When Was The Last Time You Reviewed Your Personnel Manual From A Legal Standpoint?

August 1, 2012

While not intended as a legal document, did you know your personnel manual may have the force of an employment contract? If you haven’t done so in a while, or not at all, review it to be sure it won’t cause unintended problems. Like many other physician contracts, personnel manuals often do not get an annual review; they get stuck in a drawer never to be looked at again until an employee leaves the practice and a problem arises.

Perhaps you think your personnel manual as some sort of low-key presentation booklet that describes policies and benefits for your staff. Unfortunately, it’s often loaded with dynamite. A variety of court decisions have made this apparent.

Be careful, for instance, how your manual describes the employment relationship.  Nothing in it should imply that the staff member’s role is “permanent.”  I’ve seen some manuals where it actually states that after an initial three months’ probationary employment, the position would become permanent; it’s much safer to describe the employment relationship as becoming “regular.”

As another means of assuring that you can fire an employee if dissatisfied with performance, have your manual specifically state that each staffer’s employment is “at will.”  The following helps make the point:

 “The Practice retains its right to terminate employment with or without good cause; by the same token, you have the right to leave with or without good cause.”

Watch out, too, if your manual sets out a pre-firing procedure like a set of progressive disciplinary steps.  Courts have held employers liable for “wrongful discharge” when those steps were not followed. In the same vein, language saying that discharge will only be for certain types of behavior (“for cause,” for example) may make a termination illegal if you do not or cannot document that behavior.

Statements of an employee’s benefits can be held against you even if you had changed those arrangements. I recall a practice whose manual promised all regular employees term life insurance of one times salary. The doctors dropped the group’s term life insurance contract, but the promise lived on in the manual much to their financial risk.

Some attorney’s I talk to suggest deleting from manuals all specific description of benefits. Instead, the manual should simply refer employees to the actual benefit plan documents. If you prefer describing benefits, here is a common protective statement I see including in manuals along these lines:

“The material in this manual represents our informal summary of benefits at the time of publication.  Those benefits are under continuing review, and they are fully described in our formal summary plan descriptions and/or insurance subscription agreements. Refer to those sources for a full description of each plan’s benefits and limits. If any provisions are inconsistent with this manual, the formal plan documents are controlling. We reserve the right to change or terminate any benefit plan at any time in accordance with the formal plan documents.”

As you can see, be sure to draft your personnel manual with real care. Be aware, too, that the law varies significantly from state to state on the entire subject of employee manuals and rights thereunder. I have seen offices hire a practice administrator from another state and that administrator then proceeds to revise the current manual based on where he or she came from.

If you haven’t reviewed your manual recently, I strongly suggest having it reviewed by your legal counsel – make sure it’s legally correct, comprehensive, clear and relatively bulletproof. As I mentioned before, many manuals in existence today are ticking time bombs waiting to go off. You certainly don’t want to create any undue problems for yourself and your medical practice. This issue not only applies to medical practices, but any healthcare organization that issues an employee manual to its workforce.

Reed Tinsley, CPA is a Houston-based CPA, Certified Valuation Analyst, and Certified Healthcare Business Consultant. He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational and financial management, strategic planning, and growth strategies. His entire practice is concentrated in the health care industry. Please visit www.rtacpa.com

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