But with so much change taking place in today’s workplace, are employee handbooks still essential? Yes, they are.
However, outdated handbooks can pose a legal trap for business owners and their supervisors, based on court decisions in which an employee handbook was determined to be an employment contract, prompting the judge to prevent or reverse a termination decision and substantially fine the employer.
A review of the evolution of handbooks provides insight into why some employers believe handbooks create more risks than benefits.
Prior to 1964 (passage of Title VII of the Civil Rights Act), “at-will” employment was not challenged. In fact, court decisions confirmed that the at-will employment doctrine was strong – employers or employees could terminate the employment relationship for any reason, at any time.
Under at-will employment, employers had no reason to think that employee handbooks could be interpreted as employment contracts. Consequently, handbooks were written to be informational and often included a touch of “PR” – for example, welcoming employees and indicating the company was looking forward to a long and prosperous relationship with them.
The term “permanent employee” was commonly used in handbooks in the 1960s, ’70s, and ’80s. Presumably it was a convenient way to distinguish from “temporary employees,” and not meant to be interpreted literally.
Besides Title VII, numerous laws were enacted in the late ’60s and ’70s that eroded at-will employment. Many were much-needed and had excellent intentions. In response, however, employers began to establish policies and document their actions to protect themselves against legal claims that they were violating these laws.
Many companies gave their employee handbooks a major overhaul in the late ’80s, after a few creative individuals convinced a few equally creative judges and/or juries that statements in handbooks constituted employment contracts, and therefore negated or drastically altered the at-will employment relationship.
The Wisconsin Supreme Court contributed to the transformation of employee handbooks with a landmark decision in 1985. It ruled that an express contract was created when an employee (the plaintiff) accepted a handbook that contained a “just cause” standard for terminating employees.
The continued erosion of at-will employment over the past 10 years provided ammunition for those who argued that handbooks should be construed as employment contracts and thus limit an employer’s right to terminate. Handbooks found to create an employment contract typically include references to:
While some employers fear that a handbook could result in lawsuits and monetary damages, the value and benefits of a well-written and consistently applied employee handbook far outweigh the potential risks. Among the benefits of an effective handbook are that it:
The content and tone of a company’s handbook clearly indicate how a company intends to communicate with its employees. An outdated or nonexistent handbook also conveys a clear message.
Use the following checklist to evaluate your current handbook, especially if it hasn’t been updated in the past two years. Or use it as a guideline if you’re planning to develop a handbook but aren’t sure where to start or what to include.
Jim Rittgers, SPHR, is the director of human resources for EPIC Staff Management, a Milwaukee provider of HR and safety outsourcing services. Comments and questions are welcomed via e-mail to firstname.lastname@example.org.
Test your handbook’s health
If you can answer “yes” to all of the following, your handbook is most likely an effective communication tool that promotes positive employee relations and will be valuable in defending employment-related legal claims.
April 1998 Small Business Times, Milwaukee