Is It Illegal To Not Have An Employee Handbook?

Not illegal, but not a good idea

Although there are many laws requiring employers to notify employees of certain workplace rights, there are actually no federal or state laws specifically requiring an employer to have an employee handbook.  This could encourage employers to choose not to have one.

To add to the confusion, many companies are told that having no handbook is better than having one that requires updates every time employment laws change.

In reality, this couldn’t be further from the truth! A company handbook is often the only documented evidence of how you plan to comply with state and federal laws and to treat all of your employees in a consistent manner. It delineates the rules that apply to everyone, and shows your commitment to providing employees a consistent environment to perform their duties.

In opposition, by having no handbook, you don’t have any of the numerous safe harbor policies available to you as an employer, such as burden shifters or alternative dispute resolution requirements.  Most employment laws are written for the benefit of the employee, not the employer. Subsequently, an employee simply needs to walk through your door to enjoy all the protections available to him or her.   Employers can only claim “rights” by putting them in writing.

Ultimately, it is the employer that must determine if they want to be in a position to Prevent, rather than wait and have to React.  The employee handbook, then viewed as a tool, can help you prevent, address, and solve most common issues prior to escalation.

So if we build on the premise that if your business employs just a few workers, it’s in your best interest to establish clear workplace guidelines.  Documenting company rules will help set expectations and reduce misunderstandings. Additionally, written personnel policies can protect your business in the event of an employee dispute.

If we can agree for now that there is some importance in having an Employee Handbook in a company, then let us look at it more simply and bring this item down to a can-do task.  The purpose of a clear concise employee handbook in a business cannot be underestimated, but it’s also wise not to go “overboard”.

There are some very basic items that should be contained in the Employee Handbook, and these are the essential employee policies for any small/medium business:

 1. EEO/Harassment: This crucial policy clearly states that discrimination and harassment are unacceptable in your workplace. Depending on the size and location of your business, it may be illegal to discriminate or harass workers based on gender, race, age, sexual orientation, sexual identity or even political affiliation. Determine local, state, and federal laws, and make sure they’re covered in your policy. Include language on reporting a concern, and provide the names of individuals within the company who can be contacted to handle complaints properly and confidentially.   Anti-retaliation statements should be included, but must be compliant.

2. Code of Conduct:  Conduct policy can set expectations on everything from dress code and customer interaction to personal use of company equipment and social media.  Your conduct policy could also add a phrase for inclusion any other management rules.

3. Employment/Termination: If no contract exists, a worker’s status is likely at-will. The employment can be terminated at any time, by either the employee or the employer, for legal reason. Having a written policy reinforces your right to discharge, and can help in a wrongful termination case.

4. Payroll: All businesses must have a formal payroll policy. It should include definitions of exempt and non-exempt employee classifications, as well as details on your pay period, payday, overtime-authorization rules and any meal/rest break guidelines for hourly employees. You should also explain how payroll deductions are handled for time off.  This can help mitigate actions during accusations or litigations of incorrect pay.

5. Vacation/Time Off/PTO: A documented Vacation/Time-Off policy will cover expected work hours, attendance expectations, and paid leaves (holiday, sickness, etc.) and similar claims.

Documented Evidence:  Just because you’ve taken the initiative and position to document and put the Employee Handbook together, don’t misunderstand that you’re still one step away.  Finally, ensure that both training and and receipt are acknowledged and documented. Having employees sign an acknowledgment stating they received the policies, read them and understand their content, are your best defense against ignorance. Also, keep a copy of the signed acknowledgment in the personnel file, or a date and time stamp on an electronic acknowledgment.

False Security: Unless the content of an employee handbook clearly indicates otherwise, an employee handbook can be considered a legally binding document between an employer and its employees. This means that an employee can sue an employer if the employer fails to honor any of the provisions within the employee handbook.  This should never dissuade a good company from creating this needed document, as the positive benefits outweigh the potential negatives.

Starting from Scratch: Starting with no written policies and going to a detailed employee handbook can be overwhelming. You may have many questions; what’s required in your area or business segment, or what’s most important, or what’s the best format, or (you fill in the blank).

We’ve been there, seen that...and we do not put ourselves in a position to judge.  Rather, as a helpful partner, we respectfully help study, support, and solve the root cause issues that allow your business to get back onto the success track.

Our network has a Subject Matter Expert [SME] for every business segment and each department, assure our Clients that they can be confident in any area of improvement or compliance.

If your company is in need of a SME for the areas discussed in this article, don’t hesitate to contact our team at Smart Business Doctor.  We have support personnel for every segment of business, and we specialize in the diagnosing, prescribing, and rehabilitation of challenged SMB’s.  We can also assist in the financing, with favorable rates and terms.

Kurt Zimmerman

Executive Vice President


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