Why Written HR Policies Limit Liability

This is one post every owner or company leader in a company should read. As much as I personally dislike communicating and informing via fear, uncertainty & doubt ("FUD" for the intellectual types), this has some merit. This is the state of affairs right now. The courts favor the employees, so that means the employers need to have their collective acts together. Make it a priority to get your policies down in writing - or outsource it to an expert who will.

Why Written HR Policies Limit Liability

When was the last time you reviewed your organization's policies? If you're like many employers, writing or updating policies is at the bottom of a lengthy "to-do" list. And, you may even question the value of having written policies because of the apparently conflicting advice concerning their usefulness. On one hand, many HR experts advocate having written policies as a way of communicating your organization's values and practices to employees. Alternatively, a growing number of attorneys are warning their clients that poorly drafted policies may land them in court. So, whom should you believe? The short answer is both groups. Upon closer consideration, these positions are not contradictory. Well-written policies can both serve as an effective communication device and help you stay out of court, or at least give you a better chance of prevailing. In contrast, poorly executed policies can create unintended contracts and be used of evidence of noncompliance in court.

1. Why are written policies important? Sound employment policies provide the framework within which an organization governs its employee relations. A policies and procedures manual guides both managers and employees as to what is expected and can prevent misunderstandings about employer policy. In addition, supervisors and managers are more likely to consistently apply policies that are clearly communicated in writing. It is true that written policies, like any record, can be used against an organization in a lawsuit. Poorly drafted policies often become the main evidence presented when employees allege that the policies were in fact a contract that the employer violated. However, policies that are carefully written so as not to be contracts actually should protect against these claims and not be a problem. (See number 4, below.) In addition, carefully written policies can be used to illustrate your commitment to a positive work environment and nondiscriminatory employment practices. (See number 3, below.)

2. Are we required to have written policies?Although written policies in general are not legally required, certain policies may be mandatory or at least be considered an important component in helping employers establish good faith compliance with federal and state law. For example, the Supreme Court has indicated that employers may protect themselves against liability for sexual harassment by having clearly articulated policies against sexual harassment that include effective complaint procedures. In addition, the Family and Medical Leave Act requires covered employers to provide written information regarding employee rights and employer obligations under the Act. Similarly, certain federal contractors must have written equal employment opportunity policies. And finally, many state laws require written harassment policies and policies informing employees about compensation issues.

3. Does every organization need written policies? As a general rule, every employer, except maybe those with fewer than 15 employees, should have written policies. Employers with 15 or more employees are covered by federal discrimination laws (such as Title VII and the Americans with Disabilities Act) and most state discrimination laws. Written policies are a good starting point to show your commitment to nondiscriminatory employment practices. For example, a performance review policy can show the job-related criteria used to evaluate employees and any safeguards used to ensure the process is conducted in a fair and objective manner. Smaller employers should at least consider creating a handbook since it is likely they already have some policies in writing. For example, employment offer letters may explain vacation and sick leave accrual while other items, like a posted memo, may outline pay procedures. Thus, to ensure distribution to all employees, even the small employer is well advised to compile these memos into a handbook that is given to every employee.

4. Will we create a contract if we have written policies?The simple act of putting your policies in writing should not create a binding contract if the policies are written as guidelines that explain generally what your requirements are and how employees normally will be treated. However, you can create a contract by using language that conveys rigid rules that must be followed exactly as written in all circumstances.Therefore, you should build flexibility into your wording and steer clear of any promises that could be interpreted as a contract. Your policies should not, for example: -- State that the organization will "only" or "always" do something or "must" act in a particular way; -- Describe employees as "permanent";-- State that employees will be terminated only for "cause"; -- Make promises of job security; or-- Use all-inclusive lists, such as in disciplinary procedures or work rules. Instead, you should use terms such as "generally," "typically," "usually," and "may" so that managers have flexibility in interpreting and applying the policies. In addition, you should specifically retain management's right to update, change unilaterally, and implement all policies as the organization sees fit. Finally, you should include a strong "at-will" statement that clearly specifies that all employees (who do not have contracts or collective bargaining agreements specifying otherwise) may quit at any time and for any reason or may be terminated at any time and for any lawful reason.