Creating Your Employee Policy Handbook

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Employee handbooks should be more than just a pile of photocopies you thrust at a new hire. Handbooks provide a common framework for communicating your corporate culture. If used properly, they can protect you legally as well.

OVERVIEW [top]A company's employee policy handbook can make or break a court case. For instance, an employee handbook can justify the decision to fire an employee when that former worker airs his or her grievance before a judge. Yet, the dismissed employee may use statements from the handbook to prove that the company didn't follow proper procedure, with the result that the fired employee is now entitled to compensation. Which way would the decision go in your case? It depends on how you write and present the information in your handbook. In this Quick-Read you will find:
  • Considerations for formulating an employee handbook.
  • Advantages of a well-constructed handbook.
  • Practical tips for steering clear of problems down the road.
SOLUTION [top] Lawsuits are on the rise and available employees on the decline. Many entrepreneurs, in an attempt to compete for talent, emphasize the looser, hipper atmosphere of their businesses compared to rules-laden traditional companies. Extending such casualness to an employee handbook can lead to trouble. "We're like a family, and we don't need this level of detail to change the relationship to a formal one," litigation attorney Jonathan Segal — a partner with Wolf, Block, Schorr and Solis-Cohen in Philadelphia — says, as he mimics his clients. Employee policy handbooks must contain strong language to carry authority. Softening words, such as "typically," "generally," "usually," are legal red flags. Even such common phrases as "permanent employees," "annual salary," "probationary period" and "just cause" can turn around to bite the unwary in the courtroom. Likewise, you need to evaluate point by point whether there is greater advantage in being specific or vague. In some cases, it's best not to include specifics, such as "We pay 90 % of health care premiums;" if you say how much you'll pay on the health care premiums, you're stuck with that amount. If the premiums go up, so does your dollar commitment. Keeping it vague — "we will pay a portion of employee health care premiums" or "we will provide health care opportunities" — keeps you out of hot water. Conversely, some instances definitely call for specifics. For example, if you fail to list one of the protected groups in the Equal Employment Opportunity statement (women, African-Americans, etc.) a lawyer can say you are hostile to this group. A casual workplace atmosphere can invite misunderstandings (and abuse) of vacation accrual, personal time off, salary bonuses and performance review standards. Spelling out such standards in a handbook prevents confusion, errors and abuses. Whether a company has a casual atmosphere or a formal atmosphere, providing a policy handbook to inform both middle-level managers and front-line workers of their human resources rights and responsibilities helps ensure that employees are treated equitably. A handbook also saves human resources staff time by answering common questions. In addition, if you hire a significant number of hourly workers, composing a training section for the handbook (or a self-standing procedure manual) ensures everyone receives the same information in a consistent manner. Simply putting these steps in writing may also prove an excellent exercise for you, allowing you to discover hidden reasons for lagging sales, customer service complaints and other difficult business problems. Informed employees are less likely to make mistakes that cost you money. Protecting Yourself Legally Employers who choose to rely on verbal employment policies over written handbooks are often the worse for it, according to Maurice Baskin, a Washington, D.C., attorney who serves as a spokesperson for the Society for Human Resource Management. "Charges of favoritism, often leading to unlawful discrimination, are more difficult to disprove without written policies as evidence," he notes. To enhance the value of a handbook for litigation with a fired employee, attorneys recommend the following:
  1. Print an "at-will employment" statement in large point size at the front of the book. It should state that the handbook does not create a contract, express or implied, and that it does not alter the "at-will" relationship between employer and employee. The at-will statement protects your right to fire an employee.
  2. Require employees to sign a receipt indicating they received and will comply with the employee policy handbook. Repeat this step with each addition or correction page you issue in the future.
  3. Repeat the at-will clause in the performance standards section so lawyers of disgruntled employees can't claim their clients skipped that particular page.
If you issue an employee policy handbook, you must commit the time and money necessary to keep it current throughout the rest of your company's life. Always get an attorney to review the final version before distributing copies. REAL-LIFE EXAMPLE [top] When Laura Gohman joined Indianapolis-based Software Artistry, the human resources supervisor became the 140th employee hired. When she left two years later, the employee roster stood at 300. Her legacy included polishing an employee manual that each new hire received within the first week. She included both the at-will language and noncontract agreements, followed by Software Artistry's stand on affirmative action, sexual harassment and the Family Medical Leave Act. Gohman also covered public company legalities by stating the rules for insider trading and tipping. Next, she polled her department to compile a list of frequently asked questions, and set about answering them in the manual. The final version addressed the types of training courses Software Artistry would provide or pay for, shipping and mailing policies, and employee referral programs. Gohman even printed a chart deciphering the benefits code system that appeared on employee paychecks. She tabbed each section at the side for quick reference. The handbook cost the company under $2 per copy to produce. "Look at your manual through your employees' eyes to see what doesn't make sense to them," she recommends. "A lot of personnel professionals get weighed down in the legal stuff and end up making it too technical throughout." To this end, she released updates each January, timed to explain new-year changes in benefits packages. When the company eventually merged with a competitor, employees begged the new owner to continue publishing the manual. DO IT [top]
  1. Make a list of questions commonly asked by employees, situations that repeatedly cause confusion, and personnel issues that recur at management meetings.
  2. Anticipate spending 20 to 40 hours on the initial draft. Consider whether dealing with present ambiguities wastes more time than that throughout the year.
  3. Explore commercial software templates for employee policy handbooks to determine if one can save you time. See for instance www.hrto, and
  4. Divide company information and present it in six categories:
    • The way we work (legal statements).
    • Pay and progress (money issues).
    • Time away from work/benefits (perks).
    • On the job (employee duties and performance expectations).
    • Safety in the workplace (precautions, substance abuse).
    • Receipt page (acknowledging receipt of the manual and the at-will statement).
  5. Revise or scratch any statements that could imply long-term commitments or promises with which you are uncomfortable.
  6. Highlight negative statements that smack of us-versus-them attitudes. Example: "Tardiness is prohibited," "We reserve the right to drug test," "Passing out unauthorized samples constitutes grounds for termination." Replace them with positive statements, such as "We expect employees to come to work on time" or "We expect our employees to be fit for duty, free from the adverse effects of drugs or alcohol."
  7. When in doubt, point out the rule without detailing consequences.
  8. If the handbook exceeds 30 pages, simplify by bulleting information or eliminating miscellaneous company information, such as its history. Employees tune out large blocks of copy.
  9. Have a lawyer review your handbook.
  10. Repeat your handbook's "at-will employment" statement in employment applications, job offer letters and other pre-employment paperwork as well as during formal discipline situations. This provides you with still more protection than the handbook on its own should you find yourself in court on wrongful termination charges.
  11. Publish the handbook on your company's Intranet.
RESOURCES [top] Books A Company Policy & Personnel Workbook by Ardella R. Ramey and Carl R.J. Sniffen (PSI Research/Oasis Press, 1999). Complete Employee Handbook: A Step-by-Step Guide to Create a Custom Handbook That Protects Both the Employer and the Employee by Michael A. Holzschu (Moyer Bell, 1996). How to Develop an Employee Handbook, 2nd edition, by Joseph W.R. Lawson (AMACOM, 1998). Internet Sites The Society for Human Resources Management No Fooling The Handbook on Handbooks Employee Handbook HR Guide to the Internet: Employee Handbooks Forget Policy Manuals Article Contributors Writer: Julie Sturgeon
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