Why Your Business Needs an Employee Handbook, and What Should be in it   2 comments

There are a lot of good reasons given to small businesses for adopting an Employee Handbook. Unfortunately, most of the reasons given fall into the “non-urgent” or “unnecessary expense” category. For instance, an Employee Handbook will inform your employees of their obligations so that you and your supervisors don’t have to make policy decisions on the fly (a phonecall to a supervisor is necessary in the event of an unplanned absence – a text message sent from an unknown destination will not do; track suits and flip-flops will not cut it on Casual Fridays; customer phonecalls must be returned within two hours, and so on). A Handbook will apprise employees of the extent of their rights in the workplace (family medical leave may be unpaid; your employment may be terminated at will and for no reason; there is no right to be paid for accrued vacation upon termination of employment). But, you reason, these are issues that can be dealt with as we go, as the need arises. Why the need to write everything down in painstaking detail?

Leaving aside all of the other practical reasons, there are two distinct legal reasons (and countless practical ones) which make an Employee Handbook a necessity for all businesses (apart, perhaps, from those with under five employees). This article will deal with the first of those, and we will post two more articles, in the coming weeks, which discuss the others, and offer some thoughts on implementing and enforcing an Employee Handbook.

Using the Affirmative Defenses that the Law Gave You

The first and greatest advantage of having a well-written employee handbook (at least, from a lawyer’s perspective) is quantifiable risk elimination. Certain affirmative defenses against employment claims exist for employers who have good written employment policies in place. All employers should take advantage of these defenses by making a small investment in an Employee Handbook, prepared by a labor and employment attorney.

An Example – the Fair Labor Standards Act

One prevalent and damaging type of employment liability is that of wage and hour claims arising from the Fair Labor Standards Act (FLSA), the law governing underpayment or miscalculation of overtime, minimum wage, or unlawful deductions from pay. The FLSA contains a “safe harbor” provision, however, which protects employers against liability for certain incidents of improper deductions so long as the employer: (1) has a clearly communicated policy prohibiting improper deductions, which includes a complaint mechanism; (2) reimburses employees for any improper deductions; and (3) makes a good faith commitment to comply in the future. The Federal Department of Labor recommends that this “improper deductions” policy be included in a written handbook, given to each employee upon hiring. With violations of the FLSA creating indescribable burdens, both in terms of time spent on audits, harsh penalties and liability for up to three years of back-pay, the advice of the DOL in this regard should be heeded.

And Another – Sexual Harassment

Similarly, the law on sexual harassment in the workplace has created a safety valve for employers, who are exposed to vicarious liability for the harassment of one employee by another, under Title VII of the Civil Rights Act. If the employer has a written harassment policy in place, giving victims of harassment a procedure for filing a complaint and a choice of managers to whom complaints may be addressed, the employer will have an affirmative defense against claims of sexual harassment if the employee fails to follow the complaint procedure. While not an absolute safeguard, this is a substantial and necessary defense against such claims.

Other Ways in Which Your Handbook Can Come to Your Defense

The presence of certain employment policies in your handbook can make it clear that certain activities are unauthorized in the course of work, and as such, the employer is not responsible or vicariously liable for actions of an employee which are prohibited by the handbook. For example, if an employer were to be sued for copyright violations as a result of internet downloads, it would be helpful to be able to show that employees were under strict instructions not to use the internet for personal reasons. If an employee causes a car accident while driving a company vehicle, because she was talking on the phone, the employer would certainly want to show that the employee was on strict orders to pull in before taking a call. If an employee assaults another employee at work, the employer will need to demonstrate that it had policies and procedures in place for dealing with interpersonal problems and preventing violence at work. And on, and on.


• There are affirmative defenses against very damaging claims which your employees may make against you.

• Your Handbook can be used to anticipate and deflect liabilities created by your employees – auto accidents, workplace violence, intellectual property infringement, safety violations, etc.

• Take advantage of simple risk-reduction measures by investing in a well-drafted employee manual.

• Use a Labor and Employment Attorney in the State where your business is located. Employment law varies wildly from State to State. Using a form from the internet, or from a national payroll provider, is probably a false economy.

Next installment of this article: Using Your Handbook to Make the Most of the Statutory Burdens On Your Business

By: Eadaoin Waller, a senior associate in our Corporate Department


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