Employee Handbooks: Are They Considered Contracts?

In this series, we have discussed why employee handbooks are important. By now you know that a well-drafted, legally compliant, and up-to-date handbook can have many benefits for both the employees and the employer. But is an employee handbook the same thing as an employment contract? And what exactly are the compliance issues that employers need to worry about when developing and distributing employee handbooks?

Perhaps the most important overarching concept to understand in regards to employee handbooks is the concept that employee handbooks are not, and should not be considered to be, contractual documents. The problem is that many employers are not aware that their employee handbooks can be considered binding contracts that could be used against them as evidence in court by employees that feel that they were wrongfully terminated.

The good news is that employers can avoid this risk by simply stating in the employee handbook that the handbook is not a contract. In formal terms, this is called at-will employment disclaimer, which is a term that describes a working relationship in which an employee can be terminated or can quit at any time without reason, explanation, or warning. When an employer includes an at-will disclaimer in the employee handbook, they are essentially protecting themselves from getting in hot water should an employee try to claim that the employer broke a binding employment contract by terminating them.

Thus, a crucial component of any employee handbook is a disclaimer that states that the handbook does not imply or constitute a contract between the employer and employee, and that the employer reserves the right to terminate the working relationship at any time, without reason, notice, or procedure. Furthermore, this disclaimer should express that the provisions of the employee handbook are subject to change, and the employer reserves the right to make those changes, or to modify employee benefits or wages at any time.

Another critical component to an employee handbook is the employee acknowledgment of receipt. This is a section, usually located at the end of the handbook, where the employee leaves a signature to confirm that they have received, read, and understood the information contained in the handbook. Getting this signature is more than just a formality- it can also become a key piece of documentation in the instance of a dispute, and serves as evidence that the employees were made aware of the workplace policies.

The acknowledgment of receipt should include a statement that the employee has received, read, and understood the provisions set forth in the employee handbook. This section is a good place to include the at-will employment statement, but some employers choose to have a separate section and signature for that statement. This section should specify that the handbook is subject to change, state that this most recent version supersedes all previous versions, and note the version number and effective date. Finally, this section should include a space for the employee to print their name, sign their name, and write the date.

Once the employee has signed the acknowledgment of receipt form, it is a good practice to keep this form in the employee file. Furthermore, employers should be diligent about obtaining new signatures at any time an update is made to the employee handbook.

In conclusion, drafting employee handbooks is important, but can be challenging from a compliance perspective. Do you want to learn more about how Navigate can help to take the reigns with concerns like this and other administrative necessities that detract from the growth of your business? Click here to set up a free consultation.

This post is part of a series on employee handbooks. Check out the other posts in the series:

Employee Handbooks: Why Are They Important?

Employee Handbooks: Non-compete and Non-disclosure Agreements

Employee Handbooks: Making Updates