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Issue No. 5


Is Your Employee Handbook a Time Bomb?

Jonathan A. Segal, "Is Your Employee Handbook a Time Bomb?", HR Magazine, August 1993


"HR Magazine, August 1993"

        "If you think you're safe just because your employee handbook includes a legal

         disclaimer, think again."


    Content of and word choice used in handbooks are now they key concerns of most employers with the development of employee handbooks.  Employers are subject to more than 100 federal and/or state laws affecting these.  Let's examine first some of the points that Segal has brought out in this article referencing "Is Your Employee Handbook a Time Bomb?".


        Can your employee handbook be interpreted by the courts as being a contract of employment?  This is a common risk when composing said handbooks.  The courts generally take two approaches when interpreting handbooks.  Dependant on state laws, handbooks won't be considered a contract unless the employer has indicated such and has indicated the intent to be "bound by it".  Then in other states, the handbook will be considered a contract unless the employer has indicated by intent that they will not be bound by it.  The key is that the employer, no matter what state that they operate in, includes in their handbook a "clear and conspicuous disclaimer".  This generally indicates that the employer should not hide the disclaimer within the back of the handbook, but make it as visible and clear as possible.

        Even if the employer has complied and included the appropriate disclaimer in their handbook, this should only decrease the employer's exposure to "wrongful discharge claims alleging breach of contract, this does not mean that an employer's failure to comply with its handbook is without legal risk."  The key is that even though the employer may have included the appropriate disclaimer, did they actually follow their own policies and procedures?  With this question, comes the review of the employer's discipline program and they relate to each other.  Even if the handbook includes a disclaimer, many employees are able to rely on specific policy statements which are set forth within the handbook.  Even if the employer, in a court case, utilizes the argument of "implied duty of good faith and fair dealing", it still will be the same conclusion:  "deviations from the handbook may serve as the fodder for litigation."

        Along with the employees understanding that their handbook is not a contract, supervisors/managers should be taught that the handbook should be treated as if it were a contract. 

EEO Policy

        Segal brings out 4 essential elements to consider when employee handbooks are revised:

  1. General nondiscrimination pledge:  "Employers operating in more than one state need to ensure that this pledge covers the various protected groups in all of those states."  Equally, employers should take care not to assume obligations beyond what the law requires. 

  2. Sexual harassment:  "The EEO policy must include a specific provision on sexual harassment."  This provision must be defined and expressed with the employer's strong disapproval for both "quid pro quo and hostile work-environment harassment."

  3. Reasonable accommodations:  Recommendation is that there is policy indicating specific provision based on reasonable accommodation.  This is in regards to the regulations by the EEOC under the Americans with Disabilities Act (ADA). 

  4. Complaint procedure:  The employer must establish a complaint procedure so that employees can inform management personnel of any concerns/complaints that they might have regarding unlawful discrimination.  This procedure needs to also encompass the ability for the employee to be able to bypass their supervisor, in the instance that the supervisor is the individual displaying conduct under question by the employee.


Fringe Benefits

        Segal also related four of the most essential legal issues related to benefits to be included in handbooks:

  1. "The handbook should speak in terms of coverage and not in terms of particular benefits."

  2. "The handbook should say explicitly that all statements of coverage are subject to the terms, conditions, restrictions and other eligibility requirements."

  3. "The employer should reserve its right to modify, amend or terminate any benefit plan at any time for any reason."

  4. "Many employers have a general policy of continuing to provide employees with certain insured benefits during an extended leave of absence."


Paid Time Off

        Exempt employee - it is necessary for the employee to receive a "salary", but not sufficient.  If the employee is to be considered salaried, under the Fair Labor Standards Act (FLSA), regulations provide to the employee that there are no deductions for absences consisting of less than a "full day" be made from the employee's pay.  Employer's paid-time off policies (vacation, sick) should easily be distinguishable between an exempt and nonexempt employee.  Segal brings up an interesting statement, which, could definitely play turmoil with the employer: "Because employee handbooks usually are disseminated to all exempt employees, a technical violation of this nature could cost employers literally millions of dollars - up to double payment (liquidated damages) for all overtime hours worked for up to three years.  And this is but one of many areas in which the FLSA can wreak havoc for the unsuspecting employer."

At-Will Employment

        In certain states, the absence of "at-will language", even if your handbook includes a disclaimer, the employer can have the ability to waive their rights within this area.  All employee handbooks should clearly indicate whether they are "at-will".  This language must also be clear and conspicuous, not hidden somewhere within the back of your employee handbook.




**For more detailed review of Segal's article, please click on the link provided under the title.  With this you will be able to explore related articles, review in detail his interesting article about Employee Handbooks.