The Essential Employee Handbook

Sample policies, employment law issues, self-audit tips

Your employee handbook can be an invaluable organizational tool—or an employment lawsuit waiting to happen. And in recent years, Congress and state legislatures have been busy enacting laws that directly affect your employee handbook. If you haven’t kept up, your organization could be sued.

Is your handbook missing something, contradicting another policy, saying too much, using confusing language, over-promising … or worse, simply out-of-date?

For example: “I would be surprised if more than 10% of employee handbooks now in circulation cover new employment law issues such as genetic information privacy and the rights of employees with military family members,” says attorney Jonathan Hyman, Esq.

To help you avoid disaster, we’ve compiled this special report, The Essential Employee Handbook, which provides employee handbook sample policy language, employment law guidelines, self-audit tips and warnings on the most common mistakes that may be lurking in your employee handbook.


Overview: Bullet-proof your employee handbook

An employee handbook can be the foundation of employee performance and a shield against lawsuits, or it can be a ticking time bomb that confuses employees and strips away your legal defenses. It all depends on how well it’s written and put to use.

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Companies face many hazards if they try to whip up handbooks on the fly. Too often, handbooks are inconsistent with the way business is actually conducted, or they mistakenly imply that workers have certain rights.

Example: poorly written progressive discipline policies that suggest an employee will be fired only for good cause. Such language can erase a worker’s employment at will status and the employer’s right to fire the person for any reason. Even a statement about an initial “probationary period” can suggest that workers are virtually guaranteed continued employment after a certain period of time.

Clearly, now’s the time to review your employee handbook. You don’t want your handbook to end up as Exhibit A in a courtroom.

Don’t let your employee handbook collect dust

“Each year, new employment laws go on the books and courts write thousands upon thousands of decisions interpreting old laws,” says Jonathan Hyman. “Yet, year after year, many HR professionals reach up onto a dusty shelf to hand new employees the same old employee handbook someone wrote years ago—too often without a second of consideration whether the contents still pass legal muster.”

Regularly update your handbook to incorporate changes in law and your company policies. To make it easier on yourself, don’t include details that are likely to change frequently. Make sure all sections are consistent with other company documents.

When you do update the handbook, make sure everyone knows which version is in force. Collect and destroy old handbooks. Also, include a conspicuous disclaimer that you reserve the right to make changes in the future.

You may want to include disclaimers in several places, specifying, for example, that you reserve the right to change benefits or bypass progressive discipline.

Note, however, that courts take a dim view of unilateral changes in the terms of employment. You may need to provide some type of “consideration” to workers when making such changes, such as additional pay or benefits. In some instances, continued employment may be enough consideration.

Another possible benefit of updating: lower rates for employment practices liability insurance.

Keep it simple

Your handbook shouldn’t be a legalistic tome with detailed instructions to managers and complex benefit specifications. Keep it simple; write in plain English.

Nevertheless, it’s important to have an attorney review the document. A poorly worded employee handbook can create contract obligations.

What policies should you include? Basics should include policies and rules on sexual harassment, equal employment opportunity, meal/break periods, overtime, pay periods, discipline, holidays, vacations, paid sick leave, absenteeism, grievances, ethics, email/phone use, dress code, safety and substance abuse.

Be wary of providing too many specifics on each policy. You can box yourself in. Trying to detail the consequences of every possible infraction makes it too easy for an attorney to later show how your company was inconsistent.

To cite a recent example, a federal court reinstated a UPS worker who had been fired for swearing at a supervisor. The court said that swearing was not listed as one of the seven reasons for immediate dismissal in the UPS employee manual.

Also, don’t let the handbook grow too large. A 300-page book is unlikely to be read.

Have employees sign off

To preserve the “at-will” status of employees whom you may hire and fire at will, include provisions in the handbook that say employment is at will and that nothing in the handbook should be considered a contract or guarantee of employment. Document employees’ agreement to this by having them sign and return an acknowledgment form.

However, simply stating that the handbook doesn’t create a contract is no guarantee that a court will see it that way. A court may decide that your company should abide by the rules spelled out in that document.

Note: You may also want to have workers sign an acknowledgment form that requires employees to resolve disputes with the company through binding arbitration. If so, you and your company’s attorney need to work out a procedure.

Finally, make sure all staff members, especially supervisors, know the handbook and follow its provisions. The best written policy in the world isn’t enough if your actions don’t back it up.

Employee Handbook Sample

Acknowledgment of Receipt of Employee Manual

[Upon receipt of the manual, each employee should sign an agreement similar to the one below. Obtain a signed acknowledgment from every employee who was given the manual, and place a copy in the employee’s personnel file. If you distribute the manual via email or make it available online, make sure you also obtain an acknowledgment. You should set any email distribution to require a return receipt or should track employee access to your online manual.]

I acknowledge that I have received a copy of the Employee Manual and also that I have read the manual. I understand that this manual provides an overview of XYZ’s human resources policies and does not necessarily include all procedures and policies in force. I agree to abide by the Employee Manual, and I understand that employment at XYZ is at-will and that XYZ can terminate my employment at any time, for any or no reason, with or without notice. I also understand that as an at-will employee, I have the same right to end my employment at any time, for any or no reason, with or without notice. I understand that this manual is an informational guide and not an employment contract. I acknowledge that no one at XYZ has made any promises to me concerning my employment and that I have not relied on any oral or written statements by anyone at the company when I accepted employment with XYZ.


Print name

____________________________                _________________________

Signature                                                     Date

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Handbooks: The 10 most common mistakes

  1. Using form handbooks with provisions unrelated to your company.
  2. Meshing policies and procedures, which may confuse employees.
  3. Including a probationary period, which implies that anyone who stays with the organization beyond that time is then a permanent employee.
  4. Being too specific in descriptions and lists, especially those involving discipline.
  5. Not being consistent with other company documents.
  6. Not adding a disclaimer, or not having enough disclaimers in the right places.
  7. Sabotaging disclaimers by what you do or say, especially by reassuring employees that their jobs are secure and they’ll be fired only for a really good reason.
  8. Not adapting the handbook for each state’s laws. You may need more than one version of the handbook if you have employees in several states.
  9. Failing to update the manual frequently for changing laws.
  10. Being unrealistic about what your employees or supervisors will buy into. Don’t include policies you can’t or won’t enforce.


Always include disclaimers

Under most state laws, workers are employed on an “at-will” basis unless they have an employment contract. That means employees may be fired at any time for any reason—or no reason at all—and, conversely, employees have the right to leave their jobs at any time for any reason. You must pay careful attention to your employee handbook to protect your at-will status, stay within the law and reduce your exposure to expensive litigation. Employers can best preserve at-will status by including in their handbooks a disclaimer that states:

  • All employees are hired on an at-will basis.
  • Each person’s employment is for no specific term.
  • The employer reserves the right to terminate the relationship at any time.
  • Nothing in the employee handbook should be construed as a contract or a guarantee of continued employment.

In addition, to ensure employees read and understand your manual, you should provide them a receipt/acknowledgment form to sign. Allow employees sufficient time to read the manual before requiring them to sign the acknowledgment form. (Courts have ruled that signed acknowledgments are invalid if the employees weren’t allowed adequate time to read and comprehend the material.)

Note: If your manual exists only in electronic form, provide a check-off box or some other method that conforms to electronic-signature laws for employees to acknowledge that they have read the manual.

Employee Handbook Sample


The information in this Employee Manual is intended to provide an overview of XYZ’s human resources policies, but it is not intended as a complete and exhaustive listing of every policy and procedure.

All provisions in this manual are governed by applicable local, state and federal laws and regulations and will be interpreted in a way that is consistent with those laws and regulations. XYZ has the right to modify anything in this manual at any time and for any reason. XYZ complies with all laws and regulations that are binding on it.

This manual and the policies explained within are not a contract. Nothing in this manual creates any rights or privileges to employees beyond those conferred by laws and regulations. The manual does not create a right or entitlement to employment. All employees of XYZ are at-will employees. This manual is neither a contract of employment nor an offer of employment.

As an at-will employee, you have the right to leave employment at any time, for any reason or no reason. XYZ has the right to terminate your employment at any time, for any or no reason, with or without notice. Any oral or written statements or promises made by anyone at XYZ either before you are hired or during your employment are unauthorized and expressly disavowed by XYZ and not are binding on XYZ. No one at XYZ has the authority to make any promises or to change any of the terms of employment without the express, written approval of the [president, board of directors, owner or highest-ranking individual within the organization].

XYZ makes no promises of any kind in this manual. Regardless of what the manual says or provides, XYZ is free to change wages and other working conditions without having to consult with anyone or obtain anyone’s agreement. XYZ has the absolute right to terminate anyone at any time, with or without cause.


Protect your employment at-will status

Legislation has been gradually eroding employers’ right to terminate employees at will. To protect your organization’s at-will rights to the extent possible in your particular locality, you will want to spell this out for all new and prospective employees in the front of your employee handbook as well as on your job application forms.

Employee Handbook Sample

Employment at Will

Your employment with XYZ is at-will. Employment at-will means that XYZ may alter the terms of your employment, and either you or XYZ may terminate your employment at any time and for any reason or for no reason, with or without notice. No officer or other employee has authority to alter the employment-at-will relationship, orally or in writing. This guide does not create an employment contract, establish rights, privileges or benefits of employment or establish any job guarantee.

To protect your organization’s at-will status, here are some steps you can take:

  • Give managers a handbook of their own for discussing issues like job security. But even in it, you should include an at-will policy disclaimer. Do not give employees a copy of your managers’ handbook.
  • Do not attempt to spell everything out in the employee handbook. Be sufficiently vague so that you create no contract—or at least give yourself an out.
  • If you discuss disciplinary steps, state specifically that you reserve the right to bypass all progressive discipline in some cases.
  • In your employment handbook, specify that if the employee has not signed a contract, then he is employed at-will.
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4 common policy writing mistakes

Company policies lay the foundation on which employment expectations are formed, and thus workplace actions are taken. A missing phrase here, an undefined term there can spell policy disaster. Check to make sure your organization’s policies don’t fall into the four policy writing traps discussed below.

Then learn from your colleagues’ mistakes. Jim Collison, president of Employers of America Inc., who has been writing and critiquing employee handbooks since the 1980s, cites real-life policy writing blunders and offers advice on how your organization can avoid making those same mistakes.

Mistake 1: Disclaimers are too few and far between

Some employers mistakenly believe that adding a single disclaimer to an employee handbook is all they need to give themselves the latitude to bypass, revise or replace existing policy provisions. But if employees are left scratching their heads after reading the disclaimer or searching for it within the handbook, chances are good the disclaimer will carry little legal weight should any of your organization’s policies be legally challenged.

Collison stresses the importance of having not one, not two, but five disclaimers and qualifiers in your employee handbook. He recommends:

  1. An opening disclaimer, which, in no uncertain terms, states the handbook is not a contract of employment and that the employment relationship is at-will.
  2. Benefits section qualifier, which explains that benefits or premium contributions may change at the company’s discretion and that if there is a conflict between language in the employee handbook and the official plan document (such as a group health insurance policy), the official plan document governs.
  3. At-will reminder. “In any discipline policy or complaint resolution policy, restate the employer’s right to discipline or terminate an employee at-will, with or without cause,” Collison says.
  4. Misconduct qualifier. In any list of misconduct examples, state that the list is not all encompassing or not all inclusive.

Mistake 2: Provisions are too open to interpretation

No matter how well-worded your policy may seem, chances are that some employees may be confused by it. Sometimes, that confusion is a result of the language used. Just because you’re familiar with certain terms doesn’t mean rank-and-file employees are, too. Always draft policies with an eye out for HR jargon or legalese.

Other times, confusion results from what’s not said, and is thus left open to employee interpretation. That’s why it’s imperative for your organization’s policies to spell out exactly what they mean and define all terms, as necessary.

For example, if an attendance policy states “absent employees are required to present medical documentation upon their return,” employees may assume that presenting any kind of medical document will excuse their absence under an attendance policy, when, in fact, company rules require that the documentation specifically state an employee is unable to perform his or her essential job functions.

Mistake 3: Requirements are too stringent

Another mistake that employers commonly make when drafting policies is including more stringent requirements than called for by federal and state laws.

Case in point: During surgery, an employee’s doctor determined that her condition was more serious than originally thought. He asked her to report for a follow-up appointment the day after she was scheduled to return to work. Consequently, the employee called her employer and requested an FMLA leave extension. The company nurse asked for certification. The employee took that to mean that the extension had been granted and she had 15 days to provide it. Six days later, her physician faxed over the certification. When the employee called to confirm that the documentation had been received, she was fired. Reason: The employee failed to follow the company’s policy for requesting and obtaining FMLA leave. The employee responded with a lawsuit, claiming that her termination violated the FMLA.

A court agreed, ruling that the employee had provided the company with adequate notice of her need for extended leave, and the company’s medical certification policy violated FMLA regulations because it did not provide her with the 15 days required under the law. The court said: While employers are free to establish their own medical leave policy requirements, an employee’s failure to follow such a policy does not allow the employer to deny or delay an employee from taking FMLA leave, so long as the employee’s actions satisfy the requirements of the FMLA. (Killian v. Yorozu Automotive Tenn. Inc., 6th Cir.)

Best bet: Keep policies in step with legal requirements. Before actually writing a policy, consider whether there are any applicable laws—no matter what the topic is. Of course, you won’t forget to incorporate the FMLA or the ADA into your policies, if applicable. But what about a more obscure state law, such as one on school visitation leave or lifestyle discrimination? Thinking in terms of federal and state laws every time you sit down to write a policy is a must. And remember, where federal and state requirements conflict, you must follow the one that is most beneficial to employees.

Mistake 4: Protections are too one-sided

Still another mistake employers make is forgetting to equally address all potential parties in a policy. For example, a sexual harassment policy should address the rights of the accuser, as well as the accused. Or, as in the following case, union advocates versus union opponents.

Case in point: One company’s policy on union harassment stated: “This is a non-union
organization. It always has been and it is certainly our desire that it will always be that
way ... You have a right to join and belong to a union and you have an equal right NOT to
join and belong to a union. If any other employee should interfere or try to coerce you into
signing an authorization card, please report it to your supervisor and we will see that the
harassment is stopped immediately.”

While the policy might have been intended to protect union supporters and detractors alike, the 7th Circuit Court of Appeals deemed it unlawful. Reason: The policy lacked an “equal protection guarantee” for union sympathizers and could lead employees to “conclude that engaging in protected activity was tantamount to ‘harassment’ under the policy.” (Brandeis Machinery & Supply Co. v. NLRB, 7th Cir.)

Best bet: When drafting any type of harassment policy or provision, make sure it addresses both sides of the harassment coin. State the company’s commitment to protecting each and every employee from harassment of any kind. Then spell out exactly what steps employees should take if they feel harassed. Include examples of prohibited harassment, but don’t stop there. Address the rights of the accused. Outline the investigatory steps the organization will take to ensure that false accusations or retaliatory motives aren’t the basis for the claim.

They didn’t actually write that, did they?

Most of the problems you will encounter in writing and implementing a policy have already been faced by other employers. Some organizations have overcome such obstacles and penned policies worthy of emulation. Others haven’t been so lucky. In fact, their policies serve as prime examples of what not to do. Here are some examples, provided by Collison:

Example 1: “Exempt employees are excluded from specific provisions of federal and state wage-and-hour laws. An employee’s exempt or nonexempt classification may be changed only by written notification by the company management.”

What’s wrong? “The last sentence is not true,” notes Collison. “An employee’s exempt or nonexempt status is determined or changed by the actual responsibilities of the job or by how the employer treats the employee.” For example, treating exempt employees like hourly employees changes their status to nonexempt; simply declaring a change in writing
doesn’t suffice.

Example 2: “Poor attendance and excessive tardiness are disruptive. Either may lead to disciplinary action, up to and including termination.”

What’s wrong? The policy fails to define what’s meant by “poor” attendance and “excessive” tardiness. “Be specific as to what is required of employees,” cautions Collison. “Define important terms.”

Example 3: “Compensatory time may be requested in lieu of overtime at the same rate.”

What’s wrong? It’s illegal. “Private, nongovernment employers are violating the law if they give employees compensatory time off in lieu of overtime pay,” Collison points out.

Example 4: “Pregnant employees are to inform us of their pregnancy as soon as possible so we can be sure you are assigned to work that is not harmful to you or your child.”

What’s wrong? “First,” Collison says, “an employer has a right to know about an employee’s illness or disability only if it affects the employee’s ability to do the job or represents a direct threat to the employee or co-workers Second, it’s not legal to change the pregnant employee’s work because it might be harmful to the fetus.”

Example 5: “The final paycheck of an employee who quits or is terminated by management will include any accrued vacation to date only if the resignation procedures under subpoints C and D are followed. In addition, Policy 23, subpoint F may affect the disbursement of the final paycheck and the amount therein.”

What’s wrong? Collison: “This kind of legalese has no place in an employee handbook. Also, under federal rules and many state laws, any earned and accrued vacation pay is due to the employee, no matter what ‘resignation procedures’ the employer wants to try to enforce.”

Self Audit: Your Employee Handbook

Employee handbooks are valuable business tools. But if you’re not careful, your handbook can turn into evidence in court against you.

Use the following questions to analyze the thoroughness and reliability of your employee handbook. Answer Yes or No:

  1. Does your handbook clearly state that it is not to be considered a contract in any way and that you reserve the right to change it?
  2. If your handbook lists offenses warranting discipline, including discharge, does it make clear that those offenses listed are merely illustrative rather than exhaustive?
  3. Does your handbook encourage employees to bring their complaints to their union or to management?
  4. Does your handbook make clear that the organization won’t tolerate any type of harassment?
  5. Does it provide procedures for addressing complaints of that nature?
  6. Do the benefits policies contained in the handbook comply with federal and state laws?
  7. Do all employees receive copies of the handbook each time it is revised?
  8. Do you have a receipt form that employees sign when they receive the handbook or any revisions of it?
  9. Is your handbook up to date in all areas?
  10. Does your attorney review your handbook regularly to see that it contains nothing in conflict with federal and state laws or local regulations?
  11. Is it written clearly and simply?
  12. Is the language respectful of employees?
  13. Are the rules described in the handbook enforced evenhandedly?
  14. Do you make sure that your employees read the handbook?
  15. Is it free of political statements, including the organization’s opinions regarding labor organizing?

If you answered “No” to any of these questions, you should review your company policies and the way they are communicated to your workforce.

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Take your employee handbook online: 8 tips

Is your employee handbook still an actual book?

Turning your handbook into an electronic document can cut costs, make updating easier and give employees a convenient place to access policies.

Going electronic isn’t technically difficult. But the process involves more than simply transferring written documents to a database or internal website.

Use the following guidelines to help protect your organization against legal trouble when moving handbooks online:

  1. Put acknowledgment upfront. Format the electronic handbook so that employees access the disclaimer and acknowledgment forms before reading the web version of the document.
  2. Require employees to log in using their passwords to access it. You don’t want outsiders to access company policies.
  3. Include links in the handbook that connect the policies and information to commonly used forms or documents, such as benefits, health plan summaries and IRS forms.
  4. Include HR email and telephone contacts. Update as needed.
  5. Proofread the handbook before and after putting it online to find mistakes and omissions. Test links.
  6. Alert employees to the change. Send an email (with a link to the handbook) explaining the handbook is available online. Ask employees to read the handbook, sign the forms and return them to HR by a certain date. Follow up with workers who don’t respond.
  7. When handbook changes are made, immediately email all employees. Make it clear in the subject line that the email is urgent and employees must read it. Keep records of these update emails in case legal action requires proof.
  8. Make hard copies of the handbook available for employees who prefer paper versions or have infrequent or no access to a computer.