Misclassifying Employees As "Managers": The Wrong Way To Save A Dollar
Dollar General, like other discount retailers operating in multiple states, operates on thin margins. While saving a buck is vital for Dollar, misclassifying employees as exempt managerial staff when they have little say in the management of the business and perform mostly manual labor, in order to avoid paying them overtime wages, is the wrong way to do it.
Five former “managers” of Dollar filed suit against the chain, claiming that their duties were anything but managerial—and that they should have been paid overtime wages. The five had originally sought to bring a class action suit in 2008, but the class action claims were dismissed. These five employees are now proceeding with their individual claims.
Dollar is no stranger to overtime lawsuits. A year earlier, 10 similar lawsuits were initiated in Alabama and transferred to West Virginia. Those were just the tip of the iceberg. Hundreds of cases against the store have been brought in multiple states.
In all cases, the employees claim that Dollar misclassified non-managerial employees as exempt managers in order to avoid paying overtime. The employees say that they worked 60-90 hours per week and one employee claimed that, if she was a manager, she should have had some say in how things were done, but that, instead, she was performing manual labor and not managerial tasks.
Under the Fair Labor Standards Act, employees can be exempt from the overtime pay requirement under the “Executive exemption” if the employee’s primary duty is managing the business. While there’s no hard-and-fast rule for exactly how much time must be spent managing—it’s safe to say that it needs to be more than the 5-10 hours per week, as claimed by the Dollar employees in one of the Dollar cases.
It’s understandably tempting to misclassify staff as exempt employees when, like Dollar, a chain operates thousands of stores, each with multiple employees. That’s an enormous payroll, even without overtime wages. One plaintiff’s attorney estimated the chain has saved $80 million by not paying overtime. However, like Dollar, doing so could be the fodder for multiple misclassification lawsuits. The take-away? Don’t call employees “managers” and classify them as “exempt” from overtime when their duties and responsibilities do not support the classification. It’s what they do on the job, not what they are called, that determines how they need to be paid.
