents of notices that must be provided to employees regarding various aspects of the employment relationship and a review of relevant cases should also be made since judges are often asked to comment on the sufficiency of employer policies and procedures when deciding employment-related claims.

While there is no standard form of employee handbook, and employers have substantial latitude in selecting the policies and rules that will be included in their handbooks, the provisions that are included in the handbook must comply with the current version of applicable laws and address all of the issues that are relevant to the company’s specific line of business. Employment laws and regulations, as well as general norms and expectations regarding the workplace environment, are constantly changing and this means that employers must continuously review their handbooks to make sure they are up to date and, if necessary, make appropriate modifications.  As noted above, employers are not required to have an employment handbook and the decision as to whether or not to have one should be made after considering various advantages and disadvantages.  First of all, employers should not create a handbook unless they are committed to writing it properly and supporting it through training and leadership from the top of the organization.  A poorly written handbook is arguably worse than having no handbook at all since it can only lead to problems that result in unnecessary expense for the company and undermining of employee morale.  Employees that do use well-written employee handbooks will have employees who sense that the employer is fair and treats all employees equally, that know what is expected from them and what they should expect from the employer, and that will be less likely to assert that they were unaware of workplace rules and their legal obligations.  Employee handbooks are an opportunity for employers to showcase their benefits package and explain company policies to employees in a clear and concise manner that will hopefully reduce misunderstandings and provide both the employer and employees with a benchmark from which disciplinary actions can be taken and objective decisions can be made about interpretations of the policies.

However, employee handbooks will raise serious issues for the company if the handbook contains rules that are confusing or ambiguous, implies that employees intended to be “at will” have some form of job security, or fails to reserve the right to discipline or terminate employees or modify the handbook at any time.  In addition, of course, the value of an employee handbook depends upon company managers following the rules that have been laid out in the handbook.  For example, if violations of company policies have been ignored by managers, most courts will probably determine that the policy has been waived and find that the employee was unjustly disciplined or dismissed unless the policy is formally “reinstated” by a firm and clear warning.  In addition, if policies are applied in a discriminatory manner by company managers this will also result in adverse legal results to the employer.

There are no hard and fast rules regarding the subjects that companies must cover in their employee handbooks and/or employment-related policies and procedures; however, it is generally best to be sure that each of the following topics have been addressed.

  • Disclaimer of guarantee of employment and statement of “at will” employment status;
  • Equal employment opportunity statement and specific policies for each of the key federal laws creating protected classes of employees;
  • Policies and procedures regarding “time off” (i.e., lunch hour and other breaks, holidays, personal days, vacation policy and pay, leaves (e.g., personal, family, bereavement, educational, military service and reemployment rights), jury duty and election time off)
  • Policies and procedures regarding “job-related issues” (i.e., performance evaluations, discipline and termination and other general employment practices);
  • Rules and standards of workplace conduct (e.g., attendance and punctuality, protection of confidential information, visitor rules and access to premises, personal appearance and dress, smoking, gifts and gratuities, insubordination, harassment and substance abuse);
  • Policies and procedures regarding compensation (i.e., pay computation, payday dates, pay deductions, bonuses, overtime pay, meal allowances, direct deposit and check cashing) and benefits (e.g., insurance, pension and tuition reimbursement benefits, including eligibility requirements);
  • Policies and procedures regarding safety and health (i.e., reporting accidents, rules concerning accidents and physical examinations); and
  • Policies regarding use of technology (i.e., Internet use and e-communications).

Special requirements with respect to public companies must also be taken into account, although such policies might also be adapted for privately held businesses. For example, under the Sarbanes-Oxley Act of 2002, public companies must adopt “whistleblower” policies that set out detailed policies and procedures regarding receipt, retention and evaluation of reports received by employees regarding instances of financial fraud within the company. Public companies are also required to implement business ethics policies and companies engaged in international business activities, both public and private, need to be sure policies are in place covering export controls, import and customs laws, antiboycott laws and compliance with domestic and foreign anti-bribery laws.

Two basic methods are commonly used for organizing the policies and other material included in employee handbooks: ABC indexing and grouping of homogenous policies.  As the name implies, ABC indexing presents the policy statement in alphabetical order.  While this makes it fairly easy for employees to quickly find information about a discrete topic or issue, there is no continuity in the information presented and employees may have to skip to several different places in the handbook to get a complete answer to their questions.  With the grouping-of-homogeneous-policies method, the handbook is divided into sections, each of which is composed of related policy topics (e.g., employment policies, compensation-related policies, time-off benefits, medical and other benefits, employee conduct, internal communications, career development and termination).  Assuming that each of the sections include all of the necessary information, the grouping approach allows readers to go to a particular section and see all the information that they need organized in a consistent and hopefully readable fashion.  In general, the grouping method is preferred and recommended; however, even when this approach is taken it can be useful to include an alphabetical index with page numbers to provide further help to readers in navigating the handbook, particularly since many readers may not know which section should be selected for learning about a particular topic or question.

Numerous examples of strategies for collecting and disseminating employment-related policies are available online and in legal and HR treatises.  The decision as to what approach to take depends upon the stage of the company’s development—most new companies tend to have shorter handbooks or simply collect the most important procedures and put them in the form of a memorandum or hand-out that is delivered to employees at the time that they join the company and then periodically thereafter; the types of activities engaged in by the company’s employees; the specific laws and regulations applicable to the company’s business; the company’s prior experience with responding to concerns and questions raised by employees; and the size of the company’s HR department, since that department is primarily responsible for overseeing administration of the policies included in the handbook.  Organizational culture also plays a role in how communications relating to the employee’s relationship to the company are presented.

The process of preparing an employee handbook, which depends on the size of the company and the resources, human and otherwise, available for investment in the preparation process.  Smaller companies, or companies without a formal human resources (“HR”) department, generally assign a single person to develop and write the handbook.  Other companies designate a coordinator for the handbook project and create a committee to support the coordinator and divide up the various tasks necessary to put the handbook together, distribute it among the workforce and ensure that adequate training is made available to managers and other supervisors.  When a committee structure is used the group should be kept relatively small, generally no more than five people, and membership should include the top HR executive, one executive from each of the key operational functional groups within the company, the controller to handle tax and legal questions, and a representative from the company’s communications or public relations department.  A committee leader should have the final approval rights on major decisions relating to the handbook.  While all members can and should contribute to the content of the handbook, writing responsibility should be assigned to one person, typically the project coordinator.  The committee must determine what policy statements will be included in the handbook; collect and analyze information on current organizational practices, including “unwritten” policies, procedures and expectations among employees; make recommendations to senior management about policy content, policy organization and handbook format; and must review the drafts of the handbook policy statements written by the project coordinator or by the coordinator’s designees.

Whatever approach is taken, however, the persons involved in the handbook process should have the approval and support of management; access to the top executives of the company; access to relevant documents, memos and records; knowledge and understand of company operations; access to legal advisors for specialized topics outside of the expertise of committee members; and an ability to express ideas and prepare a handbook in a style and format that fits the organizational culture of the company.  The following is a suggesting ordering of the steps that should be taken for managing and completing the preparation and distribution of an employee handbook:

  • Designate a coordinator for the handbook project and create a committee to support the coordinator and divide up the various tasks necessary to put the handbook together, distribute it among the workforce and ensure that adequate training is made available to managers and other supervisors.
  • Ensure that the persons involved in the handbook preparation process have the approval and support of management; access to the top executives of the company; access to relevant documents, memos and records; knowledge and understand of company operations; access to legal advisors for specialized topics outside of the expertise of committee members; and an ability to express ideas and prepare a handbook in a style and format that fits the organizational culture of the company.
  • Conduct a thorough review of formally established policies, such as published rules such as published rules and procedures regarding working hours and recording work time, overtime, holidays and vacations, pay and benefits, disciplinary actions and termination.
  • Identify policies that may not be formally articulated but which may nonetheless be inferred from past practices, such as unwritten rules and customs covering such matters as employee conduct.
  • The committee should meet to discuss and reach agreement on the contents of the handbook including the specific policies that will be included and the agreement should be formalized as a draft table of contents for the handbook.
  • The project coordinator (or the coordinator’s designees) should draft the policy statements agreed to by the committee and the policy drafts are distributed to each committee member for review and comment..
  • Committee members should return the policy drafts to the project coordinator, who reviews the members’ comments and modifies the drafts and distributes the second drafts of the policy statements to the committee members for further review. The second draft should be accompanied by a summary of the comments received on the first draft and an explanation from the coordinator as to how each of the comments was addressed in the second draft.
  • After second drafts are returned to the project coordinator, the coordinator and committee should proceed in the same way to prepare and review a third draft, which should be close to a proposed final version of the handbook.
  • The committee should submit the third draft to in-house or outside counsel to ensure that the policies comport with applicable law and, if necessary, to the company’s public relations department or an outside professional writer to ensure that the policies are easily understood.
  • The third draft should also be circulated to a select group of first-line supervisors for input on how it is likely to be received by employees and how comfortable the supervisors feel about their role in administering the policies in the handbook on a day-to-day basis. First-line supervisors should receive training on the contents of the handbook before it is distributed once the policies have been approved by senior executives.
  • The project coordinator should prepare a final draft of the policies to submit to the policy committee members and to senior executives with approval authority.
  • Upon receiving approval, the project coordinator should prepare the policy statements in final form for inclusion in the employee handbook.
  • Complete the distribution of the new handbook including recalling copies of old handbooks, distributing separately to managers and supervisors along with instructions on their roles in ensuring that employees receive the new handbook and understand its provisions; distributing the handbooks to employees during an information session—small group or company-wide, depending on the size of the company— in which policies are explained and employees are given an opportunity to ask questions; and  requiring employees to sign and return an acknowledgement of receipt for the handbook that should be maintained in their personnel file.

 

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