Perfecting Policy

Even entrepreneurs need to have company rules in writing. It could offer protection in the event of a lawsuit.

By:  Sarah Schlingman

Do you really need an employee handbook for your small business? It depends how much aspirin you have on hand. Not having company policies clearly laid out can lead to employees plying you with repetitive questions that can be a headache to deal with: Do we get President’s Day off? Do we have vision insurance? Are employees supposed to conform to a specific dress code?

Having set guidelines can also help to minimize the risk of an employment-related lawsuit.

According to a recent study by the Institute of Corporate Productivity, 43 percent of organizations reported they have faced Equal Employment Opportunity Commission (EEOC) protected class harassment charges, discrimination charges, or litigation at some point. However, most organizations (82 percent) feel their current discrimination policies and the communication of those policies provide adequate enough protection from litigation issues. Regardless of the facts, employee handbooks are still missing from many small businesses.

The reasons for small businesses not utilizing employee handbooks are many and varied. Oftentimes, the business owner also acts as the HR Manager; so HR-related tasks tend to get added to the bottom of their already long list of responsibilities. Also, it’s fairly common for small business owners to treat their employees like family; therefore, they would never anticipate any of the legal issues that might arise.

Regardless, if you have employees, then you have policies, and it is vital for every business to have an employee handbook. According to Candace Walters, president and CEO of HR Works, Inc., an HR management outsourcing and consulting firm, these policies could be anything from working hours to payment practices. “The handbook clarifies what your expectations are from your employees and what they can expect from you. It also helps to remove emotions from a lot of employment-related decisions. The issue of bereavement inevitably will come up and it’s better to be prepared to handle the situation so that you can save time and ensure consistency among employees.”

Because of the legal ramifications associated with an employee handbook, businesses should enlist the help of a law firm or HR company when drafting it, added Walters. “We know what kind of language to use and write in such a way that legally protects the employer,” she said. “You don’t want to make commitments casually. Someone that isn’t schooled in this wouldn’t even think about this. The way you phrase a policy could affect whether an employer is protected.”

For example, the words “probationary” or “probation” shouldn’t be used. If an employee can be fired any time during their probationary period, it could be misinterpreted that the job will be theirs forever once they are off probation.

Additionally, there have been lawsuits that have held up in court, involving claims that the employee handbook is a contract of employment. According to Walters, the Preface should state that the employee handbook is not intended to represent a contract for employment with the company, and that they have the right to amend any of the policies at any time.

In the case of sexual harassment lawsuits, employers also may be able to avoid or limit liability if their employee handbook included a sexual harassment prevention policy during the relevant periods and they are able to prove certain other factors.

Walters sums up some common errors of poorly written handbooks in her article, “Employee handbooks for small firms: How formal must they be?”

Businesses should avoid using terminology such as “permanent employee” and “probationary periods” and avoid limiting the company to termination “for cause.” They also need to emphasize that employment is “at will” and address accrual issues with vacation and sick policies.

“I look at a proper employee handbook as being the foundation for all of your HR policies and practices,” Walters said. “It’s hard to build an organization if you don’t have the fundamental pieces in place. It would be so time consuming for a business owner if they dealt with situations reactively instead of proactively.”