An Employee Handbook: An Ounce of Prevention Every Small Business Should Have

If you run a small business with one or more employees besides yourself and your spouse, you should have an employee handbook. If an employee sues you for unlawful termination, sexual harassment, discrimination, or any other employment-related issue, your first line of defense is your written and published employee handbook. A thorough, well-written handbook helps the small business owner avoid potential legal pitfalls if a problem develops with an employee.

Every handbook should reflect a desire to treat employees equally and fairly. It should clearly state your expectations and policies so that employees are on notice of consequences of any actions contrary to those policies.

Topics in a typical employee handbook often include:

- normal, expected working hours and attendance/tardiness policies

- pay rates, payroll periods, overtime policies

- vacation policies, including paid days-off, and procedures for requesting time off

- sick day policies and procedures for calling off

- policy prohibiting illegal drug use or alcohol use during work hours; procedures for random drug testing if appropriate

- disciplinary policies and procedures, including warning procedures, probationary periods, and a list of activities that will result in immediate termination
- policies on use of company assets (computers, copiers, telephones, office supplies) for personal purposes

- e-mail and Internet use policies

- performance evaluation process

- the benefits of employment and procedures for obtaining health insurance, 401-K participation
-- procedures for applying for new positions, raises, or changes in employment status

- employee safety policies; should also include OHSA regulations if appropriate

- non-discrimination policy

- sexual harassment policy

- how to file a discrimination or sexual harassment claim, both internally and externally through the Civil Rights Commission

- if you are an at-will employer, state your right to terminate for any reason or no reason at all

- if you are a contract employer, state any termination policy which may supplement the contract

The employee handbook is also a good place to discuss any confidentiality requirements your employees would be expected to follow. Many handbooks also include a history of the company, biographies of founders and key officers and a list of key contacts and responsibilities. You may want to provide job descriptions for various functions or an organizational chart.

Every employee should have a personal copy of the handbook. Most small business owners use a 3-ring binder so that pages can be easily revised and replaced. When an employee is hired, they should be asked to sign an acknowledgment that they have received the handbook, that they have read the contents, and that they agree to comply with its rules. This signed agreement should be kept in their personnel file.

As you revise the handbook, collect the old ones (or old pages, as the case may be) and replace with the new version, asking employees to sign a new acknowledgment. You do not want to have a situation where you changed a policy and they can claim they were depending on the old information.

Your employee handbook should also inform employees about your qualification (or not) for the Family Medical Leave Act, your compliance with the Americans with Disabilities Act and any other government regulations that may affect your trade or industry.

If you have employees represented by a union, make sure your handbook clearly spells out their rights and obligations, as well as defining management's relationship with the union.

But having an employee handbook is not enough. You must follow, to a T, the policies you set out. One of the worst mistakes a small business owner can make is to have a written policy, then make up the rules as they go along. It doesn't matter how much you like the employee, or how valuable they are, if your policy says it is grounds for automatic termination if they are late for work more than four times in one month, you must terminate that employee when they show up late for the fifth time, even if it's an excuse you believe. If you don't, then you jeopardize your ability to enforce any of your rules and you won't be able to fire that next employee on their fifth tardy, even if you want to.

If you need help drafting a handbook, or have one that needs to be reviewed and updated, contact a labor and employment attorney. It's too important to be put off until there is a problem. Having an employee handbook is one of those situations when an ounce of prevention is worth a pound of cure.