It is being reported there has been a 77% increase in Fair Labor Standard Act (FLSA) claims against employers alleging wage and hour violations since 2004. A large number of the claims and probably the most expensive have been about disputes over underpaying or failing to pay overtime to employees due to job misclassification.

Most recently AT & T was sued for $1 billion dollars in two class action suits, alleging a new company-wide policy exempting first line managers from overtime, violated federal law. The first line managers claimed they fill low level supervisory positions, and they do not meet the standards established to qualify as “exempt” employees.

To avoid this type of costly FLSA claim:

  • 1. Conduct a comprehensive job analysis to determine if someone is an “exempt or a non-exempt employee.” Jobs are classified as non-exempt or exempt based on:
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  • Nature of the work performed,
  • The extent of the discretion exercised in the job,
  • Level of compensation, and the education, training, and
  • Credentials of the person filing the position.

2. Once employees are properly classified as exempt or non-exempt, do a check to insure employees’ wages and benefits match their federal FLSA exempt or non-exempt status. If their wages and benefits do not match their FLSA status, correct the problem immediately.

Astronomical claims by employees against their employers, and the wide-spread press coverage they receive are sure to lead to copycat cases against smaller and mid-size employers. Costly FLSA claims over job misclassifications can be easily avoided with a moderate amount of effort by employers.

Why is it important for a business to have an employee handbook or personnel policy manual? There are many reasons.

Handbooks or policy manuals can set the tone for a business. They put all the employees on the same page with respect to workplace rules. They outline benefits for uniform and consistent treatment of employees, and they set forth the legal obligations of the employer.

Having an employee handbook or policy manual can show a good faith effort by an employer to comply with applicable laws, like EEOC, FMLA, and FLSA.

Types of polices to consider including in handbooks or policy manuals are internet usage at work, personal cell phone usage at work, attendance/punctuality, confidentiality and use of social media. If a business has decided employees will serve “at-will,” they should not include policies outlining probationary, introductory or trial periods, grievance procedures, or a lock-step discipline process. These types of policies in Minnesota could be interpreted as a guarantee of work or a contract between the employer and the employee (pdf) effectively eliminating an employee’s at-will status.

Employee handbooks or policy manuals should be tailored for each specific business; one size does not fit all when it comes to these documents. Employee handbooks or policy manuals make for better workplaces, because employees know what to expect and what is expected of them.