Most small business owners I talk with have an employee handbook somewhere. Often it was written when the company had five people, pulled from a template, or handed down from a previous HR manager. It lives in a shared drive, and nobody has opened it in a while.
That's a risk. A handbook should set clear expectations and protect your business. When it's outdated or inconsistent, it can do the opposite: hand an employee or a government agency a written record of policies you didn't follow, or rules that don't comply with the law. Here are five signs your handbook may be working against you.
No one remembers the last time it was updated
Employment law changes every year at the federal, state, and sometimes city level. A handbook written five years ago almost certainly misses something. For example, the federal Pregnant Workers Fairness Act took effect in June 2023 and requires employers with 15 or more employees to provide reasonable accommodations for pregnancy, childbirth, and related medical conditions, unless doing so would cause an undue hardship. If your accommodation policy only talks about disability, it's behind. I recommend a full review at least once a year, plus a quick update whenever a new law affects you.
It says one thing, but you do another
This is the most common problem I see. The handbook promises a 90-day review, but nobody has had one in two years. It describes a three-step discipline process, but managers skip straight to termination. It spells out a PTO policy that payroll stopped following long ago.
When practice and policy don't match, the written policy is usually what gets quoted back to you in a dispute, and your decisions start to look inconsistent or unfair. Either update the handbook to reflect how you actually operate, or start following what it says.
It reads like a contract
Handbooks should guide, not guarantee. Phrases like "permanent employee after probation," "employees will only be terminated for cause," or a required discipline sequence can create expectations a court may treat as promises. Most handbooks should state clearly that employment is at will (where your state allows it), that the handbook isn't a contract, and that policies can change. Build flexibility into your discipline policy too, so you can respond to serious misconduct without working through every step.
It restricts what employees can say
Rules that ban employees from discussing pay, criticizing the company on social media, or sharing "any information about the company" can violate the National Labor Relations Act (NLRA). Many owners don't realize the NLRA protects most private-sector employees' right to talk with each other about pay and working conditions, whether or not there's a union. The National Labor Relations Board's standard for judging these rules has shifted several times in recent years, so broad confidentiality, social media, and civility policies deserve a careful look. Keep them tied to real business needs, such as protecting trade secrets and customer data.
It was written for someone else
Templates and borrowed handbooks are a fine starting point, but they're rarely a good finish. A handbook from a 500-person company may include policies that don't apply to you and skip laws that do. One written for another state may cite the wrong leave rules or pay practices. And if employees never signed an acknowledgment that they received it, you'll have a harder time showing they knew the rules.
Colorado employers, be sure to check your handbook against a few handbook-specific requirements:
COMPS Order: If you give employees a handbook, Colorado requires you to include a copy of the current COMPS Order or the state's COMPS poster with it. If employees sign for the handbook, have them acknowledge receiving the COMPS Order too.
Vacation payout: The Colorado Supreme Court ruled in 2021 that earned vacation (including most PTO) must be paid out when employment ends. "Use it or lose it" language that forfeits earned vacation at separation isn't enforceable here. Paid leave employees can use for any purpose counts as vacation, no matter what you call it. You can cap how much vacation employees accrue, but you can't take away what they've already earned. Unlimited PTO usually isn't payable at separation because the amount can't be determined.
Pay discussions: Colorado's Equal Pay for Equal Work Act separately prohibits policies that bar or discourage employees from discussing their wages. It also prohibits retaliating against employees who discuss their pay.
Paid sick leave: our sick leave policy should match the Healthy Families and Workplaces Act, including how leave is earned, used, and carried over.
A handbook that works for you
A good handbook doesn't have to be long. It needs to be current, accurate, and true to how you run your business. If you recognized your own handbook in any of these signs, it's worth fixing before it comes up in a dispute.
I help small and growing businesses write new handbooks and update existing ones so they're compliant, consistent, and written in plain language your team will actually read.
Book a free 30-minute consultation to talk through your handbook and what it needs.
Sources
U.S. Equal Employment Opportunity Commission: What You Should Know About the Pregnant Workers Fairness Act
National Labor Relations Board: Your Right to Discuss Wages
National Labor Relations Board: Board Adopts New Standard for Assessing Lawfulness of Work Rules
Colorado COMPS Order: Rule 7 text, via Justia
Colorado Department of Labor and Employment: INFO #3E: Payment of Earned Vacation upon Separation of Employment
Colorado Department of Labor and Employment: Wage Protection Rules, 7 CCR 1103-7
Colorado Department of Labor and Employment: INFO #8: Equal Pay by Sex: The Colorado Equal Pay for Equal Work Act, Part 1
Colorado Department of Labor and Employment: Equal Pay for Equal Work Act
Colorado Department of Labor and Employment: INFO #6B: Paid Sick Leave under the Healthy Families and Workplaces Act
This post is for general informational purposes and isn't legal advice. Employment laws change, so confirm current requirements or consult an attorney for your specific situation.