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Fourth Circuit Reminds Employers to Draft Handbooks, Other Wage and Hour Policies Carefully

Many employers take their employee handbooks and policies for granted, or at least let them collect dust.  Written correctly, a handbook will clearly and succinctly outline your expectations and your key policies.  It’s a vital communication tool and can help protect you against inconsistent treatment of employees (and the potential legal liability that comes with it) for wage and hour purposes and every other area of your operations.  Failing to draft employee handbooks with care can have real wage and hour consequences, as one telecommunications company found out before Thanksgiving on appeal with the Fourth Circuit.

A large authorized cellular telephone and satellite TV retailer in North Carolina had created a policy of arbitrating all Fair Labor Standards Act (FLSA) collective action and state wage and hour actions, one increasingly common way some employers handle the continued surge of wage and hour lawsuits.  In fact, the company had inserted a provision in its handbook that committed “all employment issues” to an internal dispute resolution process, followed by mediation, then binding arbitration.  Great, right?  Unfortunately, no.  Both the district court and the Fourth Circuit found conflicts in the handbook’s acknowledgment form, which which explicitly stated that “the handbook does not create a contract.”  Apparently for emphasis, the wordy acknowledgment form repeated that “no provision should be construed to create any bindery [sic] promises or contractual obligations between the Company and the employees” and that “the information contained in the Handbook are guidelines only and are in no way to be interpreted as a contract.”

If the handbook contained contained “guidelines only,” then the arbitration provisions would not be enforceable as a contract or agreement.  The Fourth Circuit went further, refusing to enforce the arbitration provision even where the employee’s behavior—receiving it and continuing her employment—implied that she agreed to arbitrate her state wage-hour class action.  The company argued that the arbitration provision was itself binding and severable from the rest of the handbook, even if the handbook “as a whole” did not constitute a contract or agreement.  It also pointed to the favored status of the Federal Arbitration Act and contended that any doubts about the arbitration provision should be resolved in favor of arbitration.  However, the district court and the Fourth Circuit agreed that the Act’s unambiguous Section 2 as well as applicable Supreme Court precedent reflects the “fundamental principle that arbitration is a matter of contract.” Without a contract, there could be no binding arbitration.  Although the receipt of the handbook alone could have constituted assent, the Fourth Circuit concluded that the “guidelines only” acknowledgment form drafted by the company expressly disclaimed any implied agreement to be contractually bound by any terms in the employee handbook. Accordingly, since any implied assent that her behavior might have been created was nullified by the express agreement not to be bound by any of the handbook’s terms, the Fourth Circuit affirmed the district court’s decision to let the employee’s wage and hour suit move forward.

Upshot for Employers

It is December 1, and we’re rapidly approaching the end of another year.  When is the last time you had your handbook reviewed by a fresh set of eyes?  Have you updated your job descriptions recently to ensure that they reflect current job duties and that the FLSA exempt or non-exempt status you have selected complies with the FLSA and your state law?  Are you prepared for the new FLSA regulations and how they will impact your exempt status employees?  I highlight this case and these kinds of questions because not everything about the FLSA is opaque or complex.  Often, avoiding or minimizing liability for wage and hour issues comes down to careful drafting and annual reviews and updates of all of your policies, job descriptions, and handbooks.  As we head toward the holidays and into 2016, don’t become another victim of sloppy drafting and too-infrequent policy reviews.

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