By the Book: What’s Lurking in Your Employee Handbook – And How Recently Has it Been Reviewed?

by Pepper Hamilton LLP

A version of this article was originally published in the May 2014 issue of The HR Specialist. It is reprinted here with permission.

Ideally, a company’s employee handbook lays the groundwork for the employer-employee relationship, spells out what is expected of employees, and serves many purposes that are critical to sustaining a company’s business and maintaining positive workplace relationships. It can serve as the first line of defense even before a lawsuit arises. That’s why an employee handbook should be considered a “living document” that responds to changes in the law, a company’s business or industry, and workplace trends. Unfortunately, many companies fail to take the time to align their handbook with the realities of their business, and as a result, end up with a handbook that does more harm than good.

Well-drafted employee handbooks cover a number of policies and practices that are relevant to a particular business. Changes in the law, workplace demographics, technology, and the manner in which employees and employers interact continue to occur at a rapid pace. For example, technology advances and remote workforces have prompted many companies to put new rules in place, such as social media policies and “bring your own device” policies, under which employees use personal devices (i.e., smartphones, laptops, etc.) for business purposes. Same-sex marriage laws and the implementation of the Affordable Care Act are impacting employee benefit policies, making handbooks that do not address those changes outdated. And recently, the Equal Employment Opportunity Commission (EEOC) issued updated guidance on religious accommodation, which affects otherwise innocuous handbook policies on grooming and dress codes.

Employers with employees located in multiple states should understand and comply with applicable state laws that affect employee handbook policies. While federal employment laws apply nationwide, topics such as vacation and sick time are impacted by state wage payment laws. And, despite the common disclaimer in a handbook that “nothing in this handbook creates a contract between the employer and the employee,” state wage payment laws, such as Pennsylvania’s Wage Payment and Collection Law, often point to the company policy as the contractual basis under which wages and wage fringe benefits are owed by an employer.

Many companies consider minimum wage and classifications of employees as exempt or non-exempt to be governed solely by federal law. However, employers are required to comply with both federal and state wage-and-hour laws, and there may be differences. For example, Pennsylvania does not recognize the federal “computer” exempt classification as a white-collar exemption. Therefore, to be considered exempt and not entitled to overtime pay, Pennsylvania computer network and information technology employees would have to qualify under another exempt classification under Pennsylvania law. And if state and federal law compliance weren’t enough to handle, employers must also comply with local laws. Many municipalities around the country, for example, have anti-discrimination ordinances on the books that cover protected classes not covered under federal or state laws.

In litigation or administrative proceedings, employers can turn to their handbooks to defend their position. For better or worse, administrative agencies such as the EEOC and its state and local equivalents expect to see an employer’s position on a given topic spelled out in a handbook policy. Likewise, when cases proceed to court, the judge and/or jury will be looking at the handbook policies and practices an employer has put into place to assess whether the employer engaged in unlawful conduct or whether they complied with the applicable law(s).

Reviewing an employee handbook should begin with a meeting that includes the company’s human resources executives and other senior managers, as well as in-house and outside counsel, to review the nature of the business, its culture and employee relations philosophy, its employment policies and any company- or industry-specific requirements that must be followed. Once buy-in among company leadership has been achieved, HR and counsel should work together to summarize the changes for employees. Companies with unionized employees should take care not to unilaterally implement employee handbook changes in areas subject to mandatory bargaining with the union.

It is important to require employees to sign an acknowledgement that they have read and understand the handbook. Keeping such acknowledgments on file can assist in defending against lawsuits filed by employees over company policies and procedures, as it demonstrates that the employee was aware of and understood those policies and procedures, along with the penalties for non-compliance.

Although employee handbooks tend to sit on the shelf, they should play a more active role in an employer’s day-to-day operations. Handbook reviews should be conducted at regular intervals, in conjunction with any major change in the law and in accordance with changes to the company’s business or significant fluctuation in the employee headcount. Prudent employers recognize the value of a well-written handbook that not only effectively communicates the company’s policies, but also protects the company’s assets and legal position.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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