Rite Aid Settles Overtime Lawsuit for $20.9M - Free Enterprise
Free Enterprise - The FindLaw Small Business Law Blog

Rite Aid Settles Overtime Lawsuit for $20.9M

Rite Aid has agreed to settle an overtime class-action lawsuit for $20.9 million.

The company was accused of violating federal wage and hour laws when it classified approximately 6,100 assistant store managers as "exempt" workers. The lawsuit claimed these employees were misclassified, and that they should have been entitled to overtime pay and other benefits given to nonexempt employees, reports The Patriot-News.

Nationwide, there were 15 lawsuits against Rite Aid, 14 of which were resolved with this settlement. One lawsuit in California will move forward.

The issue of exempt managers is a difficult issue employers of every size deal with.

Often, companies will classify their supervisors and managers as "exempt" based solely on their titles and salaries. However, the legal analysis is not so simple.

In general, the U.S. Department of Labor (DOL) uses a "wage and duties" test to determine if an employee qualifies as an "exempt" executive employee. In fact, to be considered an exempt executive, an employee:

  • Must be compensated on a salaried basis, at a rate not less than $455 per week.

  • Must have a primary duty to manage the enterprise, or manage a customarily recognized department or subdivision of the enterprise.

  • Must customarily and regularly direct the work of at least two or more other full-time employees or their equivalents.

  • Must have the authority to hire or fire other employees.

The "salaried" portion of the wage and duties test is typically easily met. But companies often get into trouble when they provide someone with the title of "manager" without really giving them executive duties.

So if a manager spends half his time at the check-out stand or performing the duties of a regular employee, he may not be an "exempt executive" under the law, even though he occasionally has the ability to "manage the enterprise" or make personnel decisions.

There are, of course, many other types of employees who are exempt from overtime under the Fair Labor Standards Act. Check out the DOL's online FLSA Advisor for other common exemptions.

As an employer, the takeaway lesson is knowing that someone's job title plays no role in determining whether someone is "exempt" from overtime. You can name someone "chief executive" or simply "manager," and that person would not be exempt if his duties do not reflect his title.

Follow FindLaw for Consumers on Google+ by clicking here.

Related Resources: