The Case

On March 7, 2014, Judge Raymond Jackson of the U.S. District Court for the Eastern District of Virginia denied Dollar Tree’s motion for de-certification of a Fair Labor Standards Act (FLSA) class action case involving between 4,000 and 6,000 current and former employees.  The lawsuit alleges that Dollar Tree required or permitted its hourly associates and assistant store managers to work "off the clock" and overtime without compensation.  The suit covers employees in Dollar Tree stores located in 48 states and the District of Columbia.  Dollar Tree’s headquarters is located in Norfolk, Virginia.   

In their class action suit, the plaintiffs allege they were required to work off-the-clock without pay (1) when making bank deposits, (2) during interrupted meal periods, and (3) at miscellaneous other times performing activities such as unloading trucks, stocking inventory and aisles, retrieving carts and boxes, cleaning, and waiting for other employees to start the next shift.  Although Dollar Tree had corporate policies which strictly prohibited off the clock work, the plaintiffs claim it was rarely enforced in practice.  The plaintiffs claim they were forbidden from writing off the clock work on their time sheets.  In some cases, no time sheets were filled out or the time keeping system in place didn’t allow employees to enter off the clock work.  Some employees interviewed explained they never included off the clock work on their time sheets for fear of discipline.

The lawsuit further alleges Dollar Tree took no meaningful steps to rectify this problem.  On the contrary, Dollar Tree’s own corporate practices appeared to contribute to the problem.  According to the complaint, Dollar Tree’s corporate office imposed severe budget constraints and rules around employee pay.  When faced with an overload of work to be completed in a short timeframe, local store managers had to get the work done within a tight payroll budget.  This may have led to employees working off the clock in an effort to meet corporate deadlines. 

In requiring or permitting managers to engage in this practice, Dollar Tree put itself in a dangerous position.  The FLSA requires employers to pay non-exempt employees for all work performed.  In general, that means any work performed off the clock, during breaks and meal times, while waiting for the next shift to arrive, and the like, must be paid.  It is up to the employer to enforce the rules prohibiting off the clock work and to discipline managers and employees who do not comply.  Regardless, the hours worked must be compensated. 

Dollar Tree may be learning an expensive lesson about policies versus practice.  Policies are only as good as the conduct it regulates.  If policies are not properly enforced it can lead to unwritten rules and practices that casually evolve over time.  But casual practices regarding employee pay can easily lead to a violation of federal and state wage laws.  Such a mistake can cost a company millions of dollars in damages.   

The judge’s denial of Dollar Tree’s motion for de-certification foretells potential settlement, but it would be hasty to conclude that Dollar Tree as a company intended to deny their employees pay as opposed to bearing responsibility for the decisions made by its management.  Trickle down management can fail to reveal problems until it’s too late.  Work-related issues can be missed, overlooked, or created unwittingly as often as they are caused deliberately.  Awareness of existing issues can also get caught in a communication bottleneck that hinders prompt remedial action. 

What This Means for Business Owners

“Information blocks” can be avoided.  Frequent on-site monitoring of local stores can uncover inappropriate practices sufficiently in advance to rectify the problem.  Extensive training of employees and managers at all levels should be conducted regularly, both at the time of hire and every year afterward.  Policies should be easy to understand and easily accessible to employees.  In addition, they should be consistently enforced by those in authority.  Random checks by supervisory personnel should be done with written reports submitted up through the chain of command.  A hotline can be installed to encourage management and employees to report potential problems as they arise.  Audits should be conducted at appropriate intervals and thorough investigations should be conducted every time a complaint is reported.  Ideally, businesses should use experienced attorneys who are not employed by the company to examine large-scale issues or complaints that carry a high risk of liability.  But all relevant personnel should have specific training for investigating day-to-day internal complaints.  Executive personnel should make it a priority to review the potential impact of business decisions such as budget constraints on the job performance of their employees.

These measures can be time-consuming and costly to implement.  Not all businesses can afford to do them all.  But the high return in doing something as simple as creating more effective oversight will pay off handsomely when conduct like off the clock work is prevented well before it becomes a costly lawsuit.  The class action lawsuit against Dollar Tree is an eye-opening case in point.