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Employee Handbooks: Time to Update?

With the new year upon us, many employers have a lengthy list of "things to do." One item that should be on every organization's list is updating the employee handbook or personnel manual.

A properly-drafted employee handbook is an important management tool. Handbooks improve the efficiency and morale of employees by setting forth guidelines for employee performance and providing information regarding employee benefits. Similarly, handbooks help to ensure decisions made by managers and supervisors comply with applicable legal requirements and are consistent with the employer's policies and procedures. To serve these functions, an employee handbook must accurately reflect the employer's practices and California's frequently changing employment laws.

What Policies Should Be Included in Employee Handbooks?

An employee handbook not only informs employees about the employer's policies and procedures, but also informs employees about the employer's history and the benefits associated with working with the organization. Some of the most important policies to include in any handbook include the following:

At-Will Employment. A statement that employees are "at will" and the employment relationship may be terminated by the employer or the employee at any time, for any reason, with or without cause or notice, is a must for California employers. The "at-will" policy should be made applicable to other employment decisions as well, including demotion and discipline.

A recent unpublished opinion, Dore v. Arnold Worldwide, Inc., emphasizes the importance of using appropriate at-will language. In Dore, the California Court of Appeal reversed a grant of summary judgment to the employer on plaintiff's claim for breach of an implied covenant not to terminate except for cause, even though the offer letter contained the following "at-will" language: "[Y]our employment with [the Company] is at will. This simply means that [the Company] has the right to terminate your employment at any time just as you have the right to terminate your employment with [the Company] at any time."

The court held this language was problematic because it omitted from the usual definition of "at will" the proviso the employment could be terminated "with or without cause." The California Supreme Court has granted review of the Dore decision, and should provide further guidance soon.

 In addition to appropriate at-will language, employers should consider including the following language to emphasize the at-will relationship may be changed only in very limited circumstances:

The employer may, at any time, in its sole discretion, modify or vary from anything stated in this Handbook, except for the rights of the parties to terminate employment at will, which may only be modified by an express written agreement signed by the employee and [employer official].

Language that restricts the modification of the at-will policy will reduce the likelihood of casual statements or writings altering an employee's at-will status and protect the employer's ability to manage and control the workforce.

Equal Employment Opportunity Policies. Employers should clearly set forth their commitment to equal employment opportunity, including a no-retaliation provision. This policy should include a list of all currently-protected characteristics (e.g., race, sex, gender identity, national origin, religion, etc.), and a reporting procedure for perceived violations of the policy. It also is a good idea to include language that would cover new characteristics or local laws, such as, "[t]his policy prohibits disrespectful or unprofessional behavior based on any of the above characteristics, or on any other basis protected by federal, state, or local law or ordinance."

The reporting procedure should include a list of several individuals within the organization to whom employees may make complaints, including the employee's direct supervisor and the human resources or personnel department.

No-Harassment Policy. A separate no-harassment policy that covers all protected characteristics should be included. Rather than focusing on violations of the law, the policy should be drafted to provide guidance about the organization's expectations for appropriate workplace behavior.

An employer interested in preventing harassment in the workplace must adopt a policy that is more strict than the law—that way, violations of the policy do not necessarily constitute violations of the law. In other words, the policy should be structured so that, even if an employee violates the policy by engaging in a single prohibited act of disrespectful or unprofessional behavior based on a protected characteristic, the law will not be violated unless the conduct is severe or pervasive, and other elements of a hostile work environment are satisfied.

The no-harassment policy should include a detailed reporting and investigating procedure, as well as a no-retaliation provision. The reporting procedure should be consistent with the reporting procedure set forth in the organization's equal employment opportunity policy.

Leaves of Absence. It is important for California employers subject to the federal Family and Medical Leave Act ("FMLA") and the California Family Right Act ("CFRA") to implement policies consistent with their obligations under these laws.

In addition, the Domestic Partner Rights and Responsibilities Act ("DPRRA") of 2003, which went into effect on January 1, 2005, dictates that spouse-related benefits encompassed by all of California's employment laws must be provided to employees who have same-sex partners. Therefore, as of January 1, 2005, registered same-sex couples must receive the same statutory fringe employment benefits now provided to traditional married couples. This appears to include the 12 weeks of unpaid time off for eligible employees under the CFRA. It also includes workers' compensation death benefits, which apply to registered same-sex partners of employees who are killed in the course and scope of employment.

Employers should note employee rights under the FMLA and employee benefit plans that are subject to federal ERISA law are not affected by the DPRRA. So, an employee on CFRA leave to care for her ill domestic partner will be using CFRA leave, but not FMLA leave.

Pregnancy Disability Leave Policy. This policy is required by California law for employers with five or more employees.

Miscellaneous Time Off Policies. Under California law, employees may be entitled to time off for various purposes, including to attend jury duty or witness duty, to participate in military activities, to perform volunteer firefighter services, to attend school activities, to participate in a rehabilitation or adult literacy program, to assist victims of domestic violence or sexual assault, and to attend certain court proceedings. The applicability of these laws will depend on whether the employer has 25 or more employees.

Benefits. Employers should describe the benefits available to employees, including holiday, sick leave, vacations, insurance coverage, and other benefits, and should take care to carefully explain the eligibility requirements for each benefit, such as length of service or hours worked per week.

Hours of Work. Employers should include a policy setting forth "hours of work," including a discussion of work schedules, rest breaks, meal periods, and overtime pay. Employers should provide specific instructions regarding the duration and timeliness of rest breaks and meal periods, including language requiring employees to take their breaks and meal periods as scheduled.

In addition, employers should define the workweek and workday for purposes of overtime and what deductions may be taken from employees' pay. Employees who are paid a salary and who are classified as "exempt" should understand what deductions may be made from their pre-determined salaries.

General Policy Regarding Work Standards and Expectations. The employer should list general work standards and expectations and reserve the discretion to take whatever action it deems appropriate for policy violations, up to and including termination.

Acknowledgement. Finally, handbooks should include an acknowledgement for employees to sign and return to record their receipt and understanding of the handbook. The acknowledgement should reiterate the employee's at-will relationship with the organization and should be maintained in the employee's personnel file.

Other Policies Employers Should Consider

There are numerous other policies employers should consider including in their employee handbooks, including the following:

Reasonable Accommodations. California's Fair Employment and Housing Act ("FEHA") includes protections beyond those provided under the federal Americans with Disabilities Act ("ADA") for applicants and employees with disabilities. Because California employers are required to engage in an "interactive process" with applicants and employees to determine effective and reasonable accommodations, employers should consider including a reasonable accommodation policy in their handbooks.

Workplace Violence Prevention. Workplace violence prevention has become a significant employment challenge. An effective violence prevention policy states the employer's commitment to providing a safe workplace free from violence, describes prohibited conduct, requires employees to report conduct that violates the policy, details the procedures for reporting such conduct, communicates the employer's commitment to investigate all reports of violence or threats of violence in the workplace, and includes a statement of no retaliation for reporting potentially violent or threatening conduct.

Electronic Communications. If employees have access to e-mail or the Internet, an electronic communications policy should be included in handbooks. The policy should provide guidance as to when, if at all, e-mail and the Internet may be accessed for personal use and the discipline that may be imposed for violating the policy. Employees also should be informed their electronic communications will be monitored by the organization and the purpose for such monitoring. This will reduce the employees' expectation of privacy in their electronic communications.

Paid Family Leave. The Paid Family Leave program ("PFL") went into effect on January 1, 2004, and applies to all California employers. PFL essentially provides wage replacement benefits to employees who take time off to care for certain ill family members or to "bond" with a new child. Significantly, PFL applies to time off to care for same-sex domestic partners. Employees who qualify for state disability insurance will be eligible to receive a maximum of 55 percent of their weekly wages for the period during which they are on PFL. The benefits currently are funded by employees through additional payroll withholdings. The maximum wage-replacement period is six weeks during any 12-month period of employment.

Because employees receiving PFL also may be eligible for FMLA or CFRA leave, it is important for employers subject to FMLA/CFRA to include a PFL policy in their handbooks. The policy should provide that employees off work for reasons covered by PFL also will be considered to be on FMLA/CFRA leave if they are eligible for such leave.

Other Policies. When preparing a handbook, employers also may want to consider including policies on the following subjects: (1) employee classifications (e.g., full-time, part-time, temporary/seasonal) and the benefits to which employees in each classification are entitled; (2) how performance evaluations and salary reviews will be conducted; (3) dress and grooming standards; (4) the use of employer property and confidential and proprietary information; (5) conflicts of interest; and (6) general safety procedures.

On-Going Modifications to Employee Handbooks

Finally, once an employer prepares and implements a handbook, it is important to conduct periodic reviews of the handbook to ensure it is up-to-date and consistent with the employer's practices and the law.

Note: This article appears in the January 5, 2005 edition of the Daily Recorder.