The Employee Handbook: Do You Really Need One?

The nation’s dealerships have been besieged with employment discrimination lawsuits. At the heart of most is the lack of properly developed employee policies. Yet some attorneys have told their dealership clients not to have written policies, that they can be used against a dealer in a lawsuit.

Written policies, like other documents, can be used against a dealership if it doesn’t follow its policy. A poorly drafted policy can become primary evidence in a discrimination case. But carefully written policies protect against such claims. Today’s litigious environment has proven the value of a properly written policy, generally in the form of an employee handbook, and illustrated the risks to the dealership without one.

Generally a written policy is not a legal requirement, though some policy documents are mandatory or at least an important component in complying with certain state and federal labor statutes. For example, the Supreme Court has ruled that employers can protect themselves from sexual harassment claims with clearly communicated policies against harassment. And employers must provide written documentation to employees on their rights and employers’ obligations relative the Family Medical Leave Act.

Properly developed policy
A formal handbook that contains well thought-out and developed sensible policies and procedures provides a framework for how your company and employees are to act. A properly crafted employee handbook gives both managers and employees a guide to what’s expected of them and can prevent misunderstandings about those expectations. They also illustrate management’s commitment to a positive atmosphere in the workplace and its effort to avoid discriminatory practices. And managers are more likely to apply company policies consistently when they are properly recorded.

A properly drafted policy also takes care to avoid creating a binding contract. A dealership can inadvertently create a contract with language that creates rigid rules that must be followed precisely under all circumstances. It is better to build flexibility into the wording. In particular, avoid language that appears to be a promise, words like “only” or “must.” Instead use terms like “generally,” “typically” and “usually,” and “may,” “could” and “might.” They give managers the flexibility to interpret and apply a policy appropriately, that is, to fit the situation.

Your handbook should include a statement whereby management retains the right to unilaterally change or modify the document and its policies. Most important, the policy or handbook should contain “at will” language, which allows an employee to quit at any time and for any reason and likewise permits the employer to terminate an employee at any time and for any lawful reason.

A couple of final points:

  • When you have a drafted your policy, and before you give it to your employees, have it reviewed by your legal counsel to ensure it is not in conflict with any laws or regulations.
  • And finally, a well conceived handbook and effective policy must also be reviewed and updated regularly to remain relevant, not only to reflect changes in your workplace but to accommodate changing local, state and federal laws.

About the Author(s)
Rex is a Principal of HBK CPAs & Consultants and directs the firm’s Dealership Group. He has worked extensively in the dealership industry since 1984 as a department manager, a general manager and an owner, as well as providing tax, accounting and operational consulting services exclusively to dealers as an independent CPA. This experience includes working closely with hundreds of dealers from coast-to-coast since 1987 on creative tax planning and financial statements issues. He provides clients with a wide range of transaction work services, and consults for them in specialty areas such as operations, government regulatory compliance, valuations and M&A feasibility studies. Rex is active in many professional associations. He is the current Chairman of the BDO Dealership Industry Group, contributes articles and commentary to dealership industry publications, is frequently called upon to speak to industry associations and conferences, provides expert testimony, and is regularly quoted by industry and the general media.
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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