The Benefits and Pitfalls of the Employee Handbook
Playing by the Rules
Most companies, especially larger ones, have employee handbooks that detail everything from vacation time to reasons for termination. Yet, too many are content to draft a handbook and shelve it for years, never reviewing it for changes in the regulatory landscape or confusing or contradictory language. In the ever-changing world of employment law, those are mistakes that can prove costly in more ways than one.
An employee handbook isn’t a contract, nor is it a legally binding document. But in a legal proceeding, it helps to have one.
Take, for instance, the case of an employee suing a company for allowing a culture of sexual harassment — a particularly timely example.
“In court, the first thing the judge will ask is to see the company’s policy,” said John Gannon, partner with Skoler, Abbott & Presser. “If your response is ‘we don’t have one,’ that suggests the employer doesn’t care about harassment and discrimination in the workplace. And that’s really getting off on the wrong foot in the event you’re sued for harassment or discrimination.”
The #MeToo revolution has certainly sent HR departments scrambling to make sure their policies on that issue are up-to-date, clear, and enforced. But if they’re smart, said the attorneys BusinessWest spoke with, they’re also regularly reviewing all sorts of policies that govern workplace rules and expectations — from disciplinary procedures to time off — and, hopefully, including them in an employee handbook.
“Every company that has employees should have a handbook,” said Daniel Carr, an associate with Royal, P.C. in Northampton. “But we use the term ‘handbook’ loosely; there’s no requirement that they have to be bound in a single document. It could mean whatever collection of policies you have, as long as it’s applied to all employees.”
Even if the employee signs a statement that he has read and understands the handbook, that doesn’t create contractual rights, Carr explained, noting that Massachusetts is, after all, an at-will state when it comes to hiring and firing, and an employee can be terminated for any reason that is not explicitly illegal, such as discrimination.
“I can’t tell you how many cases we’ve seen where the employee claims his termination was a violation of his contract. When asked, ‘what contract?’ they argue the employee handbook is a contract. It’s not.”
Gannon agreed. “One of the nice thigns about a handbook is that you can reaffirm the principle that everyone is an at-will employee,” he explained. “That’s why it’s really important, if you’re going to have a handbook, it should make it clear this is not a binding contract, your employment is at-will, and we can change the terms of the handbook and your employment relationship at any time with or without notice.”
So, if it’s not a contract, what is a handbook, and why should employers have one — and take it seriously?
“A handbook is a collection of policies, an ever-living document that can be changed at any time by an employer with or without notice,” said Mary Kennedy, partner with Bulkley Richardson in Springfield. “The purpose of a handbook is to give information to employees about expectations at work.”
Employers use the policies in an employee handbook as a sort of roadmap to both the treatment of employees and, conversely, expectations for their behavior. They protect themselves from lawsuits, such as harassment claims, wrongful termination claims, and discrimination claims. Employee handbooks generally contain a code of conduct for employees that sets guidelines around appropriate behavior for the individual workplace.
Under Massachusetts law, for companies with at least six employees, part of that collection of expectations must be policies reflecting the state’s own guidelines governing sexual harassment, accommodations for pregnant workers, sick leave, and other issues — many of which have changed recently.
Other contents should typically include policies governing discipline, rules of behavior, when and how to take time off, sick-time guidelines, how much vacation and personal time employees get, when they are paid, and what health benefits are available and how to access them.
The contents of any handbook vary from industry to industry, Gannon noted. For instance, the time an employee clocks in may be more important on the manufacturing floor than in an office setting, while safety guidelines for construction workers will be different than those for accountants.
“It’s an inexact science, and obviously no handbook is foolproof, and you can’t account for every possible contingency,” Carr said. “There may be at times you have to deviate from it. Certainly, you don’t want to be hemming yourself in to something you can live up to. As an employer in an at-will state, you have the right to set the policies. The handbook is more about setting expectations than setting hard and fast rules.”
Law and Order
The benefits of having a handbook fall into two buckets, Gannon said: The legal obligations governed by state and federal employment law, and basic HR practices that aren’t necessarily required by the law.
For the latter, written policies must make it clear to the employee what the employer’s expectations are.
“If you do need to discipline an employee, if you need to write them up or suspend them, you never want an employee to turn around and say, ‘wait a minute, I didn’t know I was going to get written up if I was absent more than three times in a month.’ Or, ‘I didn’t know it was a violation of your company policy to raise my voice at a meeting’ — whatever the case may be. A handbook sets expectations.”
It also provides guidelines to managers so they can treat employees fairly and consistently, he added. If the policy is clear, it can be applied to everyone across the board. If not, one supervisor may write someone up for a violation, while another supervisor doesn’t. That leads to inconsistency and, sometimes, hot water in court.
“Inconsistent application of your rules can lead to a lot of legal problems if the employee challenges the reason for his or her reason for separation from employment,” Gannon said, adding that the actual enforcement of the rules is more important than what a handbook says, “but if you don’t have, at minimum, a written policy, you have a big risk of inconsistent enforcement of your work rules.”
Kennedy said having clear policies in the handbook is the first step when defending a claim of wrongful termination in court.
“If you have a no-show policy where, after three violations, the employee is terminated, and it’s in writing and the employee was told it applies to all employees, and the employer can show it was uniformly applied to all employees, then the employer has a better shot at defending itself.
“For example, if a bank teller continually makes mistakes on the line and keeps coming up short, that’s certainly not beneficial for the employer,” she explained, so a written policy outlining the consequences of coming up short multiple times would be reasonable. “Whereas, if the bank said, ‘we don’t like people with red hair,’ well, that’s different.”
Supervisors and managers, Gannon said, typically appreciate a hard-and-fast policy because it’s something they can fall back on. He recalls one client whose employee showed up to work intoxicated, and at first, his supervisor didn’t know what to do. “Fortunately, they had a policy that made it clear, if you detect someone is under the influence, this is what you should do. It helped the supervisor navigate what his options were. Without that, they’re left wondering what to do.”
Communicating the policy to employees is just as important, Kennedy said, whether it’s a physical document passed out, with the employee signing an acknowledgement of receipt, or an electronic document distributed through the company intranet, or, for a larger business, explaining new policies in a meeting and making a list of who attended. “You certainly want to give it out when onboarding people, and then when there are any changes in policy.”
Even progressive discipline can be altered if the employer can prove the action is reasonable, Carr said — again, going back to the at-will concept. “If the handbook says a first violation is a verbal warning, the second is a written warning, third is probation, and fourth is termination, you have the right to revise that if someone commits a terminable offense the first time out.”
With all the protections a handbook may provide, Gannon said, some pitfalls do exist. One is trying to put everything in a handbook.
“The more words you have in the handbook, the less likely an employee is going to read it all,” he noted. “Sometimes I’ll see one that’s 120 pages long. I’m not sure any handbook needs to be that long.”
A smarter option, he said, is to include a short, two-paragraph summary of each policy, directing the employers to ask a particular person, maybe someone in human resources, if they need a more detailed explanation.
“Another mistake is not getting it reviewed enough,” he added. “It’s great to have a handbook — most employers do — but sometimes they get stale. You don’t want to have a policy that’s outdated, or you don’t want a handbook that misstates the law, because there are often changes in the law.”
For example, on April 1, Massachusetts employers will be required to have a policy that adheres to the Pregnant Workers Fairness Act. “You need to review your handbook — it doesn’t necessarily have to be annually, but I would say every two or three years — just to make sure you’re not missing anything and there haven’t been changes in the law that would require rewording a policy.”
In a union shop, Kennedy said, employers want to make sure the handbook gels with the collective bargaining agreement, but even in a non-union shop, certain written policies may run into conflict with rulings from the National Labor Relations Board (NLRB). A few years ago, several companies made news by terminating workers for complaining about their job on social media — and took their cases to court, where they won.
“Social media has become the equivalent of the so-called water cooler,” Carr said, noting that the NLRB has long protected the rights of employees to discuss the terms and conditions of their employment, even in a public forum. However, the composition of the board has changed under President Trump and may be less willing to side with employees in all such matters.
“A few years ago, handbook provisions that restricted employees’ right to discuss terms and conditions of employment were considered overbroad — that was all the rage for awhile,” Gannon said. “New administration has scaled some of that back. With all the ebbs and flows in the world of employment law, you need to make sure the handbook stays up to date with those changes.”
Kennedy agreed. “Employment law changes on a regular basis, so handbook policies should be reviewed on a regular basis, to make sure they contain up-to-date language.”
Still, amid all the talk of violations and firings, Gannon said, the greatest value of a handbook is in its power to prevent some of those incidents in the first place.
“If an employee knows what can potentially lead to discipline, I think the employee is less likely to engage in that behavior,” he told BusinessWest. “That’s one of the really nice things about a handbook — it sets out what your expectations are. The goal of discipline is not to create a path that justifies termination. The goal of discipline is to correct behavior so that somebody can stay with the company for a long time and be a valued contributor to the group.”
To that end, he continued, “if you do need to discipline, it’s easier to explain why when you can point to handbook and say, ‘look, this is company policy, and you violated it. Sorry, but I have to write you up.’”
Turn the Page
That said, a handbook also helps with a company’s defense is they are sued, Gannon noted.
“If an employee claims they were fired because of a protected characteristic, it’s the employer’s burden to demonstrate to a judge or jury that, no, this is the real reason this person was fired. It’s nice to be able to point to a policy in a handbook that makes it clear this is why the employer took a particular action, that it wasn’t an arbitrary decision one supervisor just came up with. The company considered this particular issue, went to the extent of drafting a handbook putting this policy in place and having the employee sign off on it, and there’s an expectation the policy is going to be followed.”
Carr, who told BusinessWest he has drafted or reviewed “many, many handbooks,” emphasized, however, that a good policy holds up in court only if the employer actually enforces that policy uniformly and consistently.
“Otherwise, it’s just empty rhetoric. Sexual harassment is a perfect example, and a timely one,” he said.
Elaborating, he said virtually every company has an anti-sexual-harassment policy, and one of the tenets of sexual-harassment law is the question of whether an employer knew about, or should have known about, the alleged violations. “If the employee can show the employer was not diligent about enforcing their own policies, it creates the impression they dropped the ball and should have known.”
It’s a lesson many companies continue to learn the hard way.
Simply put, Kennedy said, “what’s bad about having a handbook is if you don’t follow it.”
Joseph Bednar can be reached at [email protected]