Employee Handbooks: Benefit or Bane

Employee handbooks and personnel policies/guidelines are a standard business practice used to meet both legal requirements and communicate many types of policies. However, they can be a legal tar pit for the unwary employer.

Usually, from a purely legal perspective, most employers only need a handful of policies, which include a Non-Discrimination policy; a Workplace Harassment policy, a statement about “at-will’ employment, a well crafted disclaimer, a Domestic Violence Leave policy, an acknowledgement form, and for employers with over 50 employees within a 75 mile radius and all public employers, a Family and Medical Leave policy.

Most other personnel policies are discretionary and are usually written to communicate standards of conduct, benefits and other topics of general interest to the workforce. However, how such policies are written is often fraught with challenges. Since 1984, the Washington courts have recognized that employer crafted policies may create the basis for unilateral contracts between an employer and its employees.

This principle was recently reinforced by the Washington Supreme Court when it upheld that language in the employer’s policies could create an enforceable unilateral contract. See Storti vs University of Washington, (2014).

In Storti, the University had a policy granting  an annual 2% merit increase for meritorious service. The policy was written that such increases “shall be awarded.” Ultimately, the court determine the language did create an unilateral contract. However, the University had additional language that allowed the University to reevaluate and suspended the merit increases if it followed specific procedures, which was also set out in the policies. The University did follow those policies. Thus, the Court concluded that, even though a contract existed, the University did not breach the contract and was not obligated to award the merit increases.

This cases reminds employers of the need to have a well crafted policies, and to make sure, if the employer is going to use mandatory language, to reserved the right to modify the policies and the process, if any to do so. One way to accomplish this is by having a conspicuous disclaimer in employee handbooks and policies, which clearly states that the policies do not create a contract, nor do they guarantee specific treatment in specific instances. This means, unless absolutely necessary, an employer should avoid using mandatory language in its policies, such as “shall”, “must” “will”. etc. Instead, an employer should use discretionary language such as “may”, “should”, “generally”, “usually”, typically, etc.

Also, employers should make sure the policies are internally consistent, and consistent with the disclaimer.

While personnel policies and the like can be useful communication tools, they are not a substitute for common sense, good judgment and respect for individual employees. Often times, employers will buy pre drafted employee handbooks, which may not be in accord with Washington law. This is a risky proposition.

Since Washington law tends to favor employee rights and is constantly evolving, employers should consider having their personnel policies periodically reviewed by legal counsel.

Gil Sparks, PHR, Attorney at Law
Ogden Murphy Wallace PLLC
gsparks.@omwlaw.com