By Ann Marie Zaletel and Andrew Crane

An employee handbook is a key tool for employers.  However, if an employer isn’t careful, a handbook can create more problems than it solves.  So, from the home office in Sioux City, Iowa (drum roll, please…..) here are tonight’s “Top Ten” handbook mistakes and tips on how to avoid them.

#10.     Including A “This Handbook Is Not A Contract” Disclaimer.  Employers traditionally have sought to shield themselves from implied contract claims by including this broad disclaimer in their handbooks.  This language actually may have the opposite effect.  For example, in a California case, a statement in an employment application that employment was “at-will” failed to preclude a contract claim because the application also included broad “no contract” language.  The court found that the application could not establish a binding employment condition (at will employment) while at the same time expressly providing that the application was not a binding contract.  

Solution: Revise the disclaimer to state that nothing in the handbook is intended to create a contract of continued employment, employment for a specified term, or any contractual obligation or legally enforceable obligations on the part of the company.

#9.       Failing To Exclude the At Will Employment Policy From “Right to Revise” Language.  Employers understandably want to protect their right to revise or terminate the policies in their handbooks.  To do so, they typically include language in their handbooks reserving their right to make changes.  Beware that this reservation of rights language can undermine the at-will employment relationship if the at-will employment policy is not explicitly excluded from the reservation. 

Solution:  Be sure to carve out the at-will employment policy from the reservation to preclude any claim that the company subsequently changed or terminated the at-will employment policy.  Also, consider stating that the at-will employment relationship can be altered only in a writing, signed by the employee and a high-ranking company official.  Otherwise, a crafty employee may try to argue that the employment relationship was changed orally or through company practice.

#8.       Including A Limited Definition of “At-Will” Employment.  Handbooks often define “at-will” employment to mean that either the employee or the company can terminate the employment relationship at any time, for any reason, with or without cause or advance notice.  This language is correct, but it does not go far enough. 

Solution:  Add language that provides that at-will employment also means that the company may make decisions regarding other terms of employment (including demotion, promotion, compensation, benefits, and job duties), with or without cause or advance notice.

#7.       Failing To Update Policies.  Making sure your handbook is up to date and takes into account legal developments is critical.  Out of date policies expose an employer to liability because they may not comply with new legal requirements.  For example, the federal Family and Medical Leave Act (“FMLA”) was has been amended and subject to new regulations multiple times over the last several years.  Your family and medical leave policy should be revised accordingly.

Solution:  Make sure your policies are updated at least annually or as changes to applicable laws occur. 

#6.       Failing to Comply With State Law Requirements.  A number of states (including California, Connecticut, New Jersey, Oregon, and Washington) have their own family and medical leave acts that are similar to the federal FMLA.  And some of these states, such as California and New Jersey, require employers to include information concerning the state leave in their handbooks. 

Solution:  Make sure your policies are reviewed to comply with laws in the States in which you do business. 

Read more later this week on the Employment Law Lookout for the rest of the “Top Ten” handbook mistakes and tips on how to avoid them!