Danger: Employee Handbooks That Handcuff

04/14/11

The Case
Miguel, the boss, stopped Lisa, the HR director, in the hall. “Franco is claiming wrongful discharge,” he said.

Alarmed, Lisa said, “Why?”

“His lawyer said we didn’t follow the disciplinary procedure outlined in the employee handbook. It says we’re supposed to start with an oral warning, progress to a written warning, then issue a final warning before terminating. And it doesn’t say anything about exceptions.”

“We caught him stealing, for goodness’ sake. We don’t need to give him any warnings before firing him, no matter what it says in the employee handbook! Were we supposed to keep a theif in the company while we went through the process?”

“I agree,” said Miguel. “Not only are we an ‘at will’ state, but our employee handbook does have some kind of disclaimer that says nothing in it should be construed as a contract.”

“Uhh,” said Lisa, flushing slightly. “The newer ones do, but not the older one he would have had. I haven’t gotten around to distributing new employee manuals to the people who have been with us for a while.”

Miguel looked annoyed and said, “Please see that you do, and right away. But still, I can’t imagine that handbook has tied our hands in this situation. I’ll check with our lawyer to make sure.”

The Analysis
Let’s start by noting what this employer should have done differently. First, a totally avoidable mistake was having various versions of the employee handbook floating around, with staff in possession of different incarnations based on when they were hired. When an employer revises its employee proceedures manual or handbook, it needs to make every effort to ensure that a copy of the new version is given to all employees—not just new hires—and it should obtain a signed acknowledgement of receipt from each employee (including managers and supervisors).

Second mistake: This employer’s previous employee handbooks did not contain “at will” language disclaiming an employee’s right to claim potentially legally enforceable rights under the employer’s progressive discipline policy. If this is the only handbook Franco received, there’s a good possibility a court will find that Franco can rely on this version as opposed to the newer one.

State Law Counts
To some extent, whether Franco has a wrongful termination claim or not depends on the state in which he works. Although a number of states, including Florida, don’t regard employee handbooks as binding contracts between employer and employee, a substantial number of courts in other states have held that offical,written employee handbooks can constitute binding agreements between the employer and employee. However, almost all have qualified this by stating that an employer’s clear and conspicuous disclaimer of specific employee rights can remove any actual or implied contractual obligation on the employer’s part.

For example, a handbook should state, to the extent legally permissible and consistent with any collective bargaining agreement in effect, that all employment is at will. A clear, understandable definition of at-will employment should follow, for example: “In the absence of a fully executed employment agreement between an authorized representative of the employer and the employee, employment is not for any specific duration and may be terminated by the employer at any time, with or without notice, for any reason or no reason.”

This language will help the employer prove that its employees do not have a legal right to rely on any express or implied rights to continued employment or to the procedural steps of a progressive discipline policy.

Be Careful with Written Progressive Discipline Policies
I generally advise employers to be careful in composing explicit written progressive discipline policies. If you choose to have one, in addition to an “at will” clause, I recommend having another disclaimer as well. The handbook should clearly and specifically state that the employer reserves the right to suspend or terminate any employee’s employment and disregard any of the steps in the progressive discipline policy if, in the employer’s sole discretion, the circumstances merit.

Print the disclaimer in bold type and capitalize it. Unless you use this language and make it conspicuous, you have, in many states, given the employee an opportunity to sue you as well as the means to prevail against you in an unemployment compensation proceeding. In this case, I wouldn’t want someone I know was stealing from me to be able to collect unemployment.

To sum up, employee handbooks drafted with good disclaimers give you the “wiggle room” an employer may need to deal with a particular situation and also provides employers with legal protection against merit-less claims. You need to make sure your handbook does both in a way that complies with state and federal laws. The best way to ensure all these objectives are met is to have your handbook reviewed by an experienced employment law attorney before giving it to employees.