How-to guide: How to draft the key provisions of an employee handbook (USA)

Introduction

This guide will assist in-house counsel, private practice lawyers, and human resource departments to understand the reasons for issuing, and the points to consider when drafting, an employee or staff handbook or manual.

This guide covers:

1. Overview of employee handbooks
2. Making the handbook fit the employer
3. How to draft an employee handbook – key considerations
4. How to draft an employee handbook – key provisions

This guide can be read in conjunction with How-to guides: Overview of US employment law and How to draft an employment contract.

Step 1 – Overview of employee handbooks

An employee handbook is not mandatory but helps to delineate, for both employees and employers, the scope and boundaries of the employment relationship. A well-crafted handbook can help a business run smoothly by eliminating uncertainty amongst employees, as well as setting out standards for employee conduct and performance.

1.1 Purpose of employee handbooks

Employee handbooks can serve a number of purposes. Their precise content and level of detail will differ depending on the organization. A handbook may set out the rules governing the employment relationship in meticulous detail. On the other hand, some employee handbooks are famous for their brevity; for example, the employee handbook used by the Nordstrom retail chain consists of one rule: ‘Use good judgment in all situations.’

Employee handbooks are a useful way of providing information in respect of an organization’s:

• formal procedures, such as those on sickness and other absence, and disciplinary and grievance issues;
• other policies, such as an equality or equal opportunities policy;
• rules and procedures for the smooth and efficient running of the business, such as a company dress code; and
• aims and culture.

Employee handbooks are not required by law, but they can reduce the risk of employment disputes by ensuring that both management and employees have access to and are aware of the organization’s rules, objectives, and management best practices, so as to foster healthy management-employee relationships.

1.1.1 Employment relationship

The most common purpose of an employee handbook is to define the relationship between the employer and their employees.

Mission statement – corporate principles

An employee handbook may contain the employer’s mission statement or core values. Many organizations are run according to a mission statement or set of core values, setting out the reasons an organization is doing business and what it hopes to achieve for itself and its customers.

Rules and procedures for the smooth running of the organization

Employee handbooks are usually where the employer’s organizational rules, as described at 1.1 above, are set out. The advantage for both the employer and the employee is that the rules are set out in one accessible place and are clearly defined. Rules commonly found in an employee handbook include:

• organization and chain of authority;
• non-discrimination and no harassment or bullying;
• equal opportunities;
• ethical obligations;
• compliance obligations;
• disciplinary procedures;
• procedure for making complaints;
• day-to-day operational matters such as reporting of injuries, attendance, PTO and employee benefits;
• code of conduct; and
• IT and data security policies.

A detailed description of these provisions and examples are provided in Section 4.

1.2 Legal status of employee handbooks

Employee handbooks do not usually have contractual status but rather are a set of rules and guidelines for employees and employers to follow.

1.2.1 Relationship with employment contracts

An employment contract is a legally binding contract between the employer and the employee. If either party breaches the terms of an employment contract, the other party may have a legal cause of action for breach of contract. In addition, making changes to an employment contract often requires the consent of the other party. An employee handbook does not usually have legally binding status, meaning that if either party breaches its terms this will not result in a breach of contract action by the other party. It is therefore common for employers to limit the amount of detail included in an employment contract, in particular relating to obligations on the employer or terms that the employer may wish to change.

Information that is omitted from an employment contract is often included in an employee handbook, as this gives the employer more flexibility to make changes and also carries less serious consequences in the event an employer breaches its own rules. For example, it is not advisable for employers to include a detailed disciplinary process in an employment contract, as if the employer does not follow the process this could give rise to a breach of contract claim from the employee.

If an employee fails to follow the rules set out in an employee handbook, this will not have any specific legal effect but may be used by an employer to justify a decision to dismiss the employee or impose some other disciplinary sanction.

The question of whether a contract supersedes a handbook, or whether the handbook becomes a part of the contract, is a factual matter and depends upon an analysis of the entire relationship.

Is the handbook a contract?

Employee handbooks have sometimes been held by the courts to constitute binding contracts between an employer and their employees. This will happen when a handbook is sufficiently definite in its terms to constitute a unilateral contract.

In Pine River State Bank v Mettille, 333 NW2d 622 (Minn 1983), the Court found that an employment handbook distributed after an employee started working for the employer constituted an offer for a unilateral contract that was accepted by the employee’s continued employment with the employer. The employee claimed that his job termination was wrongful because the job security provisions set out in the employee handbook were not followed. The Court held that ‘the jury could find, as it did, that the handbook provisions on disciplinary procedures had become part of [the employee’s] employment contract, thus restricting the bank’s right to terminate [the employee] at will.’ See, 333 NW2d at 630.

Similarly, in Esparza v Sand & Sea, Inc, (2016) 2 Cal.App.5th 781, after a former employee sued an employer for sexual harassment, the Court found that an employee handbook, welcome letter, and policy acknowledgment did not create a mutual agreement to arbitrate suits. Since the handbook explicitly stated it was not intended to be a contract or ‘to otherwise create any legally enforceable obligations,’ and the policy acknowledgement suggested that the handbook was merely information and provided ‘general information’ about employer policies and did not require employees to agree to any policies, contract formation could not have occurred. (Also see Section 3.1.6 below).

Example

In Davis v City of Montevallo, 380 So. 3d 382 (Ala. 2023), an employee was terminated by the city without following the termination procedures outlined in the employee handbook, despite the handbook's explicit at-will disclaimer. The court ultimately sided with the employee, holding that under Alabama law, the handbook's detailed, mandatory discharge procedures (‘shall’) created a binding contractual obligation for the city to follow the steps, even if it maintained the right to terminate him for any or no reason. Furthermore, the court found the handbook's disclaimer insufficient because it only disclaimed a contract for a specified duration, not a contract regarding the means of termination, which the court viewed as distinct from the reason for termination. The city's ability to modify the handbook at any time also did not preclude a finding that the current procedures constituted a contract.

While the Davis case serves as a recent reminder for employers to review their handbooks, the importance of clear disclaimers is a long-standing principle, particularly in states like Tennessee, where courts have set a high bar for an employee handbook to be construed as a contract. For instance, the Tennessee Supreme Court has noted that stating a handbook is explicitly ‘not a contract’ or should not be ‘construed as a contract’ is the clearest way for an employer to express its intent not to be bound by its provisions. See, eg, Keller v Casteel, 602 S.W.3d 351, 361-62 (Tenn. 2020).

Employment policies are another example of the interaction between the employment contract and the employment handbook. These are often included in a handbook to avoid making them contractual; however, in some cases policies in handbooks are contractually binding. Whether or not a policy is contractually binding depends on various factors including how it is referenced in the contract of employment and in the employee handbook. If an employer wishes a particular policy to be either contractual or non-contractual, it is advisable to state this expressly in both the employment contract and the policy itself (whether included in an employee handbook or as a standalone policy).

For further information about employment contracts, see How-to guide: How to draft an employment contract.

Collective bargaining agreements

A collective bargaining agreement is negotiated between labor unions or employee associations and employers and will supersede any contrary provisions in an employee handbook. When there is a collective bargaining agreement, the handbook should be thought of as a supplement to the agreement, but in the case of any discrepancies, the collective bargaining agreement terms will prevail.

A collective bargaining agreement is a contract between an employer and a labor union or other labor organization, acting on behalf of the employee members, that imposes obligations on the employer regarding the terms and conditions of employment for the employees represented by the organization that negotiated the agreement. These terms and conditions may not be altered by a handbook, but the handbook may supplement that agreement provided that the supplementation does not contradict any of the terms of the agreement.

The US Department of Labor has an Office of Labor-Management Standards that maintains a database of collective bargaining agreements ‘received voluntarily from either the employer or the labor union (or their employees or agents), singly or jointly.’

Step 2 – Making the handbook fit the employer

Ready-made, off-the-rack employee handbooks are widely available. Some are generic handbooks that could, in theory, be used by any employer. Some are drafted by trade or professional associations that make some attempt at making a handbook that is a better fit for employers in a particular type of business. It is best to regard these standardized handbooks as being only examples or starting points. A handbook should be customized to fit the needs of the organization.

2.1 Who is the employer?

Knowing the employer and the employer’s business operations is the first step in customizing a handbook.

2.1.1 Type of organization

Different types of business entity have different purposes. These differing purposes must be taken into account when drafting a handbook.

For-profit corporation or LLC

A for-profit corporation or limited liability company (LLC) is set up and run to maximize gain for its owners. Such an entity may, however, also have other goals or another mission that is compatible with making a profit, but may impact how that goal is reached. The handbook should be drafted in a manner that makes the employees participants in achieving or working for the goals of the organization.

Non-profit or charitable organization

A non-profit or charitable organization is not set up to earn money for the owners; in fact, the organization may not have owners in the usual sense. Employees are usually expected to share in the vision of the organization and be interested in working towards that vision. The handbook should reflect that interest in shared goals.

Low-profit LLC or public benefit corporation

A low-profit LLC or public benefit corporation (sometimes referred to as a B corporation) is a hybrid: it is set up to earn a profit, but maximizing that profit is not its primary purpose. Instead, the primary purpose of the entity is to generate social and public good, while operating in a responsible and sustainable manner. For example, the King Arthur Baking Company is a Vermont Benefit Corporation that engages in community education and environmental stewardship programs – ‘environmental performance requirements’ have been added to all employees’ job descriptions. In the same way as for a non-profit organization, the handbook should make the corporation’s goals clear while reiterating that the entity is a business.

2.1.2 Where does the employer do business?

Where the employer operates, and whether the employer operates from one location or multiple locations, will also be relevant.

Multiple states or jurisdictions

The laws of each jurisdiction must be considered when drafting a handbook. If the employer has locations in more than one jurisdiction, it may prove efficient to have multiple handbooks, one to cover each location.

Overseas locations

The laws of overseas jurisdictions must be taken into account where applicable, particularly as much of US employment law differs to the employment laws of other countries. For example, not all countries recognize the ‘employment at will’ doctrine that is assumed to govern most employment relationships in the United States.

It is likely that separate employee handbooks will be required for any employees who are based outside of the United States.

In addition to legal issues, there may be cultural issues that are not legal requirements but that should be accommodated for the sake of a harmonious workplace. For example, in some countries, employees prefer a workplace with religious images displayed prominently. An employee handbook in those countries should take that preference into account.

2.2 What are the employer’s goals and the nature of the relationship?

Much of the tone for the employment relationship will be set by the attitude and actions of the employer. The handbook is the primary written method for displaying that attitude. The handbook should include language to reinforce the idea that the employees and management are working towards the same goals. At the same time, it is best to avoid statements in the handbook that could suggest a relationship that goes beyond an employer-employee relationship (eg, ‘We think of ourselves as a family’) as that type of statement could raise unrealistic expectations for things such as tenure, discipline, and workplace boundaries.

Section 3: How to draft an employee handbook – key considerations

The goal of drafting an employee handbook is to create a document that is tailored to the needs of the employer. As stated above, generic or model handbooks should be used only as a starting point.

3.1 Initial considerations

3.1.1 Guiding workplace culture

Some employers have decided to upgrade their employee handbooks and replace them with ‘culture guides.’ A culture guide will often describe the history of an organization, and detail its mission and vision. A culture guide will often discuss the manner in which the organization addresses problems. A culture guide may also set out an organization’s employee compensation philosophies. Information on generally applicable employment law may also be included.

3.1.2 Level of detail

As with any type of legal drafting, the question of how much to include in a document is a crucial one. Employers should avoid creating a handbook that is too long and cumbersome to use, but should also avoid having too little detail or a handbook that is too vague.

3.1.3 Needs or conditions change

An employee handbook should not be regarded as set in stone. An employer’s needs will change over time. Market or business conditions will also dictate changes, either out of necessity or out of a need to stay competitive in the workforce. The handbook should be dynamic, rather than have outdated rules that are ignored.

A handbook should include a disclaimer that it may be changed at any time, at the employer’s discretion.

3.1.4 Multiple handbooks

There is no requirement that an employer that has elected to have an employee handbook may have only one. There are reasons for certain employers to have multiple handbooks, for example, when employees are based in different states or countries or when the work environments are different. However, take care to make sure that the different handbooks do not overlap, and that employees know what set of rules governs their employment in order to avoid confusion or accusations of favoritism.

An employer that has multiple types of facilities in multiple locations may conclude that it works best to have a separate handbook for each facility or location. Each different handbook should make clear that it applies only to a particular place.

3.1.5 Uniformity versus flexibility of handbook

While it may be considered good practice to have uniform workplace rules to eliminate suggestions of favoritism and to build a cohesive work environment, an overemphasis on uniformity may lead to results that are, at best ignored, and at worst, evidence of unlawful discrimination.

3.1.6 Relationship with employment contract

As noted above, take care to ensure that an employee handbook is separate to any contract of employment and that the handbook does not have contractual effect. Most employee handbooks will include a disclaimer that the handbook is not intended to create an employment contract.

3.1.7 State and federal employment laws and rules

An employee handbook must be aligned with state and federal employment laws. While employee handbooks are technically not legally required, some laws require that specific notices be given to employees and the handbook is the natural place to include these notices. For example, in New York all employees must receive a sexual harassment prevention policy.

In most situations, employees are not permitted to waive by agreement the rights secured by those laws. The handbook may supplement those rights or describe how they may be exercised.

3.1.8 Permanent employment?

Many handbooks include statements that imply that permanent employment is offered. Avoid such statements, unless there is an intention to offer permanent employment. Statements that are intended only to draw a distinction between temporary employees, who are hired only for a specific period of time, and other employees should make it clear that ‘permanent’ means only ‘indefinite’ or ‘without specific duration,’ rather than a ‘lifetime’.

Section 4: How to draft an employee handbook – key provisions

This section sets out the key provisions employers may wish to include in an employee handbook together with example provisions.

4.1 Standard provisions of employee handbooks

There are common provisions that should be included in an organization’s handbook. While the specifics of each provision will vary, there are certain types of provisions that belong in virtually every handbook.

4.1.1 Status of handbook and initial statements

Handbook not intended as an employment contract

If the organization does not intend that the handbook constitute a contract, a statement to that effect should be inserted.

Subject to change at the employer’s discretion

A handbook should be reviewed periodically and changed as necessary. Most handbooks contain a statement that the handbook is not a contract and may be changed at any time at the discretion of the employer.

No promise of permanent employment – employment is at will

If the organization does not intend to make the handbook a statement that permanent employment is being offered, or if it is not to be read as implying that an employee will be terminated only for cause, the handbook should make that point explicit.

Mission statement

If the organization has a mission statement, that statement may be inserted at the beginning of the handbook to make the mission clear to all employees.

4.1.2 Employment rules

The most common reason for having an employee handbook is for the employer to provide a clear, accessible statement of rules. These rules must comply with applicable labor and employment laws and regulations, and should also fit the needs of the workplace and workforce.

Organization and chain of authority

The governance of the organization should be described, and employees should understand the title or name of the person to whom they are responsible, or to whom they report.

Compliance statement

The handbook should include a statement that all employees are expected to act in full compliance with all applicable laws and regulations. If appropriate, a statement may be included saying that non-compliance may lead to disciplinary action being taken.

Non-discrimination and no harassment or bullying

A policy against discrimination and harassment should be included in an employee handbook. An employer that does not have an explicit anti-harassment policy that not only prohibits harassment but also details how it will be dealt with could face greater potential liability if an employee brings a harassment claim.

Federal, state, and local laws against discrimination should be regarded only as minimum requirements. An employer who wants to provide employees and potential employees with protection against discrimination based on characteristics not covered by legislation, such as gender identity or expression, should make that protection explicit in the handbook.

At a minimum, the handbook should prohibit harassment or discrimination based on race, color, religion, sex, national origin, disability, or age, or based on membership in any additional protected classes set by state or local law. If any additional classes are to be protected by the employer’s own initiative, those classes may be included here.

Equal opportunity

An employer that commits itself to equal opportunity in hiring, training, or promotions is less likely to face discrimination charges, and is able to take any required corrective action swiftly.

Affirmative actions against discrimination have come under increasing scrutiny since the US Supreme Court’s decision in Students for Fair Admissions, Inc. v President and Fellows of Harvard College, 600 US 181 (2023), which held that consideration of race in college admissions violates the Equal Protection Clause of the Fourteenth Amendment.

Ethical obligations

Some employers are required by law to have corporate ethics programs in place. Publicly traded companies are required by the Sarbanes-Oxley Act of 2002 (PL 107-204) to adopt a business code of ethics and create an internal procedure for employee reports about fraud or ethical violations. Other employers may put a program in place in order to mitigate potential civil or criminal liability for the organization. For instance, the Federal Sentencing Guidelines Manual (2025) provides that ‘the existence of an effective compliance and ethics program’ is a mitigating factor to be considered when determining the criminal sentence for an organization for a crime committed by that organization. The ethical obligations of employees should be made clear in the handbook.

Compliance obligations

Employees should understand that compliance with all applicable laws and regulations is an obligation for everyone. While specific employees and job descriptions will necessarily have more involvement with specific compliance matters, employees should be aware of their obligations to be in compliance with the law as well as with the internal rules of the organization. Employees should also be encouraged to report conduct that they know to be a violation, by adopting a reporting procedure and by making whistleblower protections explicit.

A robust culture of legal and regulatory compliance can mean the avoidance of significant fines and penalties for an organization, as regulatory authorities are giving increasing importance to an organization’s overall compliance when considering whether to institute enforcement actions.

Code of conduct

This section often outlines expected standards of behavior, professionalism, and workplace conduct beyond specific rules like non-discrimination. It might cover issues such as respectful communication, appropriate use of company resources, and general ethical behavior in the workplace.

4.1.3 Employment procedures

Disciplinary procedures

The organization’s disciplinary procedures should be set out explicitly. Specific grounds for discipline do not necessarily need to be included. The typical disciplinary actions, in order of severity, are verbal warning, written warning, suspension, and termination. Employees may be given the right to challenge the imposition of discipline. Note that collective bargaining agreements commonly include restrictions on employee discipline.

Reporting violations and making complaints

Employees should be allowed an avenue for reporting violations or making complaints. This often will be the employee’s immediate supervisor. An alternate means for making reports or complaints should be provided in case the immediate supervisor is the cause of the report or complaint. Provision should also be made for taking the report or complaint to a higher level if the immediate supervisor does nothing.

No retaliation or discipline for making reports

Retaliation against those who report violations (ie, whistleblowers), or those who cooperate with investigations of possible violations, is unlawful. Retaliation can include termination or being passed over for promotion, but it also may include harassment by other employees that management is not aware of. A statement prohibiting retaliation may serve to head off any problems in this area.

4.2 Additional provisions of employee handbooks

Provisions that set out the ordinary, day-to-day operations, are also included.

4.2.1 Terms and conditions

Workplace injuries

State workers’ compensation laws require injuries to be reported within a certain period of time after the injury. The person to whom workplace injuries are reported should be identified.

Attendance policy

Consequences for excessive or unexcused absences or tardiness may be made explicit.

Vacation, paid time off, and sick time

Employees’ allotment of vacation, sick time, or paid time off (PTO) should be explained, including the method by which the specific amount of time is calculated. If a health care provider’s note is required for a certain amount of sick time, that requirement should be stated.

Family and Medical Leave Act and state leave eligibility

Not every employee is eligible to take federally required leave under the Family and Medical Leave Act of 1993 (FMLA) or under comparable state laws. Explain eligibility, along with the procedure for requesting such leave.

Other leave

State laws require employers to allow employees to be absent for various purposes without being penalized, but also (in many situations) without being paid. The reasons for such leave may include, for example, military deployment, jury duty, blood or marrow donation, and voting. State laws granting such leave should be acknowledged, along with the procedures and timeline for requesting that leave.

Outside employment

Limitations, if any, on outside employment (ie, employment with another employer) should be stated. In industries where this type of employment is common, approval is usually required to avoid conflicts of interest or the possibility of having an employee work for a competitor or potential competitor.

Drug and alcohol abuse

Set out policies on workplace drug and alcohol abuse. State laws often bar employers from discriminating against employees who use lawful products outside of working hours. Drug testing is usually allowed, and is required for some occupations. If an employer has a drug testing policy, that should be set out in the handbook.

Outside activity reflecting adversely on employer

State laws protecting conduct outside of work hours may limit an employer’s right to restrict outside activities that reflect on the employer. However, many state laws allow an employer to take action against an employee engaging in otherwise protected conduct that damages the employer’s business or reputation. The handbook should contain a provision that states the employer may take such action.

4.2.2 Employee benefits

Benefit plans are of great concern to most employees. Many plans are, however, complex and are not readily explainable in a handbook beyond a general statement of the benefits offered. In addition, many plans are set up and administered by outside entities that are better equipped to give accurate descriptions of a plan.

Outline benefit plan

A general description of benefits offered, along with direction as to where to find the full description, should be provided.

Cost sharing

Describe how the costs or premiums for insurance coverage will be shared between the employer and employee.

Eligibility for participation

Employers may wish to limit participation in a benefit plan to employees who have been with the employer for a certain amount of time. This time limit should be stated.

4.2.3 Data security

Data security is a concern for virtually every employer. A detailed discussion of data security policies may not be feasible for a handbook, but is usually the subject of a more detailed policy, provided to the employees most directly affected. General statements (potentially referring employees to relevant policies) may be inserted in the handbook.

For a more detailed discussion, see How-to guide: How to develop, implement and maintain a US information & data security compliance program and Checklists: Drafting internal privacy policies and procedures and Privacy & data security law training.

Employees covered

While all employees should be aware of data security concerns of the employer, some will be more directly involved and be required to undergo special training on the subject. Those employees should, if possible, be specified in the handbook by reference to their role or job type.

Security obligation

Some employers will have particular data security requirements imposed on them by law, due to the nature of their business. For example, employees of financial institutions are obligated to observe privacy rules. Those particular requirements should be specified in the handbook.

Bring your own device (BYOD) policy

Employees will, for various reasons, use their own electronic devices (eg, tablets, computers, telephones) for work-related purposes. Set out the employer’s policy on employees using their own devices.

Reporting security breach

Employees who become aware of a security breach should be directed to report the breach as soon as possible. The handbook should specify the person to whom the report should be made, and the manner in which it is made.

4.2.4 Confidentiality

The nature of some employers’ businesses will dictate the level of confidentiality that employees must follow. This obligation is not dictated by the employment contract, but is imposed either by law or by virtue of the nature of the employment. Including confidentiality obligations in a handbook does not call for the same level of specificity that might be advisable when confidentiality provisions are included in the employee contract.

Duty of confidentiality

The specific duty of confidentiality required by the employer’s business or preference should be set out. For example, employees in a medical facility may be subject to the privilege applicable to health care providers, and are also subject to the provisions of the Health Insurance Portability and Accountability Act of 1996.

Trade secrets

It is best to state the types of information that will be regarded as trade secrets, and the measures that must be taken to protect them. It is risky to rely on employees’ understanding of the information that must be kept confidential.

4.3 Acknowledgement

Employees should sign a statement acknowledging that they have received a copy of the handbook, and that they have read and understood it.

4.4 Periodic review and amendment

An employer should review (and where appropriate amend) the employee handbook on a periodic basis, to stay aware of how effectively the handbook is operating and whether any changes would improve it. Pay attention to changes in employment laws or regulations, as well as to developing legal trends, such as an increase in remote working.

Additional resources

Emergency Workplace Organizing Committee, What is Collective Bargaining? 
Montana Department of Labor and Industry, Employee Handbook: Sample Policies
US Department of Labor, Employment Law Guide: Laws, Regulations, and Technical Assistance Services

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How-to guides:

Overview of US employment law 
How to draft an employment contract
How to protect trade secrets in the employment relationship
How to use arbitration agreements in employment
How to prepare for an Occupational Safety and Health Administration (OSHA) inspection
How to comply with the unemployment insurance program 
How to make reasonable accommodations for employees with disabilities
How to investigate workplace harassment complaints 
How to develop a whistleblower policy and reporting program

Checklists:

Determining the difference between an employee and an independent contractor
Dealing with workplace injuries
Developing a Bring Your Own Device (BYOD) policy
Employee drug testing
Terminating the employment of an at-will employee
Drafting a non-compete agreement 
Developing an Equal Employment Opportunity Commission (EEOC) compliant policy
Responding to an Equal Employment Opportunity Commission (EEOC) charge

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