“Don’t Rush to Failure” — Why Company Policies Come First

I am often asked to update a company’s handbooks, contracts, and policies, or to prepare these important documents when none existed. Unfortunately, the first test of the enforceability and utility of these writings comes at the worst possible time for the employer – when needed to justify and support a termination or, even worse, in litigation. When a company is just starting out, there are so many moving pieces to get the business off the ground that, by necessity or inattention, the documents dictating important relationships go by the wayside. Sometimes new business owners will resort to short cuts like searching the internet for something that seems to fit. However, it is often unclear where the language in these documents came from, which state and federal laws apply, and whether the document takes account of changes in authorities such as statutes or administrative regulations. Regrettably, the business owner will generally only discover these issues when the documents become critically important – too late in the game.

Careful preparation of your contracts and policies allows you to think through these questions proactively. For example, one way of drafting may dictate where any litigation occurs – preferably in your preferred courts – whereas another leaves room for the other side to choose where and how to bring a case. With that in mind, here are some points to keep in mind:

  1. CONSIDER INCLUDING VENUE AND FORUM PROVISIONS IN YOUR CONTRACTS AND USING ARBITRATION AGREEMENTS FOR YOUR EMPLOYEES. Including a dispute resolution process in your employee agreements affords you notice before things get out of hand, and can solidify your position by allowing you to determine when, how, and where matters get brought before a court. Additionally, language requiring notice of claims, or requiring that you have the opportunity to cure any alleged issues, can potentially save a relationship before things become irreconcilable. 

  2. INCLUDE NOTICE AND OPPORTUNITY TO CURE PROVISIONS IN YOUR CONTRACTS WITH VENDORS AND BUSINESS AFFILIATES. Similarly, with regard to your vendors and other contracted parties, a robust dispute resolution process can require not only advance notice, but resolution opportunity steps before launching into costly litigation. Advance notice can allow you to get in front of potentially problematic terminations. A jury waiver or arbitration clause can be imposed to lessen the damages potential of a jury verdict, and place decisions in the hands of a former judge or attorney who may be better able to understand the legal issues involved. 

  3. CAREFULLY REVIEW THE CLAUSES IN YOUR EMPLOYEE HANDBOOK. Your company handbooks is your employee’s first experience with understanding how you want to run your business. How lenient do you want to be with absenteeism, or is it critical to your business that your employees show up on time and provide advance notice of absences? Do you want to pay out unused vacation when an employee quits? Do you want the option to withhold pay if an employee leaves owing money? What kind of disciplinary policies do you want to implement? These very important questions can be addressed in a well written and considered handbook. From a practical perspective, these policies will come into play when you terminate an employee and they seek unemployment. The availability of unemployment benefits for a terminated employee can depend on whether there was a policy in place to address the conduct at issue, and whether you provided warnings prior to the termination. Therefore, to manage your unemployment claims, it is important to address in writing conduct that will constitute grounds for termination. It is also important that the employee understand those grounds in order to adjust conduct accordingly.

In the bustle of starting or scaling a business, remember the phrase “don’t rush to failure.” Careful planning at the early stages may pay dividends for years to come, providing a solid foundation on which to build your vision.

Mary Harokopus