Business Articles - Employees

Implied Contracts within an Employee Handbook or Policy Manual

Whether you run a large home service business or a small company with just few employees, it is important to understand the issues you may face with employee contracts and how to protect yourself from future problems. One issue employers need to note is the implied contract. These are oral agreement or practices that can be held against you in a court of law. Many employers may not realize when they establish implied contracts with employees. These are just some of the things that can create this type of contract:

* The custom or practice of firing someone only when there is a just cause or reason.
* Statements on the application or during hiring that talk about permanent employment.
* Statements that describe special treatment for those who have longevity or seniority.
* Work practices that give regular raises and promotions without proper documentation.
* Disciplinary actions that say you will be discharged only for specific offenses.
* If the manual is written so everything is so definite that there are no exceptions or options.

One of the best ways to avoid implied contracts is to write an employee manual. An employee manual defines the company's rules and procedures and is shared with all employees on their date of hire and when any changes/updates are made. Whether you write an extensive manual or have a few bullet points (in writing) that your employees agree to, you need to be cautious about what you put in writing. A few things to note in the employee manual to help offset problems include:

* The employee manual should make it clear every employee is working "at-will".
* The employee manual should state that this document is not a contract.
* Only the President of the company can make authorized changes.
* Everyone needs to be trained on the document.
* Everyone should sign off that they understand what has been said.

For more information on how to develop an employee manual for your company, view a sample manual from Your HR Solutions.

A statement such as this should also be included in every handbook:

The employee handbook describes important information about ABC Company. I understand that I should consult the President if I have any questions that are not answered in the handbook.

I became an employee at ABC Company voluntarily. I understand and acknowledge that there is no specified length to my employment at ABC Company and that my employment is at will. I understand and acknowledge that "at will" means that I may terminate my employment at any time, with or without cause or advance notice. I also understand and acknowledge that "at will" means that ABC Company may terminate my employment at any time, with or without cause or advance notice, as long as they do not violate federal or state laws.

I understand and acknowledge that there may be changes to the information, policies, and benefits in the handbook. The only exception is that ABC Company will not change or cancel its employment-at-will policy. I understand that ABC Company may add new policies to the handbook as well as replace, change, or cancel existing policies. I understand that I will be told about any handbook changes and I understand that only the President of ABC Company can authorize any handbook changes.

I understand and acknowledge that this handbook is not a contract of employment or a legal document. I have received the handbook and I understand that it is my responsibility to read and follow the policies contained in this handbook and any changes made to it.

While an employee manual helps define the rules, don't assume your people are not paying attention to everything you say (implied contracts) or you may regret it later. In your efforts to be kind and generous, you can get hurt in very costly ways.

By Douglas S. Duncan, Your HR Solutions, Inc.
Douglas Duncan owner of Your HR Solutions, Inc. specializes in human resources and business planning services to small and mid-sized companies. is a web site designed to Select the right people, Orient them to the position, Assimilate them into a team, and Retain the best. If you are looking for help with your employee manual or other human resource issues, he can be reached at .
Your HR Solutions, Inc. 2005

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