This time of year, everyone has a “to-do” list that is too long. Employers are no exception. In addition to replacing outdated workplace posters and pamphlets, implementing the new I-9 form, and ensuring employees receive notice of their right to claim the Earned Income Tax Credit, employers should tune up their handbooks for the new year.

Of course, a properly drafted employee handbook is an important management tool. Employers use handbooks to inform employees about the company and its policies, communicate expectations, summarize employee benefits, and provide information regarding procedures and rules. Handbooks also help managers and supervisors make decisions that are consistent with applicable legal requirements and the employer’s policies and procedures.

Because of California’s frequently changing employment laws, employers should update their handbooks at least annually. The revised handbook should include new laws and legal developments. It also is important to conform the handbook to the employer’s practices. For 2008, California employers should consider including and/or revising several key employee handbook policies.

Military Leave for Spouses of Service Members

Beginning in October 2007, employees who work at least 20 hours per week and who are spouses of military service members must be provided up to 10 days of unpaid leave when the spouse is on leave from active duty in the U.S. Armed Forces, Reserves or National Guard.

Only employers with 25 or more employees must comply with this new law. Employees must give at least two days’ notice of their need for leave and provide appropriate written documentation. Though the law does not expressly say so, the term “spouse” includes a registered domestic partner under California Family Code section 297.5, which provides that registered domestic partners must be granted the same rights as those granted to spouses.

Employers should include this new leave in their handbooks. The policy should state that employees may use accrued vacation or PTO (paid time off) for this purpose and employees who do not have accrued time off available will be granted unpaid leave.

Family and Medical Leave

Employers who are subject to the federal Family and Medical Leave Act and the California Family Rights Act may need to revise their leave policies to comply with a recent decision of the Seventh Circuit Court of Appeals (Repa v. Roadway Express). In that case, the Court decided that an FMLA regulation precludes employers from requiring employees on FMLA to use paid sick leave or vacation time if the employee is receiving some other form of “paid leave.” “Paid leave,” according to the Court, may include such things as workers’ compensation benefits, SDI benefits, payments from internal salary continuation programs and the like.

Based on the Repa decision, employers who currently require employees to use accrued sick or vacation time while on FMLA/CFRA should revise their policies and make use of accrued time voluntary and not required. Practically speaking, of course, most employees will want to use accrued time to maximize the income they receive during the leave. That said, a policy that requires such use will run afoul of the FMLA regulations.

Use of Hands Free Devices While Driving

Effective July 1, 2008, nearly anyone in California who talks on a cell phone while driving must use a “hands free” device. There are exceptions for certain drivers and emergency situations. Employers should take steps to comply with this law by implementing a policy that requires applicable employees to use “hands free” devices while driving on company business.

In addition, employers who provide cell phones for business use should also provide hands free devices unless an exception applies. Employees involved in auto accidents on the job who were not wearing compliant equipment could increase potential liability. In addition, to the extent cell phone use while on the job is a part of the job, Labor Code section 2802 may require reimbursement for the expense of the hands-free device.

Harassment Prevention

All employers should have harassment prevention policies. These policies should set a high standard of respect and professionalism. They should also include a complaint procedure for employees to report conduct they believe is inappropriate in the workplace. Of course, only conduct that is related to a “protected characteristic,” such as sex, race, religion, etc. should be covered in the policy. Harassment prevention policies, after all, are not a guarantee of a perfect workplace.

This year, the California Court of Appeal issued a key decision in this area. In Myers v. Trendwest Resort, the court ruled that to avoid strict liability under the FEHA for the actions of a supervisor, “the harassment must result from a completely private relationship unconnected with the employment.” Whether the conduct occurred at the actual work site or even while duties are being performed may be irrelevant.

Employers should address this principle in their harassment prevention policies by clearly stating that even conduct outside the workplace may violate the policy, particularly if a supervisor or manager engages in such conduct. In addition, during AB 1825 and other EEO training sessions, employers should emphasize that supervisors and managers never take off their “work” hat if they are in the presence of other employees from the organization, regardless of location, type of event, etc.

Confidentiality and Electronic Communication Policies

The National Labor Relations Board issued several decisions in 2007 that may affect employee handbooks, even for non-union employers, particularly with respect to confidentiality and electronic communication policies.

It is well-established that confidentiality provisions that do not exclude “protected activity” may violate the National Labor Relations Act if “employees would reasonably construe language to prohibit protected activity.” Protected activity under Section 7 of the NLRA includes the ability to speak about wages, hours, and other terms and conditions of employment.

In one decision this year, the NLRB ruled that the following policy was illegal under Section 7: “We recognize and protect the confidentiality of any information concerning the company, its business plans, its partners, new business efforts, customers, accounting, and financial matters.” Similarly, the NLRB rejected handbook policies subjecting employees to discipline “for disclosing confidential information or any other similar act constituting disregard for the company’s best interest.”

In light of these rulings, employers must carefully draft confidentiality policies. Such policies should protect information the company has a right to protect under the law, such as customer lists and preferences, particular processes or ingredients use to create the company’s product, and similar matters. However, employers should ensure these policies are not so general that they include categories of information, such as “all information about the company” or “anything related to employee compensation.”

Employers also should review their electronic communication policies to ensure they allow for the appropriate exercise of Section 7 rights. For example, the NLRB recently ruled that a policy prohibiting personal use of email violated Section 7 because the company allowed employees to use the email for some personal communications, but not for union-related communications. Such policies should state that say instead that the employer’s email and voicemail systems should be used “primarily” for business use. Then, employers must consistently enforce the policy and not “favor” certain types of communications over others.

Arbitration Provisions

Arbitration policies may be included in employee handbooks. However, it is advisable to have a separate arbitration agreement. That is because handbooks contain contractual disclaimers. In addition, without a specific sign-off, employees may argue (with varying degrees of success) that there was no “agreement to arbitrate.” Class action waivers in arbitration agreements usually will be illegal after a California Supreme Court decision this year.

Additionally, employers cannot necessarily use an “opt-out” provision to ensure the arbitration agreement is not later determined to be “unconscionable.” The California Supreme Court held this year that an employer’s “opt-out” was not a shield against attacks on whether the arbitration agreement provides sufficient protections of statutory rights.

“Must Haves” for all Employee Handbooks

Some of the most important policies to include in any handbook include the following:

At-Will Employment. An employer seeking to maintain “at will” employment relationships should include in the handbook a statement that employees are “at will” and the employment relationship may be terminated by the employer or the employee at any time, for any reason, with or without cause or notice. The “at-will” policy should be made applicable not only to termination, but also to other employment decisions as well.

Hours of Work. Employers should include lawful policies regarding wage and hour matters. These include definitions of the work week and work day, schedules, rest breaks/meal periods, and overtime pay. In addition, employers should explain what deductions may be taken from employees’ pay (the rules are different for exempt and non-exempt employees.)

Work Standards and Expectations. Employers should list general work standards and expectations, and reserve the discretion to take whatever action it deems appropriate for policy violations, up to and including termination.

Benefits. Employers should generally describe the benefits available to employees, including holiday, sick leave, vacations, insurance coverage, and other benefits. It is important to carefully explain the eligibility requirements for each benefit, such as length of service or hours worked. In the case of benefits governed by ERISA, it is important to refer employees to summary plan descriptions and to provide that any conflicting information in the handbook is superseded by the applicable SPD.

Equal Employment Opportunity. Employers should clearly set forth their commitment to equal employment opportunity, including a no-retaliation provision. This policy should include a list of all currently-protected characteristics and a reporting procedure for perceived violations of the policy. To the extent possible, all protected criteria should be listed separately rather than covered by a “catch-all” phrase. The reporting procedure should include a list of several individuals within the organization to whom employees may make complaints, including the employee’s direct supervisor and the human resources or personnel department.

No-Harassment. As discussed above, a separate no-harassment policy that covers all protected characteristics should be included. Rather than focusing on violations of the law, the policy should be drafted to provide guidance about the organization’s expectations for appropriate workplace behavior. An employer interested in preventing harassment in the workplace must adopt a policy that is stricter than the law—that way, violations of the policy do not necessarily constitute violations of the law.

The no-harassment policy also should include a detailed reporting and investigation procedure, as well as a no-retaliation provision. The reporting procedure should be consistent with the reporting procedure set forth in the organization’s equal employment opportunity policy.

Time Off. Under California law, employees may be entitled to time off for various purposes, including FMLA/CFRA, pregnancy disability, to attend jury duty or witness duty, to participate in military activities, to perform volunteer firefighter services, to attend school activities, to participate in a rehabilitation or adult literacy program, to assist victims of domestic violence or sexual assault, and to attend certain court proceedings. The applicability of these laws will depend on the number of employees in the workplace.

Acknowledgement. Handbooks should include an acknowledgement for employees to sign and return to record their receipt and understanding of the handbook. The acknowledgement should reiterate the employee’s at-will relationship with the organization (if applicable) and should be maintained in the employee’s personnel file. Acknowledgments also should expressly state how modifications to important policies (such as “at will” employment) may be made, and that the policies are not subject to modification by implication, practice or managers’ verbal statements.

Other Policies to Consider

When preparing a handbook, employers also may want to consider including policies on the following subjects: (1) reasonable accommodations and the interactive process; (2) workplace violence prevention; (3) paid family leave; (4) employee classifications (e.g., full-time, part-time, temporary, etc.) and the benefits to which employees in each classification are entitled; (5) how performance evaluations and salary reviews will be conducted; (6) dress and grooming standards; (7) the use of employer property and confidential and proprietary information; (8) conflicts of interest; and (9) general safety procedures.

Employers who regularly review their handbooks to ensure consistency with the law and internal practices provide themselves significant protection against employment-related claims down the road.

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