Matthews-based Family Dollar has agreed to settle a lawsuit with 1,700 store managers in New York, in which the managers allege the retailer unlawfully failed to pay them overtime.
The settlement, which has not been finalized, could cost Family Dollar up to $14 million, the company said in a news release Wednesday. Any final settlement must be approved by the court, Family Dollar said. Family Dollar plans to record a one-time charge in the fourth quarter to account for the settlement.
Wednesdays announcement isnt the first time the company has been punished for a similar offense. In 2009, Family Dollar had to pay $33 million to employees classified as managers who, improperly, did not receive overtime pay, following a class-action lawsuit in Alabama.
At the time, Family Dollar CEO Howard Levine said he thought the judgment was a raw deal for the company.
On Wednesday, Family Dollar spokeswoman Bryn Winburn said other courts have found the retailer properly classified its managers. In most states, Family Dollar has one employee per store, its store manager, classified as an exempt employee, she said via email, in response to questions about whether Family Dollar has changed the way it classifies employees since the lawsuits.
Attorneys for the store managers in New York could not be reached Wednesday. Family Dollar, founded in Charlotte in 1959, currently operates more than 7,400 stores in 45 states, with more than 50,000 employees.
Managers duties at issue
The employees in the New York case were classified as managers, and thus exempt from overtime pay, according to the lawsuit. But the company assigned them almost exclusively non-managerial duties, such as stocking shelves, mopping the bathrooms, running cash registers and unloading trucks.
They were scheduled to work more than 60 hours a week, six days a week, the lawsuit said.
Not including any legal fees taken from the settlement, a $14 million settlement with 1,700 employees would amount to just over $8,235 per employee.
Family Dollar is litigating 17 lawsuits in seven states over employees being misclassified as managers and not receiving overtime pay, according to its most recent quarterly securities filing. The company also IS facing a lawsuit alleging discriminatory pay practices against its female store managers.
In general, the Company continues to believe that its Store Managers relevant to this litigation are exempt employees under the (Fair Labor Standards Act) and have been and are being properly compensated under both federal and state laws, Family Dollar said. The company also said it couldnt reasonably estimate the possible loss if it were to reclassify its managers so they were eligible for overtime pay.
Other retailers have faced similar complaints from employees classified as exempt from overtime, including Wal-Mart, Publix, and Rite Aid.
Family Dollars sales rose to nearly $2.4 billion in the third quarter, and profits were up 12 percent, to $125 million. The companys stock closed up 92 cents on Wednesday, at $63.78 a share, an increase of about 1.5 percent. Observer researcher Maria David contributed