REGULATING THE WORKPLACE: THE IMPORTANCE OF EMPLOYEE MANUALS By: LIONEL M. SCHOOLER JACKSON WALKER L.L.P. HOUSTON EMPLOYMENT LAW SYMPOSIUM NOVEMBER 4, 2004

Introduction: Why Are Employment Manuals So Important? The First Question the Government (EEOC, DOL, TWC, etc.) Asks During an Investigation “May I see your employment manual please?” Used as a check to ensure that the company enforces applicable law

Texas Law on Employment Manuals The first rule of using Employment Manuals DO NO HARM ! What is the “harm”?

Texas Law on Employment Manuals The harm is in using an employment manual in such a way as to change the nature of the relationship between employer and employee What is the nature of the relationship generally between employer and employee?

Texas Law on Employment Manuals— At Will Doctrine The so-called “At-Will” Doctrine

Texas Law on Employment Manuals— At Will Doctrine (cont’d) The At-Will Doctrine is the focal point of Employment Manuals when there is no written agreement of employment What is the “At-Will” Doctrine?

Texas Law on Employment Manuals— At Will Doctrine (cont’d) “The long-standing rule in Texas provides for employment at will, which is terminable at any time by either party, with or without cause, absent an express agreement to the contrary.” “The general rule is that employment for an indefinite term may be terminated at will and without cause by either party.”

Texas Law on Employment Manuals— At Will Doctrine (cont’d) Most case law about employment manuals focuses upon what an employer can regulate in the workplace, and whether anything in such manuals changes the status of an “at-will” employee What impact does an employment manual have on this “at will” relationship? BE CAREFUL: The answer is not as obvious as you would think!

Texas Law on Employment Manuals The current law on Employment Manuals in Texas is derived from four recent Texas Supreme Court cases Hathaway v. General Mills Federal Express v. Dutschmann Montgomery County Hosp. District v. Brown In Re Halliburton (Brown & Root)

Texas Law on Employment Manuals Hathaway v. Mills (1986) “In employment at will situations, either party may impose modifications to the employment terms as a condition of continued employment.” “Generally, when the employer notifies an employee of changes in employment terms, the employee must accept the new terms or quit. If the employee continues working with knowledge of the changes, he has accepted the changes as a matter of law.”

Texas Law on Employment Manuals Federal Express v. Dutschmann (1993) “A disclaimer in an employee handbook negates any implication that a personnel procedures manual places a restriction on the employment at will relationship.”

Texas Law on Employment Manuals What is a “disclaimer”? “This handbook is not a contract, expressed or implied, guaranteeing employment for any specific duration. The policies and other information contained in this handbook are subject to change at any time due to business needs. The guidelines of this handbook do not constitute a contract of employment, nor any other binding agreement.”

Texas Law on Employment Manuals What is a “disclaimer”? (cont’d) “The policies stated in this handbook are subject to change at the sole discretion of the Company. From time to time, you may receive updated information concerning changes in policy.” “The handbook does not create property interests in stated benefits and policies unless some specific agreement, statute, or rule creates such an interest.”

Texas Law on Employment Manuals Montgomery County Hosp. District v. Brown (1998) “The principal issue before us is whether at-will employment can be modified by nothing more than an employer's oral assurances that an employee whose work is satisfactory will not be terminated without good cause.”

Texas Law on Employment Manuals Montgomery County Hosp. District v. Brown (cont’d) General statements like “you will have a job as long as you keep doing your job well and will not be fired unless there is a good reason or good cause to fire you” simply do not justify the conclusion that the speaker intends by them to make a binding contract of employment. For such a contract to exist, employer must unequivocally indicate definite intent to be bound not to terminate the employee except under clearly specified circumstances. General comments that an employee will not be discharged as long as his work is satisfactory do not in themselves manifest such an intent. Neither do statements that an employee will be discharged only for "good reason" or "good cause" when there is no agreement on what those terms encompass. Employee who has no formal agreement with employer cannot construct one out of indefinite comments, encouragements, or assurances.”

Texas Law on Employment Manuals Montgomery County Hosp. District v. Brown (cont’d) “We hold that an employer's oral statements do not modify an employee's at-will status absent a definite, stated intention to the contrary.” What does that last clause mean?

Texas Law on Employment Manuals In Re Halliburton (Brown & Root) (decided in 2002) In Hathaway we outlined the manner in which an employer may change the terms of an at-will employment contract. We held that the party asserting a change to an at-will employment contract must prove two things: (1) notice of the change, and (2) acceptance of the change.

Texas Law on Employment Manuals In Re Halliburton (cont’d) We stated that “to prove notice, an employer asserting a modification must prove that he unequivocally notified the employee of definite changes in employment terms.” Yet we made clear that when an employer notifies an employee of changes to the at-will employment contract and the employee “continues working with knowledge of the changes, he has accepted the changes as a matter of law.”

Texas Law on Employment Manuals In Re Halliburton (cont’d) In Hathaway, we recognized that an employer may make precisely such a “take it or leave it” offer to its at-will employees. Because an employer has a general right under Texas law to discharge an at-will employee, it cannot be unconscionable, without more, merely to premise continued employment on acceptance of new or additional employment terms.

Texas Law on Employment Manuals The Power of Employment Manuals An employer can unilaterally change policies and eliminate benefits -- such as entitlement to specific amounts of sick leave or reimbursement for unused sick leave (Gamble; Werden)

Texas Law on Employment Manuals Exceptions to Texas At Will Doctrine Statutory Common Law

Texas Law on Employment Manuals Exceptions to Texas At Will Doctrine--Statutory (cont’d) Texas Labor Code § discharge based on race, color, disability, religion, sex, national origin, or age Texas Labor Code § discharge in retaliation for filing a workers’ compensation claim Texas Agriculture Code § (b) -- discharge for exercising rights under the Agricultural Hazard Communication Act Texas Civil Prac. & Remedies Code § discharge for jury service

Texas Law on Employment Manuals Exceptions to Texas At Will Doctrine--Statutory (cont’d) Texas Government Code § discharge for military service Texas Election Code § – refusing permission to vote and/or retaliating against voter Texas Election Code § discharge for attending political convention Texas Election Code § – coercion of employees for political fundraising Texas Civil Statute art § 3 -- discharge for refusing to participate in an abortion

Texas Law on Employment Manuals Exceptions to Texas At Will Doctrine--Statutory (cont’d) Texas Family Code § 14.43(m) -- prohibiting discharge due to withholding order for child support Texas Labor Code § employer subject to fine for coercing employee to buy certain merchandise

Texas Law on Employment Manuals Exceptions to Texas At Will Doctrine--Statutory (cont’d) Texas Health & Safety Code § Nursing home employee cannot be fired for reporting abuse or neglect of a resident of the institution, and no retaliation for reporting violation of Hazard Communication Act. Texas Labor Code § – No retaliation against an employee for reporting violations of the Texas Commission on Human Rights Act

Texas Law on Employment Manuals Exceptions to At Will Doctrine—Common Law Narrow exception to employment-at-will doctrine for employee who is discharged for sole reason that the employee refused to perform an illegal act. (Sabine Pilot v. Hauck [1985])

Texas Law on Employment Manuals Is the At Will Relationship ever modified because of an employment manual? Can the employer say or do something that would have the effect of creating an enforceable promise to the employee, even without a formal written employment agreement?

Texas Law on Employment Manuals Is the At Will Relationship ever modified because of an employment manual? (cont’d) You had to ask; You just had to ask

Texas Law on Employment Manuals Is the At Will Relationship ever modified because of an employment manual? (cont’d) YES

Texas Law on Employment Manuals Is the At Will Relationship ever modified because of an employment manual? (cont’d) Here are some examples: Vida v. El Paso Employees Credit Union Matagorda Cty. Hosp. District v. Burwell Miksch v. Exxon Corp. Miller v. Riata Cadillac Handy Andy v. Rademacher

What Can/Should You Include In An Employment Manual? Protection for the Company Alternative Dispute Resolution of Employment Disputes Identification of Company Policies An Employee Manual is a “Living” Document

Protecting the Company Trade Secrets, Confidential Information Conflicts of Interest Drug Testing Workplace Violence, Concealed Weapons and Consent To Search

Identifying the Policies of the Company General Policies Nature of Employment Hiring Policies Employment Applications Hiring of Relatives; Employee Fraternization (say what?)

Identifying the Policies of the Company General Policies (cont’d) Immigration Law Compliance Outside Employment Personal information Reference Checks

Identifying the Policies of the Company Rules in the Workplace Attendance Dress Code Safety and Accident Rules Life Threatening Illnesses Anti-Substance Abuse

Identifying the Policies of the Company Rules in the Workplace (cont’d) Sexual and Other Unlawful Harassment Smoking Employee Conduct and Work Rules

Identifying the Policies of the Company Use of Mail and Phone Systems Use of Computers and the Internet/ “What do you mean I don’t have a right of privacy in the workplace?”

Identifying the Policies of the Company Rules About the Employment Relationship Performance Reviews Employment Categories Employment Termination Resignation Return of Company Property

Identifying the Policies of the Company Compensation and Benefits Payroll Work Hours and Reporting “What do you mean you worked overtime to finish the job?” Holidays Vacation

Identifying the Policies of the Company Compensation and Benefits (cont’d) Group Insurance Benefits Worker’s Compensation Retirement Plans

Identifying the Policies of the Company Leave Policies Sick Leave Medical Leave Maternity Leave

Identifying the Policies of the Company Leave Policies (cont’d) Funeral Leave Jury Duty Military Leave

WHY ARE EMPLOYMENT MANUALS SO IMPORTANT?