Employee Handbooks: 3 Easy Steps To Keep Them From Becoming Contracts

Law Blog

Employee handbooks make life easier for new employees by giving them a window into the company's culture and expectations. They also offer employers a little bit of legal protection. If the company's discipline policy is clearly described, employees can't say that they are surprised at the outcomes of their poor behavior. However, a badly written handbook can actually end up turning into a legally-enforceable contract that limits your ability to fire an employee at will. Not only can that prevent you from firing someone when you want to, it can open your company up to wrongful termination lawsuits. 

Here is some advice that can help you avoid that trap.

1.) Have a prominent disclaimer.

There should be at least one direct disclaimer in the handbook, prominently displayed in a way that is set apart from any other information. It needs to include statements that will make the at-will employee's status clear:

  • Nothing in the handbook is designed to establish a contract of employment between the company and the employee.
  • Employment is strictly "at-will," and the job can be ended at any time.
  • The employer has the ability to modify or eliminate policies without the employee's consent.

This type of disclaimer is important because they can use them to establish that employees have been aware since the first day on the job that their employment is on an "at-will" basis and not a permanent contract.

2.) Include similar language throughout the book.

Your handbook should also reinforce those ideas periodically. While it helps to have a sentence or two between sections or at the end of the handbook reminding employees that the book is a guide, not a contract, it's also important to watch the language within the piece itself. You don't want to use language so definite that it sounds like a promise (and therefore a contract).

For example, if you have a specific policy on absenteeism that outlines the discipline actions that will be taken when there are no-shows and frequent call-offs, you want to avoid sounding like the policy is set in stone. A disclaimer that says something like "unless management sees fit to take some other course of action," or "subject to management's discretion" should be included in the explanation of what can happen. Buffer phrases, like "A violation of this policy could result in termination or the listed discipline action," allow you to avoid definitive statements that could be interpreted as a contract guaranteeing that the company will always follow the written course of action.

3.) Know when to make use of bold and italicized print.

While this sounds like a small thing, the courts look at what's most conspicuous in a handbook when deciding whether or not it contractually obligates the company. Disclaimers and buffer phrases that give you flexibility and stress the absence of any contractual agreement should be in bold or italics. The separate disclaimer that contains the most blunt language could benefit from being in a colored box that sets it apart from the rest of the handbook's text.

What happens if the wrong information gets the most attention in a handbook? A recent appeals case in Utah found that, despite at least 4 references to at-will employment, an employee handbook created a contract with employees that prevented retaliation for reporting wrongdoing. Assurances against such retaliation were bolded and italicized. The court ruled, in essence, that the employees correctly relied on the assurances, since they seemed to be visually stressed in a way that made them more memorable and important than the disclaimers.

Could your employee handbook use a little careful attention to avoid similar problems? Are you just not sure what to include or how to include it in order to both meet your employee's needs for clarity while still protecting your company from lawsuits? Talk to a law firm, such as the Souders Law Group, for more information. 


19 April 2016