A company’s best defense against employee claims is a statement of firm and clearly articulated standards and rules.  Most businesspeople know that a good part of customer relations is the management of expectations.  The same is true of employee relations.  That is why it is critical that companies prepare, distribute and regularly update employee handbooks.  They are your best defense against employee claims.

Employee Handbook

California is an “at will” employment state which means that companies can terminate an employee’s employment for no reason.  Why, then, do we read of wrongful terminations lawsuits that end up in large judgments?  They arise, generally, because the company has not managed the employee’s expectations and has not taken the time emphasize the employee’s at will status. Such lawsuits can be maintained if the company has, by word and deed, led the employee to believe his employment is permanent and that he could rely on having a continuing, and long, career with the company.  (They can also arise when the employee is the beneficiary of an employment contract, but such contracts are typically extended only to top executives, so we need not address them here.)

Employee handbooks have been found by courts to be contracts between employer and employee and, as such, should spell out all of the terms of employment, such as vacation schedules and accruals, employee duties and rights, employee use of company equipment, hours, benefits and a host of rules that set forth the expectations on both sides.  It should specifically state that it is a contract and emphasize that employment is “at will”. The existence of a handbook will be very important if your company is ever the target of a claim by an employee.

A handbook is important for several reasons.  The first is that it is not unknown for disgruntled terminated employees to claim to have been told that they could expect long careers and continued employment with the company and that, as a result, the presumption of “at will” employment has been overcome.  They will claim that the expectation of continued employment is an “implied in fact” contract and proceed against the company.  It is often just enough to keep a case in court and to get it before a jury of employees who will often side with “the little guy” in an employment dispute. So, it is important to have a handbook that clearly indicates that employment is “at will” and that nothing anyone says will modify that relationship.  This will minimize the possibility that a claim will be made for wrongful termination and will make those that are made easier to defeat.

The second reason it is important is that it clarifies the relationship so that the probability of misunderstandings is drastically diminished.  Making “at will” employment a matter of contract between your company and the employee, will protect you against claims for wrongful termination.

The employee handbook also provides both employer and employee with a clear articulation of the rules that bind employee conduct.  This is very important for two reasons.  The first, of course, is that it lets the employee know what is expected of him or her.  The second is that it provides the means of minimizing claims against the employer upon termination and provides a good negotiating chip to get a release of liability from the employee when termination occurs.

If the company maintains a comprehensive set of rules, it can point to violations of those rules as a reason for termination and can provide the employer with the means of sustaining a claim that termination was “for cause”.  The clearer the rules and the care with which they are enforced will give the company the tools it needs to manage employees and protect itself from meritless claims.  It will help make the case that the reason for termination is a proper one grounded in the agreement between employee and employer.

The maintenance of a handbook and the enforcement of its rules will help the company establish reasons for termination.  Many companies have found themselves the victims of claims of discrimination, because they failed, first, to articulate the rules they expect employees to follow and, second, to adequately write up violations of those rules to document poor performance on the part of the employee.  Without that evidence, it is much harder to defend against a charge of discrimination, especially if the employee has a characteristic that is not widely present among other employees.

The strength of employee handbooks was recently illustrated in a case decided by the California Court of Appeal.  An employee in a dispute with her employer used company computers and its e-mail system to communicate with her attorney with respect to her case against the company.  The employee handbook specifically said that the employer had the right to monitor e-mails; that employees were not to use company equipment for personal purposes, that nothing on an employee’s computer was subject to a right to privacy and that the employer had the an unfettered right of access to it.

At trial, the company produced e-mails to and from the employee’s attorney that undermined her case and the Court of Appeal held that because the employer’s rights and the employee’s lack of an expectation of privacy were clearly set forth in the employee handbook, the e-mails were admissible, as a matter of contract.

This is significant because the confidentiality right between attorney and client is very strong in California so if the Court of Appeal is willing to overlook that strong public policy on the strength of an employee handbook, it clearly believes in the power of such handbooks carry with them.

Employee handbooks are wonderful tools for organizing employee relations and they systematize the conduct of those relations and define expectations. They are also your first line of defense against claims.  Every company should have one, regardless of size.

Author: JWH