The Top 10 Employee-Handbook Mistakes that Businesses Make

Done right, employee handbooks serve multiple functions. They provide employees with important information about a company, its practices, and the working environment. They also help protect employers legally by setting clear expectations and standards.

But, done wrong, employee handbooks can do more harm than good. Policies that are too specific and rigid can potentially limit an employer’s flexibility when dealing with real issues. Policies that are too general make it difficult for employers to hold employees accountable for their actions. Below are 10 of the most common employee handbook mistakes, and what to do about them.

10. An overly detailed discipline procedure

Some employers like to include a detailed discipline procedure in the employee handbook, specifying what disciplinary steps they will take if an employee violates company policy. Unfortunately, these discipline procedures are often too detailed and constricting to address workplace realities. 

For instance, a policy promising a verbal warning as a first disciplinary step does not make sense if the first incident is a serious violation of a harassment-prevention policy or an act of workplace violence. In such a situation, an employer wants the flexibility to skip steps, or even ignore the process entirely. If an employer has a policy of employment at-will — that is, that termination and everything leading up to it can happen for any reason that is not illegal — then the employer has no obligation to provide a specific discipline procedure, much less explain it in detail. 

To avoid confusion and maximize flexibility, an employer should specify at the beginning of the handbook that violation of any company policy — even one not stated in the handbook — has the potential to lead to discipline. 

9. Not controlling meal and rest periods

Many employers address breaks by only generally promising to comply with the law, without explaining what that means. Employees should be advised that if they do not take their meal and rest periods as described, they must notify their supervisors immediately. Also, if denied the right to take their meal or rest periods, employees should be advised how to bring complaints. These precautionary measures put the burden on employees to take meal or rest periods and reduce the employer’s legal exposure.

8. Not controlling overtime

Like meal and rest periods, unauthorized overtime can create significant liability for employers. Overtime policies should be structured to limit unauthorized overtime. First, employers should define the “workweek” for purposes of calculating overtime. For example, the workweek could be Sunday at 12 a.m. to Saturday at 11:59 p.m. Otherwise, employees may be free to define the workweek as they choose, potentially increasing overtime liability.

The overtime policy also should specify that employees are not permitted to work overtime without prior supervisory authorization. Though an employer cannot refuse to pay an employee who works unauthorized overtime, the employer can discipline employees who fail to follow the specific directive not to work overtime without permission.

7. Improper deductions and proper reimbursements

Some employers make a big mistake not only in making improper or illegal deductions from a paycheck, but also in reflecting that practice in their handbook. Carefully ensure that any policies relating to deductions do not violate the law; employers should include a “safe harbor” policy that addresses deductions for exempt employees. This policy should require exempt employees to notify the employer immediately if they believe illegal deductions — such as certain deductions for partial-day absences — have been made from their salaries. 

Many employers make mistakes when drafting expense-reimbursement policies. Commonly, employers seek to encourage employees to submit business expenses for reimbursement promptly by stating that failure to do so within a certain timeframe will result in no reimbursement. As with unauthorized overtime, employees should be directed to submit their expenses on time and in certain form. If they fail to do so, they can be disciplined. However, the employer cannot refuse to pay the expenses.

6. Putting a cap on medical leaves

Under the federal Americans with Disabilities Act (ADA), employers may be required to permit an employee with a disability to take time off if doing so will allow the employee to recover and return to work. Unfortunately, few employers are aware that a policy imposing a “cap” on the amount of leave provided for this purpose — such as three months — can create legal problems.

In the past few years, the Equal Employment Opportunity Commission (EEOC) challenged several employers’ leave policies with longer but definite time limits, such as one year. 

When deciding how much leave is appropriate, the ADA requires an individual assessment. Employers can limit the possibility of problems with the EEOC — or employees filing lawsuits — by maintaining flexible leave policies that make clear each situation will be evaluated individually.

5. Use it or lose it vacation policies

Employers cannot encourage employees to take vacations with a “use it or lose it” policy. Under such a policy, an employee who fails to use all his or her vacation at the end of the year loses the right to take it. Because vacation is considered a wage, such a policy deprives employees of a vested right.

Instead, vacation policies should be written to allow accrual up to a maximum, with no additional vacation accrual once an employee reaches the maximum. If an employee’s accrual falls below the maximum, then he or she begins accruing vacation again. The maximum should be a “reasonable” amount, so that employees have sufficient opportunity to take time off. The Labor Commissioner has stated, for example, that one year’s worth of vacation is not reasonable. Employees should be permitted to accrue more than one-year’s worth of vacation. Generally, adopting a maximum or “cap” of 1.25 times the annual accrual should be sufficient.

4. Electronic-communications policies

The reality of many workplaces today is that employees need access to email, the Internet, and other modes of electronic communication to do their work. For employers, these technologies have potential downsides, such as wasted time, security problems, and the possibility that employees will use these means to violate company policy. To control these problems, some employers specify that electronic communications and systems can be used only for business purposes.

However, the federal National Labor Relations Board (NLRB) has taken the position that an employer’s rigid policy prohibiting the use of its electronic-communications systems for any non-business purpose may have the effect of “chilling” union organizing. Such a restriction, the NLRB reasoned, could violate the National Labor Relations Act. Therefore, a policy on electronic communications should not entirely prohibit use of electronic systems for non-business use.

3. A rigid harassment-prevention policy

A “no harassment” or harassment-prevention policy is a must-have for all employee handbooks. It helps employers defend claims of harassment when employees fail to follow the company’s internal processes for reporting potentially harassing behavior. But, employers should not focus on “unlawful” harassment. For example, if a policy defines a “hostile work environment” in the same way the law does, then any violation of the policy will automatically be a violation of the law. To avoid this result, the employer should define “harassment” under the policy using a stricter standard than the actual legal definition. A policy could define harassment as “disrespectful or unprofessional conduct based on a protected characteristic, such as sex, race or national origin.” Then, an inappropriate joke based on one of these characteristics would violate the policy, not the law.

2. Over- or under-acknowledging

Employers should request that employees acknowledge receiving and reading the handbook.

Most importantly, an acknowledgment is a key place to reiterate a concept that the employer should have communicated many times already: employment at-will. That means either party can end the employment relationship at any time, for any reason, and with or without notice. The acknowledgment should also specify which specific person (such as the company CEO or president) could make an agreement to the contrary on the company’s behalf, in a written agreement only. This language gives the company the flexibility to make a written agreement in the limited circumstances in which it might prefer to — perhaps when hiring a highly sought executive — without unknowingly creating an agreement to the contrary.

1. Not reviewing/revising the handbook regularly

Employment laws change frequently. Keeping policies up-to-date ensures decision-makers and employees are informed. 

Scott Ludema is an outsource risk manager at Ottawa Kent Insurance in Michigan. Contact him at sludema@ottawakent.com