Are Employee Handbooks Mandatory? Here is What Employers Need to Know

What is an Employee Handbook?

An employee handbook is a collection of policies and procedures regarding the employer’s expectations for employees. It sets forth the terms and conditions of employment and provides guidelines for how disputes, as well as workplace dilemmas, will be resolved. A well-written employee handbook is a necessary tool for any employer, regardless of size. Typically , websites and blogs do not contain legal analysis when discussing what an employee handbook is and what it is used for….until now. The purpose of this section is to clearly define what an employee handbook is and what its purpose is. The terms of each Handbook will vary by company and industry.
A company has every potential reason to provide an employee with an employee handbook. However, for those reasons to have their desired impact, they must be consistent with applicable law. The potential benefit of creating an employee handbook is extensive, but here are a few examples of why a company would create an employee handbook: Company created handbooks often include the following type of information:

Employee Handbook Requirements by Law

There are currently no federal laws that require employers to maintain an employee handbook. However, a number of federal employment laws do require employers to provide certain employee handbooks or policies. For example, under the Fair Labor Standards Act, employers are required to provide break time and a private place, except a bathroom, for new mothers to express breast milk until the child’s first birthday. To effectuate FLSA amendments concerning this requirement, the US Department of Labor issued a final rule in March 2010 providing model notices that an employer may use to notify employees of their rights under the law to express breast milk. Additionally, the Employee Polygraph Protection Act requires employers to provide employees with a copy of the notice before an employer may request or require any lie-detector test.
On the state level, nearly half of the states have laws that require employers to issue certain handbooks or notices. Commonly, these cover topics such as pay methods, jury duty, victims of domestic violence, and veterans benefits. In New Jersey, for example, under the New Jersey Conscientious Employee Protection Act, employers are prohibited from discharging or retaliating against employees for reporting, or threatening to report, to a supervisor or a public body any instance of workplace wrongdoing or waste. In connection with the act’s anti-retaliation provisions, employers are also required to post a notice of the act in conspicuous places in the workplace informing employees of the act’s protections, and giving employees contact information for information on how to enforce those protections.

Advantages of Having an Employee Handbook

In light of the various laws that may or may not apply to a particular employer, how long an employer has been in existence, and whether or not a company’s employees are unionized, the advantages of maintaining a handbook may not be obvious. However, creating and maintaining a handbook can be beneficial to both employers and employees in a multitude of ways.
Employees benefit from handbooks because they: Handbooks help provide structure to a company’s workplace. For instance, one of the most commonly used policies is a "workplace harassment policy." The benefits to a well-written and fairly enforced policy include: (i) a reduction in employee claims of harassment; (ii) the ability of an employee to lodge a complaint or grievance if the policy is violated; (iii) a procedure for investigating complaints of harassment (vital to a lawfully conducted investigation); and (iv) the ability to provide appropriate discipline to offenders (which may prevent liability under local, state, or federal laws).
Since employers are required to provide "reasonable" channels for employees to raise complaints or grievances internally, maintaining a grievance or complaining procedure in the handbook can reduce litigation costs. In fact, under recent amendments to the National Labor Relation Act, new monetary sanctions are imposed for employers that do violate an employee’s rights.
Handbooks also help to clarify an employer’s expectations at work. Work is performed and compensated in exchange for an employee’s time and talent. Handbook policies related to compensation can assist employers in avoiding potential compliance issues and protect against possible claims regarding pay periods, bonuses, overtime, and meal and rest periods.
The existence of policies can also assist employees in determining whether their compensation is fair and whether pay practices are uniform throughout the company as a whole.

Drawbacks of Not Having an Employee Handbook

While not required by law, an employee handbook could be viewed as a best practice in the workplace. As discussed above, it can be used to help protect and prepare a company if something goes wrong. But what about the risks involved if a company doesn’t have a handbook? How would a company defend itself against an employee’s allegation that it discriminated, harassed, paid less than the law requires, invaded a person’s privacy, or otherwise violated the employee’s rights? A company could try to explain that it treats everyone fairly and does not tolerate harassment, but without a handbook to reinforce the message, an employee might not believe it. A company might find it hard to defend itself against a claim without a handbook to support the company’s position.
Further, even if you have an "unwritten" policy, such as the practice of calling in if you want to miss a day, there may be legal problems if you change your "unwritten" policy. An employer that changes an unwritten policy to create a de facto "disability leave policy" could be faced with a disparate impact or a failure to accommodate disparate treatment lawsuit, if an employee with a disability claims that the change unfairly affected that employee and other employees with similar disabilities.
Employers who want to reward good work with extra time off, such as "birthday days," might find it awkward to do so without a handbook that specifically states – like other benefits – this is not a contract.
These are but a few examples of the legal problems a company might face if it doesn’t have a handbook. The bottom line argument for having one is that a handbook can help an employer make its position clear to its employees and to a government agency or a court.

How to Create a Compliant Employee Handbook

While an employee handbook is not always legally required, it is crucial for establishing a positive relationship between the employer and its employees. As discussed above, some states mandate certain policies be included in a handbook. If your handbook does not contain legally required language or is not updated to reflect changes in the law, the consequences can be crippling. Fortunately, if handled properly, you can mitigate some of these risks.
If you are simply using a sample handbook found on the Internet or from resources at your state’s department of labor, consider having your handbook reviewed the first time around and after each change. State and federal laws vary greatly and this is also true when it comes to what regulations or policies need to be included in an employee handbook. For example , when did you last review your handbook to ensure it had the current version of an antidiscrimination provision? Or does your policy currently include language on what will happen if one of your employees is accused of sexual harassment? Even policies not mandated by law (for instance, social media policies) should be reviewed by legal counsel.
We also recommend that employers ensure the responsibility for keeping update of the handbook is assigned to staff members so that your handbook is regularly reviewed and employee acknowledgment forms are signed by each new hire. Employees should acknowledge that they have received the handbook and have read and understood the information contained in it. And remember both the employer and the employee (or non-employee worker) are bound by the terms of the handbook.

Essential Employee Handbook Policies

While each employer’s handbook will contain some unique policies, virtually every employee handbook will include the following policies and sections:
Anti-Harassment. Every employer should maintain an anti-harassment policy which prohibits any form of unlawful harassment of any employee or other individual including sexual harassment, works to educate employees about harassment and its consequences, provides a means for reporting allegations of harassment, and states that any proven harassment is grounds for immediate disciplinary action.
Compensation. Compensations policies should set forth which positions are listed in which pay grades and how seniority, time in position, length of service or other factors affect pay raises.
Workplace Safety. Safety policies and procedures should inform employees of both what is required of them in order to maintain a safe workplace and what they can do if they feel unsafe. The purpose of safety policies and procedures is to reduce the risk of an on-the-job injury to both employees and clients.
Benefits. Benefits policies generally state which employees are eligible for benefits, what benefits are available, and what requirements must be met in order to receive said benefits.
Time Off. Time off policies set forth which employees and/or circumstances are eligible for time off, how much time off an employee is entitled to, and whether the time off is paid or unpaid.
Employee Conduct. Employee conduct policies outline what types of employee conduct are acceptable at work and what is considered unacceptable. Such policies aim to educate employees and ward off the potential for misconduct.
Electronic Devices and Communication. Electronic device and communication policies make it clear that both company-owned devices and personal electronic devices (i.e. cell phones, laptops and tablets) are subject to search at any time; that employees are required to use passwords or PIN numbers on all company electronic devices; and that employees are prohibited from using these devices for certain purposes, particularly those that may negatively affect the employer’s reputation.
Drug and Alcohol Use. Drug and alcohol use policies require employees to refrain from using drugs and alcohol before or during work hours and while on the company’s property and/or during working hours even when off the premises.

Amending Employee Handbooks and Handbook Distribution

As important as it is to keep handbooks up-to-date, it is equally important that they are effectively distributed to employees so that they are aware of the policies.
As a general rule, handbooks should be updated annually or whenever there is a change in the law or there are significant changes to the work environment, practices, or policies. Handbook updates can be made by replacing the entire handbook or by attaching the new policies as addendums to the existing handbook. It is a good idea to include a section explaining the format of the handbook and how to navigate it (i.e., a summary of all policies is included in the table of contents for easy access, there is a search feature, the document is hyperlinked and can be accessed from anywhere , etc.). This can give employees direction on how to use the handbook so that they do not feel obligated to read the entire document.
After being updated, the handbook should be distributed to every employee through an acknowledged and documented process. Acknowledgement and documentation is especially important when taking disciplinary action against an employee on the basis of a policy contained in the handbook. To show that the employee was aware of the policy, or new addition to the handbook, the employee should sign an acknowledgement form, or electronic counterpart certifying that he/she received the updated handbook and/or reviewed the handbook policies and understands them. The signed acknowledgement form can be attached to the front of the employee handbook, emailed or provided with the handbook, or provided online via software management systems such as BambooHR or Workday.