Will your employee handbook come back to bite you?

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Frequently, when I discuss employment contracts with associates, they tell me they're not concerned about termination language because “I live in an ‘at-will' state, so that term is unenforceable, right?”

I've heard this enough times that I think a brief explanation of at-will doctrine is in order. Employment at will is a fundamental legal principle that essentially puts an employer in the driver's seat. The idea is that a boss can fire anyone at any time for any reason (or no reason) without concern for legal consequences imposed by government or threat of an employee lawsuit. But over time, the doctrine has been carved up with many exceptions as a result of legislation, case law and administrative mandates. Among them are:

Employment is subject to unemployment insurance laws; businesses pay an economic penalty when a fired worker successfully claims.

Employees subject to collective bargaining (unions) ordinarily cannot be fired at will.

Firings that involve workers who are members of a “suspect” class (older workers, minority workers and a number of others) may avail themselves of anti-discrimination laws that are contrary to the at-will doctrine.

Key to our discussion here: Employment contracts may alter or reverse the impact of the at-will doctrine.

What at-will doctrine means for associate contracts

It seems like everybody believes that the at-will doctrine supports their chosen position. Employers think they can fire an associate at any time, with impunity, regardless of their contractual promise to provide 60 days' notice. Associates think that if they're fired for no reason, their noncompete is null and void because they're free to take employment at will.

Long story short, employment under a written contract often limits the applicability or impact of the at-will doctrine. With that in mind, let's have a look at employee handbooks.

Are employee manuals and handbooks legally binding?

Initially, we need to ascertain exactly why a veterinary practice would spend the time and money to develop an employee handbook in the first place. Some believe it's simply a nice thing to do; they feel that a handbook fosters a sense of fairness and egalitarian treatment toward workers and therefore improves morale.

Clinic owners also say these handbooks keep them from having to answer the same questions over and over again, like “Where can I smoke?” and “Do I get a discount on pet food?” If it's all written down, it's less of a pain for management.

But there's an important question to consider before drafting or distributing an employee handbook: By issuing this document, have you created a legally binding contract that cuts into your theoretical at-will rights? Under some circumstances, and in some jurisdictions, the answer may be “yes.” Here's how this can happen:

Employees say, ‘It looks like a duck … '

Is it crazy to think that an employee may see an employee handbook as a contract containing promises the veterinary hospital is legally obligated to honor? First, it probably was written or reviewed by an attorney. Second, it probably incorporates important legal rights of the employee, spelling out the harassment policy, the smoking policy and so on. That sure sounds like it could be a legally binding stack of papers.

Also, the boss requires employees to sign a document saying, at minimum, that they acknowledge having received the handbook, and possibly that they agree to abide by its terms. Later, in court, is it such a reach for a judge to say the employee reasonably believed the handbook to constitute a contract? It looks, smells and quacks like a contract, so any employee “obligations” stated therein may be, in fact, obligations.

Preserving the employer's at-will rights

Don't misunderstand. I'm a firm believer in employee handbooks, but they have to be smart, they have to be kept current and their limitations must be clearly understood.

There is one critical item that needs to be included in the handbook: the statement that it's not a contract. If this language is included, it may help rebut an employee's eventual assertion that the manual is a contract with the employer or close enough that the employer is obligated to follow its terms.

Case law throughout the United States tells us not only that it's vital to state that these handbooks are not contracts, but the wording must be “conspicuous” and “explicit.” So if you bury the contract disclaimer halfway down page 32 and don't use distinctive print, the disclaimer may well be ineffectual. You want the wording in bold print, in a large font and placed at a location where the employee is likely to actually see it, like on the cover or near the spot where they must sign indicating receipt of the handbook.

The risks of ‘progressive discipline'

One common area where employers assume unanticipated risk in formulating an employee handbook is in the provisions providing for “progressive discipline.” This is where, for example, the veterinary clinic manual states that on the first occurrence of an episode of bad behavior, the punishment will be a verbal warning. Second time, a written warning. Third time, dismissal from employment.

This sounds innocuous enough, but look at it from a litigator's perspective. By establishing a protocol for progressive discipline, there is a conceivable interpretation that the employee is entitled to the position currently held, and that only if an employer finds cause to discharge an employee may a firing take place. If you are a practice owner, you do not want this. It implies a sense of entitlement, and not only does this create legal risks, it may also influence some employees' conduct negatively-they may feel that their best efforts are really not required in order to have job security.

If a veterinary hospital elects to memorialize such a progressive discipline policy, the language should be carefully drafted, and it should definitely be accompanied by a contract disclaimer.

Fix your book before the lawsuit

Employment attorneys will tell you that, by far, the most common time for them to be contacted to review and revise an employment handbook is immediately after a company has been drawn into litigation. Best practice with respect to these documents is to be judicious about the topics covered as well as the specificity with which they're addressed. Before you distribute one of these handbooks, do your best to brainstorm how it could come back to bite you later on. If you have doubts, get professional advice. The law has become much more complicated since the invention of employment-at-will doctrine.

Dr. Christopher J. Allen is president of the Associates in Veterinary Law PC, which provides legal and consulting services exclusively to veterinarians. He can be reached via email at info@veterinarylaw.com.