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.