Does My Business Need an Employee Handbook?

Obermayer Rebmann Maxwell & Hippel LLP
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While your business is not required to have an employee handbook, handbooks do offer many legal and non-legal benefits.

A well-drafted and regularly updated employee handbook can provide employees and their supervisors with the “rules of the road.” A handbook with clear rules can help ensure that employees are treated fairly and consistently across different supervisors and departments. Consider the morale issues that could develop in a workplace where, for example, supervisors of different departments or groups treat employees differently when they call out sick.

An organization’s failure to establish and follow consistent policies across the board is fodder for discrimination claims by disgruntled employees. Most workplace discrimination claims are brought under a “disparate treatment” theory, where the employee argues that they were treated less favorably than other employee(s) outside their protected class (race, gender, disability, etc.). A company’s failure to treat employees consistently can create the appearance—accurate or not—that some other employee receive more favorable treatment because of discrimination. Having (and following) robust personnel policies helps prevent these scenarios.

Employee handbooks also should contain policies addressing discrimination, sexual harassment and other forms of illegal workplace harassment, and directing employees to promptly report any harassment to the company through established channels such as the Human Resources Department.  These policies should also advise supervisors that they are required to immediately pass along complaints of discrimination or harassment, and that they are strictly prohibited from retaliating against employees who complain in good faith.  Strong language prohibiting harassment, discrimination and retaliation sends a message that harassment is not tolerated at the employer’s workplace and can help support a legal defense to future harassment claims if the victim does not report the harassment according to the policy.

Employee handbooks can also be used to tell employees and supervisors not to engage in certain conduct that might create legal exposure for the company. For example, absent a clear policy, non-exempt employees, who are legally entitled to time-and-a-half overtime pay under state and/or federal law, may attempt to work off the clock in order to impress their bosses.  These employee may not realize that they cannot consent to work overtime hours without pay, and that doing so exposes the company to liability. Similarly, many supervisors are unaware that it is illegal to retaliate against an employee for engaging in protected conduct such as filing a complaint of harassment or discrimination.

If done correctly, the time and expense of creating and distributing an employee handbook will be far outweighed by the time and money saved on troubleshooting thorny employee issues. It becomes much easier, for example, to determine when and how to discipline an employee for excessive absenteeism when an attendance policy in the handbook provides a clear standard to follow.

While employee handbooks should be customized to the particular workplace, they should always include certain elements, including a statement that nothing in the employee handbook creates and employment contract, that the handbook may be changed at any time in the employer’s sole discretion, and that at-will employees remain at-will (subject to termination at any time or any reason). Handbooks should also include a form where the employee acknowledges that he or she received—and has read and understood—the handbook.  While distributing handbooks via e-mail or a company intranet site is convenient, never underestimate the usefulness of a hardcopy receipt form, signed and dated in the employee’s own handwriting, maintained in the employee’s personnel file.  This makes it much more difficult for an employee to deny that they were aware of their rights and obligations.

Employee handbooks should also be regularly reviewed and updated to reflect actual company practices and changes in the law (typically, at least once a year). 

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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