Office-supply retailer Staples, Inc. has agreed to a $42 million settlement of thirteen lawsuits alleging that the company had misclassified more than 5,000 assistant store managers as exempt from federal and state wage-and-hour laws and consequently failed to pay them overtime compensation to which they were entitled. The claims, brought under the federal Fair Labor Standards Act and various state wage-and-hour laws, date back as far as 2002. The settlement, which is subject to court approval, contains no admission of wrongdoing by the company.

The Staples settlement illustrates the highly contentious issue of exempt status for assistant store managers in retail operations. Although some assistant store managers can satisfy the standards for exempt status as bona fide executive employees, many retail employers routinely classify this job title as exempt without assessing whether the individuals holding these jobs actually meet the requirements for exempt executive status. In some instances, assistant store managers spend most of their time performing such nonexempt work as stocking shelves and ringing up sales – a situation that can defeat exempt status. In some stores, assistant store managers do not independently supervise two or more full-time employees, but merely share supervisory authority with the store manager. This situation can also result in the assistant store managers being deemed nonexempt. Given the potential financial pitfalls of misclassifying assistant store managers as exempt, employers in the retail industry would be wise to examine carefully whether those positions meet all of the requirements for exempt status under the Fair Labor Standards Act and applicable state laws.