Employee Handbooks: Content & Pitfalls Synopsis
By Kathleen Pohlid Founder & Managing Member, Pohlid, PLLC | February 17, 2013
The New Year is a good time to review employment policies and procedures. At the top of the list: a review of your employee handbook.
Think your old handbook has been working well for years and that a review is not necessary?
Your handbook may contain provisions that are out dated, or promises to employees that you are not fulfilling. Maybe there are provisions which are illegal. Important workplace policies may have been omitted from the handbook. You may have no documentation that notice of those policies was given to employees. Or, despite there being several employees on your staff, you do not have an employee handbook. Without an employee handbook, you may also lack the means to document the existence of your workplace rules or establish that they have been effectively communicated to employees.
How costly can a mistake in a handbook be for an employer? In 2011, a Pennsylvania court of appeals affirmed a verdict of over $187 million against a major retail store on a breach of employment contract claim stemming from promises made in its employee handbook. The store promised one fifteen-minute paid break to hourly at-will employee associates who work between three and six hours a day, and two fifteen-minute paid breaks for those working over six hours. The store also touted, "Take a break and get paid for it!" Two problems: the store was not paying employees for those breaks; and employees read the handbook and were aware that they were not being paid. A class action lawsuit followed.
The employment was "at-will" and the store had diligently inserted a disclaimer in its handbook stating: "The policies and benefits presented in this handbook are for your information only and do not constitute terms or conditions of employment… This handbook is not a contract." Although it is important for an employee handbook to confirm with employees that the employment is "at-will" and to set forth a disclaimer, employers should be aware that these steps may not always preclude liability on a breach of employment contract claim.
In the case of this store, the Pennsylvania court of appeals upheld the trial court finding that the disclaimer confirmed that the employment was at-will, but it did not relieve the employer from its unilateral promise to pay employees for breaks. This case serves as an important reminder that employers must review their handbooks and all other communications to employees to ensure that they are not making promises that they do not intend to keep.