What Belongs in an Employee Handbook, and What Does Not

An employee handbook serves two purposes. It tells employees what the company expects of them and what they can expect from the company, and it documents the policies an employer will rely on if a decision is later challenged. A handbook that does the first job but not the second is a missed opportunity. A handbook that does neither is a liability.

What a handbook should contain

Every handbook is different, but for most private employers the core policies are the same:

• An at-will statement. The handbook should state clearly that employment is at will, that the handbook is not a contract, and that no one other than a designated officer can modify the at-will relationship, and then only in writing.
• Equal employment opportunity and anti-harassment policies. These should identify the protected categories under federal and state law, describe the conduct that is prohibited, and, most importantly, give employees more than one way to report a complaint. A reporting procedure that runs only through the employee's direct supervisor fails when the supervisor is the problem.
• Pay practices. Pay periods, overtime authorization, timekeeping requirements, and meal and rest break rules. Timekeeping violations are among the most common sources of wage claims, and a written policy requiring accurate records is the employer's first line of defense.
• Leave policies. Vacation or PTO accrual and payout rules, sick leave, and, for covered employers, leave under the Family and Medical Leave Act. Texas does not require payout of accrued vacation at separation unless the employer's own policy promises it, which is a reason to state the policy precisely.
• Standards of conduct and discipline. Describe the kinds of conduct that may lead to discipline, and reserve the company's discretion to decide the appropriate response in each case.
• An acknowledgment page. Each employee should sign a statement confirming receipt of the handbook and acceptance of the at-will relationship. Keep the signed page in the personnel file. In litigation, the acknowledgment is often the first exhibit.

What a handbook should leave out

Handbooks create risk when they promise more than the employer intends to deliver. The most common mistakes:

• Language that reads like a contract. Statements that employees will be terminated "only for cause," or that the company "will always" follow a particular procedure, can be argued to modify the at-will relationship.
• Rigid progressive discipline. A policy that requires a verbal warning, then a written warning, then suspension before termination will be quoted back to the employer the first time it skips a step. Describe progressive discipline as an option, not an obligation.
• Probationary period language. Calling the first ninety days "probationary" implies that something changes after they end. If employment is at will on day one and day ninety-one, the handbook should not suggest otherwise.
• Policies the company does not follow. An unenforced policy is worse than no policy. If the handbook requires annual performance reviews and the company has not given one in three years, the gap between the policy and the practice becomes evidence.

Keep it current

Employment law changes, and so do companies. A handbook written when the company had fifteen employees may be silent on obligations that attached when it reached fifty. We recommend that employers review their handbooks annually and after any significant change in headcount, locations, or the law.