REGULATING THE WORKPLACE:
THE IMPORTANCE OF EMPLOYEE
MANUALS
By: LIONEL M. SCHOOLER
JACKSON WALKER L.L.P.
HOUSTON EMPLOYMENT LAW SYMPOSIUM
NOVEMBER 4, 2004
Introduction: Why Are Employment
Manuals So Important?
• The First Question the Government (EEOC, DOL,
TWC, etc.) Asks During an Investigation
• “May I see your employment manual please?”
• Used as a check to ensure that the company enforces
applicable law
Texas Law on Employment Manuals
• The first rule of using Employment Manuals
• DO NO HARM!
• What is the “harm”?
Texas Law on Employment Manuals
• The harm is in using an employment manual in
such a way as to change the nature of the
relationship between employer and employee
• What is the nature of the relationship generally
between employer and employee?
Texas Law on Employment Manuals—
At Will Doctrine
• The so-called “At-Will” Doctrine
Texas Law on Employment Manuals—
At Will Doctrine (cont’d)
• The At-Will Doctrine is the focal point of
Employment Manuals when there is no written
agreement of employment
• What is the “At-Will” Doctrine?
Texas Law on Employment Manuals—
At Will Doctrine (cont’d)
• “The long-standing rule in Texas provides for
employment at will, which is terminable at any time
by either party, with or without cause, absent an
express agreement to the contrary.”
• “The general rule is that employment for an
indefinite term may be terminated at will and without
cause by either party.”
Texas Law on Employment Manuals—
At Will Doctrine (cont’d)
• Most case law about employment manuals focuses
upon what an employer can regulate in the
workplace, and whether anything in such manuals
changes the status of an “at-will” employee
• What impact does an employment manual have on
this “at will” relationship?
• BE CAREFUL: The answer is not as obvious as
you would think!
Texas Law on Employment Manuals
• The current law on Employment Manuals in Texas
is derived from four recent Texas Supreme Court
cases
• Hathaway v. General Mills
• Federal Express v. Dutschmann
• Montgomery County Hosp. District v. Brown
• In Re Halliburton (Brown & Root)
Texas Law on Employment Manuals
• Hathaway v. Mills (1986)
• “In employment at will situations, either party may impose
modifications to the employment terms as a condition of
continued employment.”
• “Generally, when the employer notifies an employee of
changes in employment terms, the employee must accept the
new terms or quit. If the employee continues working with
knowledge of the changes, he has accepted the changes as a
matter of law.”
Texas Law on Employment Manuals
• Federal Express v. Dutschmann (1993)
• “A disclaimer in an employee handbook negates any
implication that a personnel procedures manual
places a restriction on the employment at will
relationship.”
Texas Law on Employment Manuals
• What is a “disclaimer”?
• “This handbook is not a contract, expressed or
implied, guaranteeing employment for any specific
duration. The policies and other information
contained in this handbook are subject to change at
any time due to business needs. The guidelines of
this handbook do not constitute a contract of
employment, nor any other binding agreement.”
Texas Law on Employment Manuals
• What is a “disclaimer”? (cont’d)
• “The policies stated in this handbook are subject to change at
the sole discretion of the Company. From time to time, you
may receive updated information concerning changes in
policy.”
• “The handbook does not create property interests in stated
benefits and policies unless some specific agreement, statute,
or rule creates such an interest.”
Texas Law on Employment Manuals
• Montgomery County Hosp. District v. Brown (1998)
• “The principal issue before us
employment can be modified by
an employer's oral assurances
whose work is satisfactory will
without good cause.”
is whether at-will
nothing more than
that an employee
not be terminated
Texas Law on Employment Manuals
• Montgomery County Hosp. District v. Brown (cont’d)
• General statements like “you will have a job as long as you keep doing
your job well and will not be fired unless there is a good reason or good
cause to fire you” simply do not justify the conclusion that the speaker
intends by them to make a binding contract of employment.
• For such a contract to exist, employer must unequivocally indicate definite
intent to be bound not to terminate the employee except under clearly
specified circumstances. General comments that an employee will not be
discharged as long as his work is satisfactory do not in themselves
manifest such an intent. Neither do statements that an employee will be
discharged only for "good reason" or "good cause" when there is no
agreement on what those terms encompass.
• Employee who has no formal agreement with employer cannot construct
one out of indefinite comments, encouragements, or assurances.”
Texas Law on Employment Manuals
• Montgomery County Hosp. District v. Brown (cont’d)
• “We hold that an employer's oral statements do not modify an
employee's at-will status absent a definite, stated intention to
the contrary.”
• What does that last clause mean?
Texas Law on Employment Manuals
• In Re Halliburton (Brown & Root) (decided in 2002)
• In Hathaway we outlined the manner in which an employer
may change the terms of an at-will employment contract.
• We held that the party asserting a change to an at-will
employment contract must prove two things:
• (1) notice of the change, and
• (2) acceptance of the change.
Texas Law on Employment Manuals
• In Re Halliburton (cont’d)
• We stated that “to prove notice, an employer asserting a
modification must prove that he unequivocally notified the
employee of definite changes in employment terms.”
• Yet we made clear that when an employer notifies an
employee of changes to the at-will employment contract and
the employee “continues working with knowledge of the
changes, he has accepted the changes as a matter of law.”
Texas Law on Employment Manuals
• In Re Halliburton (cont’d)
• In Hathaway, we recognized that an employer may make
precisely such a “take it or leave it” offer to its at-will
employees. Because an employer has a general right under
Texas law to discharge an at-will employee, it cannot be
unconscionable, without more, merely to premise continued
employment on acceptance of new or additional employment
terms.
Texas Law on Employment Manuals
• The Power of Employment Manuals
• An employer can unilaterally change policies and
eliminate benefits -- such as entitlement to specific
amounts of sick leave or reimbursement for unused
sick leave (Gamble; Werden)
Texas Law on Employment Manuals
• Exceptions to Texas At Will Doctrine
• Statutory
• Common Law
Texas Law on Employment Manuals
• Exceptions to Texas At Will Doctrine--Statutory (cont’d)
• Texas Labor Code § 21.051 -- discharge based on race, color,
disability, religion, sex, national origin, or age
• Texas Labor Code § 451.001 -- discharge in retaliation for
filing a workers’ compensation claim
• Texas Agriculture Code § 125.013(b) -- discharge for
exercising rights under the Agricultural Hazard
Communication Act
• Texas Civil Prac. & Remedies Code § 122.001 -- discharge
for jury service
Texas Law on Employment Manuals
• Exceptions to Texas At Will Doctrine--Statutory (cont’d)
• Texas Government Code § 431.005 -- discharge for military
service
• Texas Election Code § 276.004 – refusing permission to vote
and/or retaliating against voter
• Texas Election Code § 161.007 -- discharge for attending
political convention
• Texas Election Code § 253.102 – coercion of employees for
political fundraising
• Texas Civil Statute art. 4512.7 § 3 -- discharge for refusing to
participate in an abortion
Texas Law on Employment Manuals
• Exceptions to Texas At Will Doctrine--Statutory
(cont’d)
• Texas Family Code § 14.43(m) -- prohibiting discharge due to
withholding order for child support
• Texas Labor Code § 52.051 -- employer subject to fine for
coercing employee to buy certain merchandise
Texas Law on Employment Manuals
• Exceptions to Texas At Will Doctrine--Statutory (cont’d)
• Texas Health & Safety Code § 242.133 -- Nursing home
employee cannot be fired for reporting abuse or neglect of a
resident of the institution, and no retaliation for reporting
violation of Hazard Communication Act.
• Texas Labor Code § 21.055 – No retaliation against an
employee for reporting violations of the Texas Commission on
Human Rights Act
Texas Law on Employment Manuals
• Exceptions to At Will Doctrine—Common Law
• Narrow exception to employment-at-will doctrine for
employee who is discharged for sole reason that the
employee refused to perform an illegal act. (Sabine
Pilot v. Hauck [1985])
Texas Law on Employment Manuals
• Is the At Will Relationship ever modified
because of an employment manual?
• Can the employer say or do something that would
have the effect of creating an enforceable promise to
the employee, even without a formal written
employment agreement?
Texas Law on Employment Manuals
• Is the At Will Relationship ever modified
because of an employment manual? (cont’d)
• You had to ask; You just had to ask
Texas Law on Employment Manuals
• Is the At Will Relationship ever modified
because of an employment manual? (cont’d)
YES
Texas Law on Employment Manuals
• Is the At Will Relationship ever modified because of
an employment manual? (cont’d)
• Here are some examples:
•
•
•
•
•
Vida v. El Paso Employees Credit Union
Matagorda Cty. Hosp. District v. Burwell
Miksch v. Exxon Corp.
Miller v. Riata Cadillac
Handy Andy v. Rademacher
What Can/Should You Include In An
Employment Manual?
• Protection for the Company
• Alternative Dispute Resolution of Employment
Disputes
• Identification of Company Policies
• An Employee Manual is a “Living” Document
Protecting the Company
• Trade Secrets, Confidential Information
• Conflicts of Interest
• Drug Testing
• Workplace Violence, Concealed Weapons and
Consent To Search
Identifying the Policies of the Company
• General Policies
• Nature of Employment
• Hiring Policies
• Employment Applications
• Hiring of Relatives; Employee Fraternization (say what?)
Identifying the Policies of the Company
• General Policies (cont’d)
• Immigration Law Compliance
• Outside Employment
• Personal information
• Reference Checks
Identifying the Policies of the Company
• Rules in the Workplace
• Attendance
• Dress Code
• Safety and Accident Rules
• Life Threatening Illnesses
• Anti-Substance Abuse
Identifying the Policies of the Company
• Rules in the Workplace (cont’d)
• Sexual and Other Unlawful Harassment
• Smoking
• Employee Conduct and Work Rules
Identifying the Policies of the Company
• Use of Mail and Phone Systems
• Use of Computers and the Internet/E-Mail
“What do you mean I don’t have
a right of privacy in the workplace?”
Identifying the Policies of the Company
• Rules About the Employment Relationship
• Performance Reviews
• Employment Categories
• Employment Termination
• Resignation
• Return of Company Property
Identifying the Policies of the Company
• Compensation and Benefits
• Payroll
• Work Hours and Reporting
• “What do you mean you worked overtime to finish the
job?”
• Holidays
• Vacation
Identifying the Policies of the Company
• Compensation and Benefits (cont’d)
• Group Insurance Benefits
• Worker’s Compensation
• Retirement Plans
Identifying the Policies of the Company
• Leave Policies
• Sick Leave
• Medical Leave
• Maternity Leave
Identifying the Policies of the Company
• Leave Policies (cont’d)
• Funeral Leave
• Jury Duty
• Military Leave
WHY ARE EMPLOYMENT
MANUALS SO IMPORTANT?