As you’ve no doubt read on this blog before, collecting signatures on policy acknowledgements is a very important step in transactional onboarding. However, HR must be aware that these employment documents don’t represent the only legally binding agreements between an organization and its workforce. Individual managers and supervisors may actually modify or nullify company policies in some cases – simply by making verbal promises to employees.

Many employers are under the impression that they must specifically grant policy modification authority to managers for them to have this ability. State courts have often come to a different conclusion. Whenever there is a disparity between what company policy outlines and what managers tell employees, this creates a risk of litigation in the form of common law claims. Workforce.com has put together an article about this topic that explains in detail how such lawsuits occurs and how they can drive up costs for employers.

Avoiding Litigation over Oral Contracts

It’s not sufficient to include wording in a policy stating that the agreement can only be modified in writing. You need to state clearly (by position within the company or by name) exactly who has this authority. For example, you might have a rule stating that any changes to the policy regarding reimbursable expenses would have to be approved by the Director of Finance. Actually, making any exceptions at all is risky business. It sets a precedent that the courts will take into consideration in deciding whether employees had reason to believe a manager who made an oral promise that contradicted written policy.

The best way to prevent lawsuits is by thoroughly training managers and supervisors regarding the hazards of careless verbal commitments. Sometimes, a variation between what managers say and what company policy states is simply due to misunderstanding. For example, if new hires are signing an updated version of a policy that managers haven’t been fully briefed about, this can lead to confusion. This might occur if the updated policy only applies to employees hired after the revision date with existing workers still being bound by the terms of the previous policy. In these situations, there are two different sets of rules in play that can be tough to remember.

Any individuals who may be perceived as having authority to speak on the company’s behalf should be immediately notified of any changes to the policy forms used in transactional onboarding. This will reduce the risk of new hires receiving contradictory information. Managers and supervisors should also be encouraged to refer employees’ policy questions to HR for clarification.

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