Employee handbooks are like insurance policies: They’re worth the investment

Many small businesses sense a need to have an employee handbook, but for various reasons haven’t made it a priority to put one in place. Perhaps you own or help run one of these small businesses. To be honest, with the demands on most small businesses, both in terms of time and money, it is easy to see how other issues take priority. However, the failure to make an employee handbook a priority may just be a matter of perspective. If you were to view an employee handbook as an insurance policy, perhaps you would be more inclined to get one.

How an employee handbook is like an insurance policy

Small businesses buy general and industry-specific insurance policies to minimize financial exposure in case something goes wrong. For most, acquiring necessary insurance policies is a no brainer and worth the time and money to get. The fact is that, although it may serve other purposes as well, an employee handbook can have the same effect as an insurance policy. With an employee handbook, a small business expends a relatively small amount of money to minimize the financial risk associated with discrimination, retaliation, and other wrongful termination claims, including unemployment claims.

The risk

The minute a business hires its first employee, it becomes subject to employment laws. As the business adds more and more employees, it becomes subject to more and more laws. Some of the most well-known federal laws include the Fair Labor Standards Act (FLSA), the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), the National Labor Relations Act (NLRA), and the Family and Medical Leave Act (Act). Each of these employment laws, along with all the other federal and state employment laws, creates rights and protections for employees that they may seek to enforce against their employers.

Moreover, for most employment laws, there is no cost for an employee to file a claim against his or her employer because such services are provided for free by a broad range of federal and state agencies. Additionally, an employee may file a claim and the government agencies will investigate it regardless of its actual merits. For employers, once an employee files an employment claim, the costs, both in time and money, begin to accrue. The question that is left is just how much time and how much money the government’s investigation and any subsequent litigation will cost. Furthermore, much like the accidents and negligence to which other insurance policies apply, employers may be subject to employment claims at any time.

The protection

Employee handbooks provide insurance-like protection to employers in two ways. First, if implemented properly, employee handbooks minimize the likelihood that employees will file employment claims after some adverse employment action has been taken against them. Second, if an employee submits a claim to a government agency, a properly implemented employee handbook should help the agency reach its conclusion quicker and in the employer’s favor, thus reducing the time and money it takes to defend the claim.

Employee handbooks minimize the risk that employees will file employment claims


Employees who feel they have been treated fairly, particularly as it pertains to the treatment of co-workers, are less likely to file employment claims. Employers who have set behavioral, performance, and discipline policies of which employees are aware and who consistently enforce those policies are more likely to have employees who feel that they have been treated fairly. Employee handbooks are the best tool to help employers put employees on notice of company policies and the consequences for violating them. IF the employer applies the policies consistently to all employees, it will create an atmosphere where employees feel they are being treated fairly, thus reducing the likelihood that employees who are subject to discipline will file employment claims against their employers.

Employee handbooks lead to quicker resolution of employment claims

Once an employee files an employment claim with a government agency, an employer’s goal should be to have the agency reach a conclusion in its favor as soon as possible. Employee handbooks that have been consistently applied are one of the best tools to accomplish this goal.

When an agency contacts an employer for information about an employee’s claim, it will ask the employer to provide, along with other items, the following:

  • copies of any written policies on which the employee’s discipline was based, including any signed acknowledgment that the employee had read the policy
  • copies of the company’s discipline policy
  • copies of any documents that show that the employer followed its discipline policy when disciplining the employee
  • copies of any documents that show that the employer applied the same level of discipline to co-workers who engaged the same or similar behavior as the employee

If an employer can provide these documents and they show consistent application of behavioral, performance, and discipline policies, the employer will have significantly increased its chances of having the claim dismissed. In many cases, especially those with the least apparent merit, this evidence by itself is sufficient to defeat the claim. This means an employer who can provide the requested information will have to spend less time and less money defending themselves than those that cannot. Because employee handbooks are the most efficient and concise method of informing employees of behavioral, performance, and disciplines policies as well as the best means of capturing an employee’s acknowledgment that they are aware of such policies, the relatively small investment an employer makes in an employee handbook acts like an insurance policy in that it minimizes greater future financial exposure.


Small business owners have many demands on their time and money, and for many, this results in failing to prioritize getting an employee handbook. If you are one these small businesses and you recognize the insurance-like benefits that employee handbooks provide in minimizing financial exposure, you may be more willing to move an employee handbook higher up on your priority list. Moreover, you may be surprised at how little time it takes and how affordable an employee handbook can be. If you have questions about the cost and time commitment needed to obtain an employee handbook, please give me a call at (866) 280-5225 or email me at drew@employmentlawhandbook.com. I would be happy to help you find the employee handbook option that works best for you.

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