The Buck Stops Here: Family Dollar Stores Settles Class Action Law Suit for 14 Million Dollars

Family Dollar Stores, a discount retailer chain in multiple states, is no stranger to lawsuits that stem from the executive exemption provision in the Fair Labor Standards Act (“FLSA”).  In order to meet the executive exemption, an employee’s primary duty must be management, they must supervise at least two Full-time employees, and must usually have the authority to hire and fire.  And if a court finds that an employee does not meet this exception, depending upon the size of the company and the length of wrongful classification, a company could incur significant monetary damages in back overtime pay owed. 

Despite two recent decisions involving Family Dollar Stores where it was found  that their employees met the executive exemption provision (and therefore the store was not liable for unpaid overtime wages), Family Dollar Stores recently announced it had reached a preliminary settlement in a class action lawsuit brought by over 1,700 New York store managers.  These managers claimed that because they were improperly classified as executives, they were entitled to lost overtime wages.  While Family Dollar Stores did not explain why they settled, it may be that they did not want to place a great deal of emphasis on the two prior decisions. 

Our prior blog noted that the 4th Circuit held that managers that spent the majority of their time on non-managerial duties can nonetheless be found exempt from overtime pay requirements.   In addition, in August 2012, a federal judge in North Carolina found in Ward v. Family Dollar Stores found that a manager was exempt under the FLSA.  While these two decisions obviously pleased Family Dollar Stores, in deciding to settle, they most likely did not forget that in 2008 the Eleventh Circuit upheld a $35.6 million judgment against them. 

Ultimately, like a snow flake, each case involving whether an employee qualifies under the executive exemption exception is unique.  Despite these two recent decisions, Family Dollar Stores knew there was still a risk for a costly loss.  While Courts will review prior awards for guidance, the facts (i.e., what duties the employees in question perform) will dictate how they rule.   Accordingly, companies still should proceed cautiously by paying close attention to the job duties of employees who can bring claims under the executive exemption provision.   

Exempt Managers Spending Major Time on Nonmanagerial Duties May Not Affect Exempt Status

The 4th Circuit U.S. Court of Appeals (MD, VA, W. VA, NC, SC) provided a significant win for employers in today’s multiple-hat-wearing, everybody-rolls-up-their-sleeves-and-pitches-in style of management, by finding that a store manager who spent most of her time on non-managerial duties is nonetheless exempt from the overtime pay requirements.

Grace, a store manager for Family Dollar claimed she was owed overtime pay and should not have been classified as an exempt store manager. Because she spent most of her workday on nonmanagerial tasks such as running the cash register, putting out stock, and janitorial work, she claimed that her “primary duty” was not management. Thus, despite the fact that she managed two or more other employees, had hiring and firing authority, and was responsible for overall store profitability and management, she asserted that she should receive overtime pay.

Unfortunately for her, no matter how much time she spent ringing up sales or mopping the floor, the Court of Appeals had little difficulty finding she is still the store’s manager and is still an exempt executive employee. The Court’s analysis is particularly well stated, so let’s borrow the Court’s words:

“[T]ime alone ‘is not the sole test’ [of whether someone is an exempt manager or executive] . . .Grace was in charge of a separate retail store, seeking to make it profitable. While she catalogs the nonmanagerial jobs that she had to do, claiming they occupy most of her time, she does so without recognizing that during 100% of the time, even while doing those jobs, she was also the person responsible for running the store. Indeed, there was no else to do so, and it cannot be rationally assumed . . . that the store went without management 99% of the time. Grace also fails to acknowledge the importance of performing nonmanagerial tasks in manner that could make the store profitable, the goal of her managerial responsibility.”

Bottom line: mopping the floor does not necessarily make an employee not a manager for purposes of the Fair Labor Standards Act, at least in the view of the 4th Circuit. If the person’s overall role and responsibilities are managerial, helping out in other ways won’t necessarily remove his or her overtime exemption.

So, while courts in other parts of the country may differ, go ahead . . . make that VP you don’t like take out the trash. Just make sure that 100% of the time, he or she has one or more over-arching exempt responsibilities.