Is your employee handbook an implied contract?

When you hire a new employee who has exceptional qualifications, you may be excited to welcome him or her into your company. On those first days of orientation and settling in, you are likely to have many conversations with your new hire, and you may intend those conversations to be words of encouragement for his or her potential success in the company.

However, business advisors recommend using caution about what you say. What you may intend to be words of encouragement may sound like promises to your new employee. You may be shocked to learn that your careless comments may be an implied contract under the law.

Did you really say that?

After hearing you praise his or her experience and qualifications as factors that could result in frequent raises and promotions at the end of a probationary period, a new employee may believe you have made a verbal contract. That employee may feel you breached that contract if you don’t offer a raise or promotion when probation is over.

This is only one misunderstanding an employee may have based on things they hear or see. For instance, if you have a history of firing people for certain violations but overlooking other offenses, your employees may accept this as an implied contract.

Your handbook

One easy way to avoid misunderstandings about implied contracts is by outlining your company’s policies in an employee handbook and making a copy available to each new hire. Your handbook can be a simple document or go into detail about many contingencies you have dealt with in your experience. Some important statements to include in your handbook follow:

• The process for changing existing policies and notifying employees of those changes
• Clarification that the handbook is not a contract
• Acknowledgement that employment in New Jersey is at-will — meaning you or your employee can separate at any time without cause — and that your company will not alter that policy
• Notice of the employee’s responsibility to read and abide by the policies in the handbook
• Agreement from the employee to contact you with any questions or confusion concerning handbook policies

To further impress upon your employees the importance of the policies in the handbook, each employee should receive training about its contents, including time to ask for clarification on any crucial issues, such as the at-will policy. At the end of training, having the employee sign a paper attesting to his or her attendance at this training will provide evidence that you explained your policies should you ever face litigation for a contract dispute.