The Importance of an Employee Handbook

March 23, 2016

 One of the biggest risks all organizations face, including home health care agencies, hospices, medical staffing firms, and others, is employee-related lawsuits. These suits involve allegations of discrimination, wrongful termination, overtime disputes, failure to promote, and negligent employee evaluations, among others. Just take a look at some sobering facts on the risk of employee-related suits for employers across industries:

  • Employee lawsuits have risen approximately 400% over the last 20 years, with the number of lawsuits accusing employers of wrongful termination tripling over the same period of time.
  • 5% of these lawsuits were brought against private employers with fewer than 100 employees.
  • New Mexico, Washington, D.C., Nevada, Alabama, and California are the top states for an employee lawsuit risk.
  • When lawsuits go to trial, the employee wins more than 63% of the time.
  • The average cost to settle an employee lawsuit out of court is $75,000.
  • The average amount awarded to employees in jury trials is $217,000.

Furthermore, an allegation of discrimination in the workplace can be a huge distraction for an organization. There is the time lost from work by company representatives to meet with lawyers, for taking depositions, and other matters related to the lawsuit. What’s more, the plaintiff will likely still be employed by the company, which may make it difficult for others to concentrate on their work. No matter how the case is resolved, the organization may also suffer a loss of goodwill.

Mitigating Employee-Related Lawsuits with a Comprehensive Employee Handbook

Prevention is the best practice to help mitigate the potential of an employee lawsuit – from having procedures in place involving hiring, employee performance evaluations, benefits, and sexual harassment training to termination policies and much more – all documented in an employee handbook. The employee handbook creates company policies, procedures, and expectations that serve to avoid potential conflicts and misunderstandings. It should be customized for each state in which the organization has operations. All new employees should be provided with the handbook, along with applicable written notification of specific laws where required. In addition, employees should acknowledge in writing that they have received and read the handbook and will comply.

When developing or updating an employee handbook, make sure it includes the following basic components, as recommended by the Small Business Administration (SBA):

  • General Employment Information: Provide a general overview of your business and outline the company’s basic policies relating to employment eligibility, job classifications, employee referrals, employee records, background checks, postings, termination and resignation procedures, and transfers and relocation.
  • Anti-Discrimination & Sexual Harassment Policies: It’s critical that the handbook expressly states that the company has zero tolerance for harassment or discrimination of any kind. Define the various types of harassment and how employees may identify harassment. Additionally, disclose to employees the ways in which they can report complaints of harassment/discrimination, as well as identify who in the company they can talk to so that they can address their concerns.
  • Pay & Salaries: Clearly explain that the company will make the required deductions from employees’ pay for federal and state taxes, as well as voluntary deductions for the company’s benefits programs. In addition, outline your legal obligations regarding overtime pay, pay schedules, time-keeping records, and meal and rest breaks. Be sure to comply with any applicable state wage-and-hour laws, in addition to federal requirements.
  • Work Schedules: Outline the company’s policies regarding work hours and schedules, attendance, punctuality, and reporting absences, along with guidelines for flexible schedules. This is particularly important for home health care organizations whose staff works off premises.
  • Disciplinary Policies: Present the company’s expectations of how employees should conduct themselves. In addition, it is important to remind employees of any legal job-related obligations with which they may need to comply (for example, the company’s legal obligations to protect patient health data). Describe the company’s disciplinary policy and other standards related to employee discipline.
  • Leave Policies: Document the company’s leave policies, especially leave that by law is required to be provided. Family and medical leave, jury duty, military leave, and time off for court cases and voting should all be documented to comply with state and local laws. In addition, explain the company’s policies for vacation, holiday, bereavement, and sick leave.
  • Employee Benefits: Include details on the company’s group benefits program and eligibility requirements, including all benefits that may be required by law, such as disability insurance and workers’ compensation. The employee benefits section should also outline the company’s plans for health insurance, retirement, and any optional benefits the company offers.
  • Safety and Security: Describe the company’s policy for creating a safe and secure workplace, including compliance with applicable Occupational Safety and Health Administration (OSHA) laws that require employees to report all accidents, injuries, potential safety hazards, safety suggestions, and health- and safety-related issues to management.

The handbook must also include an equal opportunity employment statement and a disclaimer that its provisions do not constitute a contract or a contractual commitment of continued employment. It’s also important to have employment counsel review the handbook before publication and distribution. In addition, the employee handbook should be updated at least every two years so that the information is current, with employees receiving either a revised printed copy or notification when a new electronic version is available.

Along with having an employee handbook to provide valuable legal protection if an employee later challenges a company’s policies in court, be sure to secure Employment Practices Liability Insurance (EPLI). EPLI is designed to provide compensation for losses caused by employee lawsuits, including incurred court defense costs and legal fees. Manchester Specialty provides EPLI coverage to home health care providers, hospice and medical staffing firms. Many of our insurance carriers also offer free risk management and loss control tools for human resources and employment practices. You or your local agent/broker can contact us at 855.972.9399.


Source: Trusted Choice, SBA