• Employee Handbooks, Policy Manuals, and Codes of Ethics: Which Communication Tools Are Best for Your Organization?
  • November 10, 2009 | Author: Richard Gerakitis
  • Law Firms: Troutman Sanders LLP - Atlanta Office ; Troutman Sanders LLP - Atlanta Office
  • Employers have several tools to communicate policies, procedures, and expectations to their employees. This article analyzes three of those tools: (1) an employee handbook, (2) a policy and procedure manual, and (3) a code of ethics. Regardless of which option(s) your organization uses, you should keep in mind the following:

    • Each tool must be distributed to all of your employees, kept current, and aligned with the culture of your workplace;
    • Each tool should be distributed on the employee’s first day of work, either in print or via your organization’s intranet;
    • Employees sometimes argue that these publications create an employment contract. To guard against this argument, these publications should avoid use of mandatory language (e.g., “shall” or “will”) when outlining an employer’s obligations. Further, the publication should clearly affirm employees’ at-will status and state that the document is not a guarantee or contract of employment or any term or condition of employment. It should also state that employees can be terminated for any reason not prohibited by law, including no reason at all; and
    • All employees should sign and date an acknowledgement of receipt of the publication (either in writing or via electronic signature), and confirm their understanding of, and agreement with, the terms contained therein. This acknowledgement form should be maintained in the employee’s personnel file.

    Employee Handbooks

    Employee handbooks have several functions, including: (1) explaining to employees the terms and conditions of their employment; (2) providing information to employees that the organization is required by law to communicate to its employees; and (3) serving as one tool in your organization’s legal and compliance arsenal. For example, should an employee bring a discrimination claim against his or her employer, a consistently applied employee handbook can serve as evidence that the allegedly adverse employment action was not discriminatory, and instead was the result of the employee’s violation of the express, non-discriminatory, fairly enforced rules set forth in the employee handbook.

    Before drafting an employee handbook, there are a number of things that employers should consider. First, while a lengthy handbook with detailed information on the organization’s policies may seem useful, the problems with such a handbook may outweigh the handbook’s benefits. From a practical standpoint, the handbook may become difficult to keep current as the organization modifies its policies. Further, if the organization operates in many different states, it may become difficult to address the (potentially diverging) law of each of these states in a single document and to keep the handbook current with regard to all developments in the law in each of those locations. In addition, a lengthy handbook may expose the organization to liability if the policies and procedures contained therein are not consistently followed—employees may point to such discrepancies as either evidence of discrimination or breach of an employment contract.

    On the other hand, a very brief employee handbook containing only the information that must, by law, be provided to employees does not answer frequently-asked questions about the terms and conditions of employment. This eliminates one of the benefits of employee handbooks (and also of policy and procedure manuals, discussed in greater detail below) in that it may save management time by eliminating the need to repeatedly answer employees’ questions regarding policy issues and the terms of conditions of employment. A brief employee handbook also does not provide employees with practical information about their expected conduct. Employers may find that this information is better conveyed through a code of conduct.

    Second, while many organizations benefit from use of an employee handbook, such device may not be the most effective way to communicate with your employees. For instance, you may want to supplement a brief employee handbook with a more detailed code of conduct.

    Third, there are risks concurrent with use of employee handbooks. Always have an employment lawyer review your employee handbook before distribution to ensure the handbook is adapted to the specific practices of your organization and complies with the law. Further, you should routinely review the handbook to confirm that the policies therein are still applicable to your organization and consistently followed.

    Policy and Procedure Manuals

    Policy and procedure manuals are similar to employee handbooks. A policy and procedure manual generally outlines the procedures management uses to execute the organization’s policies. While policies describe what management wants done in a specified circumstance, procedures explain how that outcome should be obtained.

    Like employee handbooks, policy and procedure manuals communicate the rules governing the employment relationship. Policy manuals, however, can go beyond topics traditionally covered by employee handbooks and may be used to standardize an organization’s operations. As such, these manuals are generally helpful to larger organizations and/or organizations with decentralized operations. At the same time, smaller businesses will find them useful, as they are not as cumbersome as a lengthy employee handbook. Thus, your organization’s reliance on a policy manual may be largely based upon business considerations, not legal requirements.

    One advantage of a policy and procedure manual is that it may reduce employees’ frequently-asked questions and, therefore, the burden on management to respond to these questions. Thus, policy and procedure manuals may also reduce the potential for conflict and misunderstanding. As with employee handbooks, however, if an organization has a policy and procedures manual, it must be consulted, interpreted, and relied upon consistently. Failure to do so may subject the organization to potential liability based upon allegations of discrimination and favoritism.

    To be able to quickly update and distribute the organization’s policy and procedure manual, the organization may want to consider maintaining the manual in electronic format on the organization’s intranet.

    Codes of Ethics

    Codes of ethics (or codes of conduct, as they are sometimes known), which are often used as a supplement to employee handbooks or policy and procedure manuals, are used to clarify and promote the organization’s values and principles within and outside of the organization. A code of ethics may address such topics as corporate principles (such as a commitment to sustainability) and a commitment to compliance with all applicable rules and regulations (and an iteration of these rules and regulations). They also often include official statements from management affirming the company’s commitment to the Code. In terms of the format of the code of ethics, organizations have the discretion to choose a format that meets their particular needs. Some organizations have adopted lengthy and detailed codes; others have taken a more concise approach. A growing number of companies are using shorter codes, with hyperlinks to additional information (hypothetical questions, related policies and frequently asked questions, for example) imbedded in their internal or external websites.

    Employees can look to their organization’s code of ethics for guidance on various ethical issues, such as conflicts of interest. The code of ethics should also contain a process for reporting code violations and a statement that employees who do report such violations will not be retaliated against. In addition to simply having a code of ethics, all organizations should regularly train their employees on the code of ethics.

    Many organizations can benefit from a code of ethics, and many organizations are already required to have a code of ethics. For example, pursuant to Sarbanes-Oxley and the listing requirements for the U.S. stock exchanges, public companies must adopt and publish a code of ethics meeting certain standards. A code of ethics could be beneficial for non-public entities as well. Indeed, many non-profit organizations are adopting codes of ethics, even though they are not subject to Sarbanes-Oxley or the U.S. stock exchange listing requirements.

    A code of ethics can serve an important legal compliance function for an organization. When an organization that has an ethics and compliance program that meets the standards set forth in the federal sentencing guidelines for corporate ethics and compliance programs is found guilty of a business crime, it may get some credit for its compliance efforts and its fine reduced. Since any organization, whether publicly-listed or not, could be convicted of a business crime because of a rogue employee’s bad acts, all organizations should at least consider adopting an ethics and compliance program, including a code of ethics, that meets the federal sentencing guidelines and standards. Organizations with an international presence should also be aware that various international governmental and non-governmental entities also require organizations to have codes of ethics, along with various other ethics and compliance programs. In addition, Delaware appears to have found that members of a corporation’s board of directors have a fiduciary duty to ensure that their organization has an effective compliance program. In the wake of recent, highly-publicized corporate frauds, other jurisdictions may adopt this or similar rules.

    Conclusion

    Your employee handbooks, policy and procedure manuals, and codes of ethics should be reviewed, on average, once per year.