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What’s in Your Employee Handbook?
Employers of all sizes, and in every type of business, have personnel policy handbooks that state and outline their formal policies and procedures. Some companies have employee handbooks that are very elaborate and detailed, posted on the company intranet or contained in three-ring binders, number and section coded, and routinely updated by a human resources department. Other employers pay less attention to their employee handbook, treating it more as a guide for the company's working hours, attendance and vacation policies, and a description of the medical and dental insurance plans. In either case, the employee handbook can be a valuable resource when defending either an employee or employer in a case.

Our Role      
The lawyers at GMGM assist their employer clients in the important task of developing and drafting employee policy handbooks for businesses. We aim to help establish an employee handbook for our clients that will cover them in any issue that may come up when dealing with current or potential employees. We also provide advice and counsel on the application of those policies. When we defend an employer client against an employee claim, the employee handbook is almost always a key piece of evidence. Likewise, when we review a potential wrongful discharge, sexual harassment, or employment discrimination claim for an employee client, the employee handbook is always critical to the evaluation. The next time you see your company's employee handbook, think of it as something more than mere information about the company's vacation, holiday, and sick-day policies, or its benefit plans. If you are an employee, think of it as a tool that can protect and preserve your rights as an employee. If you are an employer, think of it as a tool to help shield your company from liability for employee claims.

The Importance of the Employee Handbook

The best defense against an employment-related suit is legally sound policy applied consistently throughout your business.

  1. Employee Relationships: At-will Employees and Termination Policies
    For more than three decades, management consultants and lawyers have preached to employers about how important it is to have an employee handbook that contains personnel policies that do not come back to haunt them. Beginning in 1980, Michigan courts started recognizing employee claims that asserted contractual rights based upon certain written policies contained in employee handbooks. For example, most "wrongful discharge" lawsuits are based upon written progressive discipline and just cause termination policies contained in an employee handbook. If an employee has not signed or been issued a statement that says he or she is employed at-will, and his or her employee handbook says termination can occur only for a just cause, that employee handbook is the tool that will allow the employee to challenge a discharge in court and get a jury trial.

    Today, it is not uncommon for an employee handbook (and the sign-off acknowledgement that is kept in each employee's personnel file) to state that employment with the company is on an at-will basis. When the employment relationship is at-will, both the employee and the employer have the right to terminate at any time, with or without advance warning or notice, and with or without a just cause. If a terminated employee sues, alleging generally that his or her discharge was "unjust" or "unfair," the employee handbook and sign-off sheet become defense exhibits A and B, and will likely defeat the claim.

  2. Employment Discrimination and Sexual Harassment
    An employer's failure to uniformly apply its own formal policies can be the key to proving employment discrimination.
    While employee handbooks can be very useful in defending against wrongful discharge claims, they are also frequently the focus of employment discrimination and sexual harassment lawsuits. The employment at-will rule has some exceptions, including an exception for statutory employment discrimination claims. If an employer does not follow its own stated policies or procedures, an employee handbook with an at-will employment policy can still come back to haunt the employer in an employment discrimination claim.

    For example, some companies have open position posting and transfer policies which state that all vacant positions will be posted in some fashion, so that all employees will have an opportunity to apply for, and be considered for, transfer or be promoted to the position. If a company has such a policy, but fills a vacant position without first posting it and allowing all interested and qualified employees to apply and interview for the position (say the position is quietly filled by a 38-year-old employee who has been with the company for 18 months), the failure to follow the established policy can be used as evidence in an age discrimination claim by the 55-year-old, long-term employee who, despite his or her qualifications, was excluded from consideration for the job.

    Other examples of policies that can come back to haunt an employer are progressive discipline policies, attendance policies, or performance standards and evaluation policies. If the employer does not follow, or uniformly follow, its own policies, it could open itself up to potential liability for an employment discrimination claim.

    It is not unusual for employers, especially small employers, to not even know what their policies are on certain issues, or to forget that they have a policy or policies at all. Often, employers "borrow" the employee handbook of another company, merely changing the cover page and the name of the company within the text of the handbook, thinking that "if it is good enough for them, it is good enough for me." Then they forget about or don't follow the policies that they have established. Employers should create policies and procedures that they can apply and follow on a uniform basis.

    An employee handbook should contain a sexual harassment policy and complaint procedure.
    In a sexual harassment situation, an employee handbook that contains a policy that clearly defines and prohibits sexual harassment, and provides an effective complaint procedure, is a crucial tool for both the employer and the employee-victim. If the employer has a policy that defines and prohibits sexual harassment, and a complaint procedure that gives the employee-victim an opportunity to complain in confidence to one of several different management people, it can be completely shielded from liability to the employee-victim if she (or he) fails to report a "supervisory" or "hostile work environment" to higher management.

    Having a sexual harassment policy and complaint procedure alone will not completely shield an employer from liability for every sexual harassment claim. For example, if a victim of sexual harassment uses the complaint procedure and reports sexual harassment by his or her supervisor, or a co-worker, the employer must make good on its stated anti-sexual harassment policy by conducting a fair and objective investigation of the complaint and taking effective remedial action. The investigation should not simply focus on scrutinizing the facts, documents, and witnesses that the complaining employee can identify, but it should also include some independent, objective detective work by the investigator. Too often, employers "circle the wagons" to protect their management personnel, and their investigations focus more on finding information to discredit the complaining employee. When an employer does this, it not only increases his or her liability risk, but it also opens the door to an illegal retaliation claim.

  3. Employee Pay and Time-off Policies
    The employee handbook plays a vital role in the failure to pay wage or commission claims.
    Employee handbooks often contain policies that govern things such as the calculation and payment of commissions or bonuses, the accrual of paid time off, and what, if anything, will be paid to an employee upon termination. Both state and federal wage and hour law give deference to the written agreement or payment of wages policy maintained by the employer.

    If you are an employee, and your understanding of your compensation plan differs from the policy that appears in your employee handbook, you should get your plan committed to a written agreement that supersedes the policy. If you are an employer, a poorly drafted payment of wages, bonuses, and/or commission policy can lead to an unintended, and perhaps disastrous, result.

    For employers of 50 or more employees, mandatory notices under the FMLA should be contained in an employee handbook.

    A staple of most employee handbooks is the time-off policy. An employer of 50 or more employees is covered by the Family and Medical Leave Act, which is a federal law that ensures that covered employees are entitled to 12 weeks of job-protected leave for a disabling medical condition, or the birth of a child, or placement of an adopted or foster child, to care for a sick spouse, child or parent, and, since early 2008, for certain situations resulting from duty in the military. The FMLA imposes on the employer the obligation to post notices of rights under the FMLA. Moreover, if the employer has written leave of absence or time-off policies, the employer is required to spell out FMLA rights in those policies.