Retail Industry Update - February 2012, No. 1

Fisher Phillips

In This Issue:

A Tale Of Two Stores By Ed Harold (New Orleans)

Most small box retailers treat the manager of each individual location as an exempt employee under the “managerial exemption” of the Fair Labor Standards Act. As such, the store managers are not paid for hours worked over 40 in a workweek. Many small retailers, those with stores typically between 7,000 and 10,000 square feet, have been assaulted with litigation from current and former store managers claiming they are not exempt employees. This article takes a closer look at two cases that came to diametrically different results based on very similar facts.

The Plot

In order to qualify under this exemption, individual employees must meet a series of criteria. They must be paid at least $455 per week on a salary basis, customarily and regularly direct the work of two or more full time employees, hire and fire employees or make recommendations on hiring and firing, and their primary duty must be the management of the enterprise by which they are employed, or of a customarily recognized department or subdivision of that enterprise.

The main focus of these claims is the “primary duty” prong of the test. The genesis of the litigation stems from the expectations companies place on their store managers to be prepared to perform – and to occasionally, or more often actually perform – virtually every function in the store when needed. This can include anything from running the register, to stocking shelves, to cleaning the bathroom.

These expectations are driven by the need to staff leanly and efficiently. There are times of the day where customer traffic simply does not warrant having more than two employees in the store, leaving the manager with the possibility of performing what would typically not be thought of as managerial tasks. Secondarily, the plaintiffs will claim they do not manage because the company’s policies dictate uniformity and remove their discretion from managing.

These suits are generally filed as collective actions seeking damages on behalf of all store managers for the particular retailer. To participate, the managers and former managers must affirmatively opt-in as a plaintiff in the action. For larger companies, plaintiffs can number in the thousands. But even smaller retailers with only a few locations can be sued on behalf of a handful of individuals...

Please see full update below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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