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Professional Service Agreement

Employee Handbooks – Essentials and Precautions

Employee handbooks are meant to set the rules straight – but they don't always do that. In fact, many wrongful discharge cases are based on published policies in the handbook that are ignored when a discharge decision is made.

Your handbook policies can be an effective means for disseminating critical information to employees or it can be a fruitful source for employee lawsuits. The difference is usually as basic as what you write, what you don't write, the way you state it, and whether you follow your written commitments.

What to Include:

Here are essential subjects to be included:

Company overview. A brief introduction about the history, goals, growth and management philosophy of the company.

Equal opportunity statement. State than an applicant's age, sex, race, religion, and other protected classifications will have nothing to do with hiring, promotion or pay.

Working hours. Define the work week and time allotted for breaks or meals.

Pay and performance. General statements about when employees are paid and policies on leaves without pay and overtime.

Performance evaluations. Explain how employees will be evaluated and when, e.g., on the anniversary of employment or during a set annual or semi-annual period.

Termination. Explain the activities for which you will fire an employee, including poor performance, dishonesty, fighting, insubordination, absenteeism, health and safety threats and company policy infractions.

Benefits. Define who is eligible for health insurance, how long a new employee must wait for coverage and what portion of premium costs is paid by the company. Explain any additional insurance such as dental or disability that employees can buy through the company. Explain policies on vacation and all types of leave, including sick, military, funeral, personal, family, medical and jury duty. List all paid holidays.

Disclaimer. Add the disclaimer that the handbook is not a contract, policies may be changed at any time, and all employment is "at will."

What to Exclude:

Exclude restrictive language when writing the handbook. Words such as "must," "will," or "always" may bind you to actions you don't want to take in specific cases. Firing a new employee for poor attendance is usually justified, but terminating a veteran employee who has run into a personal or family problem may not be in the company's best interests. Using "may" instead of "will" may help you avoid a lawsuit.

Avoid words like "probation" which imply that the employee's at-will status is over once he or she has passed the probationary period.

Avoid statements that courts frequently interpret as implied promises. Never make references to permanent or lifetime employment. Eliminate any references to an initial probationary period after which the employee's status becomes permanent.

Make sure any list of grounds for termination contains a disclaimer that it does not represent the full range of reasons for termination.

Be certain that your handbook doesn't contain any rules that are contradicted in other areas of your handbook.

SESCO Management Consultants is available to assist with your human resource issues, including the development of legally compliant employee handbooks. You may contact us by phone at 423-764-4127 or by email at