My colleague and fellow blogger Dan Schwartz wrote recently about the case of Morgan against Family Dollar Stores. In this case, 1,400 store managers joined together in a collective action and won $35 million (plus another $19 million in attorneys fees) for overtime violations. In and among the plaintiff’s wage / hour bar, this case is a landmark and will spawn many copy cat lawsuits and should change the way retailers do business.
At issue was the question of whether or not Family Dollar was within its rights to classify its store managers as exempt “Executives” and deny them overtime. The principal question litigated was whether or not their “primary duty” was management. They won because Family Dollar could not prove that management was their primary duty.
The court held that the store managers spent most of their time on non-management tasks such as processing shipments and stocking shelves:
“As to the time-spent-on-exempt-work factor, the overwhelming evidence at trial showed Plaintiff store managers spent 80 to 90% of their time performing nonexempt, manual labor, such as stocking shelves, running the cash registers, unloading trucks, and cleaning the parking lots, floors, and bathrooms. Conversely, Plaintiff store managers spent only 10 to 20% of their time performing exempt work, a far cry from the DOL’s 50% guideline for management tasks. See 29 C.F.R. § 541.700(b) (2006); 29 C.F.R. § 541.103 (2003). Family Dollar did not present evidence to the contrary. See Allen, 495 F.3d at 1315 (“The employer is in a superior position to know and produce the most probative facts concerning the nature and amount of work performed….”). In fact, Family Dollar executives Barkus and Broome testified that Family Dollar never studied what store managers actually did on a day-to-day basis or the amount of time store managers spent on managerial duties.”
For employees, the take away is not to simply believe that you aren’t entitled to overtime pay just because your boss says you are “exempt.” Large retail stores take advantage of workers when they misclassify them as exempt. Companies like CVS and Family Dollar make billions of dollars and don’t need to profit at the expense of workers struggling to survive on $40,000 salaries.
Positions that are frequently misclassified include Assistant Managers, Computer Systems Engineers, Automobile Damage Appraisers, Mortgage Loan Processors and even Loan Underwriters. The U.S. Department of Labor has a website with helpful information. The Connecticut Department of Labor, too, has an informative website.
Employers typically do not do anywhere near enough when they decide whether to classify a position as exempt. At the very least, they need to do time studies to confirm that most of an employee’s time is spent doing exempt tasks. Hopefully, the Family Dollar case will wake up the retail industry and cause them to rethink their classifications.