Background

For the past six years, Family Dollar has been the defendant in multidistrict litigation concerning whether managers at the company’s stores were entitled to overtime pay under the Fair Labor Standards Act (the FLSA). Family Dollar, like many retailers, has considered store managers to be executives who are exempt from the FLSA’s overtime pay requirements.

In 2006, Irene Grace filed the first of a number of analogous actions, alleging that, since she spent most of her time performing non-executive duties (such as stocking and cleaning her store), she and other store managers in similar situations should not have been classified as executives — and should instead be entitled to overtime compensation under the FLSA. Thus, Grace sought to proceed both on her own behalf and on behalf of those other Family Dollar store managers who were similarly situated.

The District Court for the Western District of North Carolina declined Grace’s request to proceed collectively on behalf of all Family Dollar managers, and thereafter granted summary judgment in favor of Family Dollar on Grace’s individual FLSA claim. In 2011, the Fourth Circuit affirmed the District Court’s dismissal of Grace’s suit, holding that time spent on non-executive tasks is not the sole factor in determining executive status and that the District Court properly concluded that Grace was exempt from the FLSA. See In re Family Dollar FLSA Litig., 637 F.3d 508 (4th Cir. 2011) (the Grace case). Because the court denied Grace’s suit on the merits, the Fourth Circuit did not rule on whether collective action certification was appropriate; with no viable claim on the merits, the appropriateness of collective action certification was moot. Therefore, since 2006, each of the individual managers on whose behalf Grace sought to proceed has instead had to pursue their individual claims in separate adjudications within the ongoing multidistrict litigation.

Current Case

In the most recent decision to come out of this multidistrict litigation, Family Dollar succeeded once again when the United States District Court for the Western District of North Carolina dismissed the claim of Rickie Rowell, a manager in one of Family Dollar’s stores. Ward v. Family Dollar Stores, Inc., Case No. 3:08 MD 1932, 2012 WL 5361482 (W.D.N.C. Oct. 30, 2012).

Rowell served as a manager at a Family Dollar store for six months, beginning in 2005. Rowell’s salary was $850 per week, and he worked an average of 70.86 hours per week during his tenure. Due to his status as a manager, Family Dollar considered Rowell exempt from the FLSA and did not pay him overtime. Like the other store managers in the multidistrict litigation, Rowell claimed that he was not exempt from the FLSA and that he was entitled to overtime pay for the duration of his employment.

The District Court granted Family Dollar’s motion for summary judgment, finding that Rowell fit squarely within the definition of an exempt executive employee under the FLSA. In so holding, the court relied on the applicable regulations issued by the Department of Labor (DOL) which provide that an employee qualifies as an executive if:

  1. He is compensated on a salary basis at a rate of at least $455 per week;
  2. His primary duty is “management of the enterprise” in which he is employed, or of a customarily recognized department or subdivision thereof;
  3. He customarily and regularly directs the work of two or more other employees; and
  4. He has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

See 29 C.F.R. § 541.100(a)

The court found that Rowell clearly met the threshold under prong one, as he was paid a salary of over $455 per week. Under prong two, the court found that Rowell’s primary duties were “management duties,” even though a regional manager was above Rowell in the chain of command and Rowell spent the majority of his time performing “non-managerial” tasks. In support of the conclusion that Rowell’s primary duties were managerial, the court found that Rowell was the top-ranking employee at the store; directed, supervised, and trained other employees’ work; handled employee and customer complaints; enforced company policies; maintained sales records and financial reports; and was ultimately responsible for the success of the store as a customarily recognized subdivision of the larger Family Dollar corporate enterprise.

Rowell argued that because the majority of his day was spent on mundane or non-managerial tasks, he should be exempt from the FLSA despite the fact that he did have a number of managerial duties. The court disagreed and held that Rowell could not overcome the exemption by claiming that he spent the majority of his time performing non-managerial duties. While the DOL regulation states that an employee who spends more than 50 percent of his time performing managerial work will typically satisfy the primary duty requirement, the regulations also emphasize that “(t)ime alone…is not the sole test,” and that exempt executives are not required to spend more than 50 percent of their time performing exempt work if other factors support the conclusion that management is their primary duty. See 29 C.F.R. § 541.700(b).

The court relied on Grace, where the Fourth Circuit held that the plaintiff “was performing management duties whenever she was in the store, even though she also devoted most of her time [99%] to doing the mundane physical activities necessary for its successful operation” but will still be exempt from the FLSA. Grace,637 F.3d at 516. Moreover, in this case, Rowell was relatively free from supervision by the regional manager and was ultimately responsible for the success of the store. Thus, even if Rowell spent a majority of his time on mundane, non-managerial tasks, the fact that he was responsible for the overall supervision and management of the store meant that he satisfied prong two of the DOL regulation.

As to prong three, the court explained that “(t)o qualify as an executive, the regulations require an employee’s primary duty to include the customary and regular direction of the work of two or more other employees,” and that “customary and regular” means “a frequency that must be greater than occasional but which, of course, may be less than constant.” The court found that Family Dollar’s records reflect that Rowell managed at least “80 employee hours” 100 percent of the time he was a store manager. Therefore, because Rowell customarily and regularly directed the work of at least two full-time employees, he satisfied prong three.

The last prong requires that to be exempt, the employee must have authority to hire or fire other employees or his recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees are given particular weight. The DOL provides guidance with respect to whether an employee’s recommendations satisfy this standard. The “factors to be considered include, but are not limited to, whether it is part of the employee’s job duties to make such suggestions and recommendations; the frequency with which such suggestions and recommendations are made or requested; and the frequency with which the employee’s suggestions and recommendations are relied upon.”

The court found that Rowell clearly met this threshold. Rowell had testified at his deposition that he had an active role in participating in job fairs, reviewing applications, and conducting preliminary interviews, and would then make recommendations to his district manager as to whether the applicant should be hired, at least some of which were followed. More importantly, in several instances Rowell hired associates without prior approval by his district manager. The court found that it was therefore indisputable that Rowell had the power to hire and promote employees and that while Rowell may not always have had the ultimate decision making authority with respect to hiring, at least some of his recommendations were closely followed. Therefore, the final prong of the DOL test was satisfied, and the court granted summary judgment in favor of Family Dollar.

Implications

The Rowell case gives retailers and other employers hope that so called “working” managers can still be exempt even though they spend most or all of their time performing non-executive duties. Still, the courts have reached different results on these issues, so you need to know the law in your jurisdiction. It is also important to note that this case was decided under the FLSA. Some states like California have more strict laws and decisions that may trump the FLSA.