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Avoiding Booby Traps in Drafting Employee Manuals

March 1, 1996

Avoiding Booby Traps in Drafting Employee Manuals

March 1, 1996

Our Labor & Employment Practice Group would be happy to assist you with any questions relating to this article.

You have just worked another miracle for one of your best clients who is so pleased that he insists on paying you double your fee, in cash. No need to send a bill, he pays you right then. As you walk your very happy and satisfied client to the door and think about ordering champagne to celebrate, the client cheerfully proffers that killer statement "Oh, say, I almost forgot, I have one more simple one for you." You mentally cancel the champagne and break out in a sweat. The client continues, "We drafted up a little handbook for our employees. It is pretty simple and uncomplicated. I don't want you to spend a lot of time on it, just keep me out of jail."

Without missing a beat, you confidently reply, "No problem, we'll get right on it." Inwardly, your mind races "A labor relations thing, how tough can that be? I think my brother-in-law does some of that stuff once in a while. Hey, labor law is just common sense anyway."

Obviously, employment rules and regulations vary from jurisdiction to jurisdiction. However, the following checklist of considerations remains fairly consistent. Careful review and drafting of handbooks can save considerable time and the expense of unnecessary employment litigation. All told, it can be an "easy one" if you consider the following items.

- Avoid creating a contract - Handbooks should be reviewed to avoid the use of terms that could be interpreted to create a contractual relationship. In fact, the introductory section of the handbook should specifically indicate the manual does not create a contract. The purpose of the handbook should be limited to explaining company rules, procedures, and benefits.
- Maintain an "at-will" relationship. To the degree allowable in the respective jurisdiction, the employer will generally want to maintain an "at-will" relationship, meaning the employee can be terminated at the will of the employer as long as the reasons for the termination are not illegal. The introductory section of the manual should state that the employment relationship is "at-will" if allowable in that jurisdiction. Avoid terms such as "just cause," "good cause," or "proper cause" when describing termination or discipline matters. "Cause" is a term that provides substantially greater job protection than the concept of "at-will."
- Avoid probationary periods. A common mistake found in manuals is the existence of a probationary period when the employer really prefers to maintain an "at-will" relationship. Having a probationary period suggests that once the period has lapsed, the employee has some employment protection beyond "at-will." Use of alternative phrases such as an "orientation period" or "training period" may create the same problem. If the employer truly wants an "at-will" relationship, leave the "getting-to-know-you" period out.
- Establish benefits clearly. The manual offers the opportunity to set forth what, if any, benefits apply such as vacation, holidays, and insurance. Check these benefits to make sure the language is clear as to which employees receive those benefits when they are available. For example, some benefits may only apply to full-time employees and some may apply to both full-time and part-time employees. Some benefits are pro-rated based upon the number of hours worked. In addition, check to make certain there is flexibility to modify these benefit structures and that those listed in the manual simply refer to those existing at that particular time. Avoid phrases that "guarantee" benefits.
- Set forth work rules and procedures. Review the manual to determine the extent to which the employer's work rules and procedures are set forth clearly and concisely. The manual gives the employees notice of various rules and procedures to be followed such as what to do when the employee is not able to report to work on time, how breaks are taken, and how overtime gets approved. The manual also gives the employer the opportunity to notify the employee of what conduct during work may be reason for discipline. However, make certain that any discipline section properly coordinates with the "at-will" concept. Remember, words such as discipline for "just cause" represent a whole greater protection to the employee and must be avoided if the employer truly wants to maintain an "at-will" relationship. In addition, providing "progressive discipline" may also erode the "at-will" relationship. The point is not to maintain the "at-will" concept at all costs, or to advise against concepts such as "progressive discipline." The point is to recognize the differences and select the best option.
- Set Forth Required Policies. Review the manual to determine the extent to which it properly incorporates certain policies required by state or federal law. Some jurisdictions will require written policies regarding such things as nondiscrimination, sexual harassment reporting procedures and family and medical leave provisions, just to name a few. If required, make sure the polices are written in accordance with the most current law and review them annually so as to keep them current.
- Provide a receipt form. It is good for employees to sign a receipt form when they receive their handbooks. This receipt form acknowledges that notice of the materials in the handbook was properly provided to the employee. Avoid phrases that suggest the employee "agrees to abide by" or "promises to review and understand" because such phrases can be interpreted to create a contract. Better practice is to suggest that if employees have any questions about the materials in the handbook, they should ask their immediate supervisor.
- Set forth "modification authority" language. It is also good practice for the manual to include language making clear that it cannot be modified except by certain individuals within the company, and then only in writing. In addition, the phrase should notify the employee that the employer reserves the right to modify all aspects of the manual at its discretion. Keep in mind that if the manual is redrafted, new receipt forms should be executed with the employees.
- Consider union contract conflict. If certain employees are covered by a union contract, there are limitations as to the degree that the employee manual can apply to those employees. Many times, an introductory section of the manual will make clear that the manual does not apply to those employees. If any aspects of the manual are intended to apply to such employees, application of the manual may require bargaining obligations.
- Instruct supervisory personnel. Aside from mere drafting and review, good practice includes training supervisors regarding the appropriate use of the handbook. Supervisors should understand that the handbook is intended as a summary guideline and not a contract. In addition, supervisors should be advised not to modify the manual except as allowed by the employer. Finally, supervisors should never make any guarantees regarding benefits or employment such as "Don't worry; you'll always have a job here as long as you continue to do a good job."

Reprinted with permission. ©1996 American Bar Association, James R. Macy, The Compleat Lawyer, Winter 1996, v. 13, n.1.

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