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Employers often use handbooks and manuals to inform employees of their employment policies and to enforce their at-will policies. Although no express employment contract exists, courts have held that handbooks and manuals can be implied contracts if the language creates an impression that employees can only be dismissed for cause. The employee must be aware of the handbook provisions at the time of the discharge to rely on them in a lawsuit. Consequently, when a nonprofit changes its policies and distributes a new employee handbook it’s important to ensure that every employee receives the new version of the policy manual. Even employees who are out of work on leave should receive a new manual, by mail using a method that provides proof of delivery.
Some courts have found that a handbook or manual may create not only a right not to be discharged except for cause, but also an obligation on the part of the employer to follow certain procedures ë even where an employee is discharged for cause. For example, when an employer includes a detailed description of progressive discipline procedures, the handbook may create an impression that the employer will follow every step in the procedures before terminating an employee. If the employee is summarily discharged without all steps being taken, even if the employee’s conduct warranted dismissal ë courts have found that the employer breached an implied contract to follow all disciplinary steps described in the manual prior to discharging an employee.
The primary way to minimize the likelihood that a court or arbitrator will find that handbook provisions amount to an implied contract is to include an unambiguous prominent disclaimer, on the first page of the handbook, stating that the handbook or other documents don’t create contractual rights, and that the employment relationship is at-will. Any procedures that describe disciplinary steps should always be clearly described as guidelines, to be used at the nonprofit’s discretion. The disclaimer should also address the fact that the nonprofit has the right to make changes to its personnel policies and that the new policy manual supersedes any prior manuals.
Example of an at-will disclaimer:
DISCLAIMER - IMPORTANT NOTICE ABOUT YOUR EMPLOYMENT
Employment with Nonprofit is at-will, which means that either you or Nonprofit may terminate employment at any time, for any reason, with or without notice. The policies and practices described in this employee manual are provided to you for guidance only, but don’t constitute a contract of employment. Neither this handbook nor any other documents circulated to employees, nor any verbal representations constitute contracts. No supervisor or employee except the executive director has the authority to enter into an employment agreement, express or implied, with any employee concerning the employment relationship. These policies supersede any previous policies that may have been distributed previously. Your signature on the acknowledgement is a certification that you have received a copy of these policies as updated. These policies are subject to change at any time at the discretion of Nonprofit.
The following are examples of employee handbook mistakes that may give an employee sound footing to claim wrongful discharge based on a breach of an implied contract:
As a precautionary measure, any supervisory employee involved in hiring should be trained not to make promises about future job tenure. Courts in 34 states have held that an employer’s oral statements can create an enforceable contract for employment. For example, statements to a prospective employee that he will have a job (i) ‘as long as your performance is adequate’ or (ii) ‘as long as you do the job’ were found to create a standard that employees could only be terminated (i) if their performance was inadequate, or (ii) if they failed to complete their job duties.
Having written workplace policies and procedures that are legally up to date and easy to follow is as important as having adequate insurance. Policies that are clearly communicated to staff and consistently applied serve to safeguard against improvised solutions that can result in a lawsuit. Written policies are the starting point for ensuring that personnel dilemmas are resolved consistently and fairly. Moreover, several federal laws and many state laws require that workplaces distribute or post certain written policies. Up-to-date, legally sound personnel policies are so significant that many insurance companies, funders and potential board members look to a nonprofit’s personnel policies as a bellwether of security ë or risk. Many accreditation standards require that personnel policies be reviewed regularly. To ensure that the nonprofit’s policies are current, schedule a policy review on a regular basis.
Revising or drafting policies is generally authorized by the chief staff executive or board of directors that designates a staff person or special task force to lead the project. Some nonprofits have standing personnel or human resource committees charged with responsibility for the project. Compare current practices to the written policies. Are we doing what we say we’ll do? is a basic but important question to explore. Ultimately, after changes are made and the draft has been reviewed by legal counsel, the board of directors should formally approve the revised policies and charge the chief staff executive with making employees aware of policy changes and distributing the policies to all employees.
“First let me congratulate you on a conference well done. I had a great time at the Nonprofit Employee Benefits Conference and walked away with some valuable tools and questions that we’ll need to be addressing in both the short and long term. Thanks to you and your staff for all you do to provide us with quality resources in support of our missions.”
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Great American Insurance Group’s Specialty Human Services is committed to protecting those who improve your communities. The Center team has committed to delivering dynamic risk management solutions tailored to nonprofit organizations. These organizations have many and varied risk issues, hence the need for specialized coverage and expert knowledge for their protection. We’ve had Melanie speak on several occasions to employees and our agents. She is always on point and delivers such great value. Thank you for the terrific partnership and allowing our nonprofits to focus on their mission!