Last month, Family Dollar settled a lawsuit in New York with 1,700 employees that were classified as managers in which the employees claimed that the retailer unlawfully failed to pay them overtime.


Per a Family Dollar press release, the settlement could cost up to $14 million.  They ran into similar trouble in 2009 when Family Dollar had to pay $33 million for similar misclassification that resulted in a class-action lawsuit in Alabama.


This most recent suit was the result of employees being classified as “managers”, thus Family Dollar claimed they were exempt from overtime pay, but were assigned duties that were exclusively non-managerial  such as cleaning bathrooms, unloading trucks and stocking shelves.


This may not be the last settlement we hear about coming from Family Dollar as it relates to this issue of misclassification of employees and their failure to pay overtime.  Per their United States Security and Exchange Commission quarterly report filed in June,  there are similar class-action lawsuits in Colorado, Connecticut, Kentucky, Missouri, New Jersey and Pennsylvania.  


Family Dollar continues to believe that the employees that they classify  as “managers” relevant to their litigation are “exempt” employees and have been appropriately compensated under federal and state laws.


The Federal Fair Labor Standards Act (FLSA) guides employers on how to proceed.  Click Here for a fact sheet on overtime pay published by the United States Department of Labor, Wage and Hour Division.


Below are some of the most common exemptions and tests under the FLSA:


To qualify for the executive employee exemption, all of the following tests must be met:

The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week; 

The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; 

The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and 

The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight. 

To qualify for the administrative employee exemption, all of the following tests must be met: 

The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week; 

The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and 

The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 

To qualify for the learned professional employee exemption, all of the following tests must be met:

The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week; 

The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment; 

The advanced knowledge must be in a field of science or learning; and 

The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual
instruction.

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

The exemptions provided by FLSA Section 13(a)(1) apply only to “white collar” employees who meet the salary and duties tests set forth in the Part 541 regulations. The exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy. FLSA-covered, non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the FLSA, and are not exempt under the Part 541 regulations no matter how highly paid they might be.

VIA United States Department of Labor, Wage & Hour Division