sample policies

THE BOOK OF 

Company 

Policies 

B USINESS M ANAGEMENT D AILY

THE BOOK OF 

Company 

Policies 

B USINESS M ANAGEMENT D AILY

CONTRIBUTING WRITERS 

Jane Easter Bahls 

Jeff Fruit 

Sally Scanlon 

EDITOR 

Kathy A. Shipp 

EDITORIAL DIRECTOR 

Patrick DiDomenico 

ASSOCIATE PUBLISHER 

Adam Goldstein 

PUBLISHER 

Phillip A. Ash 

© 2010, 2001, Capitol Information Group, Inc., 7600A Leesburg Pike, West Building, Suite 300, Falls Church, VA 

22043-2004. Phone: (800) 543-2055; www.BusinessManagementDaily.com. All rights reserved. No part of this 

report may be reproduced in any form or by any means without written permission from the publisher. Printed 

in U.S.A. 

ISBN 1-880024-19-5 

“This publication is designed to provide accurate and authoritative information in regard to the subject matter 

covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or 

other professional service. If legal advice or other expert assistance is required, the services of a competent professional 

person should be sought.”—From a Declaration of Principles jointly adopted by a committee of the American 

Bar Association and a committee of publishers and associations.

Contents 

Introduction—Policies: Your Protection and Guide 1 

Put It in Writing 1 

What Makes a Good Policy 2 

How to Communicate Your Policies 3 

Keep Managers Informed 3 

Enforce Your Policies 4 

How to Use This Report 5 

Part I: Employee Manuals 7 

1. Policies Covered in Employee Manuals 7 

Tips on Disclaimers 7 

Choosing a Format 8 

Statement of Purpose 8 

Employment-at-Will Statement 9 

Possible Topics to Include 10 

Part II: Workday Rules and Procedures 13 

2. Hours of Work and Breaks 13 

What’s at Issue 13 

Policy Considerations 14 

Sample Policies 14 

3. Personal Use of Company Property 16 


Policy Considerations and Alternatives 17 


Car Phone Safety 19 

4. Computer Use 20 


Internet Usage Policy 22 

Software Piracy Policy 23 

Electronic Media Policy 23 

5. Dress Code 26 



6. Smoking 29 




7. ‘English-Only’ Policies 32 

EEOC Guidelines 32 


What’s Allowed, What’s Not 33 


Sample Policy 34 

Part III: Time-Off Policies 35 

8. Paid and Unpaid Leave 35 

Holidays 35 

The Holiday Pay Issue 36

Vacations 37 

Bad-Weather Time Off 38 

Bereavement 39 

Jury Duty 39 

Military Leave and Reserve Training 40 

Personal Days 41 

Voting 42 

Sick Days 42 

Disability Leave 44 

9. FMLA Leave 45 


Notice Requirements 47 


Sample Letter: Notifying Employee of FMLA Leave 49 

10. Workers’ Compensation 51 



Sample Return-to-Work Policy 52 

Job-Risk Ratings on Track 53 

Curbing Medical Costs 53 

Develop a Safety Policy 53 


Part IV: Employment Policies 55 

11. Hiring 55 


Job Descriptions 55 

Job Postings 56 

Employment of Relatives 57 

Job Application Forms 57 

Sample Equal Employment Opportunity Statement 59 

Interviewing Protocol 59 

What You Can—and Cannot—Ask 60 

Testing Applicants 60 

Reference/Background Checks 61 

Verifying Immigration Status 62 

Making the Offer 62 

12. Employment Contracts 64 


What to Include 65 

13. Personnel Records 66 

Retention Requirements 66 

Liability Protection 66 

Handle With Care 67 

Steps to Effective Records Management 68 

Protect Confidentiality 68 

An Expert’s View 69 


14. Performance Reviews 71 


Policy Considerations 72

Guidelines 72 


15. Terminations 74 

‘At-Will’ Revisited 74 

Progressive Discipline 75 

Policy Guidelines 75 

Model for Progressive Discipline 76 


16. Independent Contractors 78 



Preventive Steps 80 

Sample Contractor’s Agreement 80 

Part V: Employee Conduct 83 

17. A Code of Ethics 83 



‘Ethics Quick Test’ 84 


18. Conflicts of Interest 86 




19. Confidentiality and Nondisclosure 89 



Sample Nondisclosure Agreement 90 

Sample Confidentiality Policy 91 

20. Noncompete Agreements 92 

Enforcement Problems 92 


Sample Agreement 94 

21. Moonlighting 95 




22. Dispute Resolution 98 


Mandatory Arbitration 99 



Part VI: Workplace Issues 103 

23. Employee Privacy 103 



24. Sexual Harassment 105 


Who’s Covered 106



Other Discriminatory Harassment 109 

25. Substance Abuse/Drug Testing 110 



Who’s Protected by the ADA 111 

Drug Testing 112 

Cut Insurance Costs 113 


26. Politicking and Solicitations 117 


Where to Draw the Line 117 



27. Violence and Weapons 119 



Have a Game Plan 121 


Part VII: Work/Life Balance 125 

28. Work/Life Policies 125 




Work/Life Strategies 128 

29. Flexible Scheduling 129 




Part-Time Work 131 

30. Telecommuting 132 



Top Telecommuting Jobs 134 

31. Job Sharing 135 




32. Domestic-Partner Benefits 139 




33. Volunteerism Leave 144 



Sample Policies 146

Introduction 

Policies: Your Protection 

and Guide 

Policies are guidelines. Like routes on a map, they mark the way 

through a given terrain—in this case, through the rules, standards 

and benefits an organization sets for all its employees and 

managers. 

Employee policies save members of the organization time by offering ready answers 

to questions about acceptable procedures, standards and on-the-job behavior. They 

safeguard the company from ill will, regulatory hassles and lawsuits by helping ensure 

that personnel decisions are consistent and lawful. In the event that an employee or exemployee 

takes the organization to court—and data show employment litigation has 

increased by more than 2,000 percent in the last 25 years—company policies can also 

form the bulwark of an effective defense. 

Policies are simply management’s choices about how the company will operate and 

what it expects of its people. Are employees expected to live up to any particular ethical 

standard Is their performance formally appraised Do they get rest breaks, paid or 

unpaid holidays and vacation days, personal days, and time off for jury duty or religious 

observances Can they be fired at will or only for cause Are they allowed to 

telecommute, moonlight or work on flexible schedules Are job openings posted Are 

applicants tested for skills, honesty or drugs 

Put It in Writing 

Those are just a few of the myriad questions that arise as an organization builds its 

work force. Every company in its own way develops answers to them. Whether or not 

management consciously weighs its choices and formally communicates them to 

employees, over time it will develop a set of policies through its ongoing decision making. 

Thus, policies exist no matter whether management chooses to write them down. 

But even though policies need not be written, there are many persuasive reasons for 

documenting them: 

1

2 BUSINESS MANAGEMENT DAILY 

• It forces you to decide how you want your company to operate. Thus, you’re 

not leaving important decisions to the pressures of the moment or to individual 

managers and supervisors, who may not act consistently or make the same choices 

you would. 

• Written policies are easy to communicate, which means they are more likely to be 

followed. Everyone is working from the same page. 

• You make it easier to keep policies in sync with new legislation and the evolving 

work environment. You can review them regularly and revise them to suit changes 

in your operations as well as technological, regulatory and legal developments. 

That’s important because policies are a key element in a company’s culture, and 

cultures have to adapt to the changing environment to survive and grow. 

Unless your work force is so small that all members of the organization are constantly 

in touch, it is almost impossible to deliver consistent answers to personnel questions 

without considering the options, choosing among them and then communicating 

those to your people. And inconsistency can get a company into trouble. Haphazard 

decision making lowers employee morale by causing confusion about rules and procedures. 

It may also give rise to outright ill will by creating impressions of favoritism; 

without clear policies you’d have a tough time applying the same rules to everyone. 

Moreover, in today’s highly regulated, litigious society, you risk time, money, productivity, 

your company’s reputation and many a good night’s sleep when you fail to 

formulate and communicate consistent policies that meet federal, state and local 

requirements. For example, let’s say you fail to communicate a clear policy on your 

commitment to equal employment opportunity and a work environment free from 

intimidating, hostile or offensive conduct. That would leave your company—and, in 

some states, you and your supervisors personally—open to lawsuits charging discrimination 

and harassment. Or, your failure to post safety policies not only might get 

OSHA on your back but also could result in on-the-job injuries and accidents, which 

obviously lower morale, damage your reputation and increase costs. 

What Makes a Good Policy 

Effective policies clearly communicate an organization’s rules and expectations. They 

are written in standard, easily understandable language, not in legalese. And they are 

specific. For example: 

“Full-time employees get one week of vacation after one year on the job.” 

“The company does not discriminate in hiring on the basis of race, color, religion, 

ancestry, national origin, sex, disability, age or any other characteristic protected by 

applicable federal, state or local law.” 

“Employees are hired with the understanding that the first 90 days of employment 

are a trial period during which either party may terminate the employment relationship 

without cause or notice.”

THE BOOK OF COMPANY POLICIES 

3 

Of course, some policies will be more specific than others. On some issues, such as 

corporate ethics, you probably will simply state your position or philosophy and the 

standard you expect employees to uphold. In contrast, policies on benefits like time off 

or probationary employment will have to be very explicit. For some issues, such as 

Internet use or sexual harassment, you will even want to spell out the disciplinary measures 

that will apply when the policy isn’t followed. 

How to Communicate Your Policies 

The most effective way to communicate your policies is through clearly written 

employee manuals (“manuals” being plural here because you will probably want to 

give one manual to all employees and a second, supplementary manual exclusively to 

managers and supervisors with hiring, firing and disciplinary responsibilities). 

Using manuals allows you to gather all relevant policies into a single text, which 

members of your organization can consult whenever they wish. The manuals can be 

dated and revised or replaced as needed. Plus, they enable you to state plainly that neither 

the manual nor any oral or written comments made by your managers may be construed 

as a contract or an implied contract. The latter can be an important defense if you 

should someday find yourself on the wrong side of a breach of contract or wrongfultermination 

suit brought by an employee who misunderstood your policies. 

➤ Recommendation: Policy manuals may be printed, posted online or both. Online 

policy manuals offer the advantage of instant updating. However, it’s easier to track the 

distribution of printed materials, thus ensuring that employees are aware of any revisions 

you make. Because of the potential legal ramifications, we recommend that you 

distribute printed manuals, regardless of whether you post your policies online. 

Keep Managers Informed 

Take special care to see that your managers and supervisors are fully conversant with 

your policies, and that they stay up to date on any revisions and apply your rules consistently. 

For example, if your policy calls for progressive discipline for tardiness or 

unexplained absences, make sure every supervisor uses the approach outlined in your 

management policy manual when dealing with every employee who is late to work. 

Haphazard application of your policy will leave you open to charges of unfairness and 

even unlawful discrimination should the supervisor crack down on an employee in a 

protected group after ignoring similar behavior by others. 

Communicate to your managers exactly how to interpret your policies and what to 

do when policies appear to conflict. For example, let’s say your policy is to accommodate 

your employees’ religious beliefs whenever possible, but your dress code prohibits 

wearing headgear indoors. What if a Muslim or a Sikh employee wants to wear a head 

scarf or turban indoors for religious reasons Would you want a manager to (1) accommodate 

this employee without further ado, (2) discuss the matter with you before acting 

or (3) accommodate the employee but let you know so that you could consider 

amending the dress code Or, is there a compelling business necessity, such as safety, 

for upholding your no-headgear policy Bear in mind that while you might prefer to 

uphold the dress code without exception (for example, to avoid charges that you favor


one individual, or one religion, over another), doing so could open you up to legal 

action unless you can show a compelling business reason for your no-headgear policy. 

(For more on this particular issue, see dress codes and Title VII in Section 5.) 

Your supervisors and managers must understand the reasons for your policies, the 

legal issues involved (if any) and how you want them to resolve any apparent conflicts 

between one policy and another. And if a supervisor or manager makes a wrong call, 

be prepared to apologize fast to the employee and reverse the action. It not only might 

save you a lawsuit but also might help you retain the goodwill of a valued employee. 

If a new or revised policy is complex or marks a major change in procedure, consider 

calling a meeting, a teleconference or an online “chat” with your management and 

supervisory personnel to discuss the specifics and answer any questions. Make it clear 

that you expect the policies to be followed and enforced and that your managers’ own 

career advancement will depend in part on how well they fulfill that mandate. 

Enforce Your Policies 

Enforcement starts with ensuring that your employees know your policies. Even 

though judges in criminal proceedings have ruled that ignorance of the law is no excuse 

for breaking it, it’s likely to be considered a powerful mitigating factor in civil actions 

that employees (or, more likely, ex-employees) bring against their companies. All the 

more so if it can be shown that the employer was less than conscientious about disseminating 

its policies and ensuring that they were understood. 

For example, say you fire an employee for misconduct and she subsequently brings 

suit claiming that she had never seen or heard of the policy she’d breached. The court 

might well order you to reinstate her. For this reason, it’s a good idea to ask employees 

to sign a statement acknowledging their receipt and understanding of your policies and 

agreement to abide by them. After all, receiving a policy or a company manual and 

actually reading it are entirely different matters. The acknowledgment might read: 

“I hereby acknowledge receipt of the company handbook. I have read and fully 

understand the rules and procedures it contains. I acknowledge my full responsibility 

to follow them faithfully in all respects.” 

Call attention to the acknowledgment when you distribute the handbook, and ask 

each new employee to sign it and return it to you within a week. Then keep the signed 

statement in the employee’s personnel file. Do the same when you distribute new policies, 

policy revisions or updated manuals to your entire work force. 

Keep your policies up to date 

For good or ill, policies can seldom be set in stone. Changes in the organization’s needs 

and operations, new legislation and the ever-evolving work environment will necessitate 

revisions in your policies. Be sure to review them regularly—at least once a year— 

with your top managers, as well as any time there’s a new local, state or federal statute 

that affects your relationship with employees. Then ask your legal adviser to review 

potential changes to be sure they don’t run afoul of any laws related to your business.


5 

How to Use This Report 

This Special Report looks at individual company policies: both those that belong in the 

company manual, such as “Time Off,” and those that should be distributed only to 

your managers and supervisors, such as “Hiring” and “Independent Contractors.” For 

each, we discuss the key issues involved, including legal and regulatory concerns, 

along with policy considerations and alternatives for you to think about. In many cases, 

we also provide one or more samples of actual company policies so that you can see 

how other companies are addressing the issue. 

Caution: The sample policies published in this report are presented as isolated examples 

designed to stimulate your thinking on each issue. They are not intended to be 

boilerplate policies that you should automatically photocopy for your company. When 

it comes to setting or revising your own policy, we advise you to think through your 

goals and the specific experience and needs of your organization. Then consult with a 

competent legal adviser before putting them in writing. 

If you already have written policies, we suggest that you review them against the 

guidelines in this report. If you don’t have policies set down, use these discussions as 

a basis for defining your views so that you can communicate them to your people. Ask 

yourself the following: 

• What do I want to accomplish 

• How will a policy help 

• How will having no policy hurt 

• Of what legal constraints—federal, state and local—must I be aware 

• Are there any special circumstances of which I need to be aware 

As you consider them, bear in mind two Webster’s definitions of the word “policy”: 

1. “Prudence or wisdom in the management of affairs” 

2. “A definite course or method of action selected from among 

alternatives and in light of given conditions to guide and 

determine present and future decisions” 

Written policies are not only prudent in today’s litigious environment. They also 

guide all the members of your organization in following the course of action you deem 

best for the good of your company. In short, you can’t afford not to have them.

PART I: Employee Manuals 

1 

Policies Covered 

in Employee Manuals 

You can post policies on bulletin boards or the Internet, distribute 

copies of individual policies to employees as needed or even 

communicate your policies one-on-one or in staff meetings. Many 

employers, however, prefer to communicate them in an employee 

manual. Doing so offers several advantages: 

❒ Convenience. All of your policies are together in one place for easy reference. 

❒ Uniformity. Your employees all get the same information at the same time: when 

they are hired and whenever your manual is revised. 

Tips on Disclaimers 

1. Remember: Anything you say, you’re committing to. 

2. Always include a disclaimer stating that the handbook does not create any 

contractual rights. 

3. Make sure the disclaimer is displayed prominently and worded clearly. 

4. Insert the disclaimer in every manual you distribute, including supervisors’ manuals. 

5. Include disclaimers in every document that contains your EEO statements. 

6. Repeat disclaimers on the separate acknowledgment forms, which managers 

and rank-and-file employees are asked to sign after receiving the handbooks. 

Keep the forms in employees’ personnel files. 

7. Make it clear that you reserve the right to forgo progressive discipline in certain 

situations—but don’t spell them out. If you do, you may limit yourself to those. 

8. Check your current handbook and policies for implied contracts. 

9. If any policy does create a contract, assume you need your employees’ permission 

to change it. The usual path to obtain it: an offer of some type of bonus in 

return for allowing you to amend the handbook. 

10. Consider providing policy updates online to convey information without having 

to amend the handbook itself. 

7


❒ Guidance. Employees know what’s expected of them and also where to turn 

when they have a problem or a complaint. A good manual spells out grievance 

procedures as well as your philosophy, rules and regulations. 

❒ Legal protection. The manual not only gives you the opportunity to state your 

support for equal opportunity employment and other social and legislative mandates 

but also provides proof that you clearly communicated your rules, regulations and 

at-will employment policy to your employees—a first step in defending yourself 

against claims of discrimination, unlawful discharge and the like. 

Because of these advantages, legal counselors advise even small employers to 

use policy manuals. Bear in mind that a manual need not be long and complex. 

A few pages, run off on your office copier and collated in a report cover, may be all the 

manual you need to communicate key policies to your people. 

Choosing a Format 

Like the policies it communicates, your employee manual should be clear, specific and 

organized in such a way that allows employees to access information quickly. Some 

companies list policies alphabetically, but most companies group them by subject: for 

example, “Time Off,” “Code of Conduct,” “Compensation,” “Respect for Individuals,” 

“Performance and Development,” “Benefits,” “Day-to-Day Work Policies,” “Balancing 

Your Work and Personal Life” and “Time Away From Work.” Either approach will get 

your message across. Grouping, however, has the added advantage of presenting related 

concerns together. That gives you the opportunity to make your presentation less 

legalistic, share your company philosophy with employees and position the policies in 

terms of the benefits to the employees, rather than simply rules to live by. 

Whichever presentation you choose, alphabetical or grouped, you should consider 

covering the areas discussed in this chapter, to the extent that they apply to your work 

environment. 

Statement of Purpose 

Most employee manuals begin with a statement of purpose, which may include a 

“Welcome to the Company.” Here are some examples from actual company manuals: 

“In joining XYZ, you’re becoming part of a dynamic group of individuals whose 

collective talents enable us to move forward as an industry leader and innovator. 

“This handbook is an important resource for you during your tenure with XYZ. The 

information will help you better understand our history, culture and operating 

philosophies, as well as some of our policies and procedures.” 

“Welcome to a small circle that’s expanding. . . . This company is a thought still 

forming. You are now part of that thought and this thought process.”


9 

“This handbook is intended to provide employees with a general understanding of 

our personnel policies. Employees are encouraged to familiarize themselves with the 

contents of this handbook, for it will answer many common questions concerning 

employment with XYZ.” 

“For the benefit of all employees, both new and experienced, we would like to 

acquaint you with the policies governing employment with XYZ. This manual addresses 

the basic employment policy of XYZ and supersedes all previous manuals and 

written or implied policies. 

“Occasionally, it may become necessary to modify, change, update, revoke, 

replace or even terminate the policies outlined in this manual, and XYZ reserves the 

right to make changes at any time at its discretion.” 

“This handbook cannot anticipate every situation or answer every question about 

employment. It is not an employment contract and is not intended to create contractual 

obligations of any kind. Neither the employee nor XYZ is bound to continue the 

employment relationship if either chooses, at its will, to end the relationship at 

any time. 

“XYZ reserves the right to change, revise or eliminate any of the policies and/or 

benefits described in this handbook, except for its policy of employment-at-will.” 

Caution: Courts are now ruling that company manuals create binding contracts 

between employers and their employees and that employers are legally obligated by 

all the provisions and policies in the manual. This may hold true even if you issue a 

disclaimer that you’re not creating a contract by distributing the handbook. So even 

though you include a disclaimer and you have the right to change your policies at any 

time and for any reason, a court might rule (as some already have) that your handbook 

guarantees employees rights that you cannot abolish without their consent. 

Employment-at-Will Statement 

Legislation has been gradually eroding employers’ right to terminate employees at-will. 

To protect your at-will rights to the extent possible in your particular locality, you will 

want to spell this out for all new and prospective employees in the front of your employee 

manual (or in a posted policy) as well as on your job application forms. Here’s how 

two employee manuals present their company’s employment-at-will policy: 

“Your employment with XYZ is at-will. Although we hope that your employment 

here will be mutually rewarding, both you and XYZ retain the right to end the 

employment relationship at any time and for any reason.”


“XYZ, like other employers, hires and employs under terms known as employment 

at-will. Employment at-will means that XYZ may alter the terms of your employment, 

and either you or XYZ may terminate your employment at any time and for any 

reason or for no reason, with or without notice. No officer or other employee has 

authority to alter the employment-at-will relationship, orally or in writing. This guide 

does not create an employment contract, establish rights, privileges or benefits of 

employment or establish any job guarantee.” 

To protect your at-will status, there are some steps you can take: 

• Give managers a handbook of their own for discussing issues like job security. 

But even in it, you should include an at-will policy disclaimer. Do not give 

employees a copy of your managers’ handbook. 

• Do not attempt to spell everything out in the employee manual. Be sufficiently 

vague so that you create no contract—or at least give yourself an out. 

• If you discuss disciplinary steps, state specifically that you reserve the right to 

bypass all progressive discipline in some cases. 

• In your employment manual specify that if the employee has not signed a 

contract, then he is employed at-will. 

Possible Topics to Include 

We’ve chosen a combination of the grouped and alphabetical approaches here to 

organize related policies in an employee manual. 

The work environment 

Near the beginning of your manual, you’ll want to state your respect for individuals and 

your support for equal employment opportunity to make your philosophy clear and set 

the tone for the rest of your policies. This section might include your policies on: 

• Equal employment opportunity 

• Employee privacy 

• Respect for others 

Code of conduct 

• Sexual harassment 

• Substance abuse and drug testing 

You need to let employees know how you want to do business and what standards you 

expect them to uphold: 

• Corporate ethics 

• Conflicts of interest 

• Noncompete agreements 

• Confidentiality and nondisclosure 

• Intellectual property 

• Moonlighting


11 

Workday rules and procedures 

These are your day-to-day working policies. Communicating them clearly will save 

you and your supervisors time and headaches because your employees will know what 

to expect, how to proceed and what the penalties are if they don’t play by 

the rules. 

• Working hours 

• Attendance and lateness 

• Meal and rest breaks 

• Smoking 

• Personal calls, mail 

• E-mail/Internet use 

• Dress code 

Time off 

• “English-only” policy 

• Politicking and solicitations 

• Personal use of company property 

• Violence and weapons 

• Misconduct and insubordination 

• Theft and dishonesty 

• Problem resolution 

Spelling out precisely when employees may take time off and how to apply for it 

will save your supervisors a lot of time and hassle. It will prevent misunderstandings 

and accusations of unfairness when, say, Joe gets time off to attend his grandmother’s 

funeral, but Cindy has to take a personal day to attend her friend’s memorial service. 

Set specific rules so that your supervisors can be consistent in granting time off. 

• Holidays 

• Other: 

• Vacations 

Death in the family 

• Sick leave 

Jury duty 

• Personal days 

Military leave and Reserve training 

• Bad-weather days 

• FMLA leave 

Religious observances 

Voting 

Volunteerism leave 

Employment policies 

• Hiring 

Job descriptions 

Job postings 

Job application forms 

Employment of relatives 

Equal opportunity statement 

Interviewing protocol 

Reference/background checks 

Testing applicants 

Medical examinations 

Making the job offer 

Probationary periods 

Checking immigration status 

• Employment contracts 

• Flexible work arrangements 

Telecommuting 

Job sharing 

Flextime 

• Performance appraisals 

• Personnel records 

• Promotions and transfers 

• Seniority 

• Terminations/progressive discipline 

• Independent contractors


Compensation 

When is payday Who’s entitled to time and a half for overtime What deductions will 

be subtracted from pay Again, stating your policies will prevent misunderstandings 

and help ensure consistency. 

• Employment categories 

• Overtime payments 

• Pay procedures 

• Expense reimbursement 

• Payroll deductions 

• Severance pay 

• Performance bonuses 

Benefits 

Some businesses include the following benefits in their policy manuals. Others issue a 

separate booklet or a policy sheet on them. 

• Health, life, disability and other insurance 

• Pension and retirement plans 

• Tuition assistance 

• Savings and stock purchase plans 

• Other (wellness plans, health club memberships, 

employee assistance programs, legal assistance, on-site day care) 

• Domestic-partner benefits 

Safety and health 

Again, you may want to include this information in your employee manual or cover it 

separately—on company bulletin boards, for example, or by posting the information 

near equipment. However, even if you exclude the first two topics below from your 

manual, you will probably want to include your return-to-work policy here or in the 

“Time Off” section. 

• General safety rules 

• Reporting job-related accidents 

• Workers’ comp return-to-work policy 

➤ Recommendation: Don’t try to cover every contingency in your manual. Focus on 

the situations and concerns that come up most often, along with issues, such as sexual 

harassment, that could cost you big bucks if you fail to disseminate your policy.

PART II: Workday Rules and Procedures 

2 

Hours of Work 

and Breaks 

Your work schedule is one of the basics of running an orderly 

company. Many other policies in this book relate to those basic 

hours of work, so tracking them and keeping accurate records are 

important for everything from wages to vacation time, sick leave, 

overtime and FMLA eligibility. 

What’s at Issue 

To ensure compliance with the Fair Labor Standards Act, you must know what time 

actually counts toward “hours of work” and spell out the policy clearly in writing. 

That’s especially important for workers who are not exempt from overtime because 

you have to pay time and a half for hours worked in excess of 40 hours a week. 

In general, under the FLSA, time spent setting up for the day’s work or cleaning up 

afterward counts as work and must be treated as such. So does time spent waiting for 

instructions, attending training seminars, traveling between work sites or out of town 

on business, and even sleeping time unless facilities are provided for eight hours of 

uninterrupted sleep. Time spent on civic or charitable work is included if it’s done at 

the employer’s request. Generally, the only time excluded from hours worked is strictly 

personal time, such as an hour-long lunch with no job responsibilities. 

Make sure your employees know what hours they will be paid for. Under the FLSA, 

if an employee takes a meal or rest break of 20 minutes or less, he gets paid for that 

time. But the employer is not required to pay for meal or rest breaks that last 30 minutes 

or more. 

To qualify as a bona fide meal break, the employee must be relieved of all duties during 

that time. If, for example, a worker is required to eat at his desk or by his machine, 

that counts as time worked. The same goes when an employee is required to take a 

pager along to lunch. 

Caution: Nearly half the states have laws requiring you to provide meal and rest 

breaks for a specified minimum amount of time each day. For example, in California, 

employers must give employees a 10-minute rest period in every 4-hour period, plus a 

30-minute meal break within 5 hours of starting work if the workday last 6 hours or 

more. Be sure to check with your attorney about your own state law. 

13


Policy Considerations 

• Decide how you want employees to record their time. Punch clock Time sheets 

Are exempt employees expected to keep track of their hours as well 

• Have a policy that all work hours must be recorded. Conscientious hourly employees 

sometimes come in before their shift starts and start setting up. Remind them to 

record those hours because you can get into trouble with the Labor Department if 

you don’t pay employees for all the time they work, or if you don’t figure overtime 

correctly. 

• Does your company encourage or discourage overtime If you don’t want to pay 

overtime, have a policy that any overtime must be approved in advance. 

• Does your business or certain departments require coverage at all times, so not 

everyone can go to lunch at the same time If so, address how breaks will be decided 

and whether employees need permission to take their breaks. 

• If an employee will miss work, who should be notified and by when 

SAMPLE POLICIES 

Hours of Work 

“Standard working hours are from 9 a.m. to 5:30 p.m. Some departments vary within 

that basic structure, and you will be advised by your supervisor if your hours vary 

from the norm. You are entitled to one hour for lunch. Any employee remaining after 

normal working hours must receive authorization from his/her department manager.” 

—A marketing firm 

Overtime 

“Overtime must be approved by your supervisor in advance and should be included 

on the time sheet in your total hours worked. XYZ retains sole discretion to determine 

when employees must work overtime. All nonexempt employees will be paid at 

one and a half times their base hourly rate for any work performed over 40 hours 

per week.” 

—A services firm 

Lunch Breaks 

“All employees who work a 7.5-hour day will receive a daily, one-hour, unpaid lunch 

break. The supervisor has discretion for authorizing other breaks for personal need.” 

—A college


15 

“We eat lunch any time between 12 and 2 p.m. For lunchtime, we offer full-day 

employees two alternatives: 

• You can clock out for lunch and take a full hour. This gives you time to go out if 

you want to. When you finish your lunch hour, you clock back in. 

• If you work a full day, you can take one-half hour for lunch, eat in the shop and 

not clock out. 

“People who work part days will not be paid for lunch. You should eat before 

coming, or punch in when you have finished eating and are ready to work.” 

—A small manufacturer 

Time sheets 

“It is the policy of the company to comply with applicable laws that require records 

to be maintained of the hours you actually work (including overtime where applicable) 

and of the accrued leave time you have taken. 

“To ensure that you are paid in a timely manner, you will be required to record your 

time worked and your absences on the company’s employee time sheet form. This 

form should be completed daily, and signed and forwarded to your supervisor on a 

weekly basis. After reviewing the form and resolving any discrepancies, your supervisor 

will sign the form and forward it to payroll for processing. 

“Please be careful when recording your hours and leave time taken. Falsifying a 

time record is a breach of company policy and is grounds for disciplinary action, 

including the possibility of termination.” 

—A publishing company 

Absenteeism and tardiness 

“The company expects all employees to assume diligent responsibility for their attendance 

and promptness. Regular and prompt attendance is essential to the success of 

the company and the satisfaction of our customers. 

“If you are unable to report to work, you must notify your supervisor or department 

head no later than 30 minutes before your start time on each day of your absence. If 

you leave a voice mail message for your supervisor or department head concerning 

your absence, a personal follow-up call must be made by noon on the same day of 

the absence. Failure to properly notify the company of your absence will result in an 

unexcused absence. 

“It is equally important for all employees to report to work on time and to return 

from lunch and breaks in a timely manner. 

“Absenteeism or tardiness that is unexcused or excessive in the judgment of the 

company is grounds for disciplinary action, up to and including termination.” 

—A small manufacturer

3 

Personal Use 

of Company Property 

Employees get so accustomed to using company equipment and 

supplies on the job that many of them start thinking of your 

property as theirs. It may not even occur to them that using “their” 

computer or the photocopier to pursue personal business is actually 

theft—unless they’ve obtained your permission. Moreover, some may 

regard free use of office equipment as a perk for the work they do. 

It’s up to the employer to set a policy on when, if ever, company vehicles, equipment 

and other property may be used for personal purposes. You might want to 

prohibit all such use, or you might want to allow occasional use within reason. Either 

way, be sure your employees know what’s allowed and what isn’t, both to discourage 

stealing and to reassure a faithful employee that it’s OK to make an occasional copy of 

a personal document. 


❒ Availability of equipment. Personal use of copiers, fax machines, modems and 

the like may tie up company equipment when it’s needed for business. 

❒ Cost of supplies. One pen, note pad or whatever doesn’t cost much. But multiply 

that by 10 employees and you’re talking a noticeable expense in a 12-month period. 

❒ Equipment wear and tear. The more it’s used, the sooner it will need servicing, 

repair or replacement. 

❒ Productivity. Time spent on personal business is time not spent performing company 

business. 

❒ Liability. If one of your employees is using your equipment in his moonlighting 

business, your firm could be held liable if his product/work caused harm to a client or 

was not up to quality. 

❒ Goodwill. Letting employees use your equipment to make the occasional copy, 

send a fax, make a short phone call or write letters during work breaks helps foster 

a congenial work environment and indicates your support of work/life balance. 

Employers who try to police or ban every use of company property are likely to create 

resentment. 

16


17 

Policy Considerations and Alternatives 

Think about the atmosphere you want to create. An environment of mutual trust is 

nearly always more conducive to productivity than one in which Big Brother never 

stops watching. But leaving everything to trust leaves you open to misunderstandings 

and downright rip-offs. Consider the following: 

✔ How relaxed or draconian do you want to be Will you permit occasional use 

of your property or forbid it altogether Let employees know what is and is not 

permissible and what the penalty is for misappropriating equipment and supplies. 

✔ Does your current policy match your practice If you say company property is 

off-limits for personal use but you allow employees to use it in moderation, they 

will have every reason to believe you aren’t serious about your policy. That will 

make it difficult for you to discipline those who are taking advantage your goodwill 

without raising charges of unfairness. 

✔ Do you have reason to believe employees are being too free with company 

property now Possible signs include a rapid turnover of supplies that can’t be 

accounted for by business needs or a change in business practice, noticeable 

increases in fax or copier costs (again unrelated to the volume of business) or 

phone lines being constantly tied up. If it’s supplies like paper and pens that are 

disappearing too fast, you may want to limit employees’ access to them; make it 

your policy that supplies must be requisitioned on a form that requires a supervisor’s 

sign-off. 

✔ Do employees know what you expect of them What you consider obvious isn’t 

always so obvious to employees—or at least so they say. Example: A company fired 

an employee for personal use of company property. He sued for wrongful discharge—and 

won. Reason: The judge bought the employee’s claim that since the 

company had no formal policy on the subject, the plaintiff didn’t know it wasn’t permissible. 

At the very least, you need to make it clear that employees are not allowed 

to use proprietary information for any purpose other than company business. 

➤ Recommendation: You may find it helpful to post a copy of your property policy 

near your copiers, fax machines and supply storage cabinets. Word the policy carefully 

so that it doesn’t cast your employees as potential thieves or doesn’t negate what 

you allow in practice. For example, it may be fine with you if employees send an 

occasional fax or copy a few pages on their own time provided it doesn’t keep company 

business waiting. But you probably don’t want them sending or copying reams 

of information at your expense. Use your policy to draw that line. 


“Office equipment, including telephones, copiers, fax machines, voice mail and 

e-mail are to be used for XYZ business. Although limited personal use of such equipment 

is permitted, excessive personal use will lead to discipline up to and including


discharge, as will abuse of the equipment. Moreover, such equipment is 

at all times XYZ property, and XYZ reserves the right to enter and inspect such equipment 

and its contents at any time without prior notice.” 

—A trade association 

“The following list provides examples of misconduct that may result in disciplinary 

action: 

❒ Removing from the Company premises material or equipment belonging to 

the Company without authorization; or borrowing articles belonging to another 

employee, customer or supplier without consent. 

❒ Damage to or unauthorized use of Company property or equipment. 

❒ Disclosing or using for personal gain information that the Company has 

designated as confidential concerning the Company, its employees or customers.” 

—A publishing company 

Sample requisition policy 

“XYZ equipment and supplies are provided for the conduct of company business. 

Employees who need supplies should obtain a request form from their supervisor, fill 

it out and give it to the supervisor for authorization before submitting it to the Supply 

Department. Unauthorized use of company equipment and supplies for personal 

business may result in disciplinary action.” 

—An insurance company 

Sample company vehicle policy 

“The ABC Company’s vehicles represent a considerable investment by the company. 

For that reason and because these vehicles must be in excellent condition at all 

times, the following rules apply to their maintenance and use: 

• Vehicles are to be driven only by those employees who are specifically authorized 

to do so. Unauthorized use of a company vehicle will result in strict disciplinary 

action, up to and including immediate dismissal. 

• Any employee who is authorized to drive a company vehicle, and allows any other 

unauthorized use of the vehicle will be subject to the same disciplinary action 

described above. 

• Each sales or service representative who is assigned a specific vehicle is to maintain 

that vehicle according to the ABC Company Vehicle Maintenance policy. 

• ABC Company vehicles are for company business only and are not to be used for 

transporting family members or anyone not employed by ABC Company.” 

—A manufacturer


19 

Car Phone Safety 

A written policy on car phone safety may help limit your potential legal exposure in 

the event an employee is involved in a cell-phone-related accident while driving. A 

growing number of jurisdictions have banned cell phone use while driving, so if your 

jurisdiction does, your policy should say so. 

When you draft the policy, consider incorporating the following tips from the 

Automobile Club of Southern California’s Web site at www.aaa-calif.com: 

• Use a hands-free device or speaker phone so you can keep your hands on the 

wheel and your eyes on the road. 

• Make sure your phone is mounted where you can easily reach it while driving. 

• Get acquainted with all the phone’s features, such as speed dial and redial, so you 

can use it without looking. Keep your attention on the road by programming frequently 

called numbers into the phone’s memory to minimize dialing. 

• Dial sensibly. Wait for a stoplight or pull off the road before dialing—or ask your 

passenger to dial for you. 

• Don’t use your phone in distracting situations. Pull off the road to make the call. 

• Use your voice mail to take calls or leave messages for yourself. Don’t take notes 

while driving.

4 

Computer Use 

Although you want your employees to make the best possible use 

of computers, e-mail and the Internet, you must ensure that your 

system’s operation and security are not compromised. You also want 

policies and procedures that will minimize the potential for employee 

abuse of these powerful tools, whether it involves merely wasting 

time or engaging in harmful, unethical or even illegal activities. 


Your computer, e-mail and Internet policies should cover the following basic areas: 

❒ Ownership. Clearly state who owns the hardware and software used in the 

workplace. In addition to information in employee handbooks, put your basic e-mail 

policy statement on screen so that it appears each time the employee logs on. At the end 

of the statement add a reminder that by proceeding to use the system, employees are 

giving consent to having their messages monitored. 

Example: “This computer network, including all data files and applications, is the property 

of ABC Corporation. All materials and information created, transmitted or stored on this system 

are the property of ABC and may be accessed by authorized personnel. This system is for 

business, not personal, use. Users should not have any expectation of privacy with respect to the 

materials and information stored on the system.” 

❒ Legal restrictions. Employees must follow all state and federal laws directly or 

indirectly relating to computer use. Your company could get into legal trouble if 

employees violated copyright laws or downloaded pirated software. If they sent abusing 

or harassing e-mail, an offended coworker might sue your company for sexual 

harassment. Plus, your company could be liable if you allowed someone who is a 

minor to access pornography over the Internet. 

❒ Monitoring. Make sure your firm reserves the right to view employees’ e-mail or 

otherwise monitor system usage. Remind employees that e-mail files, even those that 

have been deleted, are archived and backed up, and that visits to Internet sites are 

logged. Try to eliminate any expectation of privacy an employee might have. Reason: 

Many employers give employees a specific computer and allow them to create their 

20


21 

own private password. That can lead to employees assuming that their use of the 

computer system is private. Unless you clearly dispel that notion, you may 

lose the legal right to read employees’ e-mail even if you believe they have been 

abusing the system. 

Caution: Be sure to check state laws. Many states have wiretapping laws that 

affect your ability to monitor e-mail traffic, particularly messages coming from outside 

the company system. 

Companies’ electronic monitoring of employee communications has doubled since 

1997, according to a 2000 survey by the American Management Association. Almost 75 

percent of major U.S. companies that responded to the survey said they record and 

review employees’ phone calls, e-mails, Internet connections and computer files. 

❒ Software piracy. The installation or use of unauthorized copies of software is illegal 

and can have costly consequences for your business. A consulting company headquartered 

in Chicago recently paid $480,000 to settle claims relating to unlicensed 

copies of software programs installed on office computers. The Business Software 

Alliance, a watchdog group representing the nation’s leading software companies, has 

been vigilant in policing companies. 

Software piracy can be as simple as two employees installing the same program on 

their computers when the license permits only one, or as endemic as a companywide 

practice of reproducing software rather than paying for multiple licensed copies. Some 

computers come pre-loaded with software that was never authorized by the software 

creators. Employees can download pirated software from the Internet, whether through 

a bulletin board or an Internet auction site claiming deep discounts on supposedly 

licensed software. 

Besides potential fines if you’re caught, pirated software can harm your business in 

other ways. There’s no assurance of quality and no technical support if it doesn’t work. 

Illegally copied software might also harbor viruses that could ruin your system. Make 

it your company’s policy not to use pirated software, and be sure your employees 

understand that. 


You should clearly define what you consider to be acceptable use of the system. For 

example, tell workers that they can use the system only to further their assigned tasks 

for the benefit of the company. Establish a ban on downloading pornography, sending 

racially offensive messages, performing any illegal activity and e-mailing important 

company information to outside sources. 

State what personal uses, if any, are acceptable. For instance, will you allow employees 

to receive personal e-mails or engage in charity work Is it OK for employees to 

browse the Internet over lunch, provided they avoid objectionable sites 

Caution: If you let employees use your system for personal use, you may not be able 

to deny union members the right to use it for union business. 

You should also have a clear policy on passwords and require employees to scan 

any files they download for viruses. (To protect their systems, some companies go 

even further, forbidding employees to download any software or files from their 

e-mail or the Internet.)


Sample Internet usage policy 


“The facilities to provide Internet access at ZYX come at considerable resource cost 

and commitment. The Internet’s vast informational and educational capabilities can 

help us all do a better job, but not at the expense of either productivity or security 

for our core business systems and sensitive company and client data. 

“First and foremost for ZYX, the Internet is a business tool. Employees are expected 

to use Internet access in a professional manner, primarily for business-related 

research and communication. 

“Employees with Internet access must be clear on the point that ZYX can and will 

monitor Internet usage for appropriateness. All existing ZYX policies apply to conduct 

on the Internet, especially those that deal with intellectual property protection, 

privacy, misuse of company resources, sexual harassment, information and data 

security, and confidentiality. 

“All ZYX employees receive a written copy of this policy and must sign the following 

statement either during new-hire orientation or as soon as possible thereafter: 

“I have received a written copy of the ZYX policy on Internet security and usage. I 

fully understand the terms of this policy and agree to abide by them. I realize that 

security software may record for management use the Internet address of any site 

that I visit and keep a record of any network activity in which I transmit or receive any 

kind of file. I acknowledge that any message I send or receive will be recorded and 

stored in an archive file for management use. I know that any violation of this policy 

could lead to dismissal or even criminal prosecution.” 

❒ Employees may use ZYX Internet facilities for nonbusiness research or 

browsing during meal or other breaks, or outside of work hours, provided that all 

other usage policies are adhered to. 

❒ Offensive and/or sexually explicit documents may not be displayed, printed, 

archived, stored, distributed, edited or recorded using resources. 

❒ Software or files with direct business use may be downloaded via the Internet 

into the ZYX network and thus become the property of ZYX. Such files or software 

may be used only in ways consistent with their licenses or copyrights. 

❒ No employee may use ZYX facilities to knowingly download or distribute 

pirated software or data. 

❒ Intentional use of any company resources for any illegal activity is grounds for 

immediate dismissal, and ZYX will cooperate with any legitimate law enforcement 

activity in that regard. 

❒ Employees should schedule resource-intensive operations, such as large file 

transfers, video downloads, mass e-mailing and the like, for off-peak times. 

❒ Any employee attempting to disable, defeat or circumvent any company 

security facility (firewalls, proxies, screening programs, etc.) is subject to immediate 

dismissal.


23 

❒ Any file or software downloaded from the Internet to ZYX equipment must be 

scanned for viruses before being accessed. 

—A large financial institution 

Sample software piracy policy 

“1. (Organization) licenses the use of computer software from a variety of outside 

companies. (Organization) does not own this software or its related documentation 

and unless authorized by the software developer, does not have the right to reproduce 

it except for backup purposes. 

“2. With regard to Client/Server and network applications, (Organization) employees 

shall use the software only in accordance with the license agreements. 

“3. (Organization) employees shall not download or upload unauthorized software 

over the Internet. 

“4. (Organization) employees learning of any misuse of software or related documentation 

within the Company shall notify the department manager or 

(Organization)’s legal counsel. 

“5. According to applicable copyright law, persons involved in the illegal reproduction 

of software can be subject to civil damages and criminal penalties, including 

fines and imprisonment. (Organization) does not condone the illegal duplication of 

software. (Organization) employees who make, acquire, or use unauthorized copies 

of computer software shall be disciplined as appropriate under the circumstances. 

Such discipline may include termination. 

“6. Any doubts concerning whether any employee may copy or use a given software 

program should be raised with a responsible manager before proceeding. 

“I am fully aware of the software use policies of (Organization) and agree to uphold 

those policies.” 

__________________________________ 

[Employee signature and date] 

—Copyright © 2000 by Business Software Alliance. Reprinted by permission. 

Sample electronic media policy 

“As an advanced technology company, we increasingly use and exploit electronic 

forms of communication and information exchange. Employees have access to one or 

more forms of electronic media and services (computers, e-mail, telephones, voicemail, 

fax machines, external electronic bulletin boards, wire services, on-line services, 

the Internet and the World Wide Web). 

“The company encourages the use of these media and associated services because 

information technology is our business, because they make communication more efficient 

and effective, and because they are valuable sources of information, e.g., about 

vendors, customers, new products and services. However, electronic media and services 

provided by the company are company property, and their purpose is to facilitate 

company business.


“With the rapidly changing nature of electronic media and the ‘netiquette’ that is 

developing among users of external on-line services and the Internet, this policy cannot 

lay down rules to cover every possible situation. Instead, it expresses the company’s 

philosophy and sets forth general principles to be applied to use of electronic 

media and services. 

“The following procedures apply to all electronic media and services that are: 

• accessed on or from company premises, 

• accessed using company computer equipment, or via company-paid access 

methods, and/or 

• used in a manner which identifies the individual with the company. 

PROCEDURES 

Usage 

“Electronic media may not be used for knowingly transmitting, retrieving or storage 

of any communications of a discriminatory or harassing nature, or which are derogatory 

to any individual or group, or which are obscene or X-rated communications, or 

are of a defamatory or threatening nature, or for ‘chain letters,’ or for any other purpose 

which is illegal or against company policy or contrary to the company’s interest. 

“Electronic media and services are primarily for company business use. Limited, 

occasional or incidental use of electronic media (sending or receiving) for personal, 

non-business purposes is understandable and acceptable—as is the case with personal 

phone calls. However, employees need to demonstrate a sense of responsibility 

and may not abuse the privilege. 

Monitoring 

“Electronic information created and/or communicated by an employee using e-mail, 

word processing, utility programs, spreadsheets, voice-mail, telephones, Internet/ 

BBS access, etc. will not generally be monitored by the company, and we respect our 

employees’ wish to work without ‘Big Brother’ looking over their shoulder. However, 

the following conditions should be noted: 

• The company routinely monitors usage patterns for both voice and data communications 

(e.g., number called or site accessed; call length; times of day calls). 

Reasons include cost analysis/allocation and the management of our gateway to 

the Internet. 

• The company also reserves the right, in its discretion, to review any employee's 

electronic files and messages and usage to the extent necessary to ensure that 

electronic media and services are being used in compliance with the law and 

with this and other company policies. 

• Employees should therefore not assume electronic communications are totally private 

and confidential and should transmit highly sensitive information in other ways. 

Security 

“Employees must respect the confidentiality of other people’s electronic communications 

and may not attempt to read, ‘hack’ into other systems or other people’s 

logins, or ‘crack’ passwords, or breach computer or network security measures, or


25 

monitor electronic files or communications of other employees or third parties 

except by explicit direction of company management . . . 

“Each employee who uses any security measures on a company-supplied PC or 

MAC must provide his/her group administrative assistant with a sealed hard copy 

record (to be retained in a secure location) of all of his/her PC or MAC passwords and 

encryption keys (if any) for company use if required. (Example: There may be a need 

for the company to access an employee’s system or files when s/he is away from the 

office.) There is no need to provide UNIX passwords since the UNIX system administrator 

can access all e-mail and files via ‘root’ passwords if necessary. 

“No e-mail or other electronic communications may be sent which attempt to hide 

the identity of the sender, or represent the sender as someone else or from another 

company. 

Congestion 

“Electronic media and services should not be used in a manner that is likely to cause 

network congestion or significantly hamper the ability of other people to access and 

use the system. 

Copyright 

“Anyone obtaining electronic access to other companies’ or individuals’ materials 

must respect all copyrights and may not copy, retrieve, modify or forward copyrighted 

materials except as permitted by the copyright owner or a single copy for reference 

use only. 

Networks 

“Any messages or information sent by an employee to one or more individuals via an 

electronic network (e.g., bulletin board, on-line service, or Internet) are statements 

identifiable and attributable to our company. While some users include personal ‘disclaimers’ 

in electronic messages, it should be noted that there would still be a connection 

with the company, and the statement might still be legally imputed to the 

company. All communications sent by employees via a network must comply with this 

and other company policies, and may not disclose any confidential or proprietary 

company information. 

“Network services and World Wide Web sites can and do monitor access and usage 

and can identify at least which company—and often which specific individual—is 

accessing their services. Thus accessing a particular bulletin board or Website leaves 

company-identifiable electronic ‘tracks’ even if the employee merely reviews or 

downloads the material and does not post any message. 

“The company makes available to employees a service for posting internal personal 

announcements to other company employees. All such internal electronic personal 

announcements must go through this Human Resources service. 

Discipline 

“Any employee found to be abusing the privilege of company-facilitated access to 

electronic media or services will be subject to corrective action and/or risk having the 

privilege removed for him/herself and possibly other employees.” 

—Adapted with permission of the law firm Adam J. Conti, LLC, Atlanta, Ga.

5 

What people wear to work can be far more than simply a matter 

of personal preference. Although you don’t want to restrict 

your employees’ personal choices unnecessarily, you can set rules 

that have a sound basis in operating a safe and efficient workplace. 

You can require employees to wear attire that is appropriate for their 

position and for your company. 


One area of primary concern is safety. You could be held liable for not requiring workers 

to wear helmets, shoes, safety glasses or any special clothing necessary to protect 

them from workplace accidents. You also need to ban certain accessories—jewelry, for 

example—or loose clothing that could be potentially hazardous in a manufacturing 

environment. Where safety issues are involved, you must not only have a policy in 

place but also ensure that all workers are aware of the policy. Then you should spell out 

penalties for violations of safety-related dress codes. 

A dress code does not have to treat men and women exactly the same, as long as the 

issues addressed are relatively minor. Thus you might prohibit earrings for men but 

not for women, or you could require men, but not women, to wear their hair short. 

A ruling by a U.S. Court of Appeals found that hair length was not “within the goal 

of equal employment.” Many companies have instituted a casual dress code, although 

they still can expect employees who are meeting with vendors, clients or other 

outsiders to wear appropriate business attire. 

Accommodating religious attire 

Dress Code 

One key area in which you must be careful is how to accommodate an employee’s 

religious beliefs and practices. According to Title VII, you must “reasonably accommodate” 

workers who want to wear religious clothing as long as it does not impose an 

“undue hardship” on your business. An “undue hardship” would involve any activity 

that (1) affects your company’s image; (2) poses a safety or health risk; (3) adversely 

affects employee morale and productivity; (4) forces you to show favoritism to a 

religious employee or (5) violates a law or statute. 

26


27 

To illustrate, let’s take a look at a few recent court decisions. One court ruled, for 

example, that a Sikh who was employed by a Sambo’s restaurant had to shave his beard 

to uphold the restaurant’s clean-cut image. But in another case a company was unable 

to convince the judges that an employee’s beard posed a safety risk by not allowing his 

safety mask to fight tightly against his face. (The court ruled that the mask actually fit 

better with the beard.) A substitute teacher lost her case against a Philadelphia school 

board, which claimed her religious attire violated a statute that prohibits public school 

teachers from wearing any type of dress or emblems relating to a certain religion. 

(What’s more, violation of the statute would have subjected school administrators to 

possible criminal prosecution or lawsuits from students’ parents—which would pose 

an undue hardship for the school, the judges ruled.) 

Keep in mind that you only need to accommodate an employee’s religious beliefs 

or practices when the claim is based on a bona fide belief (to qualify, the belief 

must only be sincerely held—the employee doesn’t have to be a member of an 

established religion). 

Note: You can specify that religious clothing be neat, clean and in a color that 

doesn’t clash with the company uniform, if that applies. And you can ask workers 

to tuck in loose clothing to keep it from getting caught in potentially dangerous 

machinery. 


“XYZ employees are expected to wear appropriate business attire. Employees are 

expected to dress neatly and to exercise common sense in selecting clothing and 

footwear appropriate for a business environment. Hair should be neatly groomed and 

worn in a businesslike style. 

“Women should wear suits, dresses, skirts with blouses or sweaters, or tailored 

slacks with professional blouses. Men should wear suits, sports coats or collared 

dress shirts with a tie and dress slacks. 

“Management in XYZ offices may declare certain days to be Casual Dress Days, 

which provide employees an opportunity to dress more casually at the office. At headquarters, 

Casual Dress Day is the last Friday of every month. Employees should wear 

appropriate casual clothing that is neat, clean and not overly revealing. Participation 

in Casual Dress Day is a personal decision. Employees are expected to use good judgment 

to ensure that their attire is appropriate for all activities (including meetings 

and client contact) that they will be involved in that day. General guidelines regarding 

attire still apply on Casual Dress Days, and field locations may adopt modified 

guidelines as appropriate to their environment. 

“Shorts (except knee-length shorts), tank tops, mesh shirts, cutoff shirts, thongs, 

sweat pants, jogging suits, caps, ripped jeans and T-shirts with controversial slogans


are not appropriate. Jeans and athletic footwear are acceptable so long as they are 

in presentable condition. . . . As on regular workdays, managers/coaches have the 

final say on what is appropriate attire for Casual Dress Days.” 


“We expect each staff person to outfit himself/herself and appear in a fashion 

comfortable to clients, suitable to the professional and consistent with the customs of 

the local business community. . . . 

“Since it is not unusual to have clients or bank officials visit the office, all office 

personnel are expected to be dressed in good taste at all times. Denims and jeans 

are not acceptable except when special assignments require unusual attire. For such 

occasions permission will be granted prior to the assignment.” 

—A public accounting firm

6 

Smoking 

Whatever your personal feelings about smoking, increasing 

government regulation plus ever-growing public concern for 

protecting nonsmokers from secondhand smoke make smoking 

policies imperative for businesses with even a single employee. 


❒ The bottom line. Studies show that smoking-related illnesses raise employers’ 

health care costs and lower productivity. In its April 24, 1996, issue the Journal of the 

American Medical Association estimated that employers could save more than $75 million 

annually in medical costs, disability, sick days, lost productivity and death benefits 

by banning smoking in the workplace. The study found that such bans were the most 

effective way to get workers to kick the habit. 

❒ Workplace harmony. Secondhand smoke is a hot-button issue for nonsmokers. 

They’re no longer willing to stand (or sit) by quietly while their colleagues indulge their 

habit. Although smokers may resent being made pariahs, most accept the findings that 

smoking is bad for their health and may hurt nonsmokers as well. 

❒ The law. A growing number of states and localities restrict smoking in the 

workplace. California recently banned it even in bars. In addition, if your company is 

large enough to be covered by the Americans With Disabilities Act, you may have to 

accommodate employees with severe respiratory ailments by providing a smoke-free 

work environment. 

❒ Employee privacy. In states and localities without smoking ordinances, you’re 

free to dictate workplace smoking behavior, although you might be held liable for not 

responding to nonsmokers’ health concerns if, because of your policy, they are exposed 

to secondhand smoke. 

Caution: About 29 states and the District of Columbia have so-called “smokers’ 

rights” laws. Under these statutes employers cannot prohibit the use of tobacco outside 

the workplace as a condition of employment. However, even in these states, an employer 

can require a worker to comply with company rules and policies concerning 

tobacco use while on site and/or during working hours. Be sure to read any statute 

29


carefully as it may not apply to your company. In some states the prohibitions don’t 

apply to certain organizations, such as religious entities, private employers and 

organizations whose primary purpose is to discourage the use of tobacco products. 

However, you may be able to adopt a policy of hiring only nonsmokers in 

states that don’t specifically prohibit discrimination against smokers. Reason: 

The U.S. Supreme Court gave tacit approval to a “nonsmokers-only” policy when it 

refused to review a ruling of the Florida Supreme Court upholding such a policy. The 

case: North Miami Beach adopted a policy of requiring everyone seeking a job with 

the city to sign an affidavit stating they had not used tobacco products for one year. The 

city justified its policy by proving that smokers are more expensive employees. 


You’ll want to spell out specifically where and when (if at all) employees may smoke 

on your premises. Base your policy on your major goals and concerns: 

Do any state or local ordinances mandate a smoke-free workplace or require you 

to provide smoke-free work areas for employees who request them Then ban or 

restrict smoking accordingly. Your state or local health department can fill you in on the 

laws applicable to your business. 

Are you primarily looking to cut absenteeism and health care costs Then a ban on 

smoking will probably serve you best. 

Do you simply want to make both smokers and nonsmokers comfortable to foster 

workplace harmony Then restrict smoking to areas where nonsmokers aren’t 

exposed to it, such as private, enclosed offices or enclosed smoking areas with separate 

ventilation systems. 

Can your physical plant (walls, ventilation system and so on) be adapted to 

protect nonsmokers from secondhand smoke if you allow smoking on your 

premises If not, your only choice may be to ban smoking. 

The best smoking policy for your organization will depend on state and local 

ordinances, the nature of your business, the proportion of smokers in your organization 

and your personal sentiments. But given the bottom-line issues and ever-growing 

legislation, this is one area in which you definitely need a policy. 


“We are a nonsmoking shop and office. If anyone needs to have a cigarette, they may 

go out to the street as long as it doesn’t interfere with work.” 

—A small manufacturer


31 

“Employees may smoke only on breaks and only in designated smoking areas. No 

smoking is allowed at workstations or in restrooms.” 

—An audiotape duplicator 

“XYZ is committed to enforcing the provisions of applicable local, state and 

federal law. Accordingly, XYZ’s policy on smoking is as follows: 

• Smoking is prohibited in hallways, restrooms, the reception area, work cubicles 

in rooms or areas containing photocopying or other office equipment used in 

common by employees and in XYZ vehicles occupied by more than one person, 

unless all occupants of such vehicles agree that smoking may be permitted. 

• Smoking is prohibited in conference rooms. 

• Smoking is permitted in enclosed offices, with the door closed, if all occupants of 

the office consent. 

“Department directors, managers and supervisors are responsible for seeing that 

this policy is implemented smoothly. Any complaints or conflicts should be directed 

first to them before notifying the Executive Director. In situations where the preferences 

of smokers and nonsmokers are in direct conflict, the rights of the nonsmoker 

will prevail. 

“Continued, intentional noncompliance with this policy will subject employees to 

disciplinary action up to immediate termination.” 

—A trade association

7 

‘English-Only’ Policies 

If you’re thinking of establishing an English-only policy for your 

workplace, be aware that you risk incurring the wrath of the EEOC. 

The agency is strongly opposed to English-only rules and will 

prosecute employers who commit national-origin discrimination. 

EEOC Guidelines 

The EEOC’s guidelines on national-origin discrimination include a section on “speak- 

English-only” rules for employers. Here’s a summary: 

❒ English-only rules in the workplace can have an adverse impact on those 

whose primary language is not English. The rules can create “an atmosphere of inferiority, 

isolation and intimidation based on national origin.” 

❒ English-only rules applied at all times (including lunch hours and breaks) are 

presumed to violate Title VII and will be scrutinized closely. 

❒ English-only rules that apply only at certain times may be lawful if the 

employer can show they are justified by business necessity. 

❒ If a limited English-only rule is adopted for business necessity, the employer 

should inform all employees of the rule, explain the circumstances under which 

English is required and make sure employees are aware of the repercussions of 

violating the rule. 

❒ If an employer fails to provide notice of the rule, including consequences for 

violating it, taking adverse action against an employee for violating the rule constitutes 

national-origin discrimination. 

❒ An English-only rule applied only to a particular group violates Title VII as 

unlawful disparate treatment. 

❒ English-only rules, whether applied at all times or only at certain times, may 

create a hostile work environment that could constitute unlawful harassment under 

Title VII. 

❒ If a job applicant is not hired because of an accent or manner of speaking, the 

employer must show that the accent interfered materially with the person’s ability 

to perform the job. 

32


33 

Between 1996 and 1999, the number of charges filed alleging discrimination based on 

English-only policies increased threefold (from 77 to 253), according to the EEOC. In the 

largest EEOC settlement ever for English-only violations, a Chicago manufacturer had 

to pay more than $190,000 to eight Hispanic former employees, who were fired for 

refusing to speak only English on the job. 

Even though the courts are likely to be more supportive of your policy if it is backed 

by a clear business justification, the safest course is to follow the EEOC’s more restrictive 

guidelines (see box on previous page). 


Although no laws exist banning English-only workplace rules, such requirements 

are being challenged under Title VII, which bars national-origin discrimination in 

employment. The key: Make sure your English-only rule is necessary to maintain 

supervisory control. A supervisor can’t oversee workers properly if they don’t 

understand each other. 

What’s Allowed, What’s Not 

Your English-only policy must be justified by “business necessity,” which usually 

revolves around safety and efficiency issues. The compliance manual used by the 

EEOC cites these right and wrong examples: 

• Probably permissible: All workers on an oil rig are required to speak English 

because they need to communicate quickly and respond to emergencies. 

• Probably illegal: A retailer requires English at all times during working hours 

because its customers object to employees speaking Spanish. 


When deciding when and how to implement an English-only policy for your work 

force, use these guidelines: 

• Pay attention to the dynamics of your workplace when some employees converse 

in another language. Does it help build a satisfied, productive work force, or does it 

foster hostility, inefficiency and customer complaints 

• Make sure there’s a justifiable business reason to establish an English-only rule. 

• Consult your attorney about your policy. 

• Be specific about where and when English is required. 

• Don’t prohibit employees from speaking other languages at lunch time or on 

breaks. 

• Let all employees know when the rule applies and explain the consequences of 

breaking it. 

• Produce and distribute a policy forbidding discrimination and harassment on the 

basis of national origin.


Other proactive approaches: Consider hiring supervisors who can give directions 

and safety instructions in the language most comfortable to the majority of your 

employees. Also, consider offering classes in English as a second language (at the work 

site or through the local community college). And, finally, provide diversity training for 

employees and supervisors to reduce tensions and build understanding. 

SAMPLE POLICY 

Some employers are implementing English policies such as the one below, posted by a 

small manufacturer, whose 11 employees spoke seven different languages: 

“English is the working language of our company. If you do not speak English well, 

we ask that you make every effort to learn it. We hope that you’ll try to speak English 

in the shop as much as possible.” 

If your main goal is to ease tensions, consider adding this line: 

“However, every employee is expected to treat others with respect in all aspects 

of their working relationships. So we urge you not to use your fluency in another 

language in any way that may humiliate your fellow employees.”

PART III: Time-Off Policies 

8 

Paid and Unpaid Leave 

The “Time-Off” section is probably the most dog-eared part of 

your company handbook. Employees will turn to it often as they 

strive to juggle their time between work and family life. For this 

reason at the very least, you must be very specific in writing your 

policy statements on time-off issues. 

You need to establish policies that not only meet legal guidelines but also fulfill your 

goal to get the necessary work done on time and properly. And not all time-off must be 

paid—you can allow employees to take some leave without pay. 

Many companies have moved to the concept of paid-time-off (PTO) banks, which 

allot a given number of paid days off per year that employees may use for illness, 

personal business, vacation, religious holidays or whatever they wish. Regularly scheduled 

holidays are not included in PTO banks. Among 360 companies surveyed by 

Hewitt Associates, 17 percent have a PTO program and another 13 percent are considering 

it. Companies using PTO banks believe it simplifies their planning and cuts abuse 

of sick leave in particular. 

Holidays 

Make it a policy to post your company’s holiday schedule every year. You may want to 

use the federal government’s holiday schedule as a guide in deciding your schedule: 

• New Year’s Day 

• Labor Day 

• Martin Luther King Jr.’s Birthday • Columbus Day 

• Presidents Day 

• Veterans Day 

• Memorial Day 

• Thanksgiving Day 

• Independence Day 

• Christmas Day 

The Fair Labor Standards Act doesn’t require you to pay time off for holidays. 

You should clearly state your policy on paid versus unpaid holidays in your handbook. 

Also, you may require that, to be paid for a holiday, employees must work the business 

day before and after the holiday unless they have arranged in advance with their supervisor 

to take vacation or personal time. 

Can you force employees to work on a holiday Title VII allows you to require an 

employee to work on state and federal holidays, including Christmas, if his absence 

would pose an undue hardship to your company. However, Title VII and the First and 

35


The Holiday Pay Issue 

You have some important policy decisions to make when it comes to compensation 

for holidays. Here are some questions and answers: 

• Are employees who work on government-recognized holidays supposed to get paid at 

higher rates 

No, according to the FLSA and the U.S. Department of Labor. Employers have the 

option of offering regular or premium pay for holiday work. 

• If you give workers time off for working on holidays, can you give it without pay 

Yes, according to the FLSA. Employers may give holiday workers time off on an 

alternative day, with or without pay. 

• When a legal holiday falls on a Sunday, must you give employees the following Monday 

off with pay 

There are no state laws or federal regulations that apply to this dilemma. But when 

a holiday falls on a weekend, it is a common practice among businesses to observe 

the holiday on the workday nearest to that holiday. 

14th amendments guarantee workers the right to freedom of religion. To avoid religious 

discrimination claims and morale problems, you should make every effort to 

accommodate the employee whenever possible. Make sure your company policy 

demonstrates an acceptance of all religions and a commitment to reasonable accommodation 

of employees of all faiths. You could state that employees can take religious 

holidays other than Christmas as personal days or as unpaid leave. 

Sample holiday policies 

“XYZ will observe the following days as paid holidays: New Year’s Day, Memorial Day 

(as observed by federal offices), the Fourth of July, Labor Day, Thanksgiving Day and 

Christmas Day. 

“The office will also close early on Christmas Eve and will be closed the day after 

Thanksgiving as well, but these are not paid holidays. 

“Employees may also choose to take the following days off on an unpaid basis if 

they give the company two weeks’ notice: Martin Luther King Day, Presidents Day, 

Good Friday and Veterans Day.” 

—A small Midwest manufacturer 

A second policy lists the holidays observed and then focuses on which categories 

of employees get paid holidays, which simply get the day off, and how each is 

compensated if they have to work on the holiday: 

“Regular employees have paid time off on the holiday, unless otherwise scheduled. 

When the holiday falls on the employee’s regular day off, full-time employees 

may schedule a paid day off within two weeks preceding or following the holiday. 

Part-time employees will be paid only for holidays that fall on their regular workdays. 

If the holiday falls on a non-workday, they will not be paid for it. However, if the 

holiday falls on a regular workday and they are asked to work on the holiday, they 

may schedule a substitute day off with pay.


37 

“Nonexempt employees who are required to work on their scheduled holiday will 

be compensated at their normal rate of pay for the holiday plus one and one-half 

times their base rate for the time they work. 

“Temporary employees who are not required to work on the holiday will have 

the holiday off but without pay. If they are required to work, they will receive straight 

time pay.” 

—A college 

Vacations 

On average, U.S. companies have been cutting back on the number of vacation days 

they give employees. Nationwide, workers now get an average of 11 vacation days per 

year, versus 12 in 1987. Nevertheless, companies recognize the payoff of giving employees 

a respite, and many still insist that employees take vacation on a regular basis. 

In determining vacation policy, you must specify to employees how they accrue 

vacation time, the terms under which vacation is to be taken, how to request the time 

off and what happens to unused vacation if the employee leaves the company. Union 

agreements or individual employee contracts may limit the options. 

Policy considerations 

❒ How much time. Employees earn so much paid vacation per work period. For 

example, a two-week-a-year vacation would accrue at .833 days per month worked. In 

many companies regular full-time employees accrue one day of paid annual leave at 

the end of each month after the first six months of employment. Exceptions: Time spent 

on leaves of absence for jury duty, military service or extended illness usually does not 

count for vacation accrual. 

❒ Eligibility. At what point does the employee become eligible to take vacation, 

i.e., after six months or one year of employment 

❒ Requesting vacation time. How far in advance should employees schedule 

vacation, and to whom do they make such requests How much time may be taken at 

one stretch Normally, employees with seniority will get priority when vacation 

requests conflict. Also, make sure your policy states that the company’s needs take 

priority, so vacations may need to be rescheduled or requests denied. 

❒ Unused vacation time. Can employees receive pay in lieu of vacation At what 

point do they lose accrued vacation time, or may it be carried over from one calendar 

year to the next Many companies insist that employees use accrued vacation within a 

certain period or lose it. 

Sample vacation policies 

The first policy below stresses the importance of taking vacation time by forbidding 

carryovers except when special workloads make it impossible for employees to take the 

vacation due them: 

“XYZ believes that vacation is important to the health and well-being of our 

employees and encourages all employees to utilize their vacation days. Therefore, 

XYZ will not accumulate unused vacation days or pay for unused vacation days. . . . 

In the event special work demands prevent an employee from taking all available


vacation days, however, a request may be made to carry over no more than five days 

into the next vacation cycle. To be effective, approval must be in writing.” 

—An association 

The policy goes on to specify how vacation time accrues and when it may be used. It 

also specifies what happens if the employee is fired before using accrued vacation days: 

“If an employee is terminated prior to completion of the Introductory Period, no 

vacation days are accrued . . . but once that time has passed, an employee will be 

entitled to vacation pay for accrued but unused vacation days on a pro-rata basis.” 

The second policy specifies how vacation days are accrued and alerts employees to 

the need to obtain their supervisor’s approval of their leave: 

“Each full-time employee may take vacation with full pay at such time as is 

mutually agreed upon between the employee and the owner or manager of 

operations. After one year of full-time employment, the employee accrues five working 

days of paid vacation annually; after two years, 10 days; after five years, 15 days; 

and after 10 years, 20 days. If an authorized holiday occurs within an employee’s 

vacation period, equivalent time off with pay will be provided. 

“Full-time employees may carry over up to five days of vacation leave per calendar 

year. If not used, remaining vacation time will be forfeited. 

“All vacation leave must have the prior approval of the employee’s supervisor. So 

please check with your supervisor before making vacation plans. Maximum vacation 

leave to be taken at any one time is 15 days, unless prior approval is granted by the 

manager of operations.” 

—A recording company 

Bad-Weather Time Off 

When it comes to inclement weather, you need to balance your need for productivity 

against the workers’ safety concerns. Some companies allow employees to use personal 

days to “pay” for weather days off if they opt to stay home. Others will allow work 

delays, by which the staff makes up the time later that day or week. 

Begin your policy with: “Unless the office is closed, employees are expected to come 

to work.” Then make it clear that even if the company is open, employees can decline 

to come to work if they think the weather poses a danger. However, they will have to 

use a day of leave or lose a day of pay if they choose to stay home, and they must notify 

their supervisor as soon as they know that they won’t be able to come in. (You may 

want to designate a special phone number your employees can call before the office 

opens that day.) 

Caution: You can’t dock exempt workers at an hourly rate for being late or when 

your business is closed; that would violate the FLSA and make the exempt employee 

eligible for overtime pay in the future. You are legally entitled, however, to dock 

nonexempt workers at an hourly rate. 

If your time-off policy gives employees personal days to use as they wish, it will 

make the policy more palatable. Another option is to allow unscheduled leave in 

weather emergencies.


39 

Tip: You might want to reward those workers who do make it into the office, with 

free lunch or an extra vacation day, for example. 

As part of your policy, decide under what circumstances your office will close. For 

example, you may want to follow the lead of large local firms or government offices, 

especially if you do business with them. Or, you might decide to close only when the 

Weather Service warns of blizzard conditions or hurricane-force winds and rain. 

Whatever your decision, include a notification procedure in your policy. If you 

follow the closing schedule of local governments or schools, that can be as simple as 

telling workers to tune in to the news. If you close on a case-by-case basis, you may 

want to set up a phone chain, leave messages on employees’ voice mail or e-mail, post 

notices with your local all-news station or use a combination of these methods. 

Sample bad-weather policy 

“If federal offices in Kansas City are not open for business due to severe weather 

conditions, then our office will not be open for business that day. If during the day, 

blizzard conditions arise and federal offices in Kansas City close early, we will do likewise. 

Employees will not be paid for the period of time that the office is closed.” 

—A small Midwest manufacturer 

Bereavement 

Your company must recognize the need for an employee to take time off in the event of 

a death in the family. In your policy statement you should specify the number of days 

of leave granted, whether the time off will be paid, and any restrictions you want to 

place on the definition of “family.” 

Sample policy 

“Up to four days of paid leave may be taken in the event of the death of a spouse, 

offspring, sibling, parent, spouse’s parent, grandparent, son- or daughter-in-law or 

life partner of the employee. Exceptions may be granted by the owner under extenuating 

circumstances when requested by the employee.” 

—An audio shop 

Jury Duty 

Jury duty is a key public policy consideration and a civic duty for all able adult citizens. 

As a result, you have to allow employees time off to serve, but in most states you 

are not required to pay them while on jury duty. In states that require you to pay 

employees while they serve, the amount varies from full pay for the entire length of 

their service to so much for up to so many days. 

Few states specifically forbid you from requiring employees to use vacation or sick 

days while on jury duty. But you are better off avoiding such a tactic because it could 

leave you liable under the legal theory of “public policy torts.” Under this theory, 

employers are liable for damages if their actions violate public policy. In most states, 

trying to intimidate workers from serving jury duty (by forcing them to use vacation 

days) violates public policy.


More than half the states have blanket policies that make it illegal to terminate 

employees who serve on juries. In those states you are required to hold open a job for 

employees who are selected for jury duty. 

Specify in your policy whether employees will be paid for jury service and, if so, for 

how long. Some options: 

• Full pay for the entire period of jury service. 

• Partial pay for the entire period. 

• Full pay for up to so many days and partial or no pay after that period. 

Some employers that pay the employee’s full salary while they are on jury duty 

require the employee to endorse to the company the jury pay they receive—a practice 

that employees will perceive as fair so long as it doesn’t come as a surprise to them. 

Given the wide variation in state laws, you should contact your attorney before 

formulating a written policy. 

Sample jury duty policy 

“If you are called to serve jury duty, XYZ encourages you to fulfill your right and duty 

as a citizen. Time off will be granted for the duration of your jury duty. Please provide 

your jury duty summons to your supervisor as soon as possible so that proper arrangements 

can be made to cover in your absence. You will receive your full salary for time 

spent on jury duty up to ten (10) business days. You will also be eligible for employee 

benefits as if you were actively employed during an approved jury duty. In the 

event you are dismissed from jury duty early on any day, you must report to work for 

the remainder of the day. 

“In the event you are summoned to appear in court as a witness, you are allowed 

unpaid time off.” 

—A sales promotion firm 

Military Leave and Reserve Training 

As the military trims its active force, Reserve units make up an increasing percentage 

of the armed forces and are getting more training. So you have to expect to grant more 

time off for Reservists’ training, often on shorter notice than you may have been given 

in the past. 

Under federal law employers are prohibited from discriminating in their employment 

practices against persons serving in the uniformed services. After an employee 

has gone on military leave, you are required to re-employ him if his absence is less than 

five years and if he reapplies with your company within the appropriate time limits. 

However, you don’t have to reinstate him in his old job as long as a new position offers 

him similar status, seniority, benefits and pay. 

Sample military training policies 

“XYZ’s policy is to comply with all applicable laws that afford protection rights to 

employees serving duty with the military, the Reserve and the National Guard. 

“There are two situations in which military leave is granted: temporary military duty 

(including summer encampment) and active duty. The company will supplement pay 

for up to two weeks per year for employees serving temporary military duty. For active


41 

duty (such as during the war with Iraq) or enlistment, leave will be unpaid. Upon your 

return from military service you may be eligible for reinstatement as provided in the 

Uniformed Services Employment and Reemployment Rights Act. 

“If you enlist or are called to active duty, your benefits will not continue beyond the 

end of the month in which leave begins. 

“Requests for military leave should be forwarded to your manager or supervisor.” 

—A magazine publisher 

“XYZ’s policy is to comply with all applicable laws that afford protection rights to 

employees serving duty with the Military, Military Reserve and National Guard. 

“Members of a Military Reserve or National Guard unit may have an annual 

training period. When an employee receives orders for such training, he or she should 

promptly notify the supervisor, detailing the duration of the required service. Regular 

pay minus military pay received for regularly scheduled workdays will be provided for 

up to two weeks. 

“If an employee so desires, he or she may use vacation time for military service. 

Any additional time needed for military service will be a leave of absence without 

pay. Should an employee be required to take an extended leave without pay to fulfill 

his or her military duty, eligibility for reinstatement after military duty or training is 

completed is determined in accordance with applicable federal and state laws.” 


Personal Days 

In addition to vacation and sick days, many companies offer “personal days” for 

employees to use as they wish. In this era of dual-income families, personal days have 

become an important benefit that allows employees to take care of personal matters 

during the day. They can also be used effectively for employees who wish to observe 

religious holidays other than Christmas, as well as “long weekends” combined with 

holidays (such as the Friday after Thanksgiving as a personal day). Many companies 

have built personal days into their paid-time-off banks. 

Sample policy 

“Each employee is entitled to two ‘personal days’ per year to attend to personal 

business, observe religious or other ethnic holidays, celebrate other days of personal 

significance, attend court hearings or for bereavement. Requests for personal days 

should be made to your supervisor at least one week before the requested time off 

so that the supervisor may consider work priorities before approving such requests. 

“Eligibility for paid personal days during the first year of employment is determined 

by the date of hire. Employees who are hired between Jan. 1 and May 31 are 

eligible for two paid personal days for the rest of the year. Those hired between 

June 1 and Oct. 1 are eligible for one personal day. Those who are hired after Oct. 1 

must wait until the next calendar year to become eligible for paid personal days. 

“Personal days must be used prior to Dec. 31 each year. XYZ does not carry over 

to future years any unused personal days and does not give pay in lieu of unused personal 

days.


“Personal days must be taken in increments of at least two hours. Personal hours 

will be added and tracked on your pay stub by the Payroll Department.” 


Voting 

Voting is a public policy concern akin to jury duty. You should encourage employees to 

perform this civic duty, but you must stipulate whether it is paid or unpaid time off. 

Compare the sample policies below. 

Sample policies 

“Employees will be given two hours off when necessary to vote in federal, local 

or state elections. Requests for such leave must be submitted in writing to the 

personnel manager at least 48 hours in advance of the election.” 

—A marketing association 

“On Election Days employees are encouraged to vote, but they are expected to do 

so either before or after work. If there are extenuating circumstances, arrangements 

can be made with the supervisor for unpaid time off to vote.” 

—A retail firm 

Sick Days 

Sick days and family or medical leave are the most complicated time-off policies, so 

they warrant special attention by you and your managers. Abuse of sick time has major 

implications for productivity, and placing an extra burden on employees during a 

co-worker’s absence can create morale problems and disharmony. 

❒ Your policy should specify (1) how much time accrues per specified work period; 

(2) whether sick time can carry over from year to year; and (3) whether any part of 

accrued sick time is payable to an employee if she leaves the company. Sick time is normally 

accumulated in much the same manner as vacation time. 

❒ You should define what you mean by sick leave. Some companies insist that it is 

not extended vacation time and must be used for reasons related to illness in the 

employee’s immediate family. But other firms offer workers a given number of “sick 

days” and don’t care whether employees who call in sick are actually ill. 

❒ It’s a good idea to insist that employees speak directly with their supervisors 

when they call in sick. If they leave a message, have the supervisor return the call 

and ask what’s wrong. If the employee simply says he feels sick, ask for more details. 

(Does his head hurt Did he eat something that disagreed with him Does he think he 

will be in tomorrow) The answers will help you arrange for a temporary replacement 

if necessary and also help you determine if the leave might be covered by the FMLA. 

Have the supervisor document the reason for the sick leave and note the date, day 

and time.


43 

Ways to limit sick-leave abuse 

If you’ve had a lax sick-leave policy and want to improve it, don’t get tough overnight. 

Make any changes clear to employees first. To send a message that you are on the lookout 

for abuse, issue updates to your employee manual or your posted sick-leave policy. 

You might want to try altering your policy in one of these ways: 

❒ Consider reducing the amount of sick leave available to employees. Some studies 

have shown that the more generous the sick-leave policy, the more sick leave workers 

will take. 

❒ Implement “paid-time-off” banks. In the Hewitt Associates poll mentioned 

earlier, unscheduled absences decreased at nearly half of the 360 companies that implemented 

PTO plans. One disadvantage of PTOs, though, is that they clearly classify sick 

leave with earned vacation time. Accordingly, if employees who’ve been dismissed sue 

for pay, courts are more likely to rule that they’re entitled to all the time in their 

PTO bank. 

❒ Offer extended sick leave. Extended sick leave is another way to reduce the 

expense and disruption of traditional sick-leave plans while providing income protection 

for those who are seriously ill. A Minnesota telephone company started offering 

up to 12 weeks of extended sick leave to workers when the need was verified by a 

physician and cut its regular sick leave from 12 to 5 days a year. The company said 

sick-leave absences declined 44.1 percent from 1991 to 1993. 

❒ Cash out unused sick days. In the Hewitt survey, 12 percent of employers pay 

workers 50 percent or even 100 percent for the sick leave or PTO they didn’t use, either 

at the end of each year or when the employee leaves the company. The idea is to 

provide an incentive for employees not to use sick time unless they really need it. The 

company bears the expense, but more work gets done. The sticking point is that you’re 

paying employees extra to do what they’re supposed to do. 

❒ Establish a leave-share program. A policy popular in federal agencies is to allow 

employees to donate unused leave to co-workers suffering from extended illness. For 

companies without extended sick-leave policies, the policy can build community 

spirit in the office while providing income protection for those who need it. 

Observation: Under the Family and Medical Leave Act (see Section 9) employers can 

require workers to take all their available paid vacation, sick time and personal days as 

part of their FMLA leave. This policy limits the length of time employees are absent. 

However, if the employee uses sick leave or PTO for illnesses that wouldn’t be covered 

by the FMLA, you cannot charge that time against the FMLA entitlement. 

Sample sick-day policies 

“Sick leave is earned from the first day of employment at a rate of one (1) day per 

month, culminating in a maximum of ninety (90) days. 

“After an employee is absent for three (3) consecutive days, a physician’s statement 

may be requested. 

“Sick leave is to be used for medical, dental or optical reasons only; it is not to be 

construed as a secondary or ‘add on’ vacation time. If so used, it will be considered 

grounds for termination by XYZ.


“Upon retirement or termination of employment, any unused sick leave lapses, and 

no payment will be made for such unused time.” 

—A manufacturer 

“Full-time employees accrue one day of paid sick leave at the end of each month, 

beginning with the first month of employment. Sick leave may be taken for any bona 

fide reason. Sick leave may not be taken in increments of less than two hours. 

“Up to 12 days of unused sick leave may be carried over from one calendar year 

to the next. Each employee is allowed a maximum of 12 sick days in any calendar 

year. Unused accrued sick leave will not be paid out upon termination.” 

—A newspaper publisher 

Disability Leave 

Although the Family and Medical Leave Act requires employers to provide unpaid 

leave for an employee’s serious health condition or that of a family member (see next 

chapter), your company may also wish to provide paid disability leave. Make sure you 

have a written policy to ensure consistency. Specify who is eligible, how long the leave 

may last, and how the disability leave relates to sick leave. Consider distinguishing 

between short-term and long-term leave, for which you will probably want an insurance 

policy. 

Sample disability policy 

“Short-term: The company provides a short-term disability benefit to eligible employees 

with a medically certified disability (a signed note from your doctor certifying that 

you are medically disabled and unable to return to work is a ‘medically certified disability’). 

To be eligible for this benefit, you must be a full-time employee with one year 

of continuous service. Eligible employees may take a period of up to 60 days’ paid 

leave under this benefit. Short-term disability leave runs subsequent to your sick 

leave. Once you exhaust your short-term disability benefits, there is a one-year waiting 

period until you will again be eligible for short-term disability. 

“Long-term: The company provides a long-term disability policy. This policy takes 

effect on the 91st day of absence from the company.” 

—An accounting firm

9 

FMLA Leave 

By now you probably know that you are required to inform your 

employees about their FMLA rights. If you don’t have a clearly 

written policy, you and your employees will be embroiled in misunderstandings, 

especially when it comes to determining what type 

of leave counts as FMLA leave. And if you don’t choose the right 

kind of “measuring year” to track FMLA leave, an employee could 

legally end up taking 24 weeks of such leave instead of 12 weeks. 

More on that important point later. 

First, let’s review the basics of the law. The Family and Medical Leave Act applies to 

companies with 50 or more employees working within a 75-mile radius during each of 

20 or more calendar workweeks a year. (The head-count includes part-timers and 

temps, and many states set a lower threshold of workers.) 

The law allows up to 12 weeks of unpaid leave for an employee’s “serious health 

condition”—“an illness, injury, impairment or any physical or mental condition that 

requires inpatient medical care or continuing treatment by a health care provider”— 

or that of his spouse, child or parent (not an in-law). It also covers caring for a newborn 

or an adopted or foster child. While an employee is on leave, you must continue to 

provide benefits, and when he returns, you must reinstate him to the same or an 

equivalent position. 

To be eligible for leave under the FMLA, an employee must work for your company 

for at least 12 months (not necessarily continuous months) and clock at least 1,250 

hours over the 12 months leading up to FMLA leave. 


1. Draft a written FMLA policy. You should prepare a comprehensive policy on FMLA 

leave and make it available to your employees. By committing your policy to paper 

and distributing it companywide, you and your employees can better understand how 

the law works and what’s expected of both parties. You will also be satisfying the law’s 

requirement that employees must be notified of their rights and obligations under 

the FMLA. 

45


2. Post the Labor Department’s notice. The DOL’s “Notice of FMLA Rights” poster 

should appear in a prominent spot in your workplace. If you fail to post the notice, you 

are subject to fines. More importantly, you could undermine your legal standing if 

you wanted to terminate an employee who has used up his FMLA leave or you were 

otherwise defending yourself in court. You want to show that you acted in good faith 

in educating employees about the law. Posting the DOL’s notice is an easy step in 

that direction. 

3. Respond within two business days to employees’ requests for FMLA leave. 

Once you learn that an employee’s absence may qualify under the FMLA, every day 

counts. The sooner you notify the employee in writing that his absence is FMLA 

protected, the sooner you begin the 12-week countdown until the leave is exhausted. If 

you fail to send a letter designating FMLA-qualifying leave, an eligible employee can 

take advantage of your lack of responsiveness: He can take 12 weeks of FMLA leave in 

addition to any time taken prior to receiving your letter. 

4. Include workers’ comp absences as FMLA leave. In most cases workers’ comp 

absences also qualify as FMLA leave. That means you should promptly designate time 

missed for workers’ comp injuries to activate the 12 weeks of allowable FMLA leave. 

Otherwise, you enable employees to take 12 weeks of FMLA leave on top of any time 

taken for a workers’ comp injury. 

5. Explain your company’s internal rules on using FMLA leave. Besides letting 

employees know that their leave qualifies under the FMLA, you must send written 

notification of the rights and obligations of both employer and employee. These provisions 

include: 

• The employee’s obligation to arrange for medical certification to substantiate the 

reason for the leave. 

• Your requirement that an employee use all of his accrued paid leave before taking 

unpaid leave. 

• Your right to substitute paid leave for unpaid leave. 

• Your rule that employees on FMLA leave pay a portion of their health insurance 

benefits and the employees’ liability for paying the premiums if they do not return 

from leave. 

• Your rule that employees provide a certificate that they’re fit for duty after the leave. 

• The employee’s status as a “key employee,” if applicable. (You can deny reinstatement 

of a key employee if you can prove that reinstating him at the end of his 

leave would cause your business “substantial and grievous economic injury.”) 

• The employee’s right to return to the same or an equivalent job after the leave. 

6. Establish a measuring system for tracking annual FMLA leave. There are five 

measuring-year methods you could use: 

• Calendar year. 

• A year beginning on the anniversary of the employee’s starting date at your 

company.


47 

• Rolling period based on the date of the first FMLA leave. 

• A “leave year,” such as your fiscal year. 

• A year mandated by state law. 

Be careful in selecting your tracking system. You wouldn’t want to give employees a 

chance to elect the most advantageous measuring method when they take their leave. 

For example, an employee could decide to combine two 12-week periods of leave for a 

24-week absence unless you used the rolling-period method, which would prevent her 

from taking more than a single 12-week leave. 

7. Verify serious medical conditions. Require that all employees submit medical 

certification to document a serious health condition within 15 days of their request for 

FMLA leave. The law permits you to request a second or third opinion (paid for by the 

employer). You can also track recertification. 

8. Deduct intermittent leave from an employee’s 12-week entitlement. Tracking 

intermittent leave can prove a headache for employers. But unless you charge every 

instance of intermittent leave against an employee’s 12-week entitlement, you may give 

away more leave than the law requires. While many employers track intermittent leave 

using one-hour increments, you can choose the lowest normal measure of time that you 

already have for pay purposes. In any case, realize that employees taking family and 

medical leave often miss a few hours at a time for doctors’ appointments or physical 

therapy, and that time can add up fast. 

9. Continue to pay bonuses for attendance. If you pay bonuses for attendance, 

you’re still on the hook if an employee takes FMLA leave. That’s because someone who 

would qualify for an attendance or safety bonus except for the time missed while on 

FMLA leave must receive any incentive payments you award to employees in similar 

jobs. You’re under no obligation, though, to pay performance-based rewards to 

employees on FMLA leave. 

10. Treat the ADA separately from the FMLA. An employee returning from FMLA 

leave may also qualify to receive reasonable accommodations based on the Americans 

With Disabilities Act. Upshot: As required under the ADA, you may have to modify an 

employee’s schedule or work environment or even permit additional time off beyond 

the 12 weeks of FMLA leave. 

Notice Requirements 

Eligible employees who want to take FMLA leave must give you 30-day advance notice 

when the need is foreseeable, such as when pregnant workers anticipate time off for 

childbirth. When it’s not foreseeable, they need to inform you “as soon as practicable 

under the facts and circumstances of the particular case,” which means verbal notification 

within one or two business days of realizing the need for FMLA leave. Most of the 

problems erupt during these unforeseeable medical emergencies, when employees 

(or a family member or a doctor) may not notify you promptly of their absence. 

To give proper notice, employees must explain that family and medical leave is 

needed. They don’t need to mention the FMLA as long as they provide enough information 

so that you can gather the facts and decide whether their leave qualifies under


the FMLA. In short, as long as you’re alerted about the need for the leave, the burden 

is on you to draw a preliminary conclusion about whether the leave falls under the 

FMLA. Some employers, however, choose to waive the FMLA notice obligations 

for their employees. They may have more generous or flexible policies that give 

employees a reprieve if they neglect to provide prompt notice as required by the law. 

In any case, your legal obligation to extend FMLA-protected leave can be triggered 

only if the employee properly notifies you. Once you receive that notice, you’re 

expected to monitor the situation and determine whether it qualifies under the law. 

➤ Recommendation: From a practical standpoint, if you think a request for FMLA 

leave won’t put an undue burden on your business, don’t reject it on a possible technicality. 

It will cause ill will and may land you in court. Workers who prevail in court are 

entitled to recover lost wages and benefits plus all their attorneys’ fees and court costs. 

Moreover, if they can prove you intentionally violated the law, they can get an 

additional 12 weeks of pay. 

For more information on complying with the FMLA, contact the Department of 

Labor’s hotline at (800) 959-FMLA in Washington, D.C. 

SAMPLE POLICY 

“FMLA-eligible employees may take unpaid leaves of absence for the following 

reasons: 

“Family leave: The birth of your child or the placement of a child in your home for 

adoption or foster care. FMLA family leave must conclude within 12 months after the 

birth or placement of your child. 

“Medical leave for yourself or family care: A serious medical condition of yourself 

or a family member (child, spouse, parent or one who stood in place of a parent). 

A serious health condition is an illness, injury, impairment or physical or mental condition 

that involves inpatient care, treatment or supervision by a health care provider. 

A serious health condition includes any period of incapacity due to pregnancy or for 

prenatal care. 

“Any paid leave to which the employee is entitled at the time of the leave must be 

taken as part of the 12-week leave, with the remainder of the leave unpaid. In other 

words, if the employee is entitled to two paid weeks of vacation plus five sick days 

when he or she goes on leave and takes the full 12 weeks off, the employee will be 

paid for the first three weeks of leave and take the remaining nine weeks without pay. 

“You may take up to a total of 12 workweeks for family or medical leave in any 

12-month period. A 12-month period is determined by reviewing the 12 months prior 

to the date the requested leave is to begin. 

“Eligibility: If you are an active employee, you are eligible for family and medical 

leave unless you have worked less than 1,250 hours during the 12-month period 

before the leave is to commence.


49 

“Procedures: After discussing your need for leave with your manager or supervisor, 

you should submit any request for an FMLA leave to the Human Resources 

Department at least 30 days prior to the date you wish to begin the leave if the need 

for leave is foreseeable. . . . 

“Medical certification: Employees taking FMLA medical leave for self or family 

care must submit a medical certification to Human Resources. XYZ may request, at 

its own expense, a second medical opinion. Should the first and second opinions differ, 

XYZ may require, at its own expense, the opinion of a jointly approved health care 

provider, whose opinion shall be binding. In addition, XYZ may periodically require 

recertification of a medical condition. 

“In most cases, upon returning from FMLA medical leave for self-care, you will be 

required to provide medical certification that you are able to return to work. 

Requests for such certification will be job-related and consistent with the business 

necessity of XYZ. 

“Benefits and job continuation: All benefits, if you elect, will continue through the 

leave period. You must continue to contribute your share of any medical and insurance 

premiums. If you are using paid leave (i.e., vacation, sick leave, personal days) 

for your leave, you will continue to accrue vacation and sick leave, and you will be 

paid for holidays that occur during the paid portion of your leave. Vacation and sick 

leave will not accrue during any unpaid leave, and you will not be paid for holidays 

that occur during your leave. . . . When you return from FMLA leave, you will be 

restored to the same or an equivalent job position, unless your position has been 

affected by a reduction in force, reorganization or other change that would have 

occurred had you not been on leave. 

“FMLA medical leave may be taken intermittently or on a reduced work schedule 

when medically necessary, subject to medical certification. In such circumstances, 

XYZ may temporarily transfer you to an alternative position for which you are qualified 

and that better accommodates the recurring periods of leave. If a transfer is 

made, your pay and benefits will not be reduced.” 

—A diversified media organization 

Sample Letter: Notifying Employee of FMLA Leave 

Dear [name of employee]: 

Enclosed is an important notice regarding your leave of absence. The notice 

confirms that your leave will be counted against your annual allotment of leave under 

the Family and Medical Leave Act (FMLA). 

The notice also provides additional information regarding your rights and responsibilities 

under the FMLA. Please pay special attention to those items that explain 

your obligations regarding continuation of benefits and your responsibility to provide 

[name of company] with information about your leave. For example, to remain eligible 

for FMLA leave, you must furnish periodic certification from your health care provider 

of your need to take leave. 

Additionally, we request that you give us permission to contact your health care 

provider so that we may clarify your certification of need for leave.


Please sign the enclosed permission form and return it to us in the enclosed 

envelope. 

Thank you for your help. Please contact me if you have any questions. 

Sincerely, 

[Director of Human Resources]

10 

Workers’ Compensation 

To lower your workers’ compensation costs, you might need to 

toughen your policies. Focus on reducing claims by establishing 

a company safety program and enforcing a strict absenteeism policy 

and return-to-work policy. And don’t forget to double-check any jobrisk 

classifications that seem artificially high. 


Workers’ comp costs continue to put many of America’s businesses at risk. The 

National Academy of Social Insurance estimates that workers’ comp insurance costs 

employers more than $50 billion annually. About half the states have enacted laws to 

lower workers’ comp costs. 

The goods news: Employers are reaping the rewards of improved work site safety. 

States that have realized the biggest reductions are slashing workers’ comp rates. The 

same is true for industries that have seen across-the-board reductions in workplace 

deaths. A few years ago, Farmers Insurance Group, for example, slashed rates in three 

states—25 percent in Kansas, 20 percent in Utah and 16 percent in Michigan—for 

employers who had adopted safety controls. 


When implementing policies to reduce workers’ comp costs, keep in mind that 

the workers’ comp system is state-based. Each state has it own regulations, which affect 

your comp rates and medical fee schedules. So while you’re developing your multipronged 

policies, be aware of any idiosyncracies in your state law that could 

affect your program. 

Here are some ideas to get you started: 

❒ Compare your company’s current incidence and severity rates with those from 

previous years, as well as with other companies in your industry. If you don’t know 

how to calculate these rates, contact your state workers’ comp office. 

❒ Link pay raises to safety. You may want to consider a policy that links managers’ 

pay raises to safety improvements at the work site. This will lower workers’ comp costs 

by making supervisors personally responsible for reducing accidents. 

51


❒ Change at-risk behavior. The majority of workplace injuries can be prevented or 

reduced by modifying behavior. Pinpoint the types of conduct that put workers at risk, 

then develop a list based on your company’s accident history and the expertise of your 

employees. Form a safety committee to determine which work site conduct is most 

harmful and how to resolve it. 

❒ Ferret out fraud. There may be a few rotten apples in your company who will 

claim to be seriously injured when, in fact, they’re not. That’s one reason your company 

should have a policy that includes background checks on job applicants. Also, 

you can use your own investigators or outside vendors to conduct surveillance of 

suspected claimants. 

Caution: If you ask an applicant workers’ comp-related questions before making a 

job offer, you will run afoul of the Americans With Disabilities Act. But after you make 

a job offer, you can legally ask the applicant how many times he has filed for workers’ 

comp, as well as the reasons for the claims. 

There’s good reason to fight insurance fraud. In Massachusetts, for example, comp 

fraud constitutes 15 percent to 25 percent of insurance expenses, costing businesses in 

the state between $213 million and $355 million annually. 

❒ Promptly investigate any accident. Take statements from fellow employees who 

witnessed the mishap. Notify your workers’ comp insurer immediately. 

❒ Craft a tough return-to-work policy. The sooner injured workers return to work, 

the lower your workers’ comp costs will be. So develop a no-nonsense approach to 

return-to-work along with a stated policy that injured workers will receive the best possible 

medical care. Assign the recovering employee to light-duty work if necessary. You 

don’t have to return him immediately to his old job. Be flexible in making return-towork 

assignments. If the worker is out more than 90 days, consider retraining as an 

option. (For a sample return-to-work policy, see box below.) 

❒ Inform all employees how much workers’ comp insurance costs your company. 

Make clear the correlation between insurance costs and the incidence of accidents. Point 

Sample Return-to-Work Policy 

Cable Systems International, a cable manufacturer in Phoenix, lowered its workers’ 

comp medical costs by 84 percent from 1994 to 1996 after it instituted a tough 

return-to-work program to get injured employees back to work in the shortest time 

possible. Lost-time expenses fell 98 percent, and disability cases declined from 

427 in 1994 to 142 in 1996. Only 6 of its 240 comp cases in 1996 involved lost time. 

Cable Systems’ program places severe restrictions on injured workers: 

• A five-day waiting period for disability benefits. 

• A tough definition of disability: “an inability to perform any proffered work.” 

• Required participation in a rehabilitation and modified work program. 

• A limit of 23 days of paid time off per year, including vacations, sick leave and 

holidays.


53 

out, for example, that an injury resulting in lost time now costs nearly $18,000 on average, 

compared with $6,500 in 1981, according to the National Council on Compensation 

Insurance (NCCI). 

❒ Keep workers informed. Many companies publish internal newsletters on safety 

issues. You might also want to consider giving all employees a pocket-sized version of 

safety tips, which they can study at work or at home. 

Job-Risk Ratings on Track 

How your employees’ jobs are classified for risk is a key factor in determining your 

insurance costs. Many small businesses are paying artificially high workers’ comp 

premiums because their employee job-risk ratings are overstated or many workers’ 

illnesses or injuries are being wrongly classified as work related. 

Job titles are rated in 37 states by the NCCI, whose ratings often affect classification 

systems in the remaining states. If your employees are mistakenly pegged with higherrisk 

job classifications, your premium will be undeservedly high. To make sure your 

job classifications match the real work being done at your company, you may want 

to check out NCCI’s Scopes Manual, which lists job descriptions and ratings for more 

than 700 positions. If you think your ratings are off base, consult with the NCCI at 

(800) 622-4123, your insurance agent or your state workers’ comp agency. 

Curbing Medical Costs 

Many companies are using managed care to control workers’ comp. Some states have 

actually mandated use of managed care for all companies. Such programs include: 

treatment of work-related injuries within medical networks; case management 

approaches that involve all parties in the course of action following an injury; 

utilization reviews that assess proposed treatments; and bill auditing. 

Because of the explosion in workers’ compensation expenses in the early ’90s, many 

states shifted the emphasis of their laws from increasing benefits for injured employees 

to containing costs for employers—especially medical expenses. Those medical 

expenses now account for approximately 40 percent of workers’ comp costs while cash 

benefits account for 60 percent. 

Develop a Safety Policy 

Your main objective is to develop a safety and health policy that ensures employees’ 

well-being but in turn reduces workers’ comp costs. Your managers must buy into this 

effort on an ongoing basis. If interest wavers, workers are less likely to follow the safety 

rules and injuries will rise. 

Often, such safety plans are developed by a safety committee or a self-directed work 

team. Here are some tips for your committee to consider in developing a good plan: 

Communication. Conduct company meetings to explain policies and give orientation 

to new hires. Do regular follow-up sessions. Post safety and health policies prominently 

in the workplace.


Careful work site analyses. Usually, a job analysis includes four criteria: the worker, 

the job duties, the equipment, machinery or tools used and the physical environment. 

If you do not have safety specialists on staff, consider hiring state safety professionals 

or private occupational consultants familiar with your industry. 

Training sessions. Educate supervisors and employees about the proper way to use 

company equipment. Instruct your staff to be on the lookout for potential hazards, and 

establish a regular procedure for reporting these problems. 

Enforcement. Emphasize that all employees, including managers, must follow 

safety and health policies. Establish a discipline system for violation of safety rules. 

Follow-up. Mandate regular self-inspections, and follow up on any hazards found 

during the inspections. 

SAMPLE POLICY 

“In conformity with state workers’ compensation acts, XYZ carries an insurance 

policy providing for physical injury and loss of work time to an employee who sustains 

an injury on the job. These laws vary from state to state, but most provide for limited 

weekly compensation when disabled, hospital and doctors’ costs, payments for 

specific injuries, as well as certain death benefits. Payments are coordinated with 

short-term and long-term disability benefits. 

“If you are injured on the job, please notify your supervisor immediately.” 

—A printing company

PART IV: Employment Policies 

11 

Hiring 

If you have only a few employees and one person does all the 

hiring for your company, you may not see the need to have a 

formal set of hiring protocols. But you’d be well advised to draw up 

guidelines to ensure that you get the best person for every job and 

avoid breaking any federal, state or local laws in the process. 

You should be willing to lavish a lot of time on hiring. Experts say the costs of a bad 

hire usually far exceed any amount of extra effort expended in making the best possible 

hires. And if there’s one thing today’s job applicants are savvy about, it’s their legal 

rights. Mistakes made in the hiring process, however innocently, are all too likely to 

spark legal action down the road. 


The key legal issues are job discrimination, personal privacy and job security. Asking 

the wrong questions in a job interview or giving personality tests may run you afoul of 

antidiscrimination and privacy statutes, while talking about job security may limit your 

freedom to fire at will. To protect your rights, examine your hiring policies for possible 

legal exposure and redraft them as needed. Then make sure that every manager on 

your team is thoroughly versed in the protocol and follows it to the letter. 

Take the time to train managers in the recruiting and screening process. A sound 

hiring policy includes the following: a well-crafted job description, wide recruiting 

methods, an effective job application, an organized interview, possible testing, careful 

reference checking and making the final offer. 

Job Descriptions 

An explicit job description will help you hire the right person to perform the job. Plus, 

a good job description will be a useful tool should you ever need to defend yourself 

in court: for example, in suits alleging that you refused to accommodate candidates 

protected by the ADA. Reason: An applicant who is able to perform the “essential 

functions” of the job is considered qualified for the job and thus protected by the ADA. 

A good job description is a working document that clearly spells out the duties of the 

position and later provides a way to measure an individual’s performance. It gives both 

55


management and the employee a clear understanding of the job and how it fits into 

your organization. A job description should be reviewed and updated each time a 

replacement is sought. 

Remember to include in job descriptions any physical requirements that may be 

associated with each position. Also, if you require a pre-employment medical exam, 

make sure the doctor reviews the job description and bases his medical opinions on the 

requirements of the position. 

Job Postings 

Make it a policy to let employees know about job openings in your company. Posting 

job openings will improve employee morale, and it will help you promote from within 

and get referrals from employees who may know others who’d like to become a part of 

your team. You may even want to offer bonuses to employees who refer candidates you 

eventually hire. 

There are no federal requirements for posting job openings from within, except for 

governmental entities. However, if a company is charged with discriminating against a 

protected class in hiring, a good defense is a consistent policy of the widest possible 

advertisement for job openings, including internal postings, media ads and recruiters. 

This is why, when you look through the classifieds on any given weekend, you will 

notice the popular boilerplate language at the bottom of many ads: “Equal Opportunity 

Employer.” 

Sample job-posting policies 

“XYZ believes that job opportunities are often best filled from within the organization. 

Therefore, XYZ maintains a job posting system so you can learn about job openings 

and express interest in those for which you are qualified. 

“To apply for a posted position, you need to have the required skills, have been in 

your current position for at least one year and have at least satisfactory performance, 

attendance and punctuality.” 

—A financial services firm 

“Vacancies within the company are normally posted on the company bulletin 

board. Interested employees should contact the listed supervisor to apply for the 

position. It is your responsibility to inform your current supervisor of your interest in 

a posted position before you contact the listed supervisor. As an employee, it is a 

good idea to keep your supervisor informed of your job aspirations, any educational 

courses you are taking, degrees earned or other information pertaining to your professional 

development. 

“The company reserves the right to select, at its sole discretion, persons not currently 

employed by the company in filling vacant positions.” 

—A telecommunications company


57 

Employment of Relatives 

As companies today struggle to find and retain good employees, it may make sense to 

consider hiring a relative of a proven, loyal employee. But relatives working together 

don’t always make for one big happy family, as many companies have discovered. 

Family conflicts can spill over into the workplace, or other employees may mutter 

about favoritism if, say, their manager is also supervising her own daughter. 

To avoid these conflicts, many companies allow employment of relatives only if they 

don’t work in the same department or are not in a reporting relationship. A written policy 

can help ensure consistency. How will you define who is a “relative” And if two 

employees get married or form a domestic partnership, who will decide which one 

needs to be transferred or terminated Think through these issues, and establish a policy 

that’s right for your company. 

Sample policy 

“The employment of relatives in the same area of an organization may cause 

serious conflicts and problems with favoritism and employee morale. In addition to 

claims of partiality in treatment at work, personal conflicts from outside the work 

environment can be carried into day-to-day working relationships. 

“For the purposes of this policy, a relative is any person who is related by blood or 

marriage, or whose relationship with the employee is similar to that of persons who 

are related by blood or marriage. 

“Relatives of persons currently employed by XYZ may be hired only if they will 

not be working directly for or supervising a relative. XYZ employees cannot be 

transferred into such a reporting relationship. 

“If the relative relationship is established after employment, the individuals 

concerned will decide who is to be transferred. If that decision is not made within 

30 calendar days, management will decide. 

“In other cases where a conflict or the potential for conflict arises, even if there is 

no supervisory relationship involved, the parties may be separated by reassignment 

or terminated from employment.” 

—A professional services firm 

Job Application Forms 

Ever wonder why you were asked to fill out a job application even though you had 

already sent in a résumé Because a job application provides a written record of historical, 

verifiable information on each candidate. Standard forms make it easier to compare 

applicants’ qualifications and to find information the interviewer needs to discuss 

in the job interview. They also give you an opportunity to (1) communicate important 

information to the applicant, such as your employment-at-will policy, (2) obtain the 

applicant’s signed permission to gather background information on her and (3) get her 

signed verification that the statements made in the application are true. 

Application forms serve another essential purpose. Your company must report 

a large amount of information to various federal agencies, especially to the Labor 

Department and the IRS. The application form is an efficient tool for gathering this data.


Finally, if there should ever be litigation over a hiring or firing decision, remember: 

Applications count as legal documents. If you discover the candidate lied on the application, 

you’re on safe legal ground if you refuse to hire him or fire an employee if you 

find out about it later. 

If you don’t already have a standard application form, you can purchase one or 

design your own. Be sure it asks only for job-related and legally required information. 

Remember: What you can’t ask in an interview, you can’t ask on a job application. 

Always ask yourself whether the information you’re requesting will help you make a 

selection. If not, drop the question. 

Contents of a standard form 

Most application forms provide the following: 

• An EEOC statement (see page 59) 

• Statement of the at-will employment relationship 

• Statement, if applicable, that the applicant may be asked to take a drug test 

Most request the following: 

• Statement verifying that the information provided by the applicant is true 

• Authorization for the employer to check references and gather background 

information 

• Professional references, including name of the person and company, company’s 

address, phone number and how long the applicant and reference have been 

acquainted 

• Applicant’s signature 

They usually require the following: 

• Applicant’s full name, address and phone number 

• Social Security number 

• Position(s) desired 

• Full-time or part-time availability 

• Date when applicant can begin 

• Current employment status and whether you can contact his employer 

• Applicant’s high school, college and professional education, including school 

location, number of years attended, degree or certification attained and major. 

Do not, however, ask for graduation dates, which could be seen as an attempt to 

circumvent the legal prohibitions on asking the applicant’s age. You may ask for 

the date only if it is needed to verify the data. 

• Special training or achievements 

• Employment history, including the company name, address, phone number, dates 

of employment, supervisor’s name, job title and reason for leaving 

Note: Many employers include a blank page to allow applicants to write in greater 

depth about their experience. Although you may find it simpler to ask the applicant


59 

to attach a résumé, many are prepared by professional résumé writers. Thus, handwritten 

information from the candidate may prove more valuable. 

Sample Equal Employment Opportunity Statement 

“XYZ recruits, hires, trains, assigns personnel, promotes and compensates employees 

without regard to race, color, religion, national origin, age, sex, marital status, 

disability or sexual orientation. All employment decisions at XYZ are made on the 

basis of merit and job requirements.” 

Interviewing Protocol 

Ask a candidate a forbidden question in the job interview and you could end up in 

court. Fail to get all the information you need, and you could be sued for negligent 

hiring. What’s an employer to do 

Establish a game plan 

❒ Before contacting any candidates, encourage your managers to prepare by 

studying the job description. 

❒ Prepare a list of job-related questions, which have been carefully screened to 

remove any possible discriminatory overtones. 

❒ Develop an outline of what you and your managers plan to tell the candidates 

about your company and the job. 

Writing all this down may seem like overkill, but it has definite advantages. It helps 

you think through exactly what you need in the way of qualifications. You will be able 

to listen better during an interview because you won’t be busy thinking up your next 

question while the candidate is answering the last one. You won’t neglect to give or 

request any essential information that might skew or delay the selection process, or 

give rise to later misunderstandings. Plus, you will ensure an equal playing field for all 

candidates and proof of your fairness. 

Make the most of an interview 

Interviewers need to look at three factors as they assess an applicant for a position. 

Skills are an obvious need, but motivation and compatibility with the organization are 

essential to satisfactory job performance. 

Try not to ask questions which lead to “yes” or “no” answers. Use a conversational 

tone, and allow pauses, which offer a chance for the applicant to add comments you 

may find useful. Ask for specifics for vague or generalized answers. Example: “Could 

you give me an example of how you handled yourself well under pressure” 

Caution: Avoid questions that might lead an applicant to reveal a former employer’s 

trade secrets, especially if she has worked for a competitor. You could end up in a lawsuit. 

And be wary of candidates who volunteer such information. Hire them, and your 

own trade secrets may be the next to make the rounds. Also, if a prospective employee 

opens the door to an otherwise impermissible subject, don’t assume that you’re now 

free to ask whatever you want. Remember: There are certain questions you cannot ask 

in an interview (see next page).


Explain that you will be checking references, and if your job application form 

doesn’t include a signed authorization for reference checks, be sure you ask the 

applicant to sign a separate one. 

What You Can—and Cannot—Ask 

By now you probably know the drill: Don’t ask questions related to race, religion, 

national origin, disabilities, age or other protected characteristics unless you can show 

a bona fide, job-related need to know. 

And don’t pry unnecessarily into a candidate’s privacy. Questions about birthplace, 

height, weight, marital status, relatives, children and disabilities are strictly off limits in 

pre-employment interviews. 

The ADA bans any question that is likely to elicit information about a person’s 

disabilities, but it allows questions about the person’s ability to perform the essential 

functions of the job. The test is whether the question can reasonably be expected to lead 

to disclosure of a disability. The distinction can be very subtle, so the EEOC has adopted 

an “enforcement guidance” for its field staff spelling out which questions are permissible 

and which aren’t. You are on safest ground if you request these from the EEOC 

and follow the wording of the allowable questions, and you’ll be almost as safe if you 

apply its reasoning to the questions you want to ask. 

Once you offer the candidate a job, contingent on the person’s fitness to perform 

it, you can make further inquiries. If you learn he can’t do the job, you can legally 

withdraw your offer. 

Bear in mind that only a few areas are totally off limits in pre-employment 

interviews. If you have a valid concern about a candidate’s ability to do the job, there 

are legal ways to ask for the information you need. For example, say your job involves 

rotating shifts, seasonal overtime or spending a certain percentage of each week on the 

road. You can’t ask about the applicant’s child-care arrangements or plans to have children, 

but you can explain the job requirements and explicitly ask if the applicant can 

meet them. 

Remember: The EEOC and the courts agree that you don’t have to hire or retain 

individuals who can’t perform all the essential functions of the job. 

Testing Applicants 

You can test a candidate’s skill provided the skill is an essential job requirement and the 

test is a valid measure of it. EEOC guidelines and federal and state laws require that 

pre-employment tests relate to the specific jobs for which applicants are being considered. 

That means you have to validate any tests you use by being able to show that 

success on the job is closely linked to success on the test. 

Honesty tests, psychological inventories and personality tests are tools you may be 

considering to screen candidates. However, these types of pre-employment tests carry 

some risks: Unless you can demonstrate that you are measuring job-related qualities 

and the tests fulfill a business necessity, you could be exposing your company to 

charges of discrimination and invasion of privacy.


61 

Note: The Employee Polygraph Protection Act of 1988 prohibits lie detector testing by 

most private employers. In fact, you are required to post a notice of the law where 

applicants and employees can readily see it. (You can get the poster from a local office 

of the Wage and Hour Division.) 

Bottom line: An effective, well-structured interview is probably your best tool for 

assessing applicants. Tests should not replace your own experience and judgment; they 

should serve simply as another piece of information in the hiring process. 

Reference/Background Checks 

Make it your policy never to hire a candidate without a reference/background check. 

You could end up with an employee who looks great but can’t cut it, as a former 

employer could have told you. Or, your organization could be held liable for “negligent 

hiring” or “failure to warn” should the employee turn violent on the job. If the employee’s 

past history would have revealed a problem, but you didn’t spot it because you 

didn’t check, the courts will say you “should have known.” Your firm not only might 

have to pay damages but would suffer a loss of reputation. 

When a candidate provides references, ask him for names other than just prior 

employers, such as former supervisors, a vendor he may have worked closely with, a 

co-worker or a subordinate. These people might be more forthcoming than a personnel 

department about describing a candidate’s work habits and character. 

If you ask for references without the applicant’s OK or ask the wrong questions, you 

risk getting sued. Therefore, make it your policy to: 

• Inform candidates that you will check references. 

• Get a signed waiver from the candidate authorizing you to do so. 

• Focus on the facts: What were the job responsibilities Under what conditions did he 

work best Why did he leave the company Would you rehire him 

• Ask references only those questions that you can lawfully ask candidates. 

• Never rely on a single reference. 

It is legal to check public records to verify a candidate’s credentials. You can call a 

university to confirm a degree or a licensing body to verify that a candidate is really certified. 

You can run a criminal records check to see if an applicant was ever convicted of 

a crime (although it’s illegal to ask about a criminal arrest, which means the person was 

only suspected of a crime). 

Many companies conduct credit checks on applicants whose jobs would entail handling 

money. But you must follow the rules under the Fair Credit Reporting Act. You 

don’t need an applicant’s permission to obtain a basic credit report, which is available 

from a credit bureau. But if you request a more comprehensive investigative report— 

including interviews with friends and business associates regarding the applicant’s 

character—you must inform the applicant in writing within three days. If you decide 

not to hire the person and your decision was in any way influenced by the information 

in the credit report, you must inform the applicant and also provide the name of the 

credit bureau that provided the report.

62 

BUSINESS MANAGEMENT DAILY 

Verifying Immigration Status 

Verifying employee immigration status is your responsibility, but it’s easier now that 

the Immigration and Naturalization Service has streamlined the process. The INS now 

says workers can use only these documents: 

❒ For employability and identity: A U.S. passport, resident alien or alien 

registration card and possibly a visa or a foreign passport. 

❒ For employability only: A Social Security card and possibly an employment 

authorization card. 

❒ For identification only: A driver’s license or an identification card. 

It is in your best interest to notify the INS immediately of any worker using false 

documentation. The Immigration Reform and Control Act of 1986 makes it illegal to 

hire or recruit a worker whom the employer knows has not been granted permission 

by the INS to be employed in the United States. It’s also illegal to hire any worker who 

has not completed INS Form I-9. The penalties for failure to comply are stiff and have 

driven some employers out of business. 

Sample policy 

“XYZ is committed to employing only United States citizens and aliens who are 

authorized to work in the United States and does not unlawfully discriminate on the 

basis of citizenship or national origin. 

“In compliance with the Immigration Reform and Control Act of 1986, each new 

employee, as a condition of employment, must complete the Employment 

Eligibility/Verification Form I-9 and present documentation establishing identity and 

employment eligibility. Former employees who are rehired must also complete the 

form if they have not completed an I-9 with XYZ within the past three years, or if their 

previous I-9 is no longer retained or valid. 

“Employees may raise questions or complaints about immigration law compliance 

without fear of reprisal.” 

—A New England firm 

Making the Offer 

Once you have selected the individual you hope to bring on board, make a clear and 

definite offer. Beware of overpromising or making references to permanent job security, 

which can open the door to a wrongful termination lawsuit if the employee doesn’t 

work out. One way to protect yourself is to use a formal employment contract, particularly 

for high-level hires (see Section 12). For lower-level workers, you can avoid the 

legal expense yet buy yourself some protection with a written job offer letter. 

After a candidate accepts an employment offer, spell out the terms, including expected 

standards of performance, initial performance evaluation and the financial and 

fringe benefits. Your employee manual and summary plan description will cover most 

of these, except pay, which you probably covered in the written job offer letter. If new 

employees are not eligible for certain benefits until they’ve completed a given trial period, 

make that clear in writing so there’s no question later about eligibility.


63 

Often, companies make the mistake of stating in their employee handbooks that new 

employees will have a 60- or 90-day probationary period when they start work. The 

idea is twofold: to put employees on notice that they’re being evaluated, and to avoid 

having to pay benefits to a worker who quits or proves so unsuitable that he gets fired 

after the first three days. 

That’s not a good idea because it implies that once the probation period is over, 

employees are permanent. This could negate the at-will status, in which employees 

may be fired at any time for any (nondiscriminatory) reason or no reason at all. (While 

no employer would fire a perfectly good employee for no reason, you don’t want to be 

second-guessed in court.) Even though it’s good to let employees know they’re being 

evaluated, they should understand that it’s an ongoing process throughout their 

employment, with the first evaluation coming after, say, the first 90 days. You want to 

preserve the principle that it’s up to the employer whether the employee continues 

to work for the company. 

While it makes sense not to start benefits immediately, you can simply say that benefits 

such as sick leave, vacation and health insurance will begin accruing after the 

employee has worked 90 days. That way, you don’t leave the impression that after a 

probationary period, the employee is considered permanent.

12 

Employment Contracts 

In most states, employees work “at will.” They can quit at their own 

discretion, and their employer can fire them without citing a 

narrowly defined cause, such as dereliction of duty or a need to 

restructure. This gives both parties wide latitude to manage their 

affairs in their own best interests and is generally regarded as one of 

management’s most cherished rights. 

Employment contracts, union or otherwise, restrict the at-will relationship. They 

often impose monetary penalties on the party who wants out before the contract’s 

term is up, and they usually require employers to show cause before discharging the 

individual under contract. 

Generally, both parties enter into an employment contract knowingly. Some 

employers, however, have been surprised to find that informal letters of agreement can 

be just as binding as formal contracts if they spell out terms and contain the necessary 

signatures. In fact, some states don’t even require signatures; they honor oral contracts 

and sometimes “implied contracts” as well. 

Implied contracts, as their name suggests, are contractual agreements created by the 

commitments a party makes or gives the impression of making. They can be oral or 

written and, in this litigious age, can be management’s worst nightmare. A recruitment 

ad offering “permanent employment,” a verbal comment like “Keep up the good work 

and you’ve got a job for life” or a reference in your employee manual to dismissing 

“for cause only” . . . all might be construed as implied employment contracts in some 

states, with the potential to land you in a wrongful-discharge suit should you need to 

terminate an employee. 


To protect your rights and avoid misunderstandings, make it a priority to determine 

what kinds of employment relationships make sense for your business, and draw up 

your policies accordingly. Obviously, if you employ union workers, they will be 

covered by contracts. Do you want to give contracts to other employees as well If so, 

why and to whom 

Most companies that use employment contracts offer them to only a small segment 

of their nonunion work force, such as top executives. Contracts tend to come into play 

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65 

when a prospective employee is seeking job security or special employment terms 

and the company is out to attract or keep an especially valuable individual or to protect 

its trade secrets or customer base. Although written contracts limit your right to 

fire, they offer the advantage of imposing mutual obligations from the get-go. If properly 

worded, they may also require the employee to submit employment-related disputes 

to arbitration instead of filing a lawsuit. Since the contract generally spells out 

what each party expects of the other, poor performance on the employee’s part can justify 

termination for breach of contract. On the other hand, it can also make separation 

extremely expensive for the company by triggering golden parachute clauses or 

lengthy arbitration proceedings. 

What to Include 

No contract should be entered into without legal advice on its merits and judicial 

soundness. Typically, an employment contract should include the following: 

• Names of the employer and the employee. 

• Term of the contract. 

• Place the contract is to be performed. 

• Employee’s duties and obligations. 

• Working facilities. 

• Who controls the rights to inventions and patents, as well as an agreement to 

maintain trade secrets. 

• Compensation, including wages, salary, commissions, bonuses, overtime or shift 

differential pay and severance agreements. 

• Special compensation plans, including deferred compensation, bonuses, profit 

sharing, stock options and pension and retirement plans. 

• Expense account, including who pays for travel, meals, lodging. 

• Covenant not to compete after leaving employment, including the length of time 

and geographical limitations. (For details on noncompete agreements, see Section 20.) 

• Employee benefits, including health insurance, life and disability insurance, 

workers’ compensation, vacations, holidays and sick leave. 

• Right of either party to terminate with proper notice. 

• Right to discharge an employee for cause. 

• Remedies for breach of contract. 

• Methods for modifying, renewing and extending the contract. 

• Laws governing interpretation of contract. 

• Date and place of signing the contract. 

• Signatures (and initials indicating acceptance of certain provisions, as required). 

• An arbitration clause stating that all employment-related disputes will be subject to 

arbitration and that the arbitration will be final and binding.

13 

Personnel Records 

Given the amount of litigation nowadays, you should pay 

particular attention to records pertaining to your employees. 

A well-considered recordkeeping policy not only is essential to 

a healthy bottom line but also will shield your company from 

potential liability. 

You must safeguard the confidentiality of personnel records. Allowing unauthorized 

access to medical records, for example, is grounds for legal action. A sound records 

management policy enables you to impose controls over who may have access to confidential 

information, and it ensures that sensitive information will remain secure. Only 

authorized employees should handle and examine personnel records and other files 

that contain confidential data. 

Retention Requirements 

Many federal, state and local regulations contain recordkeeping requirements. Not 

every government rule will apply to your business, but many will. You must keep certain 

records available for the possibility of government review. For this reason, it’s vital 

that you prepare a retention schedule for all your files. 

Liability Protection 

Nowhere is accurate, organized recordkeeping more important than during litigation. 

Sound record management enables you to support your case and bring the 

sometimes costly legal process to a quick and satisfying conclusion. Appropriate 

records submitted in a timely manner can end nuisance litigation and force a 

settlement or an early judgment. 

Poorly maintained records can result in a judgment against you. The legal process 

relies heavily on paper documentation, and in fact, if you can’t produce records 

associated with a particular case, you can be charged with obstruction of justice 

or even contempt of court. The court may assume that the absent records would 

have supported the opposition’s case. Bottom line: Your missing records can and 

will be used against you. 

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67 

The government publishes a number of resources to help businesses track 

regulatory requirements, including the Code of Federal Regulations and the Federal 

Register, which can be found on the Internet and in most libraries, and the Guide to 

Retention Requirements, available through the U.S. Government Printing Office. You 

need to research state as well as federal requirements to protect your company fully 

and ensure compliance with all applicable laws. Keep a detailed record of your legal 

research, documenting the sources you’ve consulted, the agencies contacted, and what 

information you received. Be able to show that you have made a good-faith effort to 

ensure compliance with recordkeeping requirements. 

Handle With Care 

Personnel records require special and careful handling. How you determine whom to 

hire, whom to promote, how much to pay workers and when to terminate an employee 

must be documented and the records maintained in case an employee challenges 

your choices. Remember: Information placed in personnel files must be supported by 

facts so that your company can defend itself against an allegation that you defamed or 

discriminated against an employee. 

Caution: Any documentation relating to an employee, including your appointment 

book and calendar, might be a vital part of a future lawsuit, so carefully consider what 

you record. 

Other information must be sifted to ensure that it does not end up in an employee’s 

personnel file. For example, the Americans With Disabilities Act and the Family and 

Medical Leave Act specifically require that medical records be stored separately from 

other employment records and be kept confidential. However, you can place registration 

forms for health insurance, life insurance and 401(k) plans in personnel files. 

Access to personnel files should be restricted to an employee’s immediate supervisor; 

access to medical files should be restricted to human resources personnel. 

Self-insured companies have an obligation to handle benefits plans with the strictest 

confidentiality. For example, when requesting reports listing company-paid prescriptions, 

be certain that you (1) specify to the provider not to provide names, (2) keep the 

data under lock and key while evaluating costs of your plan and (3) destroy the document 

as soon as you’ve finished to prevent it from falling into unauthorized hands. 

Lock employee files, both personnel and medical, and restrict access only to those in 

your company with a legitimate need to know, including the employee himself. Make 

it clear to all that the information in the files is confidential and not to be shared, except 

on a need-to-know basis. Note that such federal acts as the Privacy Act and OSHA set 

certain requirements for handling personnel records. It is a good idea to require all 

employees to sign a form spelling out the records policy, making it clear that employees’ 

files can be opened without their permission in unique situations, such as requests 

from public health agencies or judicial subpoenas. 

You can put sealed letters in employee personnel files, but some state laws mandate 

that you give employees access to them. Sealed letters may be used in the disciplinary 

process as a follow-up to a verbal warning. A supervisor may place a sealed letter in 

the employee’s file, to remain there for a specified, agreed-upon time. If the worker 

repeats the offense within the time period, the letter is opened and the worker held


accountable. If the employee’s conduct improves, the letter is removed after the specified 

time. This not only gives employees a second chance but also lets you document 

problems to substantiate any future disciplinary action should it become necessary. 

Steps to Effective Records Management 

In the long run, a records management policy will save you money by eliminating 

unnecessary files and reducing time spent searching through obsolete files. Each 

company must have its own unique, tailor-made recordkeeping plan. There are, 

however, common elements to every document management policy. 

To create an effective records management program, follow these steps: 

1. Determine what records your company should have. 

2. Inventory your records to see what you do have. 

3. Establish a document retention schedule based on legal requirements and business needs. 

4. Determine the most appropriate storage format for each type of record. 

5. Decide where records will be stored. 

6. Establish safeguards to protect records from unauthorized access, damage or loss. 

7. Create a procedure for moving records from active to inactive storage. 

8. Implement a systematic policy for records evaluation and destruction. 

Protect Confidentiality 

At least once a year, have authorized employees sign a statement acknowledging 

that they understand the company’s policy on confidential records. Make it clear 

that anyone who violates that confidentiality will be disciplined. Enforce your policy 

with two goals: to protect privacy and prevent leaks, and to put your company on solid 

legal ground. 

Here are some voluntary guidelines suggested by the Privacy Protection Study 

Commission to help you develop an effective policy to protect confidential information: 

❒ Identify any records that will not be accessible to job applicants, employees and 

those who leave your company. 

❒ Permit employees access to personnel evaluations that could be used for selection, 

promotion or placement (exclusive of comments on “management advancement 

potential”). 

❒ Grant employees direct access to their medical and insurance records when 

coverage is provided or administered by the employer. 

Under the Privacy Act of 1974, employees have the right to look at their personnel 

files. There is no federal law guaranteeing an employee’s right to make copies of 

employment records, but some states grant them that right. Employers are urged to 

allow workers to correct, amend or supplement their records if they think they are not 

accurate, timely or complete.


69 

An Expert’s View 

As you prepare your policy on accessing personnel files, consider these recommendations 

from Robert Brady, president of Business & Legal Reports, Inc.: 

✔ Make sure your policy complies with state law. If you have offices in several 

states, you may want to develop a separate policy for each state. 

✔ Put the policy in writing and distribute it to all employees. 

✔ Define “personnel file” specifically. It can include application forms, performance 

appraisals, disciplinary records, health and safety data, retirement information 

and insurance-related items. If you want to provide access only to items required 

by law, you will want to develop a very narrow definition of “personnel file.” 

✔ Keep other records in a separate file: for example, investigative information/ 

documentation relating to an active or past investigation. 

✔ Allow access to the files only under supervision, at stated times and only 

under certain circumstances. 

✔ List the names of employees who are allowed to access the personnel files of 

other employees. Also include third parties, such as family members and 

lawyers, who may be allowed access to the files. 

✔ Appoint a records custodian, and audit your employment records regularly. 

Remove outdated and irrelevant information from the files. 


“XYZ maintains a personnel file on each employee. The personnel file includes such 

information as the employee’s job application, résumé, records of training, documentation 

of performance appraisals and salary increases and other employment records. 

“Personnel files are the property of XYZ, and access to the information they contain 

is restricted. Generally, only supervisors and management personnel of XYZ who 

have a legitimate reason to review information in a file are allowed to do so. 

“Employees who wish to review their own file should contact the Personnel 

Department. With reasonable advance notice, employees may review their personnel 

files in the presence of an individual appointed by XYZ to maintain the files.” 

—A research organization 

“Employees have the right to access their personnel files, and they may submit 

written corrections to or comments on any material in their files that they consider 

inaccurate or with which they disagree. To do so, employees must make two copies 

of their comments or corrections and give one to the personnel office and the other 

to their immediate supervisor.” 

—A university


“The company will maintain only those employee records necessary for job and 

benefit-related purposes and as required by law. To ensure that your personnel file 

is up to date at all times, please notify the office manager of any changes in your 

name, telephone number, home address, marital status, number of dependents, beneficiary 

designations, the individuals to notify in case of emergency and so forth. 

“Access to personnel files is restricted to individuals with a legitimate business 

need for specific information. Such individuals may include personnel staff, supervisors, 

department heads, the company’s legal counsel, and those who are permitted 

by law to have access. 

“Current employees may see their files under the following conditions: 

1. Requests for the review of a personnel file must be made in writing by completing 

a file request form, which is available from the office manager, and obtaining the 

approval of the company president. 

2. The file must be reviewed in the presence of a manager or other person designated 

by the company president. 

3. Employees may not mark or make any changes to any information contained in 

their personnel file. Employees may submit a written statement of disagreement 

with items in their files.” 

—An insurance company

14 

Performance Reviews 

Less than 10 percent of U.S. companies have good performance 

appraisal systems, according to one personnel expert. If your 

idea of performance reviews is a once-a-year talk with each employee, 

then your company is missing out on the value of conducting 

employee evaluations in the first place. Whatever kind of rating 

system you use—and there are many—appraisals should tell your 

managers more than whether to give employees a raise or promote 

or terminate them. 

Performance reviews don’t just happen once a year. Managers must assess progress 

toward performance goals year-round and assemble evidence to form those assessments. 

You need a company policy outlining your system so that managers will know 

how to track performance on an ongoing basis and collect concrete data to document 

performance, both good and bad. This system could even protect you against liability 

in the event an employee ever challenges your personnel actions in court. 


Inadequate or unfair performance reviews can cause serious morale problems, 

miscommunication, faulty decision making and costly legal repercussions. 

At their best, professional and objective appraisals help make your company a 

well-oiled machine. Performance reviews have three basic purposes: 

• To give all employees feedback on their performance. 

• To establish a basis for modifying work-related behavior. 

• To provide management with information on which to judge compensation, work 

assignments, promotions or retention. 

If you have a formal evaluation system in place now or are considering one, make 

sure your review system has a clearly defined purpose. It should be a means to gather 

accurate information appropriate to each position and cover all key areas of performance. 

Employees must have a clear understanding of why they are being reviewed, 

exactly what the review will cover and how your company will use the information. 

71



One of the main goals of any appraisal system is to encourage an ongoing dialogue 

between managers and employees. By the time you get to the formal annual review 

there should be no surprises for the manager or the employee. To make reviews productive, 

you need to uncover the reasons behind poor performance and set goals that 

will make lasting improvements in your employees’ work. 

Before undertaking a formal annual review, ask each employee to conduct a selfappraisal 

of his work, to be submitted prior to the manager’s review. The self-appraisal 

creates more active involvement by employees in the process, affords them an opportunity 

to express their views to management and gives the reviewer a better understanding 

of the employee. Surprisingly, many employees are more critical of their work 

than are managers, and they tend to set higher goals. Many companies make the selfappraisal 

voluntary; others require employees to submit the form but do not set 

requirements on how it must be filled out. The self-appraisal form can be the same one 

that’s filled out by the supervisor, or it can ask for additional information. 

Guidelines 

Here are the key points to consider when creating your company policy on 

performance reviews: 

❒ You should encourage managers to discuss work performance with their 

employees on a regular basis, not just once a year or when serious problems arise. But 

do set at least one formal annual review for every employee, and make sure all 

managers abide by the timetable. 

❒ The review process really begins with an accurate job description. This will 

enable the employer and employee to have a clear understanding of the work to be 

done and how it will be evaluated in advance of any review. Then you can compare 

results expected with results achieved. 

❒ Standards for employees performing the same job should be consistently applied 

to all. Base your standards on measurable results and behaviors where possible, not on 

subjective opinion about the employee’s style or personality. 

❒ You should use consistent review forms and ratings for all employees in similar 

positions, but allow managers the latitude to add comments explaining their rating and 

to offer suggestions for improvement. 

❒ Effective reviews have clear, accurate ratings on how employees are performing. 

Emphasize that you want managers to make honest, objective appraisals. Consider the 

consequences if your supervisors indiscriminately handed out good reviews even to 

poor performers. Their appraisals would pull the rug out from under your company’s 

legal defense if someone sued you because he was fired or denied a promotion. 

The manager who says “all my employees are outstanding” may not be discriminating 

“satisfactory” performance from “above average” or “excellent.” Define the limits 

for these categories whenever possible, and make sure all parties understand them. 

Example: “Product shipped on or prior to deadline 85 percent of the time is satisfactory, 

90 percent is above average, and 95 percent is excellent.” Monitor each manager’s


73 

reviews for consistency, and compare managers across departments who are reviewing 

employees with the same or similar work assignments. 

Caution: Do not require managers to adhere to any set quota on ratings of employees, 

even if the ratings are tied to raises or merit pay. You want to encourage honest, 

accurate ratings, not ones tied to budgetary limits. 

❒ You should ask employees to sign and date their written appraisals, acknowledging 

that they have read them. 

❒ Employees should have the right to respond to their review or to appeal a review 

they disagree with. Keep any written responses by an employee in your records 

with the manager’s review, along with notes on any action taken as a result of the 

employee’s response. 

❒ Managers who are charged with conducting reviews need adequate training. 

They require an understanding of how the process should work, how to use it effectively 

and how to make fair, informed ratings that are consistent across the board. 

For new managers, consider conducting training sessions to practice oral review 

techniques and build their confidence. Reviews themselves should be critiqued by top 

management or human resources, particularly for less experienced managers. 

Note: Negative performance reviews by themselves are not actionable. You do not 

need to shy away from accurate, truthful evaluations of employees who have filed suit 

against your firm. Courts have ruled that a bad performance review, on its own, is not 

enough to prove that a company retaliated against a worker. 


“Supervisors and employees are strongly encouraged to discuss job performance and 

goals on an informal, day-to-day basis. Additional formal performance evaluations 

are conducted annually to provide both supervisors and employees the opportunity 

to discuss job tasks, identify and correct weaknesses, encourage and recognize 

strengths, and discuss positive, purposeful approaches for meeting goals.” 

—A professional society 

“XYZ hires the most qualified people available and gives them maximum opportunity 

to advance. A written evaluation will be discussed with the employee no less 

than once a year. The objectives of the performance evaluation process are: to 

review job performance, to facilitate timely written and verbal feedback, to provide 

a record that a performance review was prepared and discussed, to identify specific 

opportunities for personal development, to provide recommendations for future 

assignments and to provide background information for advancement and compensation 

decisions.” 

—A professional services firm

15 

Terminations 

When you have to terminate an employee for poor performance, 

it shouldn’t come as a surprise to either of you. Instead, you 

should have set policies that lay the groundwork for progressive 

discipline, which gives the person an opportunity to improve. Then, 

if termination is still necessary, you should handle it with honesty, 

fairness, discretion—and full documentation. Otherwise, if you never 

informed the employee of your company’s policies or poorly 

communicated the standards, you might be forced to overturn his 

termination or pay a large settlement. 

Thirty years ago, you could have fired an employee and thought no more of it. These 

days, it’s much harder to get rid of a problem employee. A lot of workers are suing for 

wrongful discharge or discrimination, and some are alleging that their firings violated 

an implied employment contract. The lesson in all this: You can still fire people, but you 

must play by the rules and follow an established discipline policy. 

‘At-Will’ Revisited 

Traditionally, people hired for an indefinite period were considered at-will employees. 

Unless they held an employment contract specifically stating otherwise, you could fire 

them for a good reason, a bad reason—or no reason at all. Over the years, though, 

courts have recognized exceptions to the at-will doctrine. Here are three big exceptions: 

❒ Under federal law it is illegal to terminate workers because of their age, race, religion, 

sex, national origin or a disability that does not influence their job performance. 

❒ You cannot legally terminate an employee for reasons that might violate public 

policy. For instance, you can’t fire an engineer for informing the EPA that your 

company has been dumping toxic waste in the river. 

❒ If you tell your workers that they will be fired for cause only—or otherwise 

establish rules that spell out how and when terminations will be handled—you might 

be creating an implied employment contract. 

Employment at-will has been so deeply eroded by exceptions that you’d be wise 

not to fire a worker without a good reason—one that you can articulate clearly and 

document convincingly. 

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75 

Some employers state in their handbooks (and on job application forms) that 

employees are subject to termination without cause. Some ask their employees to 

acknowledge this clause by signing a form. There’s a trade-off here: Signing that type 

of statement won’t endear you to your workers. A policy of firing for “just cause only” 

is more likely to build loyalty, but it might subject you to judicial review. 

Progressive Discipline 

The most reliable way to protect yourself from charges of wrongful dismissal is to 

establish a policy of progressive discipline. By having such a structure in place and 

making your supervisors abide by it, you can ensure that any employee fired because 

of poor performance was treated fairly and in accordance with your company’s 

policies. (For a sample policy on progressive discipline, see box on next page.) 

Policy Guidelines 

❒ Document every time you warn an employee that her performance will have 

to improve. Make references to her job description and the standards set forth in her 

performance reviews. Do make it clear, however, that the tasks in the job description are 

subject to change depending on the organization’s needs and that you may ask the 

employee to do various other jobs. 

❒ Use the “progressive discipline” approach. 

❒ Watch what you promise. Avoid any suggestion when hiring, for example, 

that so long as the person is productive, “the job is yours for life.” Such comments are 

considered “implied contracts” by some courts, and they can severely restrict your 

right to fire. 

❒ Play by the rules. Follow your discipline policy to the letter in every situation 

with every employee. If your employee handbook says you’ll provide a verbal 

warning, a written reprimand and a probationary period, then make sure you do so. 

Of course, your handbook should also give you the right to fire someone immediately 

if he engages in serious misconduct. After all, you should not have to give an 

employee 30 days to prove that he will stop embezzling the company’s funds. 

❒ Keep quiet. Don’t discuss your reasons for the termination with other employees. 

You could end up getting sued for defamation of character. 

❒ Don’t force an employee to resign. That’s called constructive discharge, and 

courts take a dim view, to varying degrees, of personnel practices such as these: 

improper demotion, coercion into early retirement or failure to transfer, discriminatory 

pay, and harassment based on sex, age, race or disability. 

Observation: An eye-opening study by Ohio State University found that workers 

who are fired or laid off without an explanation are 10 times more likely to sue than are 

those who are given concrete reasons for the termination. Of the 1,000 people surveyed, 

a full 20 percent whose pink slips came without explanation said they were suing, versus 

less than 2 percent who were given a reason for their termination.


Model for Progressive Discipline 

Establish a policy of progressive discipline, and make sure your supervisors abide 

by it. Take the following steps: 

✔ As soon as a supervisor perceives a worker’s performance problem, she should 

issue an oral reprimand. The supervisor should ask the worker if there are any 

long-term problems or skill deficiencies that need to be corrected. Have the 

manager prepare a memo to file about the conversation, in case further action is 

necessary. 

✔ If the problem persists (or more problems emerge), the supervisor should provide 

the employee with a written warning delineating the objectionable behavior, 

along with the consequences. Explain the standards that will be used to judge the 

employee. Specify the time frame within which performance must improve, and 

state that continued failure will result in termination. A copy of the memo should 

be placed in the employee’s personnel file. Have the worker sign a copy to 

acknowledge receipt. Otherwise, he could claim that he never received a copy. 

✔ If performance does not improve, deliver a final written warning, perhaps 

accompanied by probationary status for the employee. The final warning should 

contain copies of the previous warnings, indicate specific areas in which the 

employee must improve and specify the time period within which the worker’s 

behavior or performance must be corrected. 

✔ If the problem persists, the supervisor should notify the human resources 

department or other company authority. In general, supervisors should not be 

given firing authority. Someone else in the company should evaluate the full 

range of discharge-related considerations. Some companies suspend the 

employee while his performance is investigated by a human resources manager 

or other company official. Witnesses are interviewed, and documents are analyzed. 

The employee is confronted with the facts revealed by the investigation 

and is given the opportunity to present his side of the story. Regardless of 

whether there is a formal investigation, before taking any final action, your company 

should consider these questions: 

• Does the employee claim that a contractual relationship exists, and if so, does 

that assertion have merit 

• Has the employee recently filed a workers’ compensation claim, complained to 

a government agency about alleged workplace violations or taken any other 

actions that might make a discharge look like unlawful retaliation by the 

employer 

• Is there an issue relating to good faith and fair dealing, especially if the termination 

involves a long-term employee 

Even if the answer to any of these questions is "Yes," you can still survive a challenge to a firing; 

however, you must be able to prove that the circumstances of the case justify your actions. 

✔ Assuming that you decide to support the recommendation of the worker’s supervisor, 

send a termination letter to the worker and clearly state the reasons for dismissal. 

Admittedly, this is a time-consuming process. When a worker is not performing 

his job satisfactorily, you don’t want to have him on the staff any longer 

than necessary; however, if you dismiss a worker and he can prove that he was 

treated unfairly, you could be forced to pay a large settlement or reinstate him.


77 


“There are two ways to terminate employment: voluntary and involuntary. Voluntary 

terminations include resignations, retirement, failure to return from leave, failure to 

report to work for three consecutive days without notifying the company, and completion 

of a contract. Involuntary terminations include layoffs and disciplinary action. 

Employees who want to leave in good standing will give their supervisor at least two 

weeks’ notice.” 

—An educational institution 

“Certain conduct is so repugnant to the policies of XYZ that it will lead to 

immediate discharge. Such conduct includes, but is not limited to: 

• Reporting for work under the influence of alcohol or controlled substances. 

• Possession, use, sale or distribution of controlled substances on XYZ property. 

• Theft. 

• Engaging in harassing conduct. 

• Fabrication of business documents, including résumés and expense reports. 

• Excessive absenteeism or tardiness. 

• Fighting on XYZ premises. 

• Abuse of equipment (including excessive personal use of office equipment). 

• Insubordination. 

• Gambling on XYZ premises.” 

—An association 

“Your employment at XYZ is ‘at will,’ meaning that you or XYZ may terminate your 

employment at any time for any reason. 

“The circumstances surrounding your termination, however, may affect your 

entitlement to payment for unused vacation time. Employees who resign voluntarily 

by providing at least two weeks’ written notice of resignation may, at XYZ’s discretion, 

be paid up to a maximum of four weeks of unused, accrued vacation. 

“Employees who are involuntarily terminated may be paid for unused, accrued 

vacation, up to a maximum of four weeks at XYZ’s discretion. Under no circumstances 

will employees be paid for unused, accrued vacation if they are terminated for any of 

the following reasons: misuse or misappropriation of XYZ funds, theft of XYZ property 

or secrets, insubordination, fighting with other employees, unauthorized possession 

of firearms and/or other weapons while on XYZ’s premises or performing XYZ 

duties, reporting to work under the influence of intoxicants or illegal drugs, possession 

of illegal drugs either while on company time or premises, unexcused absences 

or immoral acts on the job. This list is not exclusive, and XYZ reserves the right to 

refuse payment for unused vacation time for any reason.” 

—A publishing house

16 

Independent Contractors 

Companies everywhere are scrutinizing their payrolls and 

full-time employee head counts with an eye toward cost-saving 

measures. Clearly, you need full-time employees to perform duties 

essential to your company’s bottom line on a daily basis. But you 

may need more help to handle some tasks in peak business periods, 

for work requiring special expertise not needed on a full-time basis 

or for special projects outside your core business. For these kinds of 

situations it makes perfect sense to use independent contractors. Just 

be aware that you’ll need a concrete policy for managers to steer clear 

of the IRS and legal headaches in hiring outside workers. 


Not all tasks are right for independent contractors, and the contractual and regulatory 

burdens of the relationship can be very complex. On the positive side, though, the benefits 

are easy to see. As a U.S. Chamber of Commerce study showed, for each full-time 

employee’s salary, a company on average pays 12.4 percent in Social Security, workers’ 

comp, unemployment and disability insurance; another 12.4 percent in vacation time, 

sick leave and lunch and work breaks; and 15.5 percent in pensions, health insurance 

and other benefits. In addition, federal statutes such as Title VII, the Americans With 

Disabilities Act and the Family and Medical Leave Act don’t apply to freelancers. All 

the above are powerful bottom-line incentives to use contract labor. 

Some of the downsides are equally obvious. The IRS is fully aware of the employer’s 

potential savings from hiring independent contractors, which is why it scrutinizes 

employee records for “red flags.” If the IRS concludes that you misclassified a worker, 

you could be liable for back taxes, penalties and interest charges. Not only that, but the 

reclassified employee could sue to be included retroactively in your benefits plan— 

another huge cost. 

The other downsides, however, are not as clear. Control of your company’s 

confidential information, undue reliance on outsiders for key policy or product 

decisions, competition for contractors’ time with their other assignments and just 

plain shoddy work can reduce or eliminate the savings you expected from employing 

an outside contractor. 

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79 


As a key starting point, determine which business functions in your company might be 

outsourced to contractors. Management consultants recommend that you look at: 

• The centrality of the function to your day-to-day operations. 

• The amount of control you want to exert over the operations side of these functions: 

that is, how the tasks are being accomplished. 

• The special expertise required to perform the needed function (which may or may 

not be needed full time in your company). 

• The cost of hiring full-time qualified individuals to perform this function. 

• Whether or not using contractors will meet the complicated IRS standards for 

worker classification, which have recently changed. 

The main issue in determining a worker’s tax status is whether or not the employer 

can control the worker. In recent years, the IRS’ “20 factor test” was the key tool to 

deciding whether a worker qualified as an independent contractor or an employee. But 

even labor lawyers found the test difficult to apply. 

IRS revises standards 

A few years ago, the IRS moved to a simpler set of standards. The agency’s emphasis 

shifted toward compiling worker-status evidence under three main questions: 

• How much behavioral control does the employer exercise over the worker 

• What financial control does the employer have over the worker 

• How do the worker and employer view their work arrangement 

Within those main categories are 10 questions that IRS auditors now focus on to 

determine a worker’s status. These include eight of the original 20 factors: 

1. Did you train the worker to perform the services for you 

2. Did you give the worker instructions on where, when and how the work is to be performed 

3. Is the worker protected from losing money as a result of providing services to your company 

4. Is the worker prohibited from providing services to the public at large 

5. Do you pay for the worker’s business expenses 

6. Does the worker provide services to your company on an ongoing basis 

7. Do you pay the worker by the week, month or hour 

8. Are the services the worker provides essential to running the company 

The last two factors were added in 1997: 

9. Does a written contract exist that describes the relationship the parties intend to create 

10. Does the business provide the worker with employee-type benefits 

In addition, under the Small Business Job Protection Act of 1996, the burden of proof is 

now on the IRS to prove that the individual in question qualifies as an employee. 

Employers are further protected against substantial unpaid employment taxes if 

(1) they had a reasonable basis for treating workers as independent contractors; (2) they 

regularly filed a Form 1099 for each worker; and (3) they consistently classified all 

workers with similar jobs as independent contractors. The tax liability is limited to one 

year for employers who misclassify workers.


Also, be aware that not all states and courts apply the same standards in determining 

whether workers are employees or independent contractors. “State unemployment 

compensation statutes take a very narrow view because the purpose is to provide relief 

for people in unfortunate circumstances,” says Eric Dreiband, a Chicago lawyer. So a 

contractor’s unemployment compensation might be charged to your account if your 

business severed the relationship, leaving the contractor out of a job. 

Preventive Steps 

The most important safeguards are to maintain accurate records and follow the rules on 

Form 1099s. If 1099s were mailed on time and filed properly, you may be able to avoid 

retroactive payroll taxes even if an auditor reclassifies your contractors as employees. 

Here are some other tips: 

• Enforce your rules uniformly. For example, if some telemarketers are classified as 

employees and others as contractors, you will need a well-documented reason for 

doing so. 

• If you send some contractors 1099s, send them to all outside workers to whom you 

paid more than $600 the previous year. 

• Have independent contractors acknowledge in writing that they are not covered by 

your benefits plan. 

• Have an accountant certify your worker classifications. 

• Compose a formal contract for outside workers. It should include the work to be 

done, the length of the agreement and the amounts to be paid. It should also state 

that no benefits will be provided and that the contractor is responsible for paying 

state and federal taxes. You may also want them to sign an acknowledgment that 

they have complied with business licensing requirements and maintain their own 

employment records. 

• Require outside contractors to provide their own equipment and supplies. 

• Allow them to choose their own work schedules within a general time frame. 

• Don’t supervise their work beyond expected standards of quality. 

• Let them decide whether to hire assistants. 

• Don’t withhold taxes. 

• Don’t provide an expense account. 

Caution: Avoid downsizing employees out of a job, then rehiring them as independent 

contractors to perform the same function. The IRS takes a dim view of that action. 

Sample Contractor’s Agreement 

This is a sample letter of agreement between a company and an independent contractor 

(agreement should be signed and dated by both parties): 

“XYZ, Inc. (hereafter referred to as XYZ) hereby agrees to pay Jane Jones a flat fee 

of $1,500 (one thousand five hundred dollars) per month for a period of one year to


81 

engage the services of Jane Jones as a consultant to XYZ in the area of public relations 

and to act as a representative of XYZ in that area. The 12-month period of this 

agreement commences on June 1, 1998, and terminates on May 31, 1999, unless 

extended by written agreement by both parties. 

“XYZ will pay the $1,500 fee on or before the first of each month. In addition, XYZ 

agrees to reimburse Jane Jones for reasonable expenses incurred while acting as a 

consultant to or representative of XYZ, up to a maximum of $300 (three hundred dollars) 

per month. Reasonable expenses include such items as phone, fax, photocopier, 

postage, local transportation and the cost of local business meetings. XYZ is not 

liable for expenses incurred by Jane Jones for rent, taxes, insurance or salaries. 

Reimbursement of expenses is to be paid by XYZ within 15 days of receipt of an itemized 

expense report. Reimbursement of expenses in excess of $300, or expenses 

incurred outside the Minneapolis metro area, require prior approval by XYZ. 

“Jane Jones agrees to commit the equivalent of one day a week per month for the 

12 months of this agreement to working as a consultant to and/or representative of 

XYZ in the area of public relations. During any given month, the specific apportioning 

of this time within that month is at the discretion of Jane Jones except insofar as 

XYZ may identify a specific need for these services at a given time. 

“As a consultant and representative, Jane Jones agrees to use her knowledge and 

contacts to increase the awareness of and promote the use of XYZ’s magnetic tape 

restoration and disaster recovery services within the archival community. As a representative 

of XYZ, it is agreed that Jane Jones does not have the authority to commit 

XYZ to a contract or in any way obligate XYZ to a third party. 

“The specifics set forth in this letter have been agreed to by XYZ and Jane Jones 

and are binding on both parties.” 

—A disaster recovery firm

PART V: Employee Conduct 

17 

A Code of Ethics 

In its Code of Ethics, Lockheed Martin tells its employees to heed 

the warning signs: “You’re on thin ethical ice when you hear ‘No 

one will ever know,’ ‘Everyone does it’ or ‘We can hide it.’ If you find 

yourself using any of these expressions . . . make sure you are on solid 

ethical ground.” 

In recent years, developing a code of ethics has become a central concern for businesses. 

Managers and workers alike usually want to do the right thing but sometimes 

need guidance about where to draw the line and what to do when confronted with an 

ethical dilemma. Many business schools now even require students to take courses in 

ethics, and a number of firms specialize in assisting companies with ethical issues. 


Your company’s ethical standards should be reflected throughout all your company 

policies. As Tim C. Mazur of the Council for Ethics in Economics notes: “You want your 

employees to know generally that you expect them to do what’s right. Then, let them 

know specifically how you expect them to react when faced with a situation. It’s part 

of your company’s culture.” 

If your company fostered a corporate culture in which fudging was acceptable, 

employees might conclude that it’s OK to make questionable calls in the name of 

personal or professional gain. For example, employees might think that taking office 

supplies home is “no big deal,” or even that they’re entitled to them. A sales executive 

might knowingly provide misleading information to close a deal. Managers might 

falsify data to hide their misdeeds or even protect employees. Although ethics is an 

individual matter, an organization’s policies can either encourage its people to act with 

unflagging integrity or induce them to compromise their morals. 

A growing number of companies have introduced a formal ethics program as a 

resource for employees. About 80 percent of Fortune 100 companies have such 

programs in place. An ethics program consists of these main elements: 

• Introduction of a written code of ethics, which is periodically updated. 

• Creation of a high-level ethics officer to advise employees and establish a confidential 

internal reporting system for workers to report violations of the law. 

• Ethics training for all employees. 

83


At least some of the heightened concern about ethics has resulted from legal and 

regulatory action. For example, the recent enactment of Federal Sentencing Guidelines 

created standardized sentencing for corporate lawbreakers. Violations of OSHA or EPA 

regulations or convictions for fraud or theft carry extremely high fines, but the fines can 

be lowered through a seven-step process designed to determine how much effort a 

company had made to discover or prevent illegal activities. Part of the process involves 

having an individual in the company designated to handle compliance issues. Having 

a code of ethics and evidence that employees have been made aware of it is also a mitigating 

factor. Companies are assessed a score from 1 to 100, and fines are adjusted 

appropriately. In one dramatic example, Ashland Oil saw a $55.2 million fine reduced 

to $1 million because it had strong ethics and compliance programs in place. 


Ethical considerations begin with your company’s mission statement, which should 

include a statement of your beliefs or values. A study of large firms by The Business 

Roundtable revealed that “many executives believe that a culture in which ethical concern 

permeates the whole organization is necessary to the self-interest of the company.” 

In your employee manual, start with a basic code of ethics that outlines your 

general expectations for individual behavior and company actions toward employees, 

customers, vendors or suppliers, stockholders and the community in general. That 

basic statement will then carry through the rest of your policies. Keep the statement as 

simple as possible, with easily understandable standards of conduct. 

➤ Recommendation: Ethics is one area where leadership by example speaks the 

loudest. If employees see you carrying through on your good intentions in daily business, 

they are more likely to follow that example. If they see others dismissed or 

‘Ethics Quick Test’ 

At Texas Instruments, in Richardson, Texas, all employees receive a wallet-size card 

that identifies seven points to consider when faced with making an ethical choice: 

• Is the action legal 

• Does it comply with our values 

• If you do it, will you feel bad 

• How will it look in the newspaper 

• If you know it’s wrong, don’t do it! 

• If you’re not sure, ask. 

• Keep asking until you get an answer. 

The other side of the card lists where employees can go for ethics answers, such 

as to their supervisor, human resources, the legal department or the company’s 

ethics office.


85 

demoted for unethical behavior, they will think twice about their own actions. Insist 

that your managers toe the line here, too, and let them know they should confer with 

you or a designated individual about any ethical concerns they may have. 

SAMPLE POLICY 

“Integrity and competence are essential ingredients of professional behavior. Every 

employee of the Firm is obligated to hold in the strictest confidence any information 

and knowledge that he/she may acquire concerning the financial affairs, transactions, 

procedures, records and business of the Firm’s clients and of the Firm. We must 

continuously remember that the principle of independence of the Certified Public 

Accountant is an important part of our service. 

“All staff members are expected to become thoroughly familiar with the rules of 

conduct and interpretation of the rules of conduct of the American Institute of 

Certified Public Accountants as contained in the AICPA Code of Professional Ethics as 

well as the Code of Professional Conduct of the New York State Society of CPAs.” 

—A New York CPA firm 

You may also want to check out Lockheed Martin’s 14-page Code of Ethics published 

on its Web site at www.lmco.com.

18 

Conflicts of Interest 

In today’s competitive business climate, the stakes are high when a 

company’s reputation, proprietary information or way of doing 

business is on the line. That’s why employees’ interactions with outside 

parties must not create a conflict of interest with your organization. 

In some cases, an organization’s very survival may hinge on 

protecting its reputation, ideas, products or services. In others, 

employees acting for personal gain may create an appearance of 

wrongdoing or a conflict of interest, even if none really exists. 

Conflicts of interest frequently interweave with related topics, such as employment 

contracts, moonlighting, confidentiality/nondisclosure agreements, politicking, ethics 

and intellectual property. 


A conflict of interest is not easy to define. That’s why your company policy should cite 

various circumstances and relationships that might constitute a conflict of interest to 

you. Generally, those situations fall into these categories: 

• Employees in a position to influence your company’s decision making. 

• Outside employment or investment in a business owned by clients, vendors or 

competitors. 

• Personal financial dealings with clients, vendors or competitors. 

• The exchange of gifts, cash, favors or other items of value that could be perceived 

as influencing an employee relative to a business decision. 

• Interactions that may damage the credibility or integrity of your organization. 

In some extreme circumstances, conflicts of interest are downright illegal. For 

example, athletes paid by gamblers to fix games by altering their performance could 

well end up in jail. So would government or company officials taking outright bribes in 

return for favorable actions or decisions. 

Most conflicts, however, are more subtle. They may involve a vendor’s lavish 

holiday gift that the employee did not request. Or, free tickets for a big game, offered at 

the last minute because the holder couldn’t use them. Or, allowing an outside party to 

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pick up the check for an expensive dinner. For these and other examples, your employees 

need to know your company’s ground rules so that they can recognize what you 

deem unacceptable. 


Since it would be impossible for you to cover all potential conflicts of interest, you 

should state in your written policy that employees are required to contact management 

about any situation that could be conceived as a conflict of interest. 

Many companies permit employees to receive gifts of nominal value, such as pens, 

company mugs, calendars or “consumables” (cookies, candy, fruit). However, when the 

gifts could reasonably be perceived as influencing the employee in favor of the giver, 

most companies require that they be returned. 

➤ Recommendation: To handle a gift return tactfully, have the employee send along a 

thank-you note explaining that the gift must be returned because of company policy. 

Or, you may consider donating the gift to a charitable organization and sending an 

explanatory note to the giver. Having a written record of the return serves as a safeguard 

for your company and the employee, and it puts the giver on formal notice that 

such gifts are not acceptable. 

A potential conflict of interest may arise when a spouse, relative or “significant 

other” works for a client, vendor or competitor. Certainly, you cannot put boundaries 

on employees’ relationships outside their jobs, but you can address your primary 

concern: maintaining the confidentiality of proprietary information. One way to do that 

is to require employees to sign confidentiality agreements, which list the types of information 

the company deems confidential, as well as the restrictions on employee 

disclosure. Your policy should clearly state that if the employee fails to comply, the 

company reserves the right to take disciplinary action, including possible termination. 

Or, you may want to consider restructuring the employee’s job to prevent access to the 

kinds of information that could be damaging. 


“An actual or potential conflict of interest occurs when an employee is in a position 

to influence a decision that may result in a personal gain for that employee or for a 

relative as a result of XYZ’s business dealings. For the purposes of this policy, a relative 

is any person who is related by blood or marriage, or whose relationship with the 

employee is similar to that of persons who are related by blood or marriage. 

“No ‘presumption of guilt’ is created by the mere existence of a relationship 

with outside firms. However, if employees have any influence on transactions involving 

purchases, contracts or leases, it is imperative that they disclose to the Personnel 

Director or immediate supervisor as soon as possible the existence of any actual


or potential conflict of interest so that safeguards can be established to protect 

all parties. 

“Personal gain may result not only in cases where an employee or relative has a 

significant ownership in a firm with which XYZ does business, but also when 

an employee or relative receives any kickback, bribe, substantial gift or special 

consideration as a result of any transaction of business dealings involving XYZ.” 

—A consulting firm 

“We reiterate that it is not good enough to be incorruptible and act with honest 

motives. It is equally important to use good judgment and conduct one’s outside 

activities so that no one—management, our editors, an SEC investigator or a political 

critic of the company—has any ground for even raising the suspicion that an 

employee misused a position with the Company.” 

—A media company

19 

Confidentiality 

and Nondisclosure 

All businesses want to safeguard trade secrets and proprietary 

information and maintain their customers’ trust. So you will naturally 

want to let your employees and independent contractors know 

what you expect of them in this regard. Your options range from 

making a simple policy statement telling them what you consider 

confidential and how you expect them to treat such information to 

asking them to sign a nondisclosure agreement. 


Before drafting a nondisclosure agreement, consider what you want to protect and how 

and why leaks are likely to occur. 

Safeguarding proprietary information: Certainly you have customer lists and 

marketing strategies that you’d prefer to keep private. And your customers doubtless 

depend on you to keep information about their business confidential. You may also 

have proprietary production methods, recipes, research and so on that contribute 

significantly to your company’s success. 

Stopping leaks: Leaks are as likely to occur through “loose lips” as through 

intentional misappropriation. Your best protection against loose lips is to make it clear 

to employees that company information is to be treated confidentially and then follow 

that proscription yourself by safeguarding proprietary information from casual 

perusal, giving employees access to it only on a need-to-know basis and disciplining 

any employee who breaches your policy. 

Intentional misappropriation is another matter. Here you are talking theft, presumably 

by a person in a position of trust who has access to confidential information. A 

nondisclosure agreement may help you protect your business from unfair competition 

by making such employees aware of both their legal obligation to protect proprietary 

information and your intention to use the full force of the law to enforce your policy. 

For additional protection, you may want to consider asking key employees to sign a 

noncompete agreement (see Section 20). 

89



❒ How do you handle business information Do you keep certain information 

confidential, allowing employees access to it only when necessary Or is the information 

lying around where anyone can access it If the latter, expect to have trouble 

convincing a court that it is a bona fide trade secret. 

❒ Do you have genuine trade secrets to protect Be aware that the law and 

businesses often disagree on what constitutes a “trade secret.” What you consider a 

secret, a court may consider general knowledge. Customer lists, for example, are seldom 

protected. Lawyers say courts will typically accord lists trade-secret status only if 

identifying the customers on the list would require extraordinary effort and the vendor 

expended considerable time and money over a period of many years to secure them. 

Therefore, if competitors could identify your customers and prospects through public 

sources, a judge might not bar a former employee from joining a competitor and 

soliciting your customers even if she had signed a nondisclosure agreement with you. 

Other confidential information that is unlikely to meet the judicial definition of 

“trade secret” includes normal business or financial information; pricing, estimating 

and salary data; operating plans; promotional objectives and supplier contracts, except 

when they have been compiled over a long period of time and at great expense. 

❒ Would a simple policy statement make more sense A nondisclosure agreement 

may help protect your trade secrets if you have genuine secrets to protect. But many 

companies don’t. If yours is one of them, consider issuing a confidentiality policy 

statement to help safeguard sensitive information in lieu of asking employees to sign a 

nondisclosure agreement. 

Whether you decide to draft a nondisclosure agreement, a confidentiality policy 

or both, be sure to define what you consider proprietary or confidential information 

and offer some examples. Make it clear, however, that the information covered in the 

agreement or policy isn’t limited to those. 

Sample Nondisclosure Agreement 

“The Employee understands and agrees that all books, records, documents and 

information, whether written or not, pertaining to the Company’s business activities, 

including but not limited to, customers, customer lists and customer’s accounts, are 

the confidential and proprietary property of the Company and are to be used exclusively 

for the benefit of the Company. He/she further warrants, covenants and agrees 

that such confidential and proprietary property shall not be copied without the 

express permission of the Company and that upon termination of employment with 

the Company, all such confidential and proprietary property and any and all copies 

thereof shall be immediately returned to the Company.” 

—A brokerage firm


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Sample Confidentiality Policy 

“XYZ’s business is based on information. Our customers depend on us to know the 

financial services business, provide services that reflect that knowledge and maintain 

the confidentiality of their business with us. It is vitally important that all employees 

recognize their duty to maintain the confidentiality of trade secrets, proprietary and 

confidential information and not to use such information in competition with XYZ. 

Trade secrets, proprietary and confidential information include, among other things, 

information concerning former, present and prospective customers of XYZ (including 

customer lists) and the affairs, operations and business activities of XYZ, which may 

be available to you but not to the public. 

“Any disclosure or use of any trade secret, proprietary or confidential information, 

other than in connection with XYZ’s business or as specifically authorized in writing 

by XYZ, could be highly detrimental to XYZ and could result in serious loss of business 

and pecuniary damage to XYZ. You are required to hold in the strictest confidence 

all trade secrets, proprietary and confidential information unless you receive 

specific written authorization from XYZ. Trade secrets, proprietary and confidential 

information must be returned to XYZ upon the termination of your employment or at 

any other time upon request.” 

—A bank

20 

Noncompete Agreements 

Soldiers who defect to the enemy are generally shot if caught, and 

citizens who disclose state secrets to foreign governments are 

jailed. But ex-employees who share your hard-won trade secrets with 

competitors—or go into competition with you themselves—can be 

hard to curb. Given the potential financial stakes, there’s good reason 

for the growing interest among employers in asking key employees 

to sign noncompete agreements. 

These agreements are designed to ensure that moonlighting or former employees 

won’t use what you’ve taught them to compete with you. The agreements often include 

nondisclosure clauses (see Section 19). Employers hope that by adding them to their policy 

arsenals, and by having them signed as a condition of employment (or continued 

employment), they’ll protect themselves. Trouble is, such agreements are easier signed 

than enforced, for a number of reasons. 

Enforcement Problems 

❒ Laws vary from state to state. Many courts and legislatures consider noncompetes 

a violation of public policy because they restrain competition and limit the 

individual’s right to earn a living. California is perhaps the most stringent; it will 

enforce noncompetes only against a company’s shareholders—nonshareholder 

employees can’t be held to them. 

❒ The agreement or its terms may be judged unreasonable. You have to go to court 

(or arbitration) to enforce a noncompete agreement. Thus, it’s up to the judge or arbitrator 

to decide whether it’s reasonable. If you can’t show the agreement is necessary to 

protect a legitimate business interest, such as a trade secret, the judge may consider 

it a restraint of trade and throw out your case. In New York, for example, you’ll need 

to prove that (1) the agreement is necessary to prevent disclosure of trade secrets; 

(2) the departing individual is unique, probably impossible to replace and, if working 

for a competitor, likely to disclose trade secrets; and (3) the terms and scope of the 

agreement meet a test of reasonableness. In other words, you can’t make an agreement 

so restrictive that your ex-employee can’t earn a living. 

❒ You offered no quid pro quo. The agreement isn’t legally binding unless the 

employer offers the employee something in return for signing it (see next page). 

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❒ Enforcement is costly. You’ll probably have to sue the ex-employee, a move 

that entails major expenditures of time and money. But if you don’t fight breaches of 

contract, your noncompetes will be meaningless. 

❒ Firing the employee may nullify the agreement. A court ruled against an 

employer who tried to enforce a noncompete agreement against a salesperson whom it 

fired for poor performance. The judges said that by firing him, the company “deems the 

employee worthless.” Thus, they reasoned, there couldn’t be any harm if he went to 

work for a rival. However, they ruled the agreement’s nondisclosure provisions were 

still enforceable. 


If, despite the foregoing, you’d still like to draw up a noncompete agreement for your 

key employees to sign (or continue using your present agreement), carefully consider 

the following issues: 

State law: Does it restrict noncompete agreements 

Enforcement: Is your state judiciary generally friendly or hostile toward noncompete 

agreements 

Business necessity: Does your company have legitimate trade secrets to protect 

Unique individual: Can you demonstrate that the individual’s contribution is such 

that you can’t replace him or that the loss of his services will cause your business 

irreparable injury Merely being a key or senior executive won’t necessarily cut it. 

Limitations: Does your agreement, or one you are considering, include time and 

geographic limitations The courts not only favor free trade but also try to prevent exemployees 

from suffering undue hardship in marketing their skills. Thus, enforceable 

agreements include time frames (typically with a maximum of one to two years) and 

geographic restrictions suited both to the scope of the ex-employee’s job and to your 

business operations and industry. Geographical limits should reflect only the areas in 

which you operate or reasonably expect to operate. 

Generally, the more restrictive the agreement, the tougher it will be to enforce 

because individuals must be given a reasonable opportunity to pursue a livelihood 

in their chosen fields. However, the courts do allow more severe restrictions on top 

managers than on lower-level employees. 

Quid pro quo: What do you offer the employee in return for signing the agreement 

The court will consider it coerced, thus null, if you fail to give the employee something 

in return. In many states, that “something” for a new hire may be the job itself. For 

established employees, you’ll probably have to offer a bonus or promotion. Again, 

consult with your lawyer to ensure that your quid pro quo passes muster under your 

state’s laws. 

Clarity: Is the agreement written in plain English The less complex the wording, the 

less room for argument or challenge by the employee. 

Judicial discretion: Does your agreement contain a “blue-pencil provision”: that is, 

a provision that allows the judge to change some of the terms If not, the judge may 

have to invalidate the entire agreement if she finds even one term unreasonable. 

Tailoring: Owing to widely differing state laws, judicial preferences and the like, 

you’ll need to tailor any off-the-shelf agreements to your particular situation. So plan


to consult long and hard with your attorney. This is one area in which any agreement 

is definitely not better than none at all. 

Noncompete agreements can help protect your business from unscrupulous 

ex-employees—but only in certain states and only if they are carefully drawn. Work 

with an attorney who is familiar with the laws of your state and the general tenor of 

applicable judicial rulings. 

Sample Agreement 

“The undersigned understands and agrees that the Company has a vital interest 

in retaining the loyalty, fidelity and continued employment and association of its registered 

representatives and its customers. He/she warrants, covenants and agrees 

that while employed by the Company and for a period of one (1) year following termination 

of his/her employment with the Company for any reason, he/she shall not, 

directly or indirectly, (i) induce, solicit, offer or recruit or attempt to induce, solicit, 

offer or recruit any registered representative of the Company to apply for or accept 

employment with any other person or entity engaged in the securities business, or 

which is in any manner in competition with the Company; or (ii) induce, solicit, or 

attempt to induce or solicit any customer of the Company to move his, her or its 

account out of the Company. 

“Notwithstanding any provision set forth in this paragraph, upon termination of 

employment with the Company, the Employee may contact, solicit or do business with 

any customers whose accounts he/she serviced at any time prior to employment at the 

Company. To avoid any misunderstanding regarding the identification of such customers, 

the Employee agrees to provide the Company a written list of such customers 

within ten (10) days of his/her date of hire.” 

—A registered securities firm

21 

Moonlighting 

More than seven million Americans, or about 6 percent of the 

work force, hold second jobs, up from 4 percent in 1975, according 

to the Bureau of Labor Statistics. There’s every indication those 

numbers will continue to climb for the foreseeable future. If you don’t 

already have “moonlighters” in your company, it is increasingly 

likely that you will. 


❒ Productivity. When employees work two jobs, problems can arise: tardiness, 

absenteeism and lower performance due to tiredness or distractions. 

❒ Safety. Tired and distracted workers tend to make more mistakes than others, and 

those mistakes can endanger everyone on the job. 

❒ Conflicts of interest. Knowingly or innocently, moonlighters may share your 

proprietary information with their secondary employers or use confidential information, 

such as customer lists, to grow their own fledgling businesses. They may even go 

into competition with you. 

❒ Possible misuse of company property. Again, innocently or knowingly, moonlighters 

may use your equipment and supplies to pursue their after-hours business. 

❒ Potential for increased workers’ compensation costs. Employees injured while 

moonlighting may file workers’ comp claims against your business. 


“A formal, written policy regarding moonlighting is probably a good idea,” says 

Wendell Patton, consultant with Landon Miles Inc. in Columbia, S.C. He recommends 

that policies contain “language that does not prohibit moonlighting but does prohibit 

the negative aspects of moonlighting.” 

Before you start drafting a policy—or simply dismiss the idea—give some thought 

to your needs: 

Are you experiencing problems related to moonlighting If not, you may not need 

a moonlighting policy, particularly if you have well-defined policies on performance, 

attendance, use of company property and conflicts of interest. However, if you 

95


anticipate or are experiencing problems, now is the time to address the specifics by 

drafting a policy that suits your philosophy and concerns. 

Are safety and performance your main concerns Use your performance and attendance 

policies to help stem tardiness, absenteeism and lowered productivity. Then 

emphasize these issues in your moonlighting policy. Make it clear that moonlighting 

employees must meet your productivity standards, including deadlines and overtime 

when called for, and that failure to do so may result in discipline or termination. Bear 

in mind, however, that it may be more productive to try to accommodate workers with 

scheduling conflicts by offering them flextime. 

Is your main concern conflict of interest Then you may want to restrict moonlighting 

by requiring employees to obtain approval from senior management before 

accepting a second job. If you don’t want to be that stringent, be sure to spell out what 

constitutes a conflict of interest and what the penalties are. Moonlighting for a competitor 

or setting up an after-hours business that competes with yours could be grounds 

for dismissal. The same would hold true if an employee used your proprietary information, 

such as customer lists or mailing lists, for another employer (or in his own business) 

even if the second employer doesn’t compete with you. 

What about issues of fairness and discrimination A moonlighting policy will make 

it easier to defend the fairness of any discipline you may have to mete out to a moonlighter 

who breaches your policies. Just be sure you apply the same standards and 

procedures to every moonlighting employee who holds a similar position with your 

firm to avoid charges of discrimination. 

How flexible can you be You can’t expect to keep forever a highly productive 

employee whose goal is to open her own (noncompetitive) business. But you’ll probably 

keep her longer if you let her moonlight to get it started. The Department of Labor 

found that about one-sixth of employees with second jobs say they moonlight for the 

enjoyment or learning experience of their after-hours work. They may actually bring 

more energy and creativity to the work they do for their full-time employer. You 

can encourage their pursuits but have a clear understanding that you still expect a 

professional performance on the job. 

Do you need a moonlighting policy for your entire work force If your concerns are 

limited to a few key employees, employment contracts that prohibit them from 

moonlighting may prove more effective than a policy statement. 

➤ Recommendation: Think twice about letting employees work for themselves after 

hours on your premises or use your equipment in their after-hours enterprises. You 

could be held liable for workers’ compensation (or damages for negligence) if the 

employee got hurt in either situation. What’s more, if the work is done with your equipment 

and/or on your premises, you face potential liability for its quality. Thus if your 

employee’s client was hurt because of his after-hours work, the client could sue you, 

claiming that he thought your firm sanctioned the employee’s work. 

Caution: Before you attack a moonlighting situation with defensive gusto, be aware 

that a company cannot invade a worker’s privacy to determine if she is moonlighting. 

If you learn that a worker is moonlighting, and you don’t have a formal policy on it, 

make objective observations and stick to the facts. Note how you learned of the outside 

activity in case the worker tries to prove later that you invaded her privacy to find out 

about her second job.


97 

Most employers frown on moonlighting and fear lowered productivity, the eventual 

loss of a valued employee or conflicts of interest. But unless you have a formal company 

policy or make it part of a valid employee contract, what employees do on their own 

time is their business, provided they don’t make it yours. It becomes your business if 

they devote so much time and energy to the second job that their productivity suffers 

or if they compete with you or use your property or proprietary information in their 

off-hours job without your permission. A well-defined moonlighting policy can help 

you stem such problems. 


“An employee may hold a job with another organization as long as he or she 

satisfactorily performs his or her job responsibilities with XYZ. All employees will be 

judged by the same performance standards and will be subject to XYZ’s scheduling 

demands, regardless of any existing outside work requirements. 

“If the Company determines that an employee’s outside work interferes with 

performance or the ability to meet the requirements of XYZ as they are modified from 

time to time, the employee may be asked to terminate the outside employment if he 

or she wishes to remain with XYZ. 

“Outside employment will present a conflict of interest if it has an adverse impact 

on XYZ.” 

—A professional services firm 

“On occasion, employees of XYZ may decide to seek employment outside their regular 

working hours. The company has no objection to this type of work when it does 

not interfere with employee performance or attendance at XYZ and when he or she 

is not in the employ of a vendor, client or competitor so as to create a conflict of interest 

in employment. 

“All employees engaged in outside employment must immediately inform their 

supervisors in writing. Failure to disclose or misrepresent outside employment may 

result in disciplinary action, up to and including termination. 

“All employees will be judged by the same performance standards and will 

be subject to XYZ’s scheduling demands, regardless of any existing outside work 

requirements.” 

—A publishing house

22 

Dispute Resolution 

When something goes wrong in an employment relationship and 

it turns into a lawsuit, there’s more at stake than the risk of a 

court judgment. Even if your company wins, defending against the 

suit can cost thousands of dollars and consume hours of management’s 

time. Plus, any relationship you might have had with the 

employee before the lawsuit will almost certainly be destroyed. 

There is a better way: alternative dispute resolution (ADR). The process begins simply 

by talking through the issues in hopes of resolving the dispute to everyone’s satisfaction. 

If that fails, you can turn to mediation, which involves engaging a neutral 

third party to help the parties work out a solution. If there’s still an impasse, the dispute 

can go to arbitration, where a private judge is hired to decide the matter. 

Arbitration is more formal and costly than mediation but far quicker and less expensive 

than going to court. 

An increasing number of companies are making the commitment to ADR, having 

employees sign an agreement to submit any disputes that might arise with the company 

to mediation, and if that doesn’t work, to binding arbitration. From 1998 to 1999, the 

mediation caseload of the American Arbitration Association (AAA) grew 17.5 percent, 

and its arbitration caseload rose from 95,143 to 140,188—compared to about 45,000 

cases per year in the mid-1980s. 


If simply talking things over with an employee doesn’t bring about a resolution, mediation 

is an excellent next step. It’s good for all concerned because mediation leaves the 

parties in control of the settlement. You might have to give up more than you’d like, but 

so will the other party—and chances are it will be preferable to a lawsuit. The AAA 

reports that in more than 85 percent of the mediation cases filed, the parties are able to 

reach settlements—and preserve their business relationships. 

When the employee involved is still working for your company, mediation gives you 

a chance to preserve the relationship. After all, you’ve spent a lot of time and money 

training this person, and oftentimes the employee just wants to be heard. Resolve the 

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99 

problem and you retain a productive employee. Or, if it’s a disgruntled ex-employee, 

keeping the matter out of court will save a great deal of time and money. 

One reason mediation works is that both parties have agreed on the mediator (typically 

someone from a local or national mediation organization, thoroughly trained in 

getting people to agree). In smaller disputes, the mediator may just sit down with the 

employee and an executive who is authorized to make decisions on behalf of the company, 

find out why they cannot agree and help them craft a solution. For larger disputes 

or those in which tempers are flaring, each party may caucus with their attorneys in a 

separate room while the mediator goes back and forth. When both parties agree on a 

settlement, the mediator gets it in writing with their signatures. That decision can then 

be filed with a court. 

In arbitration, someone else is imposing a solution. But the arbitrator, who’s likewise 

chosen by both parties, is someone familiar with the industry. That can save a lot of 

time in complex commercial cases because you don’t have to educate the judge and jury 

except on the facts of the case. 

Be aware that the arbitrator’s decision cannot be appealed in court unless it’s so outrageous 

that it violates public policy to enforce it. Truly unreasonable decisions are rare, 

however, so companies are willing to take the risk. For the typical employment dispute, 

it can be a relief to know that there won’t be endless appeals. 

Because arbitration is less expensive than litigation, it’s also easier for someone to file 

a claim against you. If your arbitration policy calls for the company to pay most of the 

expenses, you may be inviting employees to initiate arbitration. But this door swings 

both ways: It’s also easier to defend a claim. That means former employees are less likely 

to extort a settlement based on the cost of a lawsuit. 

As with a lawsuit, arbitration includes an initial period of requesting documents and 

briefs by each side summarizing the facts and the arguments. At the proceeding, witnesses 

are examined and cross-examined, and the attorneys offer opening and closing 

arguments. Then the arbitrators (typically a panel of three) have 30 days to issue their 

ruling. (You can get a decision the same day if you make arrangements in advance.) 

Unless both parties request a written finding of facts with legal reasoning and conclusions, 

the ruling is a simple statement of who gets what. 

Mandatory Arbitration 

For years, small businesses have shied away from making workers sign mandatory 

arbitration agreements because of the dicey legal status of such pacts. But a recent 

U.S. Supreme Court ruling gives you the green light to require employees to go 

through arbitration to settle disputes, rather than going to court. 

In a 5-4 ruling, the court said a retail worker could not sue his employer over alleged 

harassment at work because he had previously signed an agreement that required 

him to submit such claims to arbitration. The pact was enforceable even though the 

employee was required to sign it as a condition of employment. (Circuit City Stores, 

Inc. v. Adams, No. 99-1379)



One of the most controversial issues concerns whether ADR agreements are enforceable—that 

is, whether you can require employees to submit a dispute to arbitration. 

After all, if you require employees to sign an arbitration agreement, you are making 

them sign away their right to a jury trial. That’s a problem if the dispute concerns 

charges of sexual harassment or discrimination. 

In recent years, courts in most jurisdictions have been enforcing arbitration agreements 

only if they specifically state that they cover discrimination and other statutory 

claims. Reason: In Title VII, Congress granted employees a right to a jury trial, so 

employees must knowingly and willingly sign away that right before the court will 

enforce the arbitration clause. Thus if you’re drawing up an ADR policy that includes 

binding arbitration, make sure it covers the following: 

• The clause must be equally binding on both sides. You cannot require employees to 

take their disputes to arbitration if the company reserves the right to sue. 

• The employee must have read, understood and signed the agreement. It cannot be 

hidden in fine print at the back of the employee handbook. Indeed, the ADR agreement 

should be separate from the handbook. Reason: You don’t want your handbook 

to count as a binding contract, but you do want the ADR policy to be binding. 

• The ADR clause has to provide a procedure for discovery, so the employee has a 

right to the same personnel documents and data that the company does. State that 

the arbitration process will follow the procedures of the American Arbitration 

Association or another major organization where these issues have already been 

addressed. 

• There must be some “consideration”—that is, the employee must have received 

something valuable in exchange for signing away the right to a jury trial. For new 

hires, the ADR agreement can be a condition of employment. For current employees, 

you can offer a bonus or promotion in exchange for signing. 

• In some jurisdictions, the arbitrator must be able to assess the same level of damages 

as a regular judge—including punitive damages. Check with your attorney. 

Consider involving your employees in the design of your ADR program since they 

are likely to resist a policy imposed from above. Once they’re involved in creating the 

policy and understand the reasons for it, they’ll probably agree that it’s best for everyone 

concerned. 

SAMPLE POLICY 

“This organization is committed to prompt and fair resolution of all disputes of any 

nature that may arise in the workplace. This policy governs all aspects of employment 

dispute resolution, including all legal claims that the employee may have against the 

company, up to and including discharge, and any claims of discrimination based upon 

race, color, sex, disability, religion, national origin, age or any other protected 

attribute, or any claims arising under any federal, state, local law or any common law. 

This dispute resolution procedure is a condition of employment with this organization.


101 

1. Employees should promptly discuss any problems or concerns that are related to 

their work in any way with their immediate supervisor. If the immediate supervisor 

is the cause of the problem or if the employee feels uncomfortable discussing the 

matter with the supervisor, issues may be raised initially with the president. 

2. Whenever issues are raised, both the company and the employee will undertake to 

make a good-faith effort to resolve the matter by openly discussing the matter and 

attempting to reach a resolution. If resolution is not achieved, the issue may be 

referred to the president who will conduct such investigation as she deems appropriate 

and meet with the employee in a sincere effort to discuss, analyze and 

resolve the matter. If a mutual resolution is not reached, the president may issue a 

determination on the issue, which shall be final unless the employee invokes mediation 

under this procedure. 

3. If the employee is dissatisfied with the president’s decision and the claim involves 

a material aspect of the employment or an allegation of violation of any law, the 

employee can request that the matter be submitted to mediation. The parties shall 

jointly designate a mediator, or if the parties cannot agree, the employer can 

request that a mediator be designated from any one of three or more certified 

mediation organizations located in the metropolitan area that the employee designates. 

The cost of the mediation shall be borne equally by the company and the 

employee, unless the parties agree otherwise. The company and the employee are 

obligated to make a good faith effort to resolve the issue through mediation. 

4. If the matter is not resolved in mediation, either party may request that the matter 

be referred to arbitration by making a written request of the other party within 

sixty days of the conclusion of mediation. If the parties do not mutually designate 

an arbitrator, one will be selected under the rules and regulations of the American 

Arbitration Association for the arbitration of employment disputes. Upon the 

employee’s request, an arbitration hearing will be held under the AAA arbitration 

rules. The decision of the Arbitrator will be final and binding upon both parties. 

Judgment on the arbitration award may be entered by any court having jurisdiction. 

The cost of the arbitration will be borne equally by the parties, unless otherwise 

directed by the arbitrator in the award.” 

—Reprinted by permission of the law firm Adam J. Conti, LLC, Atlanta, Ga.

PART VI: Workplace Issues 

23 

Employee Privacy 

Issues of employee privacy come up in a wide range of activities, 

from pre-employment interviews and reference checks to employees’ 

phone calls, e-mail, use of the Internet, work and medical records 

and disciplinary actions. Some issues are covered by law; others are 

gradually being worked out in the courts. Still others simply require 

thoughtful consideration by employers and employees alike. While 

you want to demonstrate your respect for employees’ privacy, your 

business and legal concerns compel you to monitor certain employee 

activities and keep records on each individual. 


You must balance the right to privacy against your company’s compelling business 

interests—for example, when ensuring a safe workplace or quality customer service. 

Employers are forbidden to engage in certain practices, such as asking job applicants 

questions that might be discriminatory or monitoring employees without notice in 

areas where they have a reasonable expectation of privacy. 

Privacy is at issue in many areas of legitimate employer concern. Among them: 

• Interviewing applicants. 

• Internet use. 

• Background/reference checks. • Dress. 

• Job testing. 

• Religious observances. 

• Drug testing and medical exams. • Politicking on the job. 

• Personnel files and medical records. • Union activity on the job. 

• Smoking in the workplace. 

• Return-to-work policies. 

• Substance abuse. 

• Weapons in the workplace. 

• Phone calls. 

• Giving job references. 

We discuss many of these in this Special Report and others in relation to larger issues, 

such as hiring and termination. But bear in mind that all policies touching on these 

issues must balance your need-to-know with your employees’ right to (or expectation 

of) privacy. 

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It’s in your best interest to dictate and monitor employee behavior only when absolutely 

necessary. Make it clear to employees that you respect them as individuals, and let 

them know when and why you may sometimes monitor their activities. For example: 

❒ Legal requirements. Depending on your company’s size and business, you may 

be required by law to maintain records on employees’ immigration status, health, sex, 

race and other characteristics that would otherwise be protected by various civil rights 

laws. The laws often specify exactly how to keep such information and who can access 

those records. 

❒ Productivity. To improve performance and ensure that employees do a good job, 

you may want to monitor service calls and other employee interactions as a basis for 

employee training. 

❒ Workplace safety. In the interests of safety and productivity, you’ll want to investigate 

incidents of violent or threatening behavior on the job as well as suspected substance 

abuse. This may call for drug testing or searches of employees’ desks or lockers. 

❒ Company reputation and liability. To safeguard your company’s reputation and 

bottom line, you want to ensure that company property isn’t being used in the commission 

of crimes, such as making threatening calls, sending pornographic e-mail or 

selling drugs on the premises. You also want to protect yourself against employee theft. 

Remember, too, that it’s your responsibility to investigate job applicants to weed out 

criminals, workers with violent tendencies, current substance abusers and even 

bad drivers if you’re going to put them to work behind the wheel. If you skip their 

background checks, you could be held liable for “negligent hiring.” 

Mutual respect fosters employee morale and productivity. Employees who feel they 

are respected and who respect one another are usually more willing to cut each other 

some slack. That, in turn, tends to reduce misunderstandings and on-the-job conflict. 

Here’s how one company expresses that idea: 

“Respect for employees anchors our policies here at XYZ. Employees are respected 

as individuals and appreciated for the unique contributions they make to our 

business. Likewise, every employee is expected to treat others with respect in all 

aspects of their working relationships. The company expects your full cooperation to 

make these policies effective.” 

—A large media firm 

The media firm then goes on to state its policies on equal employment opportunity 

and inappropriate behavior (including all types of harassment). It’s a formula you 

might want to follow to set the tone for your policies and your employee manual.

24 

Sexual Harassment 

If you don’t have a sexual harassment policy in place, you should 

make it your first priority—today. The U.S. Supreme Court sent 

you a clear message in 1998: Employers are liable for supervisors’ 

misconduct even if they knew nothing about the harassment. In some 

cases, though, the court said an employer can defend itself if it can 

show that it “exercised reasonable care to prevent or correct promptly 

any sexually harassing behavior” and if the victim “unreasonably 

failed to take advantage of any preventive or corrective opportunities 

provided by the employer.” 

The Supreme Court also made it clear that employers now are responsible for all 

types of harassment by supervisors, including “hostile environment.” (Lower courts 

had already been in agreement that employers are automatically liable in quid pro quo 

harassment cases.) 

Here’s what the two forms of harassment mean: 

❒ Quid pro quo. Literally “this for that,” quid pro quo harassment occurs when a 

supervisor or employer uses job rewards (such as promotions or raises) or punishment 

(such as demotions or firing) to force a worker into a sexual relationship. 

It’s important to note that in Burlington Industries v. Ellerth the Supreme Court said 

the female employee could sue even if she couldn’t show any job-related harm from her 

male supervisor’s harassing conduct. She only had to show that the conduct was 

“severe or pervasive.” 

❒ Hostile environment. This form of harassment is more subtle and is subject to 

personal tastes. Workers who bring hostile-environment suits claim the workplace 

atmosphere was so sexually charged that it affected their job performance. Recognized 

causes of hostile environment include pornographic pictures, verbal abuse, offensive 

language or jokes, unwanted hugs or back rubs, and demeaning remarks about a 

person’s gender. 

In Faragher v. City of Boca Raton the Supreme Court said the city was liable even if it 

was not aware that a female lifeguard was being harassed by her male supervisors. 

Furthermore, the court said, the city had failed to disseminate its sexual harassment 

policy among the beach employees. 

105



The sheer number of sexual harassment cases on the Supreme Court’s docket in 1998 

showed just how volatile this issue is in the workplace today. The justices heard three 

cases involving Title VII, under which sexual harassment is considered a form of sex 

discrimination, as well as a fourth case involving Title IX and a school district. 

Sexual harassment costs companies millions of dollars annually in lowered productivity 

and morale, absenteeism, turnover and lawsuits. The Equal Employment 

Opportunity Commission reports that sexual harassment claims have more than doubled 

since 1991, to 15,836 cases in 2000. If you had to go to court over such a charge, it 

would cost you on average $80,000 just to defend your company. 

EEOC guidelines define sexual harassment as any “unwelcome sexual advances, 

request for sexual favors and other verbal or physical conduct of a sexual nature.” 

What’s your best defense In the words of the EEOC: “Prevention is the best tool to 

eliminate sexual harassment in the workplace. Employers . . . should clearly communicate 

to employees that sexual harassment will not be tolerated. They can do so by 

establishing an effective complaint or grievance process and taking immediate and 

appropriate action when an employee complains.” 

Be aware that sexual harassment can poison your workplace in various ways. 

Among the situations you might not have considered: 

❒ Same-sex harassment. While Title VII does not specifically address same-sex 

harassment, the U.S. Supreme Court ruled that a worker is allowed to bring suit against 

co-workers of the same sex. (Oncale v. Sundowner Offshore Services) Note that 13.6 percent 

of all sexual harassment cases are filed by men, and most of those are brought 

against other men. The wise course for you is to make sure employees understand that 

you not only won’t tolerate same-sex harassment but will treat alleged instances as seriously 

as you do opposite-sex harassment. 

❒ Romance in the office. Companies that allow dating between supervisors and 

subordinates are asking for trouble, and not just because other employees may feel the 

supervisor may show favoritism toward his romantic partner. When such romances 

sour, the subordinate may accuse the supervisor of sexual harassment, catching the 

company in the middle. Keep in mind that any romantic advances, regardless of 

any prior relationship between the workers involved, do become “your business” 

the moment they become unwelcome, which is a good reason to monitor office 

relationships carefully. 

Who’s Covered 

Workers can file sexual harassment claims under Title VII if their company employs 

15 or more people. You may be thinking that leaves you off the hook if yours is a very 

small firm. Think again. In a 1997 Supreme Court ruling, the justices said employers 

must include part-timers in their 15-worker head count. Also, many states and localities 

have antidiscrimination laws that apply to companies with fewer than 15 employees. 

Bear in mind, too, that you can be held liable for tort damages even if you don’t 

have enough employees to be covered by federal and state employment laws.


107 


You must have a formal policy prohibiting sexual harassment, one that conforms to 

state as well as federal law. Communicate this policy to all employees in your company, 

regardless of management level. Review and update your policy on a regular basis. 

An effective sexual harassment policy should contain these points: 

✔ A broad definition of the type of conduct that constitutes sexual harassment. 

✔ A statement that offenders will be subject to appropriate discipline, up to and 

including discharge. 

✔ A statement encouraging employees who feel victimized by sexual harassment to 

report the offensive conduct. 

✔ A statement requiring employees and supervisors to report any offensive conduct 

that they experience or witness. 

✔ A statement providing assurances that there will be no retaliation against an 

employee reporting sexual harassment. 

✔ A statement indicating that all reports of sexual harassment will be promptly and 

thoroughly investigated, and prompt remedial action will be taken should the 

company conclude that sexual harassment has occurred. 

In defining “harassment,” you may quote the EEOC verbatim or write your own 

definition with the help of your legal counsel, but be sure to include both quid pro quo 

and hostile-environment harassment. You should also define sexual favoritism and 

even indirect harassment. You want to make sure your employees understand that you 

are enforcing both the spirit and the letter of the law. 

Set up a complaint procedure 

Provide the names and phone numbers of contact people to whom workers can report 

misconduct. (If you had only one contact, it would be difficult for someone harassed by 

that person to file a complaint.) Specify who will investigate and decide the outcome of 

a complaint. Try to ensure confidentiality to the greatest extent possible. Set a time 

frame to process and resolve complaints quickly and fairly, and decide how appeals 

will be handled. 

Explain the procedures for filing a complaint with the EEOC as well, or at least make 

it clear that employees have that option. Have someone outside the policy team review 

your policy to make sure that the grievance procedures are spelled out clearly, in terms 

all employees can understand. 

Investigate complaints ASAP 

Every complaint of sexual harassment must be taken seriously and investigated 

promptly. Develop a method to interview the accused, the accuser and potential 

witnesses, as well as a system to gather and record evidence. Treat all parties with 

dignity and respect. Conduct all interviews privately, and ensure the confidentiality of 

the investigation.


Enforce your policy 

If your investigation reveals an actual sexual harassment case, notify the involved 

parties and decide on the type of disciplinary action to take. Depending on the 

harasser’s work record and the gravity of the charge, you may decide on an oral or 

written warning, deferral of a raise or a promotion, demotion, suspension or discharge. 

Be fair in your judgment, and apply your disciplinary actions evenly. Make sure you 

have all the necessary documentation to back up any disciplinary action. Keep all those 

records contained in one file. If the harasser decides to sue for wrongful termination or 

job discrimination, you will be able to locate all the information you need to justify 

your decision. 

Promote your policy 

It’s not enough simply to have a sexual harassment policy on file. To avert liability, 

employees must know your policy exists and understand your grievance procedures. 

Once your policy is written, don’t bury it in a pile of other company edicts or attach it 

as an afterthought to your antidiscrimination policy. Present it separately in handbooks 

and on bulletin boards. Think of it not as “just another company rule” but as an educational 

vehicle for your employees. Hold in-house meetings to communicate your policy 

effectively. Ask your work force to give you their input and to voice their concerns. 

Unlike other policies that are invoked only when a particular situation arises, 

your sexual harassment policy governs workplace interaction all day, every day. It 

shouldn’t be a reference that employees turn to only after a problem arises. 

SAMPLE POLICY 

“XYZ is pledged to preserving a working environment free from sexual harassment. 

Harassment is against the law and is a form of gender discrimination. The aim of this 

policy is to prevent harassment of any kind by anyone employed by or associated with 

the company. 

“Sexual harassment consists of unwelcome sexual advances, requests for sexual 

favors or unwanted sexual attention by anyone associated with the company, whether 

male or female. Harassment may include references to employment status or conditions 

or may serve to create a hostile, intimidating or uncomfortable work environment. 

Harassment includes, but is not limited to, obscene jokes, lewd comments, 

sexual depictions, repeated requests for dates, touching, staring or other sexual 

conduct committed either on or off company premises. 

“Victims of sexual harassment have the right to sue both the company and the 

perpetrator by contacting the Equal Employment Opportunity Commission or a 

state agency. For this reason and for the protection of all our employees, XYZ seeks 

to prevent sexual harassment.


109 

“All XYZ employees are responsible for helping ensure that our workplace is kept 

free of sexual harassment. If you feel you have been a victim of sexual harassment, 

report the behavior to our Sexual Harassment Coordinators [name, location, phone 

number] or to any supervisor, member of the personnel department or the company 

president. If you have witnessed sexual harassment, you also are urged to report the 

incident so that prompt action may be taken. 

“All complaints will be treated seriously, kept as confidential as possible and investigated 

fully. XYZ expressly forbids any retaliation against employees for reporting 

sexual harassment. If, however, the company finds that false charges have been filed, 

disciplinary action may be taken against anyone who provides false information. 

“If an investigation confirms that sexual harassment has occurred, immediate 

action will be taken to put an end to the harassment. XYZ will take appropriate 

corrective actions against anyone found to be in violation of this policy, including 

possible termination of employment.” 


Other discriminatory harassment 

Harassment on the basis of factors other than sex can also create dissension in your 

company and get you dragged into court on charges of discrimination. To protect yourself 

and make it clear that your organization respects all individuals, you may want to 

draw up a separate policy statement to address it. A New York association uses this one: 

“XYZ strongly supports the rights of all its employees to work in an environment 

free from all forms of harassment, including harassment on the basis of race, color, 

religion, gender, sexual orientation, national origin, age or disability. . . . 

“Harassing conduct includes, but is not limited to: 

• Epithets. 

• Slurs. 

• Negative stereotyping. 

• Threatening, intimidating or hostile acts that relate to the above characteristics. 

• Written or graphic material that denigrates or shows hostility or aversion toward an 

individual or group because of the above characteristics, and that is placed on 

walls, bulletin boards, or elsewhere on the premises, or circulated in the workplace. 

“In compliance with the EEOC Guidelines and our policy, XYZ prohibits harassment 

of any kind. 

“If the result of an investigation indicates that corrective action is called for, such 

action may include disciplinary measures up to and including immediate termination 

of the employment of the offender.” 

—A New York association

25 

Substance Abuse/ 

Drug Testing 

Many smaller companies handle substance abuse problems on an 

ad hoc basis. They have no formal policy because (1) they 

haven’t had a problem with substance abuse or (2) they don’t consider 

the problems they’ve had serious enough to warrant a policy. 

They may also be leery of confronting the privacy issues involved. 

This may be a head-in-the-sand response, given that twice as many employees at 

small companies (under 25 workers) use illegal drugs (11 percent) than at companies 

with 25 or more employees (5.4 percent), according to a groundbreaking study by 

the U.S. Substance Abuse and Mental Health Services Administration. The reason may 

be that only 20 percent of small companies screen workers for drugs, compared with 

80 percent of larger companies. Also, the tight labor market has forced more smalls to 

relax their hiring standards. 

The impact: Workers who use drugs perform at about two-thirds their capacity and 

cost employers, on average, an extra $7,000 per year in increased health care costs, lost 

productivity and absenteeism. 

The Department of Labor encourages every workplace to establish a comprehensive 

substance abuse program with the following components: a written substance abuse 

policy, an employee education and awareness program, a supervisor training program, 

an employee assistance plan and, where appropriate, a drug testing program. 


Look at the following issues when setting up a substance abuse policy: 

✔ Do you handle hazardous materials or run complex production equipment 

✔ How many company vehicles do you have on the road 

✔ If an employee breached your security measures or made mistakes on the job 

because of substance abuse, who would be harmed and how seriously 

✔ Would your insurance cover you for substance abuse-related incidents 

✔ Are you subject to the Drug-Free Workplace Act of 1988 If so, you are required 

to post and enforce an antidrug policy that bans the use, possession and distribution 

110


111 

of drugs on company premises. You must also create and maintain an employee 

drug awareness program. The act covers all organizations receiving procurement 

contract awards of $100,000 or more and all recipients of federal grants. 


When you adopt a policy, state it clearly and define substance abuse so there can be no 

mistake about what’s covered and where. You will want to: 

❒ Express the company’s concern for the well-being of workers with substance 

abuse problems. Point out that substance use harms the company and threatens the 

safety of co-workers and the well-being of the worker’s family. 

❒ Expressly prohibit the use, possession or distribution of drugs or alcohol on 

company premises. 

❒ Specify how you will deal with violators. Indicate the penalties for violation of 

the policy, including possible suspension or termination. 

❒ State your policy on drug testing if you plan to use such tests (see next page). Cite 

what lawyers generally refer to as the “compelling business interests” for administering 

drug tests. You want employees to understand how substance abuse harms them as 

well as the business in general. 

❒ Offer assistance. Let workers know that you will refer them to self-help and 

professional resources if they want help with any “personal problems.” If your 

company’s health insurance plan pays for substance abuse treatment, outline the 

benefits. But emphasize that after you have offered help, you expect performance 

problems to be solved. 

❒ Assure employees that the company will safeguard their privacy, and that participation 

in an employee assistance program will not jeopardize their employment or 

advancement. 

❒ Review all other company policies to ensure consistency with your drug abuse 

policy and revise them if necessary. For example, you might need to change the rules of 

conduct that apply to alcohol being served at company parties and picnics. 

❒ Consider giving employees at least 90 days’ notice before implementing a substance 

abuse policy. That allows you time to announce the policy, get employee feedback 

and, if warranted, makes changes to address employee concerns. 

❒ Train your supervisory personnel to recognize the signs of substance abuse, and 

instruct them closely on what action to take should they suspect a colleague or subordinate 

of abusing drugs/alcohol on the job. Bear in mind that substance abuse is a medical 

diagnosis, which company personnel are not qualified to make. Your managers 

should be concerned only with behavior that affects job performance or violates company 

policy. Caution them to document and report behavior problems but to omit any 

reference to substance abuse. 

Who’s Protected by the ADA 

Current users of illegal drugs are not covered by the ADA, but former and recovering 

users are protected under the act. This means you cannot refuse to hire—and you can’t 

fire—a person simply because of an addiction. But you can refuse to hire a person and


in fact fire him if he is currently abusing alcohol or drugs. You cannot refuse to employ 

someone who has been successfully rehabilitated unless you can demonstrate a jobrelated 

reason for doing so. 

Even though alcoholism is a protected disability under the ADA, it does not restrict 

your right to discipline, discharge or deny employment to an alcoholic whose use of 

alcohol adversely affects his job performance or conduct to the extent that the individual 

cannot carry out his essential job functions. For example, if a worker with an alcohol 

problem is often late to work or unable to do his job, you can take disciplinary 

action. You may not, however, discipline an alcoholic employee more severely than you 

would another employee with the same performance or conduct problems. 

Drug Testing 

Any drug testing program must meet numerous legal restrictions, which vary depending 

on the type of workplace, to safeguard employee privacy and guard against illegal 

discrimination. Before setting up a drug testing program, consult with your attorney. 

There are several legal issues you’ll need to address: 

❒ Constitutional protections: Special rules apply to drug testing by public employers, 

who are subject to the dictates of the Fourth Amendment, which prohibits unreasonable 

search and seizure. The U.S. Supreme Court has ruled that a public employer’s 

taking of a blood, urine or breath specimen for alcohol or other drug testing constitutes 

a “search.” Determining whether a test is reasonable requires balancing the public 

employer’s legitimate interests with the degree of intrusion on the individual’s privacy. 

Accordingly, courts favor employee testing by governmental employers only 

when it’s based on “reasonable suspicion” of alcohol or other drug use. 

Some state constitutions extend the right of privacy to private employees, too. In 

those states, private employers testing for drugs may likewise have to meet rigorous 

standards. 

❒ Disability discrimination: Drug tests are not considered medical examinations 

under the ADA, so employers are allowed to conduct them at any time during the preemployment 

stage to check for current use of illegal drugs. 

However, those tests may reveal the presence of legal drugs. You’re in trouble if you 

exclude an applicant from a job because of a suspected drug addiction and a drug test 

reveals the presence of a lawfully prescribed drug. You are liable under the ADA. 

An employer cannot ask if an individual is taking prescription drugs before making 

a conditional job offer. To avoid liability, you can wait to conduct a drug test until an 

offer is made. Because applicants who test positive for illegal drugs are not covered by 

the ADA, you can withdraw a job offer based on illegal drug use. 

Alcoholism is a protected disability under the ADA, so alcohol testing is prohibited 

until after you’ve made a conditional job offer. 

Test results must be treated as confidential medical records. For more details on testing, 

you may wish to read the EEOC’s Enforcement Guidance: Pre-employment Disability- 

Related Questions and Medical Examinations, which is available online at www.eeoc.gov/ 

docs/preemp.html. 

Most states also have laws that prohibit disability discrimination in employment. 

Many of these laws apply to alcoholics and drug users, and may prohibit adverse


113 

employment decisions based solely on positive test results. Consult your lawyer about 

the laws in your state. 

❒ Collective bargaining rights: The National Labor Relations Board has ruled that 

compulsory drug testing of current employees amounts to a substantial change in the 

terms and conditions of employment; thus drug testing is subject to mandatory bargaining 

under the National Labor Relations Act. So if your company is unionized, you 

cannot implement new rules on drug testing without first bargaining with the union. 

However, you don’t need to consult the union about testing job applicants. 

❒ State, local and common law concerns: Some states and cities have laws restricting 

workplace drug and alcohol testing, with procedural safeguards and privacy protections. 

Likewise, courts in several states have developed legal theories that may 

restrict workplace testing in the private sector. 

For instance, an employee dismissed for refusing to submit to a drug test might claim 

wrongful discharge, arguing that it’s against public policy to fire employees who insist 

on their right to privacy. If a supervisor were to circulate false information about the 

results of an employee’s drug test, that might be grounds for a claim of defamation. 

Also, a highly intrusive testing procedure might be grounds for a common law claim of 

invasion of privacy or intentional infliction of emotional distress. 

Be sure to inform job applicants and employees of your drug testing policy, and get 

a signed and dated consent form before administering any drug test. If you ask applicants 

to take a drug test as a condition of employment, issue fair warning on your job 

application form. Include words to this effect: 

“XYZ reserves the right to make employment conditional on the results of a 

drug test.” 

The consent form could be worded along these lines: 

“I consent to undergo a urinalysis to determine the presence of alcohol or illegal 

drugs in my system. I understand the test will be given on company time and at its 

expense. I further understand that the test results will remain confidential between 

the company and myself, except as may be required by law.” 

Cut Insurance Costs 

More states are adopting drug-free workplace laws that can translate into lower insurance 

rates for employers. They include Georgia, Ohio, Virginia, Florida, Tennessee 

and Washington, which allow cuts in workers’ comp premiums for employers who 

participate in drug-testing programs. The average premium credit for participating 

employers: 5 percent. Higher discounts depend on the frequency of drug testing. For 

more information on setting up your own drug-free workplace programs, contact the 

Center for Substance Abuse Prevention at (800) WORKPLACE or www.samhsa.gov/ 

csap/index.html. 

Note: You cannot force applicants or employees to submit to drug tests, but you can 

refuse to hire the former or discipline or fire the latter if they refuse to be tested.


In setting up a drug testing program, consider the following questions, drawn 

from a Department of Labor publication, What Works: Workplaces Without Alcohol and 

Other Drugs: 

• Who will be tested (Only applicants All employees Only employees in “safetysensitive” 

positions) 

• When will testing be done (After all accidents Only after some accidents When 

an employee behaves abnormally On a random basis As part of a routine physical 

examination) 

• For what drugs will testing be done (Only for marijuana and cocaine, which are 

the most commonly used illegal drugs For all illegal drugs For alcohol For prescription 

drugs that may affect performance) 

• How frequently will testing be done (Weekly Monthly Annually) 

• What action will you take if an applicant tests positive (Refuse to hire Tell the 

applicant why he is not being hired Allow the applicant to be retested Allow the 

applicant to reapply after a set time period or after determining that he is drug free) 

• What action will be taken if an employee tests positive (Fire an employee who 

tests positive Refer the employee to counseling and treatment after the first positive 

test but fire her after the second Allow an employee more than one chance to 

be rehabilitated before firing) 

• What tests will be used, and what procedures will be followed to ensure reliability 

(How will specimens be collected, identified and tracked How will a laboratory be 

selected Your state’s laws might specify a laboratory. If not, be sure to use one certified 

by the U.S. Department of Health and Human Services or accredited by the 

College of American Pathologists. Will a confirmation test be used This is sound 

policy if you’re planning to use the results as the basis for any employment decision. 

Will a physician with appropriate training review and interpret positive test results) 

• What precautions will be used to protect an individual’s privacy and the confidentiality 

of test results (Under what circumstances, if any, will specimen collection be 

observed Who will have access to test results) 

For more information, you may wish to obtain the Department of Health and 

Human Services’ “Model Plan for a Comprehensive Drug-Free Workplace Program” by 

calling the National Clearinghouse for Alcohol and Drug Information at (800) 729-6686. 

SAMPLE POLICY 

“The Company prohibits the use, transfer, distribution, manufacture or possession of 

alcohol, controlled substances, unauthorized drugs, intoxicants, drug paraphernalia, 

or combination thereof on any company premises or work sites, including Company 

vehicles and private vehicles parked on Company premises or work sites. 

“Use or possession of prescription drugs consistent with a physician’s directions is 

not considered a violation of this policy.


115 

“Employees who fail to conform to these rules will be subject to removal from the 

facility and appropriate disciplinary action, up to and including termination of 

employment. This policy applies to all employees. 

“Self-identification: Employees who volunteer information of their chemical dependency 

problems may receive the support and aid of the Company for rehabilitation. 

However, any support or aid offered to an employee is a discretionary management 

decision and will be based partly on the circumstances of the employee, the manner 

the Company obtained the information and the seriousness and frequency of other 

Company violations. 

“The decision to request a diagnosis and accept treatment for a chemical dependency 

is the personal responsibility of the individual. An individual’s refusal to accept 

referral for diagnosis or to follow prescribed treatment will be considered insubordination 

and a violation of this policy. 

“Fitness for Duty: As a condition of employment, employees must report to their 

jobs in a condition that will allow them to be mentally and physically alert. 

“When a manager has reason to believe fitness for duty of an employee is impaired, 

because the employee is under the influence of alcohol, drugs, or other controlled 

substances, the employee’s fitness should be witnessed by another supervisor (if possible). 

If they concur that the employee’s fitness for duty is impaired, the Company will 

administer appropriate disciplinary action, including discharge. 

“Testing: All alcohol and drug testing procedures will conform to all local, state and 

federal regulations. No testing procedures will be implemented that will not meet the 

Company’s professional and certifiable standards. 

“All laboratories, hospitals and their professional staff must meet the standards of 

the National Institute on Drug Abuse.… The Company will require, but not limit, alcohol 

and drug testing for: 

• After accidents 

• Annual physicals 

• Reasonable suspicion 

• Return-to-duty testing 

• Random 

• Pre-employment (where permitted by law) 

• Follow-up testing 

“Employees testing positive for alcohol and/or drugs may be required to enroll in 

at least one of the following: 

• Employee Assistance Program 

• Education and/or training program 

• Rehabilitation program 

“The selection of an appropriate program and/or appropriate disciplinary action 

for the employee violating the alcohol and drug abuse policy is completely a discretionary 

decision of management, and the Company reserves the right to take disciplinary 

action up to and including discharge. 

“If an employee is required to enroll in a rehabilitation, education or assistance 

program, continued employment is conditioned upon the following requirements:


1. The employee must present written certification that he/she has successfully completed 

the appropriate rehabilitation program. 

2. The employee must satisfactorily complete an alcohol and drug test. 

“Confidentiality: The Company will maintain the highest standards for confidentiality 

for all records and information concerning alcohol and drug dependencies. No 

employee is authorized without the express consent of the Company president to 

release, communicate or leave unsecured information on alcohol or drug abuse problems. 

Any employee violating this policy will be subject to disciplinary action, including 

possible termination of employment. Non-employees, contractors, vendors and 

agencies that disclose unauthorized information will be subject to legal recourse. 

“Nothing in this statement of policy is to be interpreted as constituting a waiver of 

management’s responsibility to maintain discipline, or the right to take disciplinary 

measures in the case of poor performance or misconduct.” 

—Printing Industries of America, Inc.

26 

Politicking 

and Solicitations 

You work hard to minimize distractions in the workplace. 

Creating conditions that help keep employees focused on their 

work means higher productivity and increased efficiency. And when 

outsiders enter your work site, you want to present an image that fits 

what your organization is all about. You also want to avoid situations 

unrelated to work that could cause conflict or alienation for some 

individuals or groups. Those all are sound reasons to consider 

policies on politicking and solicitations in the workplace. 


You have every right to control employees’ activities on the job. You have the right to 

forbid political activities and other types of solicitation on the job, whether they involve 

wearing a campaign button, soliciting a charitable donation, holding a Tupperware 

party or selling Girl Scout cookies. But you have to walk a fine line between free-speech 

Where to Draw the Line 

If employees protest and assert their right to free speech, remind them that the 

Constitution guarantees their speech won’t be stifled by the government—not by 

a private employer. Still, it’s not a good idea to fire someone for, say, expressing 

political views that are different from your own. So where do you draw the line 

A court case in Nebraska shows the way. A worker insisted on wearing a graphic 

antiabortion button, which upset many co-workers and disrupted her office. Noting 

a 40 percent drop in productivity, her supervisors gave her three choices: Wear the 

button only in her cubicle; cover it while at work; or wear a less graphic button. She 

refused and was fired. Then she sued the company. A trial and an appellate court 

ruled that the company’s options were a reasonable accommodation of the worker’s 

beliefs. 

117


issues and company policy, and perhaps also between being strictly business and 

supporting positive community involvement. 

The courts have ruled that freedom of speech applies to all branches and agencies of 

the government, but not to private employers. However, if a court rules that you have 

restricted political expression in such a way that you violate public policy, you could 

end up in a world of trouble. Reason: Protecting an employee’s freedom of political 

expression is an important public policy concern, on a par with protecting workers 

who perform jury duty or file a workers’ compensation claim. Accommodating the 

employee, on the other hand, could create ill will among co-workers. 


To prevent political expression or solicitation from becoming disruptive, establish a 

policy and explain it to your employees. Make sure the policy is grounded in reasons 

related to the efficient conduct of business. When drafting your policy, consider 

the following: 

❒ Don’t confuse business goals with personal ones. Always have a sound 

business reason for banning political expression or solicitations. 

❒ Be evenhanded. Don’t ban support of one activity but allow another similar one. 

You might consider banning only truly disruptive political expression: for example, 

prohibiting campaign buttons, T-shirts or signs that would interfere with business. 

Likewise, you’d be within your rights to prohibit an employee from plastering white 

supremacist posters all over his cubicle. 

❒ Restrict only those expressions that might affect productivity or customer 

relations. If workers want to wear buttons at lunchtime or have a bumper sticker on 

their car parked in the company lot, leave the issue alone. Also, don’t address political 

involvement that takes place during employees’ off-hours. 

❒ Provide concrete guidelines for any exceptions. Selling Girl Scout cookies or 

candy bars for youth sports may be acceptable, but selling fruit baskets as a private 

for-profit effort may not. 

❒ Enforce your policy consistently and fairly. Inconsistency is difficult to defend in 

court, especially if the worker being disciplined is a member of a protected class. 

SAMPLE POLICY 

“In order to avoid interruption of work and protect you from unnecessary annoyance, 

solicitation of or by employees is prohibited in work areas during work time. Work 

time does not include lunch or approved break periods. Work areas, for the purposes 

of solicitation, do not include lunchrooms, lounges or parking lots. Distribution of 

literature to or by employees is prohibited in work areas at all times. 

“Nonemployees may not solicit or distribute literature to employees on Company 

property at any time. The only exception to this policy is in the case of Companysponsored 

solicitation.” 

—A publishing company

27 

Violence 

and Weapons 

From 1992 to 1996 more than 1,000 people a year were murdered 

in the American workplace, and two million workers a year were 

physically attacked on the job, according to the latest figures available 

from the Bureau of Labor Statistics. Over the past decade 

there’s been nearly a tenfold increase in the number of murders 

committed in the workplace. 

Often it is an employee or ex-employee who turns violent. The Society for Human 

Resource Management reports that 57 percent of all workplace violence is directed 

against fellow employees by a co-worker, and 17 percent is an employee against a 

supervisor. Six percent of the attackers are customers; 4 percent are boyfriends or girlfriends 

of employees; 3 percent are spouses of employees. In many cases, at least some 

co-workers knew that the person might turn violent. 

Still, you can’t predict the behavior of your employees, clients and all their friends 

and relatives. You can’t anticipate or plan for every possible danger. But the law dictates 

that you, as the employer, have a “duty of care” to keep all individuals in your 

workplace safe from dangers you can reasonably anticipate, both from inside and outside 

forces. To do that, you need to evaluate potential dangers and formulate an appropriate 

action plan. 


Weapons in the workplace present an obvious potential for violence. Aside from allowing 

designated, trained security personnel to carry them, you should explicitly ban 

weapons from the premises. Even in the case of security staff, carefully weigh the risks 

posed by the mere presence of their weapons against the potential for them to protect 

others from harm. Some organizations even list categories of prohibited weapons, so 

there’s no room for doubt. 

There are many reasons why you need a policy to prevent workplace violence: 

❒ Employee trauma. If your workplace turned into a scene of carnage, your workforce 

would be severely traumatized. It would be up to you as an employer to provide 

119


post-traumatic stress counseling and other services. Plus, after the employees returned 

to work, their productivity would likely suffer because of fears of a recurrence. 

❒ Company reputation. You don’t want your company to become a headline, where 

the main thing people remember about your business is that people got injured there. 

❒ Liability. When there’s violence in the workplace, employers can be held liable if 

they fail to screen job applicants carefully, don’t recognize problem employees and take 

action, or fail to maintain adequate security. 

Normally, employees who are injured on the job, whether accidentally or because of 

workplace violence, receive only workers’ compensation. To recover damages in a lawsuit, 

injured employees would have to show that the employer intentionally ignored a 

known risk. Another option for them would be to bring legal action against the building 

owner, a franchiser or a property manager. 

What if an employee harms a customer, passerby or another third party Suppose a 

business sends a carpet cleaner to a private home and the worker rapes a customer. 

Traditionally, the law would hold that the employer is not liable because the employee 

acted outside the scope of his duty. But in recent years there’s been a strong move to 

make the employer more responsible, by arguing that the company should have 

screened more carefully or terminated an employee who showed violent tendencies. 

❒ Screening candidates. Consider running a criminal background check on job candidates, 

especially if they will be dealing with customers in their homes. (In job applications 

and interviews, you can ask about criminal convictions, but not about arrests.) 

Other efforts to screen out job candidates who might turn violent are complicated by 

the Americans With Disabilities Act. You might be tempted to screen out mentally 

unstable job applicants by asking whether they have a history of mental illness or drug 

abuse. That would violate the ADA, which prohibits discrimination against people 

with physical or mental disabilities, real or perceived. You can ask if they have a history 

of violence, but not if the question is likely to yield information about mental illness. 

Always check references. Be aware, though, that prior employers who terminated 

the employee because of a violent tendency might be afraid to say so out of fear of being 

sued over defamation of character. When it comes to violence, though, most employers 

will warn you, at least indirectly. Train hiring managers in how to listen for the unspoken 

message. 


To reduce the chance of workplace violence—or your liability if it does happen—establish 

a program that covers the following: 

• Ban weapons, and have a zero-tolerance policy regarding threats in the workplace. 

• Screen carefully by checking references and doing criminal background checks. 

• Train supervisors to recognize personality changes and warning signs. 

• Defuse disputes. Establish a mediation program to resolve employee disputes 

rather than letting them simmer. 

• Evaluate your security system at least once a year. Consider whether you might 

need silent alarms, ID keys, cameras or even an armed guard.


121 

• Make it a policy that any restraining orders involving employees must be reported 

to management, and include this in your employee handbook. 

• Train front-line employees. Receptionists and front-desk clerks should be on the 

lookout for unusual or unsettling encounters, and have clear instructions on how to 

handle and report them to minimize risk to themselves and others. Every employee 

should be instructed as to when and how to contact the police. 

• Establish procedures for employees to report threats or other violent behavior. 

Offer several avenues for reporting: supervisors, security personnel, human 

resources, or if there’s imminent danger, everyone nearby. 

• Document any threats and your response to them. Your zero-tolerance policy 

should dictate dismissal of an employee who makes a threat. If it’s a worker’s relative 

or friend who’s being disruptive and dangerous, you are within your legal 

rights to terminate the employee, provided you give him adequate warning. 

Caution: When an ADA-related disability is involved, you must generally tolerate a 

certain level of disability-caused conduct, but you do not have to tolerate direct, violent 

threats to the health or safety of others in your workplace. 

• Assess how your company handles stress-inducing events. For example, what is 

your procedure when a law enforcement officer or process server comes to see an 

employee Such confrontations shouldn’t occur in view of other employees. For 

instance, you could instruct your receptionist to direct the officer to a private part 

of the office near an outside door, then quietly ask the employee involved to report 

to that area. 

• Terminate with care. Have someone along as a witness if you have to terminate a 

violent employee; consider engaging plainclothes backup security. Treat the worker 

with dignity, and allow a way for the person to depart quietly. Afterward, change 

the locks on the premises. 

Have a Game Plan 

You should have a plan for what to do in case violence does erupt, starting with protecting 

yourself, calling police and warning those in the vicinity. The plan should 

include the following steps after the assailant leaves: 

• Seek assistance from co-workers and attend to those who are injured. 

• If the assailant is an employee, pull his personnel file. 

• Designate someone to notify the victims’ families. Be sure all employees have a 

current emergency contact on file, and make it company policy to update the information 

annually. 

• Inform a designated media spokesperson. (Newspapers and broadcast outlets often 

monitor police scanners and react quickly to potentially newsworthy events.) 

• Notify your in-house counsel. 

• Provide counselors trained in handling post-traumatic stress to talk with all the 

employees affected by the incident.


• Ask law enforcement for approval to clean up the site. You don’t want to damage 

the integrity of the evidence, but you do want to restore the site as soon as possible. 

• Beware of looters, who might try to take advantage of your situation. 

• Begin documentation of the event as soon as possible. 

SAMPLE POLICY 

Purpose 

“All employees have the right to work in an environment free from physical violence, 

threats and intimidation. The Company’s position is that violence is a form of serious 

misconduct that undermines the integrity of the employment relationship. No employee 

should be subject to unsolicited and physical violence, threats or intimidation. 

Such behavior may result in disciplinary action, up to and including dismissal. 

Policy 

“The Company has a strong commitment to its employees to provide a safe, healthy 

and secure work environment. The Company also expects its employees to maintain 

a high level of productivity and efficiency. The presence of weapons and the occurrence 

of violence in the workplace during working hours or otherwise are inconsistent 

with these objectives. While the Company has no intention of intruding into the 

private lives of its present or potential employees, it expects all employees to report 

on the work site without possessing weapons and to perform their job without violence 

toward any other individual . . . 

Coverage 

“All applicants considered for employment [and all current employees] will be 

required to sign an acknowledgment that they have received this Policy and understand 

its contents and intent . . . Any applicant or employee who refuses to sign the 

acknowledgment will be subject to termination, up to and including discharge. 

Definitions 

“Crime of Violence or Violence: Includes any degree of murder, voluntary manslaughter, 

aggravated rape, rape, mayhem, especially aggravated robbery, robbery, burglary, 

aggravated assault, assault, physical or verbal threats and battery. 

“Weapon: Includes an explosive or an explosive weapon, a device principally 

designed, made or adapted for delivering or shooting an explosive weapon, a 

machine gun, a short-barrel rifle or shotgun, a handgun, a firearm silencer, a 

switchblade knife or any other type of knife, or knuckles, or any other implement 

for infliction of bodily injury, serious bodily injury or death that has no common lawful 

purpose. 

“On the Work Site: Includes all property owned or occupied by the Company 

(including Company job sites) or in a Company vehicle.


123 

“Possession: Includes, but is not limited to, the presence of a weapon on the 

employee, in his/her motor vehicle, lunch box, locker, tool kit, bag, purse, cabinets, 

office, etc. 

Policy Implementation 

“It is the responsibility of the Plant Manager to ensure that all employees are 

informed of and aware of this Policy and legal guidelines. Employees who are victims 

of or witnesses to violent incidents should immediately report such conduct to their 

supervisors or the Human Resources Manager. 

Prohibited Activities 

“The Company specifically prohibits the following and will routinely discipline an 

employee, up to and including discharge for any of the following: 

• Use, possession, or sale of any weapon as described above. 

• Storing any weapon in a locker, desk, vehicles, lunch box, tool kit, bag, purse or 

other repository on the work site or other Company premises. 

• Illegal possession, use or sale of a weapon off Company property that adversely 

affects his/her own or other’s safety at work, or indicates a propensity for same. 

• Refusing to submit to an inspection for the presence of a weapon that is requested 

by the Company. 

• Conviction under any criminal statute for the illegal possession of a weapon or for 

committing a violent act against the person or property of another. 

• Refusing to sign a statement to comply with the Company’s Policy on Workplace 

Violence. 

• Refusing to participate in an investigation pertaining to allegations or suspicion 

that violence has or is likely to occur, or an investigation pertaining to the carrying 

of a weapon by the employee or a co-employee. 

• Verbal or physical threats, threatening gestures or statements. 

• Fighting. 

“The Company, in its discretion, may from time to time modify this policy. In the 

event the Workplace Violence Policy is revised, a copy of the revised policy will be 

provided to each employee, and to the extent that the employee acknowledgment of 

the Policy may need to be updated or revised, each employee will be required to sign 

an updated version. 

Reporting 

“An employee who witnesses an incident of violence or threatening language or conduct 

must report the incident to his or her supervisor or Human Resources promptly. 

No employee who reports an incident of violence or threatening conduct or participates 

in an investigation of such an incident shall be subject to retaliation. 

Discipline 

“An employee who violates this Policy by engaging in violent conduct or bringing a 

weapon into the workplace is subject to discipline, up to and including immediate 

termination.


“An employee who violates this Policy by bringing onto the work site a weapon and 

whose employment is not terminated by the Company will be subject to searches from 

time to time, for an indefinite period of time not to exceed one (1) year from the date 

of the violation. 

“An employee’s consent to submit to a search is required as a condition of employment 

and the employee’s refusal to consent may result in disciplinary action, including 

discharge, for a first refusal or any subsequent refusal. 

Miscellaneous 

“The Company has the right to search any areas on Company premises for weapons, 

including, but not limited to, lockers, furniture, containers, drawers, equipment or 

other facilities, lunch boxes, briefcases, personal bags, personal toolboxes or tool 

kits, parking lots, Company vehicles and personal vehicles parked on Company 

premises. 

“If an employee is injured while participating in a fight or after instigating a fight, 

then entitlement to workers' compensation benefits may be denied. 

“No part of this Policy, nor any procedure therein, is intended to affect the 

Company's right to manage or control its workforce, or be construed as a guarantee 

or contract of employment or continued employment. 

Nonretaliation 

“This policy also prohibits retaliation against employees who report incidents of 

threats, physical violence, intimidating conduct or weapons possession. Any employee 

bringing a harassment complaint or assisting in the investigation of such a complaint 

will not be adversely affected in terms and conditions of employment, nor discriminated 

against or discharged because of the complaint. 

Exceptions 

“Exceptions to this policy must be approved by the President. 

Modification and Revision 

“This policy is subject to modification or revision in part or in its entirety to reflect 

changes in conditions subsequent to the effective date of this policy.” 

—Reprinted with permission of the law firm Adam J. Conti, LLC, Atlanta, Ga.

PART VII: Work/Life Balance 

28 

Work/Life Policies 

If there ever was a time when companies could ignore their employees’ 

concerns about life beyond the workplace, that time has passed. 

Double-income families are trying to juggle responsibilities at home 

with those in the workplace. Baby boomers are coping with the failing 

health of their aging parents and searching for elder care answers. 

Commuters fed up with clogged freeways are lured by the idea of 

working off-site, linked to their office by computer, phone and fax. 

In short, employees are demanding more flexibility and quality-of-life benefits—and 

if they don’t get what they want, many are willing to move to a company more in tune 

with their needs. 

To attract and retain talented employees, reduce absenteeism and boost productivity, 

many companies have established work/life programs ranging from flexible scheduling 

and telecommuting to job sharing, on-site day care, lactation rooms for nursing 

mothers who’ve returned to work, as well as domestic-partner benefits. All stem from 

the changing demographics of the work force and companies’ commitment to help 

employees balance work and home. For employers, it’s a good idea to declare this commitment 

with a general statement of policy, which will serve as an umbrella for specific 

work/life programs. 


Addressing employees’ quality-of-life concerns may seem irrelevant to the hard-nosed 

requirements of business. Some programs, such as flextime and job sharing, would 

probably add to your recordkeeping. Others, such as telecommuting, raise questions 

about supervision and company security. Still others, such as lactation rooms and onsite 

day care, prompt concerns about cost. But surveys show how work/life programs 

can benefit the bottom line: 

• A Kensington Technology Group survey found that 56 percent of U.S. workers consider 

the lack of work/life balance a leading cause of stress. 

• Fleet Financial Group, based in Massachusetts, reported in 1998 that when work 

was reorganized to enhance employees’ quality of life, the level of employee stress 

dropped significantly. 

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• In a study of more than 800 organizations conducted by management consultant 

William M. Mercer Inc., 86 percent of the employers said they “cannot remain competitive 

. . . without addressing work/life and diversity issues.” More than 50 percent 

said work/life programs had a positive impact on employee productivity, 

morale and attendance. 

• Productivity increased sharply at a processing center of Hewlett-Packard Financial 

Services a few years ago when some employees began working four 10-hour days, 

with a full day off every week to devote to personal matters. Employees with compressed 

schedules completed 252 transactions a week, while those working five 

eight-hour days completed 185. 

• When the Whirlpool Foundation, Working Mother magazine and Work and Family 

Newsbrief surveyed more than 150 executives in 1997, participants linked 

work/life programs (flextime, child care and elder care services and employee 

assistance programs) with 16 positive business results, including increased productivity, 

reduced absenteeism, reduced turnover, enhanced employee morale and 

lower health care costs. 

• In a poll of 1,000 employees at Baxter Healthcare, 89 percent of the respondents 

who perceived company support for balancing work and life also expressed satisfaction 

with the company. 


In the following chapters we present five work/life policies for you to consider for your 

employees: flexible scheduling, telecommuting, job sharing, domestic-partner benefits 

and volunteerism. 

Note that some of the policies discussed elsewhere in this Special Report could also 

fall under the work/life umbrella, such as: 

• Meal breaks. Allowing employees to opt for longer meal breaks would give them 

the opportunity to take a midday exercise break or attend to personal business. 

• Company property. A policy that allows some minimal personal use of company 

property (say, an occasional e-mail or fax) could help employees get personal business 

out of the way efficiently on their breaks. 

• Time off. Vacation policy, bereavement leave, jury duty, maternity/paternity leave 

and personal days all reflect the company’s commitment to helping employees balance 

work and life. 

• Family and medical leave. FMLA leave, which is required by law for companies 

with 50 or more employees, addresses the need for work/life balance, whether it’s 

for an employee’s own serious health problem or that of a family member. Some 

small companies that don’t have to comply with the FMLA have adopted their 

own family leave benefit.


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Keep in mind that some of the options offered by companies as part of their commitment 

to work/life balance are actually classified as employee benefits: child care or 

elder care services, on-site child care, financial assistance, concierge services, lactation 

rooms, employee assistance programs, health and wellness programs and so forth. 

Most experts advise companies not to summarize these benefits in their employee 

handbooks—especially for ever-changing plans such as group health insurance. Doing 

so would encourage employees to rely solely on the summary in the handbook. 

Instead, your handbook should only mention the benefits offered and refer employees 

to the sponsor’s summary plan description. 


“XYZ Company believes it will be beneficial to the company, the communities in which 

it operates, and future generations if the company’s increasingly diverse workforce is 

enabled to lead full and productive lives, both at work and at home. The company is 

committed to making changes in the workplace and fostering changes in the community 

that are sensitive to the evolving family unit and the increasingly diverse workforce. 

XYZ believes this will result in healthier and more productive employees, better 

able to drive the company to compete more effectively in the global marketplace.” 

—A large manufacturer 

“To attract, develop and retain current and future leaders, it is ABC’s intention to 

consider and, where feasible, permit flexible work arrangements in situations where 

the needs of the business and the needs of the associate can both be met. 

“The emergence of a diverse, heterogeneous workforce, changes in family structure 

and lifestyles, the shift to a global marketplace, and the development of new 

technologies have led to new attitudes among associates as to how work relates to 

the rest of their lives. ABC recognizes and respects the need for all associates to 

effectively balance work and personal needs and objectives.” 

—A hotel chain 

“Our Work/Life Vision: to support a healthy work/personal life/community balance. 

Our Work/Life Mission: to strategically develop initiatives and influence management 

practices and policy decisions regarding the issues of balancing workplace, personal 

life commitment and well-being of our employees and their families.” 

—A large manufacturer


Work/Life Strategies 

The Global Business Responsibility Resource Center offers the following strategies 

for developing comprehensive work/life policies and practices: 

• Articulate work/life as a core value, and express it in the company’s mission 

statement. 

• Gain support from top management. If senior executives do not regard work/life 

balance as a priority, the effort is less likely to succeed. 

• Identify employee needs through focus groups and surveys. 

• Implement a range of work/life initiatives. 

• Develop measures to hold supervisors accountable on this issue. 

• Provide systems for work/life information and support, including lunchtime 

seminars, information centers, in-house print or online newsletters. 

• Communicate the work/life vision to current and prospective employees. 

• Educate and train staff, providing managers with the skills they need to address 

employee concerns. 

• Examine the workplace culture and work processes. Are employees expected to 

travel on weekends Are meetings routinely scheduled outside core business 

hours 

• Evaluate the career tracks of flextime employees to ensure they have access to 

career development opportunities. 

• Track and measure results.

29 

Flexible Scheduling 

Many employers offer some flexible scheduling to give employees 

more options in balancing their job and home. Among 1,050 

U.S. employers surveyed by Hewitt Associates in 1999, 79 percent 

offer increased flexibility in work schedules, up from 53 percent in 

1991. About 29 percent offer some form of compressed workweek. 

Flextime, telecommuting and job sharing have become popular benefits. Proponents 

say these low-cost arrangements can boost employee morale, enhance personal life, and 

reduce absenteeism, tardiness and turnover. If nothing else, they tend to lower stress 

among employees by giving them more control over their time. 


Flexible scheduling helps businesses attract and retain good employees at little extra 

cost. Before adopting any policy on flextime, however, you should consider the following 

issues: 

❒ Suitable jobs. Many jobs are suited to flextime—most office positions, sales jobs, 

computer programming and so forth. But you probably need to have the receptionist 

on duty during normal work hours, or all workers on a given assembly line shift. The 

nature of the work will determine which, if any, flexible scheduling options will suit 

your business. 

❒ Staffing requirements. How many people do you need on the premises, and when 

do you need them Flexible schedules have to be designed so that enough employees are 

on hand when you need them. That can make setting up flextime a bit complicated. 

❒ Internal communications. If employees work different hours, you have to find 

ways to ensure that coordination doesn’t suffer. 

❒ Overtime. Under the Fair Labor Standards Act, if a nonexempt worker puts in 

more than 40 hours in one week, the employer has to pay time-and-a-half overtime for 

the extra hours—even if the employee works fewer than 40 hours the following week 

and not more than 80 hours in a two-week period. So unless you want to pay a lot of 

overtime, your flextime schedule needs to fit within a single week. 

❒ Fairness issues. Offering flextime to only some workers may cause resentment 

among those who can’t take advantage of it. Address this concern before announcing 

flexible scheduling options, and explain your reasoning to all employees. 

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Here are some flextime options that are working for a variety of companies, both large 

and small: 

• Staggering the schedules for starting and ending workdays so that employees can 

choose the hours that work best with their family commitments. 

• Scheduling some longer workdays so that employees can enjoy periodic three-day 

weekends. Under the popular “9-80” schedule, employees work 80 hours over nine 

days, with every other Friday off. 

• Compressing the workweek into 10-hour shifts four days a week so that employees 

get a full day off every week. 

• Establishing core hours when employees are required to be on the job to provide 

peak coverage during the busiest time of day. 

• Offering expanded lunch periods so that employees can choose either to clock out 

for a midday break of an hour or more, or stick to a half-hour break, not clock out, 

and get home earlier. 


“XYZ offers flexible work arrangements as an alternative to a traditional work 

schedule. They provide you with options in the number of hours you work and where 

you work. 

“You may request a flexible work arrangement when a traditional work schedule is 

not ideal for you. For example, you may need special hours to care for a child or other 

relative, to attend school or to meet other personal demands . . . 

“Not every job is adaptable to a flexible work arrangement, so there is no assurance 

that an arrangement can be approved by your manager . . . An approved flexible work 

arrangement typically begins on a temporary basis to make sure that the arrangement 

is workable for you and for your area’s business. Your manager and human resources 

representative will work with you to implement the arrangement . . . 

“If your manager approves a flexible work arrangement, you and your manager 

sign an agreement outlining specifics about the arrangement.” 

—A large multinational corporation 

The above policy also specifies who is eligible to request a flexible work arrangement, 

the types of arrangements available and how to make a request. 

“As stated in its Policy on Equal Opportunities: ‘The Organization confirms its commitment 

to develop, maintain and support a comprehensive policy of equal opportunities 

in employment within the Organization.’ To assist in this, the Organization will


131 

actively support flex-time where it is reasonable and practical to do so and where 

operational needs will not be adversely affected. 

“Definition of Flex-Time: Flex-time is a work schedule which allows employees to 

work hours that are not within the standard 8 a.m. to 5 p.m. range, while maintaining 

a high level of service during the organization’s peak operating hours (typically 

10 a.m. to 3 p.m.). With a flex-time schedule, non-exempt employees are still subject 

to all requirements of the Fair Labor Standards Act. Employees who are exempt from 

FLSA are expected to work whatever number of hours are required to accomplish 

their duties and may be permitted to set their own schedules . . . 

“Eligibility: Because services within each division vary, not every employee in each 

department will be able to work similar flex-time schedules. Therefore, supervisors 

will have to carefully examine the flex-time schedules which their employees request 

[to] ensure ample employee coverage during peak hours. 

“Managing Flex-Time: It is the responsibility of the supervisor to verify and ensure 

performance of employees with flex-time schedules. Flex-time schedules will need to 

be placed in a central location so that all employees stay aware of who is covering 

department services. Good relationships among everyone involved are important for 

a successful flex-time policy. Trust is a big factor; supervisors must feel confident that 

employees will not abuse the benefits that are inherent in a flex-time schedule. Flextime 

is a privilege, not a right, and, if abused, can be taken away at the discretion of 

the supervisor.” 

—Excerpts reprinted with permission from Womans-Work.com, 

a division of Womans-Work LLC 

The above policy then describes three available flextime schedules. 

Part-Time Work 

Allowing employees to work on a part-time basis gives employers more benefits 

than headaches, according to a survey by the Conference Board. Part-time schedules 

increase staffing flexibility, improve morale, reduce turnover, lower costs and boost 

productivity. 

Nevertheless, you might have more management challenges and perceived 

inequities between full- and part-time workers. When employees request part-time 

status, think through the same questions listed under “What’s at Issue” for flexible 

scheduling.

30 

Telecommuting 

As thousands of workers face brutal daily commutes, no wonder 

so many people jump at the chance to work from home. With a 

computer, phone and fax connecting them to the “virtual office,” 

many say they can do their jobs just as well—or better—at home or 

from a telework center. 

“Studies suggest that telework holds vast potential to benefit workers, employers 

and the American economy as a whole,” according to the Labor Department’s 2001 

report Telework: The New Workplace of the 21st Century. 

Even though managers might fear that unsupervised employees won’t focus on 

their work, many employees say they are far more productive when not distracted by 

office noise and chitchat. Some studies show that productivity rises when companies 

introduce telecommuting. In 1997 Lexis-Nexis attributed a 45 percent drop in operating 

costs over a three-year period to its introduction of flexible scheduling, including 

telecommuting. The company reported that the primary reason for the lower costs was 

enhanced productivity. Other benefits to employers: reduced absenteeism and retention 

costs and lower overhead expenses because of reduced office space needs. 

More companies are offering telecommuting options, according to an Olsten Corp. 

survey. While only 39 percent offered telecommuting in 1994, the percentage jumped 

to 49 percent in 1995 and 62 percent in 1996. The International Telework Association & 

Council projects that by the end of 2004, nearly 30 million regular employees will be 

telecommuting. 


Telecommuting can work to everyone’s advantage, but you must address several 

issues before drawing up a policy: 

❒ Supervision. Which people are able to work unsupervised for entire days Not 

everyone will succeed at this. That’s why it’s a good idea to start all telecommuting 

arrangements with a trial period. 

❒ Internal communications. How often do you need the employees to be in the 

office for team building, face-to-face conferencing and so forth 

❒ Overtime. For companies with nonexempt telecommuters, the problem often isn’t 

that these employees claim to work more hours than they actually do; rather, they fail 

132


133 

to write down all the hours they work. They might report that they worked 40 hours a 

week, but then months later—fed up with their workload—they bring in a log showing 

they actually worked 60 hours a week or more and then demand back overtime. This 

can get you into trouble with the Department of Labor. Tell supervisors to keep tabs on 

hours reported and what’s being accomplished to make sure the records match. 

❒ Extra costs. You may incur extra costs for home equipment and supplies, plus 

more phone equipment. 

❒ Security. Company equipment, paperwork and confidential information are less 

secure in people’s homes than in the workplace. Make sure all equipment you send out 

is fully inventoried, including notes on its condition, and that employees sign a document 

stating they have taken possession of it. Have a plan outlining how any confidential 

material will stay locked up or be otherwise inaccessible to others. Consider 

what would happen if an employee’s teenager was playing around on the home-based 

company computer and destroyed crucial data. 

❒ Children. Will your employee be trying to work eight-hour days at home while 

tending to a toddler or infant 

❒ Liability. The company can be held liable for injuries to telecommuting employees 

in their own homes, even if they trip over the dog on the way to the refrigerator. Or 

if the employee runs out to the post office and has a car accident on the way, your company 

could be liable for that, too. Many companies send someone to do a safety inspection 

of the home work area at the start of the arrangement. Your policy should include 

what hours the employee will be working so that your company won’t be on the hook 

for every injury that might occur in the home. 


Creating a policy will buy you a great deal of legal protection—if it is done correctly. 

The trick is to develop a policy that is broad and flexible enough to be customized by 

individuals and work groups while still providing enough structure to offer guidance. 

The Bay Area Telecommuting Assistance Project, located in Oakland, Calif., recommends 

that your telecommuting policy: 

• Be administered by human resources personnel, with input from management and 

employees. 

• Define and interpret the role of telecommuting at your company, and explain your 

company’s commitment to it. 

• List the principles of telecommuting at your company. Explain your firm’s business 

needs, terms and conditions of employment, workspace designation and telecommuting 

agreement. 

• Discuss scheduling and dependent-care arrangements. 

• Discuss the tax implications of a telecommuting schedule. 

• Establish the voluntary nature of the program. 

• Explain your criteria for selecting telecommuting candidates. Describe the type of 

job, employees and supervisors who are best suited for telecommuting at your firm.


• Define what equipment will be provided and who will be responsible for its care. 

Include company policy regarding proprietary information and security. 

• Explain how you will measure performance and evaluate the success of the 

program. 

• Provide guidance on when and how long employees are supposed to work. 

Include specific information about overtime. 

• Include your safety policy, as well as a brief statement on ergonomics. 

Caution: The Equal Employment Opportunity Commission says that working at 

home can be a reasonable accommodation under the Americans With Disabilities Act. 

You can deny a request to work at home if it is unreasonable, but you’d better be able 

to prove that to the EEOC. You can try to make your case when the EEOC forces you to 

go to trial, or you can avoid that by setting up a policy now—one that states which jobs 

can and cannot reasonably be performed away from the office. 

Top Telecommuting Jobs 

The Market Research Institute’s Telecommute Survey cited the following positions 

as managers’ top choices for telecommuting: 

• Information specialists 69% 

• Sales representatives 68 

• Programmers 61 

• Market research analysts 59 

• Systems analysts 52 

• Customer service reps 50 

• Human resource professionals 33 

• Managers 24 

In another survey conducted by OfficeTeam in 2001, 63 percent of the executives 

polled ranked staff-level positions as the best candidates for telecommuting; 13 percent 

said administrative support staff; 11 percent said managers.

31 

Job Sharing 

Suppose a talented employee in a position of responsibility wants to 

reduce her hours to spend more time with her family. You don’t 

want to lose her skills, but your company really needs someone working 

the position 40 hours a week. The solution may be job sharing. 

Find or hire another employee with similar or complementary skills who likewise 

wants to work part time and share the single position. Allocate the schedule, responsibilities, 

full-time salary, benefits and vacation time between the two. Both employees 

will get more compensation than they probably would working part time elsewhere, 

and your company can still reap the benefit of their skills. 


There are several issues you’ll need to think through about job sharing, including: 

❒ Scheduling. You can divide the hours in various ways to meet the company’s 

operational needs. Typically, the schedule is worked out between the job-sharing partners 

and the manager. Ideally, the job-share partners each should work half time. 

Among the options: 

• Half or split days—one partner working in the morning and the other one in the 

afternoon. 

• Half or split weeks—one partner working the first 2.5 days (Monday through 

Wednesday morning) and the other one the remaining 2.5 days (Wednesday afternoon 

through Friday). 

• Two days one week and three days the next—with the job sharers alternating on 

the extra day. 

• Alternate weeks—each working one week on, one week off (normally done on a 

Wednesday p.m. through Wednesday a.m. basis). 

• Splitting the hours unequally—one partner working two days; the other, three days. 

❒ Communication. How will the partners communicate about what needs to be 

done if they’re not in the office at the same time Some job-sharing teams communicate 

primarily through notes and occasional phone calls. Some companies insist that 

135


their schedules overlap, say for an hour a day or a half day per week. That raises questions, 

though, about how two people can work at the same desk at the same time. If 

the partners use that time to coordinate efforts, though, they could use a nearby conference 

room. 

❒ Overtime. Be sure to check exempt and nonexempt status to determine when 

nonexempt employees will be due overtime. 

❒ Union questions. If your workers are unionized, review your contract to see if 

union members are allowed to participate in job-sharing programs. 

❒ Workers’ comp and Medicare. Both are calculated on a per-employee basis, so 

you will increase your costs in these areas. The same goes for unemployment insurance 

premiums. (The chances of an unemployment claim increase with the number of 

employees.) 


Before entering into a job-sharing arrangement, establish a policy that you can apply to 

other potential job-sharing teams to ensure consistency. 

As with any new policy, check to make sure it meets organizational needs, is consistent 

with all internal policy and complies with applicable laws. The general policy 

statement should put job sharing in the context of equal employment opportunity. The 

company might commit to support job sharing when it is reasonable and practical and 

does not disrupt operations. 

Ask yourself the following: 

• Are all full-time positions potentially open to job sharing If not, address which job 

categories are suitable and which are not. 

• Are all full-time employees eligible State guidelines the company will use to determine 

eligibility, such as receiving satisfactory or above-average job evaluations. 

• How will the company handle joint résumés received from would-be job sharers 

For instance, you might state that joint candidates will be treated the same as any 

other candidate, and that the partners will be interviewed both separately and 

together to discuss plans for cooperation. Is an offer made to two candidates contingent 

on both accepting the offer 

• How will job-sharing employees be compensated You might state that the new 

job-sharing partners will negotiate with each other and with the HR department on 

who receives which of the benefits due to a single full-time employee, and how 

vacation time is divided. For instance, one partner might already be covered by a 

spouse’s health insurance but have a need for a different benefit. 

• What will you do when one job-share partner leaves and the other one doesn’t 

want to work full time Typically, the remaining partner uses her own contacts to 

search for a replacement, or the company advertises the position. If one can’t be 

found, you may have to transfer the remaining partner to a different position that 

only needs half-time coverage or else accept that person’s resignation too.


137 

SAMPLE POLICY 

“As stated in its Policy on Equal Opportunities: ‘The Organization confirms its commitment 

to develop, maintain and support a comprehensive policy of equal opportunities 

in employment within the Organization.’ To assist in this, the Organization will 

actively support job sharing where it is reasonable and practical to do so and where 

operational needs will not be adversely affected . . . 

“Job Share Arrangements: 

a. [In a job share] two people voluntarily share the duties and responsibilities of one 

full-time position, dividing the hours between them. The full-time salary and holiday/leave 

time are allocated on a pro rata basis to each of the job sharers. 

Guidance on job-share arrangements can be sought from the Human Resource 

Office when a position becomes vacant, or when a request to job-share is received 

from an existing full-time employee. 

All full-time positions are deemed to be potentially open to job sharing. 

However, the Organization, in accordance with managerial interests, reserves the 

right to ensure that operational needs will not be adversely affected. Agreement to 

a job being shared should not be unreasonably withheld. 

b. The way in which the actual hours of a job-share position are divided between the 

job-share partners should be decided by the manager/supervisor in consultation 

with the partners . . . 

c. The overall duties and responsibilities of the whole position will be shared 

between the job-share partners. The exact agreed-upon working arrangements of 

the job-share partners will be decided by the manager. 

“Recruitment and Selection: When recruiting for a position, the normal approach 

of selecting the candidate (or job-share partners) whose skills profile is the closest 

match to job requirements will be adhered to. When a joint résumé is received from 

job-share partners, it must be assessed in the same manner as applications from 

other candidates. The normal practice will be to interview and test the job-share 

partners separately to assess each one against the job requirements. It may also be 

appropriate to interview the job-share candidates together to discuss their joint 

application. An offer made to job-share partners is dependent upon both partners 

accepting the offer of employment . . . 

“Resignation: If one job-share partner leaves and the remaining partner does not 

want to work full time, the following procedure should be followed: 

a. An assessment of the needs of the organization should be carried out to ascertain 

whether full-time coverage is required. 

b. The vacant half of the job-share position should be advertised. 

c. The remaining job-share partner should use any available contacts to assist in finding 

a partner.


d. If a suitable job partner cannot be found, an organization-wide search for alternative 

work should be implemented for the remaining job-share partner. 

“If all the above has been carried out and it is still not possible to either find a 

replacement job-share partner or find the remaining partner a suitable alternative 

position, the remaining partner will voluntarily terminate.” 

—Excerpts reprinted with permission from Womans-Work.com, 

a division of Womans-Work, LLC

32 

Domestic-Partner Benefits 

An increasing number of employees are asking for domesticpartner 

(DP) benefits, claiming that it’s discriminatory for companies 

not to offer the same benefits for domestic partners as they do 

for spouses. 

In an effort to level the playing field and remain competitive, many companies now 

offer domestic-partner benefits, either to same-sex couples only or to unmarried opposite-sex 

couples as well. In 1990 fewer than a half dozen U.S. employers offered DP benefits, 

but the number has grown rapidly since then. In a Hewitt Associates survey in 

2000, 22 percent of the large companies polled were offering benefits to domestic partners, 

twice as many as three years earlier. Another 35 percent of the companies reported 

that they might consider doing so within three years. 

Other Hewitt survey findings: 

• Among the companies that offer domestic-partner benefits, 76 percent say they do 

so to attract and retain employees. Thirty percent offer them to comply with 

nondiscrimination policies, and 17 percent to comply with local government 

regulations. 

• Almost two-thirds (64 percent) of the companies offer DP benefits to both same-sex 

and opposite-sex couples. 

• Most companies that offer domestic-partner benefits (87 percent) require proof of 

the relationship, such as an affidavit. 

• More than two-thirds (68 percent) require a minimum waiting period before an 

employee can replace one domestic partner with another in a benefit plan. Nearly 

all (92 percent) require the employee to notify the company when a domestic partnership 

ends. 


Domestic-partner benefits offer a challenge as well as an opportunity to business 

because of the issues involved. For example: 

❒ Government initiatives. While several U.S. cities provide domestic-partner benefits 

for their own employees, San Francisco requires all companies doing business with 

139


the city to provide them for their own employees. Several other cities, including New 

York, Los Angeles and Seattle, are considering similar ordinances. The state of Hawaii 

extends broad rights to domestic partners, and several other states are considering 

doing so. 

❒ Court rulings. Courts are divided on the legal status of domestic partners. Several 

recent rulings have supported the argument that it’s a form of employment discrimination 

to deny domestic-partner benefits. In 1997 the Alaska Supreme Court ruled that 

state university employees were entitled to health insurance benefits for their domestic 

partners. In 1998 an Oregon appeals court ruled it unconstitutional to deny health 

insurance to domestic partners of gay state employees. 

But other courts have found the opposite, including courts in New Jersey and 

Wisconsin. In 1998 a court ruled that San Francisco did not have the authority to require 

United Airlines to provide health insurance to domestic partners of its employees 

because airlines are exempt from the city’s DP ordinance. 

❒ Public outcry. Some conservative groups have launched boycotts against companies 

that offer domestic-partner benefits; they argue that doing so undercuts the institution 

of marriage. By contrast, gay rights groups have boycotted at least one company 

for refusing to offer these benefits. The protests, however, appear not to have affected 

the operations or profits of the companies involved. For instance, religious groups boycotted 

Walt Disney when the corporation established a DP program in 1996, and they 

organized demonstrations at Disney theme parks. Nonetheless, the company posted 

record earnings that year. 

❒ Corporate resistance. In 1996, when the Society for Human Resource 

Management (SHRM) surveyed 777 companies on this issue, companies that did not 

offer DP benefits were asked why not. More than half—56 percent—cited lack of 

employee interest; 30 percent cited concern about health costs; and 21 percent cited 

moral objections. Other reasons included lack of senior management support, concern 

about potential abuse of the program and worry about a backlash from community 

stakeholders. 

❒ Cost. In the 1980s, when gay rights groups started publicizing the concept of 

domestic-partner benefits, many companies refused to offer them out of fear that their 

health care costs would skyrocket, especially with the treatment of HIV and AIDS. But 

in practice, health care costs at companies offering DP benefits have increased very little 

or not at all. In a 1996 survey by SHRM, 85 percent of the companies with DP benefits 

reported that their health care costs had remained about the same. The San Franciscobased 

Global Business Responsibility Resource Center suggests the following reasons: 

• Typically, less than 1 percent of eligible employees elect health coverage for domestic 

partners, whether because their partners are already covered by their own 

employers or because gay employees are reticent about revealing their sexual orientation 

at work. 

• AIDS treatment costs haven’t proved as expensive as many companies had feared. 

The cost of treating AIDS/HIV is normally less than treatments for heart disease 

and cancer. 

• Since employees who enroll in DP programs tend to be younger than the average 

employee, they incur fewer health care expenses.


141 

❒ Tax consequences. In most cases employees must pay federal income tax on the 

value of the medical insurance provided for their domestic partner by the company. 

Under the current IRS code, employers need not pay taxes on domestic-partner benefits. 

In some places, including Washington, D.C., and Broward County, Fla., companies 

that offer DP benefits receive a local tax break. 

❒ Availability of insurance. Until recently, companies that wanted to offer DP benefits 

had trouble finding health insurers willing to write the policies; the insurers feared an 

increase in HIV/AIDS claims. Insurance laws in some states (including Georgia, Kentucky, 

New Jersey, Tennessee and Virginia, plus the District of Columbia and Puerto Rico) prohibit 

insurers from providing domestic-partner coverage. But under pressure from leading 

corporations, more than 100 insurance companies now provide such coverage. 


When considering domestic-partner benefits, you should create a policy to ensure consistency 

and address some of the controversy that might arise. The Global Business 

Responsibility Resource Center advises companies to do the following: 

• Decide who is eligible. First, will you offer the benefit to same-sex couples only, or 

both same-sex and unmarried opposite-sex couples Some companies stipulate 

same-sex couples only on the grounds that by law they have no opportunity to 

marry. But that can make you vulnerable to a lawsuit charging discrimination on 

the basis of marital status. According to a 1997 survey by consultant Towers Perrin, 

55 percent of companies with DP benefits offer them to both same-sex and opposite-sex 

couples. 

Second, what about the children of the domestic partner Many companies 

include them in the spirit of equity, since traditional benefits policies include the 

children of an employee’s spouse even if they are not related by blood or adoption 

to the employee. 

Third, what about non-romantic partners Some companies have allowed an 

employee to designate a parent, sibling or other non-romantically attached member 

of the household as a domestic partner for the purpose of benefits. 

• Define domestic partnerships. While there is no authoritative standard, a domestic 

partnership is typically defined as an ongoing relationship between two adults of 

the same sex or opposite sex who share a residence; are responsible for each other’s 

emotional and financial welfare; are not related by blood; and are not legally married 

to anyone else. 

• Verify domestic partnerships. Most companies require employees to verify that the 

person named is actually a domestic partner, either by signing an affidavit or registering 

with a government agency. Some gay rights groups contend that this is discriminatory 

because employers do not require employees to produce a marriage 

certificate to prove they’re married. 

Some companies require a minimum waiting period after a domestic partnership 

is declared, such as three or six months. Most require employees to notify the company 

when a domestic partnership ends. Many then stipulate a minimum waiting 

period before a new partner can be enrolled.


• Determine which benefits are included. Typically, companies offer the same benefits 

as they do for spouses, starting with medical coverage. Don’t forget the “soft 

benefits,” such as adoption assistance, health and fitness programs, employee assistance 

programs and employee discounts. 

• Involve and educate employees. To minimize backlash within the company, educate 

employees about the program, why it’s being offered and who is eligible. Some 

companies hire an outside consultant to help implement a DP program. Consider 

educational packets, employee forums, diversity training, gay and lesbian employee 

groups as well as a confidential way to ask questions or express concerns. 


“Domestic Partners: Domestic Partners are two adults who have chosen to share one 

another’s lives in an intimate and committed relationship of mutual caring. The 

requirements to be domestic partners are: 

1. The two must live together. 

2. The two must agree to be jointly responsible for each other’s basic living expenses 

during the Domestic Partnership. 

3. Neither person may be married or a member of another domestic partnership. 

4. The two must not be related in a way which would prevent them from being married 

to each other. 

5. Both must be over 18. 

6. Neither person has had a different domestic partner in the previous six months 

(this requirement does not apply if the partner died). 

7. The two must sign a Declaration of Domestic Partnership . . . 

“A Declaration of Domestic Partnership is a statement signed under penalty of perjury. 

By signing it, the two people swear that they meet the requirements of the definition 

of domestic partnership when they sign the statement. Each must provide a 

mailing address. 

“Ending Domestic Partnerships: A Domestic Partnership ends when: 

1. One partner sends the other a written notice that he or she has ended the partnership; 

or 

2. One of the partners dies; or 

3. One of the partners marries or the partners no longer live together. 

“Notice the Partnership has ended: When a Domestic Partnership ends, the partner/employee 

(or if that partner has died, the surviving partner) must sign a notice 

saying that the partnership has ended and give it to the employer. The notice must 

be dated and signed under penalty of perjury. The notice must be sent within 60 days


143 

of the end of the partnership. If the employer or any benefits provider suffers loss as 

a result of failure to send this notice, it may sue the partner who was obliged to send 

it for actual loss. The partner who signs the notice must send a copy to the other partner. 

Failure to give the notice will neither prevent nor delay ending the Domestic 

Partnership. 

“Effect of Domestic Partnership: The obligations of domestic partners to each 

other are those described in the definition. If a domestic partnership ends, the partners 

incur no further obligations to each other.” 

—Excerpted from the Web site of the American Civil Liberties Union, 

www.aclu.org. 

“Consistent with our commitment to diversity and meeting our employees’ needs, 

ABC Inc. extended the programs and services listed below to domestic partners 

(either same sex or opposite sex) of its employees. A domestic partner is an adult who 

lives together with another adult in an exclusive, committed relationship.” 

—A computer software company 

The policy above continues by listing a range of programs and services (such as fitness 

centers and relocation assistance) extended to all domestic partners. It states that 

same-sex domestic partners of employees are extended health benefits as well.

33 

Volunteerism Leave 

Companies can combine work/life balance with business interests 

and community improvement by encouraging employees to 

donate some of their work hours to community service. This is paid 

volunteer work, meaning that the company pays employees their 

usual wage for the time they devote to community projects. In 1999, 

21 percent of U.S. corporations offered paid “release time” policies, 

according to the Points of Light Foundation. 

Volunteer release time programs can take several forms. Many companies allow 

employees to work on volunteer activities during normal, paid hours for a set amount 

of time per month or per year. Some grant matching time, allowing an employee to volunteer 

for a set amount of time during paid work hours, provided the employee does 

an equal amount of volunteering during off hours. Some send employees to a community-wide 

volunteer day or create their own companywide day. Others allow paid 

social service leave, in which an employee or group of employees work full time for a 

month or more on a specific project with a community organization. Often the business 

identifies particular projects or organizations to support and gets some public relations 

mileage out of the effort. 


Besides providing a public service, employers are offering volunteer leave for a number 

of reasons. Releasing employees for community service sends a message that the company 

is committed to supporting employee interests outside the workplace. Employees 

feel valued as people, and job candidates are more likely to join the company. 

When You&Company, a Boston-based career management firm, surveyed 2,100 

MBA graduates, 83 percent reported that if they were weighing two otherwise-equal 

job offers, they would lean toward the company with a reputation for social responsibility. 

Also, when employees build ties to their community through their volunteering, 

they are less likely to relocate. 

A company that commits money and employee time to community organizations 

grows in reputation and stature. And employees who volunteer during business hours 

have greater visibility than those who do so evenings and weekends. The projects chosen 

can be an extension of your business interests—for instance, tutoring high school 

144


145 

students in reading, math and computer skills in the community will improve the quality 

of your local job applicants. 

While doing volunteer work, your employees may be developing skills that will 

serve them well on the job. A Conference Board survey found that employee volunteers 

improved skills in communication, problem solving, organization, time management, 

leadership, planning, budgeting and getting along with others. In the 1999 Points of 

Light survey, 60 percent of the U.S. corporations with volunteer policies credited those 

programs with developing employee skills. Of course, unpaid volunteer work has the 

same effect, but release time encourages employees to put in volunteer hours they 

might not otherwise have. 

Further, if you send employees in a given department out as a team, the volunteer 

effort can build collegiality and team spirit. The shared sense of working together to 

benefit others can enhance their internal cohesion in ways that will pay off in the 

workplace. 

The downside, of course, is that the hours per month employees spend on volunteering 

take time away from their jobs. Many companies, though, find the benefits are 

well worth the sacrifice. 


A small company can provide release time for employees on an informal basis. Larger 

companies will want a written policy to communicate their commitment to volunteerism 

and to avoid confusion and inconsistency. The Global Business Responsibility 

Resource Center recommends the following steps: 

❒ Decide on the type of program. Common choices are (1) work release, in which 

the company sets an amount of paid time each employee can take during regular business 

hours; (2) matching time, in which the company grants a set amount of paid time 

and requires the employee to match it with volunteer time outside business hours; 

(3) social service leave, by which the company grants paid leave (two weeks up to one 

year) to an employee or group to work full time on a special community project. 

❒ Outline eligibility requirements. How long must an employee work for the company 

to be eligible for volunteerism leave Are both salaried and hourly employees eligible 

Both full-time and part-time employees (on a prorated basis) What types of volunteer 

work count for release time—anything the employee chooses or only companysponsored 

programs 

❒ Enlist senior management to communicate the policy. Your staff is more likely to 

believe the company is truly encouraging the program if they hear it from the top. 

❒ Ensure support from middle management. Middle managers are often the most 

resistant to release-time policies—they’re the ones most focused on trying to get things 

done. Inform middle managers about any volunteerism program you’re considering, 

and allow for their input. Suggest team volunteer efforts, which build departmental 

cohesion and help middle managers see the benefits. 

❒ Recognize employees who volunteer. Award ceremonies, lunches, articles in the 

company newsletter and such will show employees that the company values their volunteer 

efforts.



“While it is the intention of this policy to provide all employees the opportunity to 

become involved in their community, approval from direct supervision must be 

obtained when time away from work is involved. If the volunteer activity is companysponsored 

but can only occur during core work hours, then time away from work will 

be considered time spent on company business. If the volunteer activity is not company-sponsored, 

flextime should be utilized. Prior to committing to volunteer activities 

requiring time away from work, it is the employee’s responsibility to discuss with 

his or her supervisor the impact such activity will have on the employee’s work 

performance. 

“In addition, in consultation with employees involved in company-sponsored programs, 

human resources, management, and/or the employees’ direct supervisor will 

determine whether the volunteer activity should be viewed as a source for career 

development. If community service fills a company business need and is part of an 

employee’s development plan, the activity will be considered an objective in the performance 

management process. Involvement in company-sponsored programs and 

initiatives is not mandatory.” 

—A large personal-care corporation 

“The company has a formalized policy regarding paid release time, which the company 

refers to as ‘community service time’ and defines as ‘the contribution of time and 

work to a group or organization for the advancement, assistance or enrichment of the 

community.’ 

“All full- and part-time employees at the headquarters office are eligible for community 

service time immediately upon date of hire. Full-time employees working 30 

or more hours a week receive 40 hours of community service time per calendar year 

(16 hours of company-sponsored service time plus 24 hours of company and/or individual 

service time). Part-time employees working less than 30 hours per week 

receive 20 hours of community service time per calendar year (8 hours of companysponsored 

service time plus 12 hours of company and/or individual service time). 

Employees in our retail branches can utilize community service time after six months 

from date of hire. 

“Our written policy states that the company ‘will not approve as service any activity 

for an organization that does not comply with the company policy of nondiscrimination; 

that has primarily a political focus . . . or that has primarily a religious focus.’” 

—A large retail company

ISBN 1-880024-19-5 

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9 781880 024195 

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