Why Your Growing Business Needs an Employee Handbook

By Scaringi Law

Many business owners view the expense of getting an employee handbook custom tailored to their growing business as an unnecessary expense. In most cases, the owner has never experienced significant employee behavior or performance problems, never been sued by a former employee, and never worried about setting specific policies governing bonuses, time off, working from home, or reporting concerns. As your business grows and your workforce expands, however, your employees may want specific guidance about workplace rules and you will want to protect your business and all your hard work from administrative charges and lawsuits by employees or former employees. Here are several ways an employee handbook can protect your business:

Prevention of Harassment and Discrimination. Preventing and correcting harassment or discrimination in the workplace is essential. Aside from monetary liability, workplaces where harassment or discrimination are permitted to fester are often dysfunctional and lead to high employee turnover, loss of quality employees, low morale, and inferior work product and work volume. Title VII of the Civil Rights Act applies to employers with 15 or more employees; a similar Pennsylvania law applies to employers with 4 or more employees. When courts are asked to assess employer liability for workplace harassment and discrimination, they invariably look to see if the employer took reasonable steps to prevent or correct harassment. This almost always requires that an employer issue a written policy to all employees explaining what kinds of conduct are prohibited, how they can report suspected violations of the policy, and assuring employees making such complaints that retaliation will not be allowed. Without a written policy, an employer faces an almost impossible task of convincing a judge or jury that it was committed to preventing unlawful behavior and took reasonable steps to ensure it did not occur. These kinds of lawsuits can result in an employer being liable for front and back pay, compensatory and punitive damages, and attorneys’ fees for the prevailing employee—not to mention significant bad local press.

Payment for Accrued but Unused Vacation Time. Most employers provide employees with some type of paid leave benefit that either accrues in a lump sum at the beginning of the year or incrementally with each pay period. Most employers also do not permit employees to roll over accrued vacation from year to year; instead, employees must “use it or lose it.” What about an employee who quits or is fired? If you do not have a written policy concerning accrued but unused vacation time, you may need to pay the employee for all such accrued time. This can be particularly unpalatable to an employer if the employee was fired for cause or just stopped showing up. Fortunately, Pennsylvania law is clear—you can treat accrued but unused vacation any way you want, provided that you have a written policy clearly explaining when such accrued time will (employee voluntarily quits, provides a two-week notice, and returns all company property) and will not (employee is fired for cause or abandons his job without notice) be paid.

Fair Labor Standards Act Compliance. The Fair Labor Standards Act (“FLSA”) and the Pennsylvania Minimum Wage Act apply to virtually all Pennsylvania employers, regardless of size or number of people employed. These laws govern minimum wages, overtime, and exemptions from overtime. Under both laws, improper deductions from an exempt employee’s weekly salary can cause the exemption to be lost not only for the employee who suffered the improper deduction, but all employees with his or her job title. This could result in the employer being required to pay overtime wages for all hours worked in excess of 40 in a workweek by those salaried employees, going back two and sometimes three years. Employers can avoid this result if they have a written policy that creates an “FLSA Safe Harbor,” i.e., a policy that states that deductions from salaried workers’ pay are generally not permitted, a reporting pathway for employees to use if they believe they suffered an improper deduction, and a policy that states that errors will be promptly corrected. Employers without a written policy to this effect are opening themselves to significant liability for what could be small payroll errors.

Avoid Policies that are Common, but Illegal. Having an attorney create a handbook for your business will also allow you to avoid some common practices that are not permitted by law but are often implemented by employers who are unaware that they are not permitted. An attorney can advise you that the following policies, for example, should not be followed at your business:

• Not sending an employee his final paycheck because he did not provide a two-week notice
• Docking a salaried employee’s wages by four hours because they went home sick at lunchtime
• Reducing an employee’s hourly rate or salary without at least providing one pay period’s notice
• Firing employees with a disability without first determining if they can be provided a reasonable accommodation
• Permitting “off the clock” work or failing to pay overtime
• Failing to confirm that an employee is legally permitted to work in the United States.
• A policy that prohibits employees from discussing their wages, salary, or working conditions

The expense of an employee handbook is relatively small in comparison to the significant liability an employer faces for not operating within the bounds of employment and labor laws and not having policies to ensure that its operations are proper. Furthermore, you do not need to figure out what policies you need and try to draft them alone. An experienced employment attorney will have many stock policies that have been carefully drafted to provide maximum protection for an employer and will be able to easily draft policies that are specific to your company, if necessary. Your employees will appreciate the certainty about workplace policies and procedures that comes with a handbook and you can be certain you are addressing employee concerns in a consistent and legal way.

To schedule a consultation about having an attorney write an employee handbook call 717 657 7770.