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2 Ways Employee Handbooks Help You Avoid Liability

Lay out expectations to avoid lawsuits

Posted by Jared Jacobson on August 6th, 2015

We are often asked if employee handbooks, sometimes referred to as a personnel manuals, are necessary.

Simply put, an employee handbook is absolutely essential for employers of all sizes to have on file and to be acknowledged as having been received by each and every employee upon commencement of employment.

Typical excuses we regularly hear as to why companies do not have an employee handbook include:

  • My company is not big enough
  • Everyone is friends here, no one would sue us, I treat my employees well
  • They are not “contracts” anyway so what’s the point of having one
  • They cost too much money
  • My human resources, office manager, legal service company or payroll company is “taking care of it”
  • We have “polices” that cover us


Avoiding Punitive Damages

The size of the company is completely irrelevant as to whether the company needs a handbook.
A host of employment laws governing the employer-employee relationship apply to employers with as few as two to as many as hundreds of thousands of employees.

The size of the company is completely irrelevant as to whether the company needs a handbook, however, what exactly needs to be in the handbook will be affected by the number of employees that an employer employs.


Does an Employee Handbook Actually Matter?

An obstacle that employers regularly face when deciding whether a handbook is right for them, is that the handbook may or may not have an immediate and noticeable effect on the employer’s business.

However, rest assured, should a claim be brought against the employer, even a small company, and it does not have a well-drafted handbook that is appropriate for that particular company and industry in place, it can be devastating.

By devastating, I mean punitive damages may be available and you could be put out of business.

Punitive damages are those awarded to a plaintiff (employee in this case) in order to send a message and “punish” the employer for not having properly considered the employer-employee relationship, when the expectation is that the employer is in a superior and best position to do so.


A Quick and Inexpensive Protection Measure

The fact of the matter is employee handbooks can be completed rather quickly and relatively inexpensively depending on how large your company is, whether you have any government contracts (which, by the way, regularly mandate compliance with employment laws, EEO polices, etc., which can easily be placed in a handbook) and what the company’s budget is.

Another policy you should think about developing (if you haven’t already) is a code of conduct. Download this Code of Conduct Template to get you started.

A good employment law firm will often work with companies on pricing, always providing flat fees, as the need is so important and the benefits long lasting to all parties involved.


Laying Out Expectations and Heading Off Lawsuits

a handbook is a roadmap that provides employees some direction when they have an issue at work.
Besides the real threat of increased damages upon a finding of liability, another huge benefit for both employers and employees of having an employee handbook and various other polices, is to set expectations for employees.

The last thing an employer needs is an employee reporting a problem externally (whether to a plaintiff’s attorney or government agency) prior to reporting internally first, to their supervisor, manager, or human resources department.


Encourage Internal Complaints

Whether it is a sexual harassment complaint, workplace bullying, or one involving fraud against the government, securities fraud or some other whistleblower matter, etc., the best way to head it off is to not only encourage employees to come forward, but to provide them with a very clear procedure to do so.

A very clear procedure: a whistleblower hotline. Schedule a demo for i-Sight’s Ethics Hotline to see if it might work for you.

This is easily accomplished through the employee handbook.

This is just one example of communicating to the employee what is expected of him or her and can be a life saver compared to the alternative.

Finally, there are a number of notices that are legally required to be provided to an employee, many of which can be done through a handbook and need not be actually posted in front of everyone’s faces, reminding them to sue you every day… however, there are still several posting requirements which cannot be avoided.

Boiling it down, a handbook is a roadmap that provides employees some direction when they have an issue at work. It benefits everyone in the workplace.


My Human Resources or Payroll Company is Drafting it

Whether you have two employees or 2,000, when a cost-benefit analysis is done in connection with having a handbook, it is truly a no-brainer.
First, as noted above, your human resources employee(s) should be performing more of an administrative and liaison role between management and the employees, rather than a legal one.

Otherwise, your human resources professional could be bringing liability not only on the company, but potentially even on themselves and other officers, under certain laws.


Employee Handbook vs Several Policies

Further, it is often said, especially among small companies, that they have “polices”, therefore, they don’t need a full-on handbook.

This can mean many different things depending on the company, but what we have generally found is that a company has pulled a hodgepodge of inconsistent polices off of the internet which can have the effect of canceling out the purpose behind doing so.

If this is your company, you may want to reconsider.

Second, payroll companies are helpful for a number of reasons, but laying out the intricacies of various state and federal laws in a handbook and drafting complimentary polices is definitely not one of them.

Of course they can provide you with one, but you can’t assume that “one size fits all”, because that’s not the case, although many business owners have been told by human resource organizations (and their payroll companies) to think otherwise.


Not Just Anyone Should Draft Your Handbook

It is important that the handbook and polices are drafted only after a thorough analysis is done on the company, and then the documents should be tailored specifically to that particular business and industry.

It is not brain surgery, however, it needs to be done by a qualified employment attorney, not a payroll company, human resource professional or a legal service company, which is another “pennywise and pound foolish” approach.


You’ll Be Happy You Have One

Whether you have two employees or 2,000, when a cost-benefit analysis is done in connection with having a handbook, it is truly a no-brainer.

Even if a claim does not come in for years, internally or even worse, from a plaintiff’s lawyer externally or a government agency investigator, when it finally does you will be happy that you made the right decision to get a handbook on file and have each employee acknowledge that s/he read it upon commencement of his or her employment.

The alternative could be the end of your business when the plaintiff’s lawyer and a jury determines that you did not care enough about your employees and it is apparent.

Jared Jacoboson
Jared Jacoboson

Attorney and founder of The Law Firm of Jacobson & Rooks, LLC

Jared Jacobson is one of the founding members of The Law Firm of Jacobson & Rooks, LLC. Jared Jacobson represents individual employees and executives as well as counsels employers in conducting workplace investigations to mitigate risks of employment and whistleblower litigation. Jared regularly performs human resource audits to ensure compliance with state (PA, NJ and NY) and federal discrimination, misclassification and wage and hour laws, as well as the risks associated with whistleblowers. Jared helps his clients understand the importance of investing in pre-emptive annual policy audits and work-place training as well as performing a proper investigation when a complaint is filed or threatened which can be invaluable when compared with the alternative.

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