Done well, an employee handbook can be an invaluable tool for maintaining an orderly workplace and developing a healthy corporate culture. If done carelessly, however, it could result in inconsistent or arbitrary personnel decisions, administrative inefficiency, and potential litigation.

At yesterday’s NJBIA Business Bootcamp, attorney Michael A. Shadiack of Connell Foley LLP, explained that to best protect a company, and clearly communicate with employees, the following four phrases should not appear in an employee handbook:

  • “permanent employee”;
  • “fired for cause”;
  • “progressive discipline”; and
  • “No member of management can enter into an employment contract.”

Shadiack explained how these phrases can cause a problem for businesses and what phrases should be used instead in a handbook.

Note: The information in this article was presented at the Nov. 29 NJBIA Business Bootcamp, Employee Handbooks: Connecting Compliance & Culture. It is provided for informational purposes only, specific to New Jersey-based employers, and does not constitute legal advice.

 

Don’t say, “Permanent employee.”

Does your handbook state that after an employee completes the introductory period he or she will become a “permanent” employee?  If you terminate an employee who believes that he or she has “permanent” status then the employee may argue that your use of the word “permanent” counters the “at-will” employment relationship.

Any reference in the handbook to an employee (who is otherwise employed “at-will”) as “permanent” potentially exposes the employer to a lawsuit based on a detrimental reliance or breach of implied contract theory.  For the same reason, a phrase in a welcome message contained in the handbook such as “we hope you have a long tenure with our company,” should also be avoided, Shadiack suggested.

Say, “Regular employment status” instead.

There is a significant legal difference between the words “permanent” and “regular,” and businesses must be careful in the choice of words used in the handbook.

“The word ‘permanent’ should not appear anywhere in an employee handbook,” Shadiack said. “No one in the organization is a permanent employee.”

IIf an employer utilizes an initial introductory period of employment, the employer can state in the handbook that upon completion of the introductory period the employee will enter the “regular employment status,” Shadiack said.

Don’t say, “Fired for cause.”

An employee handbook that specifies which instances may result in the employee being “fired for cause” could be interpreted to mean he or she can only be terminated if the employer has “cause” to do so.  Such a phrase also is counter to the “at-will” employment relationship, and could result in a legal challenge to the employer’s decision to terminate an employee for poor performance or even reporting late to work if such misconduct is perceived by the employee (or his or her counsel) to not be good “cause.”

Even if “for cause” is used in an entirely different context in a handbook, such as “an employee fired for cause will forfeit his or her accrued vacation time,” an employee could attempt to use that verbiage as a basis to challenge the termination and the “at-will” nature of the employment relationship.

Say, they are “at-will employees” instead.

Pursuant to New Jersey law, an employer can terminate an employee who is “at-will” for any reason, so long as it is not an illegal reason (such as discrimination, retaliation, engaging in activity protected per law to name a few),” Shadiack said.

Every handbook should include an “at-will employment” policy and disclaimer, which makes clear that unless an employee has an individual employment contract, or is covered by a collective bargaining agreement, his or her employment is not for any specific time and may be terminated for any reason or no reason at all, and with or without prior notice, at any time by the company, or the employee may resign his or her employment at any time.

Shadiack noted such a policy should also explain that neither the handbook, nor any other company document, confers any contractual right, either expressed or implied, to remain in the company’s employ, nor do they guarantee any fixed term or condition of employment.

Don’t use, “Progressive discipline.”

Progressive discipline is a step-by-step process that potentially locks the company into a specific disciplinary action for an act of workplace misconduct, poor performance or violation of company policy.  For example, a verbal warning for a first offense, written warning for a second and third offense, a suspension for a fourth offense, and termination for any further offense by that employee.

Use, “Corrective discipline” instead.

In contrast, a corrective discipline process allows the company to make a disciplinary decision based upon the facts and circumstances of each violation and determine the appropriate level of discipline.

By way of a corrective discipline process, the company would reserve its right to terminate an at-will employee even for a first offense if the misconduct was of a nature to warrant such discipline, Shadiack said.

Don’t say, “No one can enter into an employment contract.”

The employee handbook should have a disclaimer upfront stating that it is not a contract of employment. Again, absent a unionized workforce, nothing in the handbook should state or imply any employee’s status is anything other than “at-will,” Shadiack noted.

But employers and employees can still enter into employment contracts; the disclaimer just prevents misunderstandings in the handbook.  A blanket ban on any contractual relationship, however, could be argued to be a ban against a union representing the workforce, which could potentially subject a company to an unfair labor practice charge.

Say who, specifically, can enter into employment contracts instead.

Within the “at-will” employment policy, the company is well-advised to identify the individual in the company who is authorized to enter into a contractual relationship with an employee and/or a union.

“So for instance, you may want to state in the handbook, ‘Other than the president of the company, no supervisor, employee or other representative of the company has any authority to enter into an agreement for employment for any specified period of time or to make any agreement covering the terms and conditions of employment.’” Shadiack said.  “You have to designate someone in your organization—preferably the person at the highest level in the organization – who is authorized to enter into such an agreement.”

 

Michael A. Shadiack is the Chair of Connell Foley’s Labor and Employment Practice Group. Representing a broad spectrum of employers and management personnel, in addition to defending employers in litigation he drafts and updates employee handbooks, provides preventive compliance counseling on personnel issues, and conducts on-site workplace training on a host of HR topics important to businesses, including workplace harassment prevention training.