Carefully Drafted Attendance Policies Can Reduce Unemployment Costs

Wisconsin employers received good news on June 26 when the Wisconsin Supreme Court ruled that employers may adopt stricter attendance policies than the attendance standards contained in the state unemployment law, and may avoid paying unemployment benefits to employees who violate such stricter policies.

The new case, Wis. Dept. of Workforce Development v. LIRC, Valarie Beres and Mequon Jewish Campus (Wis. 2018) (hereinafter, “Beres”), highlights the financial advantages enjoyed by employers who maintain carefully drafted, and routinely updated, employee handbooks and personnel policies.

1. Overview of Wisconsin Unemployment Law Governing Attendance Policies. In 2014, the Wisconsin Legislature passed sweeping changes to the unemployment statutes, including modifications relating to a terminated employee’s eligibility for or disqualification from benefits. Among other things, the new amendments provide that employees are disqualified from receiving unemployment benefits when they engage in unacceptable absenteeism. Unacceptable absenteeism is specifically defined in Section 108.04(5)(e), Wis. Stats., as the following:

“Absenteeism by an employee on more than 2 occasions within the 120-day period before the date of the employee’s termination, unless otherwise specified by his or her employer in an employment manual of which the employee has acknowledged receipt with his or her signature, or excessive tardiness by an employee in violation of a policy of the employer that has been communicated to the employee, if the employee does not provide to his or her employer both notice and one or more valid reasons for the absenteeism or tardiness.”

The definition of unacceptable absenteeism in Section 108.04(5)(e), and its relationship with employer attendance polices, was at the heart of the Beres case.

2. Facts of the Case. Valarie Beres worked for the Mequon Jewish Campus and was in her probationary status as a new employee at the time of the relevant occurrences. During her new hire orientation, she was provided a copy of Mequon’s employee handbook and signed a document acknowledging her receipt. The handbook contained an attendance policy. The attendance policy required, in part, that employees who were going to miss work for any reason must call in to notify their manager of their absence at least 2 hours prior to the start of their scheduled shift. Employees in their probationary period were warned that they could face termination for even a single violation of the call-in rule.

At some point during her probationary period, Ms. Beres missed work due to “flu-like” symptoms. She failed to call her manager before the 2 hour deadline. As a result, she was terminated 3 days later.

3. Battle Over Unemployment Benefits. After being fired, Ms. Beres applied for unemployment benefits. Her application was initially denied, but the Wisconsin Labor and Industry Review Commission (“LIRC”) awarded her benefits on grounds that Mequon’s “absenteeism” rules were more stringent than the definition of unacceptable “absenteeism” in Section 108.04(5)(e). As noted above, nothing in Section 108.04(5)(e) specifically requires the employee to call in before their shift, and the only reference to providing “notice” to an employer is when the employee has engaged in “excessive tardiness.” Ms. Beres had not missed more than “2 days’ work in a 120 day period” and was not accused of “excessive tardiness.”

Mequon argued that the first portion of Section 108.04(5)(e) permits an employer to adopt a more restrictive definition of unacceptable “absenteeism” in an employment manual, provided that the employee signs a receipt of that manual. The LIRC rejected that argument and ruled that Section 108.04(5)(e) allows employers to adopt a more generous definition of unacceptable “absenteeism” but not a more restrictive definition. To do so would allow employers to narrow employees’ rights to unemployment benefits beyond that approved by the Legislature.

The case was initially appealed to the circuit court, then to the Court of Appeals and ultimately to the Wisconsin Supreme Court. The Supreme Court rejected the LIRC’s interpretation of Section 108.04(5)(e). The Court declared that, as Mequon had argued, an employer is free to adopt a more restrictive definition of unacceptable “absenteeism,” including establishing call-in requirements, even though the restrictive definition has the potential to reduce an employee’s ability to claim unemployment benefits from the employer. Based on that ruling, Ms. Beres was disqualified from receiving unemployment benefits from Mequon.

4. Takeaways from the Beres Decision. The Beres decision is very helpful to Wisconsin employers and provides another option for employers seeking to reduce operational costs. However, employers must be vigilant in order to qualify for the benefits of the Beres ruling. Here are some important takeaways from the decision.

• Carefully Draft Attendance and Other Conduct Policies. In order for any personnel policy to be effective, both from a practical standpoint and legal standpoint, the policy must be carefully drafted. This means it must be easy to understand, must clearly explain its provisions, must attempt to cover as many contingencies as possible, and must be designed to avoid inconsistency.

The policy in the Beres case is a good example of effective drafting. The call-in rule was very straightforward and easy to understand. The employee could not claim that she did not understand the policy or that it somehow did not apply to her.

• Employees and Supervisors Should Receive Training on the Policies. Creating an employment policy alone will not be effective unless there is effective training provided to employees, so that they can clearly understand the policies, and to supervisors, so they are aware of the policy, can answer questions about it, and can consistently enforce it. Inconsistent policy enforcement by supervisors often leads to legal exposure.

All too often employers simply pass out handbooks to employees with little or no discussion over the provisions of the handbook. This is a huge mistake, both from a legal and practical standpoint. Employers should review each policy with the employee at the time of dissemination, provide examples of how the policy applies, and allow for questions. Evidence of such training significantly enhances the employer’s ability to defend legal claims associated with the policy.

• Ensure that Signed Acknowledgements are Obtained and Preserved. One of the requirements of Section 108.04(5)(e) is that employees must have signed an acknowledgement of the policy in order for the employer to take advantage of the exception recognized in the Beres case. Signed acknowledgements are not only critical from an unemployment standpoint but also for nearly every other legal claim.

Recently, many employers have moved to intranet-based personnel policies. Some of those employers now skip the step of requiring signed acknowledgements. This is dangerous. Most jurisdictions now recognize electronic signatures as valid as written signatures, so there should be no reason not to secure acknowledgements.

The acknowledgement should not only confirm receipt of the policy but should also confirm the employee’s understanding of the policy, confirm that the employee has had the opportunity to ask any questions about any policy, and confirm that the employee is aware of where to locate additional copies of the policy and any future changes or updates to the policy.

Acknowledgements can also reaffirm the at-will status of the employment relationship. Acknowledgements should not attempt to create a contract between the employee and the company, which could undermine the employer’s “at-will” protections.

• Handbooks and Policies Should be Regularly Reviewed for Legal Compliance. As witnessed by the Beres decision, legislatures and courts are continuously modifying laws or interpretations of laws, and those modifications can drastically increase employers’ legal exposures, particularly if the personnel policies are not updated to conform with the laws.

In addition, an employer’s operations, composition of the workforce, and other business factors often change over the course of a few years. For example, an employer could become a federal contractor, could hire employees in other states, or could engage in new areas of business covered by laws that did not previously apply. The failure to take into account legal changes stemming from operational changes (such as the applicability of other state employment laws for out-of-state hires) can further escalate legal exposures.

For these reasons, it is highly recommended that employee handbooks and other policies be reviewed by legal counsel before dissemination and be regularly reviewed for updates. The recommended sequence for an updated legal review is at least two to three years, although some employers have policies reviewed annually. The cost of legal update reviews is far less than original drafting costs.

• Probationary Periods Can be Useful. The Beres case also highlights the useful feature of maintaining probation periods for new employees.

While some may feel that the Mequon policy of immediate termination upon a single violation during probationary periods is a fairly “harsh” policy, many employers find that an employee’s habits revealed during their probationary period, good or bad, are a good indicator of their future potential. This is particularly important in relation to attendance.

If an employee has poor attendance during their first few weeks of employment, when they are presumably attempting to display their best behavior, it seems likely that they will have chronic attendance problems throughout their career.

Likewise, an employee’s propensity to follow or ignore work rules, such as the call-in rule in the Beres case, may indicate that the employee’s compliance with rules and instructions will continue to be problematic. It is often less costly to terminate employees who reveal significant performance or compliance flaws during this initial period than after the organization has invested time and energy in training and assimilation.

Some employers fear that “probation periods” can increase legal exposure, by inferring that after the probationary period employees can no longer be terminated without cause. However, probationary policies can be drafted to avoid this inference.

• Many Factors Influence Unemployment Costs. Employers routinely analyze operational costs to identify potential expenses which can be reduced or alleviated. Unemployment costs can, for some employers, be an area where reductions and savings can be realized. However, no single “magic bullet” exists to reduce unemployment costs. Unemployment costs are determined by many factors.

First, as noted in the Beres case, effective personnel policies can significantly assist an employer in establishing “misconduct” so as to disqualify terminated employees from receiving benefits. Second, care in the selection, recruitment, and evaluation of job applicants improves the employer’s chances of hiring employees with a better likelihood to succeed. Third, training supervisors to ensure that policies are consistently enforced can enhance employer’s rights during unemployment hearings. Fourth, it is critical that documentation be created and preserved, such as acknowledgement forms, supervisor’s notes, disciplinary forms, and similar records. The availability of proper documentation is critical to successfully defending unemployment and other legal claims. Finally, employers should explore methods of reducing overall turnover, which can be a major factor in unemployment benefit costs.

5. Conclusion. The Beres case emphasizes that Wisconsin employers can take steps to reduce their unemployment liabilities. One step is to adopt policies which are carefully drafted with an eye toward legal compliance. The Conway, Olejniczak and Jerry Employment Team has decades of experience in creating and reviewing personnel policies and would be happy to review or discuss your policies with you at your convenience. Please contact one of our team members for more information on the Beres decision or for assistance with your employment policies.

More information on drafting and/or reviewing attendance policies may be obtained from the Employment Team at Conway, Olejniczak & Jerry.

Written By:
Attorney Gregory A. Grobe