Ms. Pohlid

Hospitality Law

Employee Handbooks: Content & Pitfalls Synopsis

By Kathleen Pohlid, Founder and Managing Member, Pohlid, PLLC

The New Year is a good time to review employment policies and procedures. At the top of the list: a review of your employee handbook.

Think your old handbook has been working well for years and that a review is not necessary?

Your handbook may contain provisions that are out dated, or promises to employees that you are not fulfilling. Maybe there are provisions which are illegal. Important workplace policies may have been omitted from the handbook. You may have no documentation that notice of those policies was given to employees. Or, despite there being several employees on your staff, you do not have an employee handbook. Without an employee handbook, you may also lack the means to document the existence of your workplace rules or establish that they have been effectively communicated to employees.

How costly can a mistake in a handbook be for an employer? In 2011, a Pennsylvania court of appeals affirmed a verdict of over $187 million against a major retail store on a breach of employment contract claim stemming from promises made in its employee handbook. The store promised one fifteen-minute paid break to hourly at-will employee associates who work between three and six hours a day, and two fifteen-minute paid breaks for those working over six hours. The store also touted, "Take a break and get paid for it!" Two problems: the store was not paying employees for those breaks; and employees read the handbook and were aware that they were not being paid. A class action lawsuit followed.

The employment was "at-will" and the store had diligently inserted a disclaimer in its handbook stating: "The policies and benefits presented in this handbook are for your information only and do not constitute terms or conditions of employment… This handbook is not a contract." Although it is important for an employee handbook to confirm with employees that the employment is "at-will" and to set forth a disclaimer, employers should be aware that these steps may not always preclude liability on a breach of employment contract claim.

In the case of this store, the Pennsylvania court of appeals upheld the trial court finding that the disclaimer confirmed that the employment was at-will, but it did not relieve the employer from its unilateral promise to pay employees for breaks. This case serves as an important reminder that employers must review their handbooks and all other communications to employees to ensure that they are not making promises that they do not intend to keep.

At-Will Employment and Unilateral Contracts.

When employment is at-will, the employee handbook should contain a provision stating this and obtain signed acknowledgement from the employee that it is at-will. The provision should also specify what at-will employment means. Under the doctrine of at-will employment, either the employer or the employee may terminate the employment arrangement at-will. If an employment is at-will this means that employer may hire, fire, suspend or discipline any employee at any time and for any reason - good or bad - or for no reason at all, except that they may not do so for an illegal reason. The illegal reason is determined according to federal and state law.

It is illegal under federal law for employers to terminate an employee based upon any of the following reasons: race, age, sex, color, religion, national origin, disability, veteran status, or genetic information. Most states have exceptions to the at-will employment doctrine which prohibit employers from terminating employees for discriminatory reasons and/or whistle blower activity. It is important that employers ensure that their handbooks are reviewed by counsel to ensure compliance with the laws in their jurisdiction. This review should include ensuring the handbook does not include provisions that add unintended contractual obligations on behalf of the employer and that the terms do not compromise the at-will employment arrangement.

In most jurisdictions, the fact that an employment arrangement is at-will does not preclude the existence of unilateral agreements or contracts within the context of the employment. Typically, a unilateral employment agreement will involve the employer making a promise (for example, the employer will provide employees with a paid fifteen-minute break) in exchange for the employee's performance (their continued employment). Provisions and promises contained in an employee handbook can form a unilateral contract. Some examples of such promises that may form a unilateral contract, even in the employment at-will context, include: promotions, vacations, time off, work schedules, benefits, disciplinary step process, performance evaluations, and dispute resolution procedures. Avoid written promises to employees regarding terms and conditions of employment unless you intend to be bound by them.

Termination for Cause

Employers should be especially cautious with respect to provisions which may be interpreted to change an "at-will" employment to one for cause. This may occur if the employee handbook contains promises that the employee will be assured continued employment by the employer or that the employer will not terminate them except for cause or disciplinary reasons. One example involving a hospital in New Mexico illustrates how this can occur even when the employment is termed at-will.

The case arose after the hospital immediately terminated a nurse for violation of a hospital work rule. Although the employment was characterized as at-will, the handbook stated that employees who violate work rules will be counseled and given a verbal warning, followed by a written warning, a period of suspension and termination "as a last resort." The court found that the hospital breached its employment agreement with the nurse because it automatically terminated her without following the disciplinary procedures as set forth in the employee handbook.

In many jurisdictions, courts may conclude that provisions in a handbook may constitute a binding contract on behalf of the employer even when the employment is at-will. Typically, this occurs if the handbook provision contains specific language indicating the employer's intent to be bound by the provision. Also, the binding terms are considered in the context of the entire handbook and other relevant documents.

Disclaimer Provisions.

Since provisions in an employee handbook may be construed to create a written promise or contract for employment, disclaimers are important components of the handbook to demonstrate that the employer does not intend to create such a contract. The disclaimer should be provided in addition to the provisions specifying that the employment is at-will. The disclaimer should confirm that the handbook supersedes prior handbooks. Disclaimer provisions should plainly state that nothing in the handbook should be construed as a contract. Additionally, the provision should put employees on notice that the employer has the sole right to change the rules, policies, procedures and benefits set forth in the handbook. Furthermore, the employer may do so without prior notice to employees.

Avoid Violating the National Labor Relations Act

Employers must be careful that their employee handbooks do not contain provisions which impinge upon employee rights under the National Labor Relations Act. Section 7 of the NLRA provides that

  • Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities.

Concerted activities under the NLRA involve either (1) two or more employees acting together, or (2) a single employee if he involves co-employees before acting or acts on behalf of others; addressing working conditions or seeking improvements in working conditions.

An employer may be found to commit an unfair labor practice without intending to prevent employees from engaging in concerted activities. Additionally, the prohibition against interfering with an employee's Section 7 rights applies whether or not the employee is covered by a collective bargaining agreement. Therefore, it is important that establishments ensure that their employee handbooks and work rules do not violate Section 7 of the NLRA.

Employers may commit an unfair labor practice in violation of Section 7, if the employer: (1) takes action which tends to chill an employee's free exercise of their Section 7 rights; (2) prohibits employees from engaging in Section 7 rights; or (3) disciplines or retaliates against employees for exercising their Section 7 rights.

NLRB examining at-will provisions in handbooks.

Recently, the National Labor Relations Board has been increasing its scrutiny of employee handbooks for provisions that violate Section 7 of the NLRA. On October 31, 2012, the NLRB Acting General Counsel asked Regional Offices to submit employer handbook at-will provisions to ensure that those provisions did not chill or prevent employees from attempting to change their terms and conditions of employment. The NLRB initiated this request after addressing two charges filed by employees who alleged that the at-will provisions in their employer handbooks violated Section 7. Those charges involved:

  • At-will provision from a California trucking company's handbook: No manager, supervisor, or employee of Rocha Transportation has any authority to enter into an agreement for employment for any specified period of time or to make an agreement for employment other than at-will. Only the president of the company has authority to make any such agreement and then only in writing.

  • At-will provision from an Arizona restaurant's employee handbook: No representative of the company has any authority to enter into any agreement contrary to the foregoing employment at will relationship.

The Acting General Counsel did not find that either provision violated the NLRA. However, the charges and the increased scrutiny of this issue confirms that establishments must ensure that their at-will employment provisions do not completely preclude or chill employees from attempting to change the terms or conditions of their employment, including the at-will provisions. Establishments must recognize and confirm that the employment is at-will. However, provisions which completely prohibit employees from their right to seek change in their terms of employment must be avoided.

In addition to scrutinizing "at-will" employment provisions, the NLRB has also increased its focus on other provisions in employee handbooks which may violate Section 7 of the NLRA. In 2012, the Acting General Counsel published a review of several examples from employer handbooks and social media policies which constituted an unfair labor practice. Those provisions included: prohibiting employees from discussing or disclosing their wages; prohibitions against making derogatory and demeaning statements about the company, management, their supervisors, and other employees; permitting employees to discuss the terms and conditions of employment only if done in an appropriate manner; and prohibiting the disclosure of confidential, sensitive non-public information. Employers should carefully review their handbooks and social media policies to ensure compliance with Section 7 of the NLRA.

Grievance Procedures

It is beneficial for employers to develop procedures to address employee grievances and document those procedures in their handbooks. Many jurisdictions recognize the general rule requiring employees to exhaust their employer's internal grievance procedures before pursuing a breach of contract claim based upon their employer's failure to follow its policies. Employers may succeed in obtaining a dismissal of any breach of contract claim filed by an employee who fails to comply with the employer grievance procedures prior to filing their claim.

For example, in March of 2012, a New Mexico state court of appeals reversed a verdict issued by a trial court on behalf of an employee who alleged his employer breached their employment contract by failure to comply with promises made in the employee handbook. The handbook also contained a two-step grievance procedure, which the employee failed to follow. The court of appeals reversed the verdict and directed summary judgment in favor of the employer holding that "[a]n employee must substantially comply with mandatory internal grievance procedures contained in the employee handbook before filing suit for breach of contract based on an alleged failure of the employer to follow the employee handbook." This case emphasizes the benefit of employers establishing and documenting employee grievance procedures.

Equal Employment Opportunity Provisions

Employee handbooks are an important means of confirming and documenting the employer's commitment to equal employment opportunities, advancement and prohibitions against discrimination. Employers must exercise their responsibility to establish equal employment opportunities and prohibit workplace discrimination and harassment. This responsibility includes establishing procedures for reporting and addressing all incidents of discrimination and harassment. If the employer fails to do so, they can be held liable for acts of workplace discrimination and harassment even if they were unaware of those acts. The employee handbook is an important tool to put employees on notice of the employer's policies and the procedures employees are to follow if such incidents occur.

Leave and Pay Policies

The employee handbook should also set forth the employer's pay policies including: paydays and pay periods; hours of work; flexible work schedule policies; vacation, paid time off, and sick leave; family and medical leave policies; and policies relating to work done outside regular work hours. Employers should be aware of their obligation to pay employees for work which they require or permit employees to perform outside regular work hours. This may involve employees responding to phone calls and gaining remote computer access to perform work. Employers who desire to prohibit such work outside regular hours must ensure their policies are implemented, effectively communicated and enforced. Employers should also ensure their pay policies address topics including serving on jury duty, military duty, and time off for voting.

The employee handbook is also an effective means to document and communicate a safe harbor policy for salaried exempt employees. Under the Fair Labor Standards Act, employers are prohibited from making any improper deductions from the pay of employees who are exempt from the overtime provisions. The U.S. Department of Labor regulations set forth specific and limited circumstances in which such deductions may be made. If an improper deduction is made, the employer loses the exemption for each affected employee and from other similar exempt employees. This could be a very costly mistake for employers. However, DOL regulation 29 C.F.R. 541.603(d) provides a safe harbor to limit this liability.

Employers may qualify for the safe harbor if they: (1) commit and ensure that employees will receive their full pay due under the FLSA; (2) establish procedures for employees to address their pay concerns; (3) confirm that employees will be reimbursed for any improper deductions and (4) make a good faith commitment to comply in the future. If the employer qualifies for the safe harbor they will not lose the exemption. DOL regulations specify that "publishing the policy in an employee handbook" that "was distributed to employees prior to the improper pay deductions" is "best evidence" of such a safe harbor policy.

Written Acknowledgement

An employee handbook is only effective if it has been received and read by employees. The best means to confirm that it has been effectively communicated is to include a signed written acknowledgement from employees confirming that the employee has received and read the handbook. The acknowledgement should also include a promise that the employee will comply with the employer's policies.

Other topics

The employee handbook is an important tool for employers to ensure that employees know and comply with workplace rules. Other topics to address include drug free workplace policies; policies of non-discrimination and accommodation of individuals with disabilities; smoke free policies; appearance, dress and hygiene policies; security and weapons policy; confidentiality policies; social media policies; use of employer property and technology; reporting workplace injuries; and safety and health policies. Additionally, the employee handbook is an opportunity to impart to all employees the company culture, history, goals, and values.

Employer handbooks are an important resource and can help employers effectively manage their workplace. However, it is crucial for employers to periodically review their handbooks to ensure the provisions comply with the law and do not impose upon the employer promises that they do not intend to meet. Ensure that your handbooks are regularly reviewed and that all managers and employees are trained and informed regarding their contents.

Kathleen Pohlid is the founder and managing member of the law firm of Pohlid, PLLC in the Nashville, Tennessee area. She advises business clients in matters including employment, occupational safety and health, Americans with Disabilities Act (accommodation & discrimination) and regulatory compliance. Her goal is to enable clients to comply with the myriad of state and federal laws to succeed in their business, mindful of the challenges facing businesses and the importance of cost effectiveness. She has advised and represented businesses in a variety of industries including restaurants, hotels, and other entities in the tourism and hospitality industries. She has over 20 years of combined federal government and private sector experience in employment law and litigation. She holds an AV® rating from Martindale-Hubbell (highest for professional competency and ethics), a B.S. degree from the U.S. Naval Academy and a J.D. from Samford University. Ms. Pohlid can be contacted at 615-369-0810 or kpohlid@pohlid.com Please visit http://www.pohlid.com for more information. Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
General Search:

OCTOBER: Revenue Management: Technology and Big Data

Gary Isenberg

Hotel room night inventory is the hotel industry’s most precious commodity. Hotel revenue management has evolved into a complex and fragmented process. Today’s onsite revenue manager is influenced greatly by four competing forces, each armed with their own set of revenue goals and objectives -- as if there are virtually four individual revenue managers, each with its own distinct interests. So many divergent purposes oftentimes leading to conflicts that, if left unchecked, can significantly damper hotel revenues and profits. READ MORE

Jon Higbie

For years, hotels have housed their Revenue Management systems on their premises. This was possible because data sets were huge but manageable, and required large but not overwhelming amounts of computing power. However, these on-premise systems are a thing of the past. In the era of Big Data, the cost of building and maintaining an extensive computing infrastructure is incredibly expensive. The solution – cloud computing. The cloud allows hotels to create innovative Revenue Management applications that deliver revenue uplift and customized guest experiences. Without the cloud, hotels risk remaining handcuffed to their current Revenue Management solutions – and falling behind competitors. READ MORE

Jenna Smith

You do not have to be a hospitality professional to recognize the influx and impact of new technologies in the hotel industry. Guests are becoming familiar with using virtual room keys on their smartphones to check in, and online resources like review sites and online travel agencies (OTAs) continue to shape the way consumers make decisions and book rooms. Behind the scenes, sales and marketing professionals are using new tools to communicate with guests, enhance operational efficiencies, and improve service by addressing guests’ needs and solving problems quickly and with a minimum of disruption. READ MORE

Yatish Nathraj

Technology is becoming an ever more growing part of the hospitality industry and it has helped us increase efficiency for guest check-inn, simplified the night audit process and now has the opportunity to increase our revenue production. These systems need hands on calibration to ensure they are optimized for your operations. As a manager you need to understand how these systems work and what kind of return on investment your business is getting. Although some of these systems maybe mistaken as a “set it and forget it” product, these highly sophisticated tools need local expert like you and your team to analysis the data it gives you and input new data requirements. READ MORE

Coming Up In The November Online Hotel Business Review

Feature Focus
Architecture & Design: Authentic, Interactive and Immersive
If there is one dominant trend in the field of hotel architecture and design, it’s that travelers are demanding authentic, immersive and interactive experiences. This is especially true for Millennials but Baby Boomers are seeking out meaningful experiences as well. As a result, the development of immersive travel experiences - winery resorts, culinary resorts, resorts geared toward specific sports enthusiasts - will continue to expand. Another kind of immersive experience is an urban resort – one that provides all the elements you'd expect in a luxury resort, but urbanized. The urban resort hotel is designed as a staging area where the city itself provides all the amenities, and the hotel functions as a kind of sophisticated concierge service. Another trend is a re-thinking of the hotel lobby, which has evolved into an active social hub with flexible spaces for work and play, featuring cafe?s, bars, libraries, computer stations, game rooms, and more. The goal is to make this area as interactive as possible and to bring people together, making the space less of a traditional hotel lobby and more of a contemporary gathering place. This emphasis on the lobby has also had an associated effect on the size of hotel rooms – they are getting smaller. Since most activities are designed to take place in the lobby, there is less time spent in rooms which justifies their smaller design. Finally, the wellness and ecology movements are also having a major impact on design. The industry is actively adopting standards so that new structures are not only environmentally sustainable, but also promote optimum health and well- being for the travelers who will inhabit them. These are a few of the current trends in the fields of hotel architecture and design that will be examined in the November issue of the Hotel Business Review.