Can a Windows 7 Standard User be given rights to install Windows Updates?

All computers are Windows 7 Pro.

The company owner doesn't want employees to have the ability to change passwords or otherwise damage computers if they leave the company under unhappy circumstances.

He also doesn't want to have to call in the outside IT company to put in an administrative password for them every time that there is a Windows, Java, Flash, etc. update.  (Although IT can connect remotely with TeamViewer)

Is there any way to set a local security policy to enable a Standard Windows user account to install their own updates, but keep all the other restrictions of a standard user?

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Windows updates don't depend on user rights, they are installed by the update service. Any user can for example choose to install updates on shutdown.
The simple answer is no. You can install WSUS and have it done for you automatically if you so desire. The only setting that would apply to your question is that a standard user can be allowed to do windows updates, but not anything else as far as I know. Look here:

    Using RUN open gpedit.msc
    Navigate to Computer Configuration -> Administrative Templates -> Windows Component -> Windows Update
    Enable "Allow non administrator to receive update notifications"

and check here in Control Panel:

Control Panel\All Control Panel Items\Windows Update"  Place a check-mark in "Allow standard user to install updates"

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That's wrong, the GPO mentioned does allow him to receive notifications...but even without, he may install updates the way I mentioned.
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