Alliance for Children and Families, March 31, 2002
What You Should Know About Personnel Policy Manuals and Employee Handbooks
SCENARIO: An employee quits work to go elsewhere, receives a final
paycheck and his personnel file is closed. Six weeks later, you are sued for damages for unpaid sick leave. The employee claims his supervisor promised that accrued sick leave would be paid out as final wages. You deny. You go to court, bringing your human resources director as your witness. The trial opens. The employee gives his story to the judge and steps down. You call your HR director to the stand.
“Did this employee receive a copy of your employee handbook?” you ask.
“Yes” is the answer.
“And is this handbook similar to the one that he received?” You wave a small,
bound booklet that contains summaries of all pertinent personnel policies.
“Yes, it is” is the reply.
“I see that this book has a signature page for the employee to date and sign. Did
the plaintiff sign this page of the book?”
“He did. Here is the page, signed and dated, that we found in his personnel file.”
“What does this handbook have to say about sick leave?”
The HR director flips to a page in the book. “It says,” she reads, “that sick
leave must be taken in days off from work and unused sick leave is not paid out at termination.”
The judge looks over her reading glasses at the plaintiff and asks: “Sir, did you receive this handbook when you were an employee?” He is embarrassed but nods yes. She looks again at the passage and then, after a moment, pounds her gavel, “I find that the employer did not offer to pay for accrued sick leave. It’s right here in the book. There is no promise. Case dismissed.”
Personnel policies govern the most critical relationship in your organization—the relationship you have with your employees. How you hire and train them, introduce them to their coworkers, organize their workspace, supervise their efforts, administer their compensation and benefits, provide for their illnesses, and recognize their good work greatly influences their job satisfaction, productivity, and morale. I have been fortunate to learn about personnel management from some very skilled practitioners, and would like to pass on information about one of the most valuable resources available to you as an administrator: personnel policies.
Why should every Alliance member have written personnel policies? There are a number of reasons. First, if you have more than 15 employees, the size of your workforce triggers a number of state and federal discrimination laws that gives employees specific rights. Your policies will address them proactively. Second, if your agency is accredited by the Council on Accreditation for Children and Family Services (COA) (or it is seeking accreditation), personnel policies are required. Third, since personnel administration is a hot area of the law, your liability insurance premiums for “employment practices” coverage may be increased if you do not have clearly spelled-out personnel policies, or you may not be able to get insurance at all. Finally, written personnel policies send a crisp and clear message to employees that you take employment matters seriously and will use best practices in resolving them.
POLICY MANUALS AND HANDBOOKS— WHAT’S THE DIFFERENCE?
Personnel policy manuals are usually three-ring binders that contain detailed policies and the procedures that implement them. They are distributed only to supervisory staff. They serve two main functions: (1) they are a set of board-approved statements of general policy as to how you intend to treat your employees, and (2) they are a set of instructions to inform supervisors about how the policies are to be applied. Personnel policy manuals are management tools, and they should be available only to those having personnel management functions. Those who possess a manual should be oriented to its contents and trained in its use. Direct-care staff should not be given access to these manuals, as they could misunderstand their use, misinterpret their provisions, or overlook important disclaimers intended to protect your agency.
Employee handbooks are distributed to each employee and provide employees with general information about such policies and procedures as salary and compensation, benefits, work hours, rules of conduct, and so forth. They are educational and informative summaries of personnel policies (and procedures), but they are not the policies themselves. If a handbook provision conflicts with a personnel policy, the policy itself should prevail. Each handbook should have a tear-out page that the employee signs and dates to document his or her receipt of the book. This page becomes part of the employee’s personnel file.
The accompanying illustration shows two sample pages: one from a personnel policy manual and the other from an employee handbook. You can see how the former offers the approved policy along with highly specific instructions as to how it is implemented, while the other contains highlights that are important for each employee to know.
DO POLICY MANUALS OR HANDBOOKS CREATE A CONTRACT WITH THE EMPLOYEE?
States vary in their rulings as to whether personnel policy manuals or employee handbooks create a contract. Most states now hold that they do create a contract unless the employer clearly and consistently states its intention not to do so. The language used by the employer is key: Where a policy manual or handbook uses mandatory language about what processes will be used or what benefits will be conferred, it creates an expectation and therefore generally constitutes a promise. Where a policy manual or handbook uses permissive language with disclaimers against interpreting it as a promise or con- tract, courts generally will find that no contract has been formed. In other words, drafters should always use terms such as “may” rather than “shall,” “usually” rather than “always,” and “typically” rather than “must” to avoid turning a handbook into a contract.
WHAT ABOUT COA ACCREDITATION?
COA accreditation standards require an accredited agency to have up-to-date personnel policies that are available to each employee. An entire chapter of the COA accreditation standards is dedicated to managing human resources. That chapter specifically details such personnel policies as recruitment, equal employment opportunity, harassment, evaluation and promotion policies, record keeping, etc. Your personnel policy manual and employee handbooks are evidence that you know and use best practices.
WHAT KINDS OF ISSUES DO PERSONNEL POLICIES ADDRESS?
Most employment disputes center around hiring and termination decisions, com- pensation and benefits, and rules of the workplace. Personnel policies are critical evidence in harassment suits, ADA claims, FLSA classification suits and wage claims, worker’s compensation claims, and FMLA claims and benefits disputes.
I recently catalogued the laws that I saw as most relevant to nonprofit organizations and I listed some 29 federal laws and 15 state laws. There are others that will affect human resource issues in your organization, either directly or indirectly. If you have personnel policies or if you issue employee handbooks, they will be relevant to claims that arise under these laws and statutes. Please note that the Illinois laws provided are examples from a specific state and that the laws in your state may differ significantly, so you need to make sure that you are familiar with the laws in your state.
WHAT IS “AT-WILL” EMPLOYMENT AND HOW IS IT AFFECTED BY PERSONNEL POLICIES?
In common law, employers are allowed to hire and fire employees “at will,” that is, without cause and without due process. Any employer who wishes to retain the right to hire and fire at-will must explicitly and consistently state its intention to be an “at-will” employer. Without a written personnel policy on the subject, whether or not an employer is at-will must be proven by the evidence: letters of employment, verbal communications, hiring and promotion practices, etc. With a properly worded written personnel policy on the subject, most employers will be considered at-will. This is a tremendously important matter to the organization, because it allows you to manage employees with a higher degree of flexibility, it prevents the establishment of long-term contracts, and it offers “wiggle room” where a situa- tion cannot be clearly identified as requiring one response over another.
HOW OFTEN SHOULD POLICY MANUALS OR HANDBOOKS BE REVISED?
Policy manuals and handbooks should be revised regularly. Employment law is a rapidly changing landscape. I receive monthly updates from a personnel policy service and daily notices of employment-related cases throughout the United States. Since personnel policy manuals are most often distributed as loose-leaf binders, they can be updated as needed as important cases come along or laws and interpretive rules or regulations change. I suggest that your human resources or personnel department hold quarterly meetings of all supervisory personnel to introduce revisions, refresh memories about key personnel practices, and answer questions. Employee handbooks should be updated every 12 to 24 months and (as noted in the scenario) every employee should sign a tear-out sheet that proves he or she received the updated document.
WHAT IF NEW POLICIES PROVIDE LESSER BENEFITS?
Some policy changes may restrict or limit benefits or rights that had been granted under earlier versions. When a contract is modified, common law principles require there to be “consideration” in order for a new contract to be valid and enforceable. That is, a contract cannot be amended unilaterally. Therefore, if a new personnel policy or version of your employee hand- book restricts or limits benefits received in earlier versions, you generally must give your employees something (other than the right to continue work) as consideration for their acceptance of these new (lesser) terms.
IS THERE A DOWNSIDE TO PERSONNEL POLICY MANUALS OR EMPLOYEE HANDBOOKS?
Properly used, personnel policy manuals and employee handbooks are a tremendous asset to your administration. Unskillfully used, they are just the opposite. Why? Because when you establish a standard and then you violate it, courts will hold you responsible for what is, essentially, a breach of contract. A terrific-looking manual or handbook can be a dangerous piece of evidence if the claimant can prove that you espoused a particular policy and then didn’t deliver. Therefore, if you publish policy manuals or handbooks, you must understand their contents, use them properly, and keep them up to date. Be certain of your inten- tions and your ability to carry them out before you publish these important human resource tools.
WHAT’S THE UPSIDE?
When personnel issues are handled well, you can avoid costly employee lawsuits, bring excessive overtime and/or employee turnover under control, and minimize your recruitment and training expenses. Supervisors will be able to knowledgeably walk that fine line between management requirements and direct care staff needs and wants. Your employees will think twice about asserting frivolous workers compensation or unemployment com- pensation claims. In short, good policies pay for themselves, and your attention to this critical function will have a beneficial bottom-line result.