Rite Aid Settlement: A Lesson in FLSA Overtime Laws

By Andrew Lu on January 10, 2013 | Last updated on March 21, 2019

Rite Aid has reached a $20.9 settlement over a FLSA wage and hour class-action lawsuit.

The settlement effectively ends 14 of the 15 lawsuits the company faced for allegedly misclassifying its assistant managers as exempt employees, reports The Patriot-News.

Plaintiffs argued that the assistant managers performed the work of non-exempt employees. So despite their titles, the managers should have been classified as non-exempt and entitled to benefits like overtime pay.

Wage and hour lawsuits have resulted in some of the largest settlements and judgments against employers.

The classification of employees is one of the trickiest issues. Employers typically have an incentive to classify its employees as exempt, as exempt workers are not entitled to many of the benefits that other workers enjoy like overtime, breaks, and minimum wage. However, it can be extremely difficult to fit within these exempt categories.

The most common exemption that employers use are for executive, administrative, and professional employees.

In the Rite Aid case, the company was likely trying to categorize its workers as exempt executives.

However, to be an exempt executive, the employee must actually be engaged in executive functions like making personnel decisions, setting pay rates, directing the work of others, making operational decisions, and other high-level tasks. In addition, it is not enough if the worker spends just some of her time performing these functions. Instead, the worker must be "primarily" engaged in these functions.

So the question in the Rite Aid case was: Just how many executive duties did these "assistant managers" actually perform?

And as you review your personnel classifications, you should ask yourself this same question regarding your company's employees and assistant managers. If you find that they are not performing executive functions most of the time, or at all, then they may be more properly categorized as non-exempt.

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