The United States District Court for the Western District of Kentucky recently dismissed a putative class action suit against Family Dollar, Inc. brought by Family Dollar Store Managers. Plaintiffs in the case had sued Family Dollar, alleging that the conditions of their employment at Family Dollar prevented them from receiving applicable overtime pay, mandatory rest breaks, and additional compensation due for working seven days a week. In his opinion, Judge John G. Heyburn, II, held that under Kentucky labor law, Plaintiffs were exempt from receiving these benefits because they were, in effect, supervisory employees.
In this case, Plaintiffs, Store Managers of Family Dollar Stores, were paid weekly salaries but worked the equivalent of seven days a week, with weeks that often exceeded sixty hours. On average, the pay of these Store Managers amounted to between $8.04 per hour and $10.83 per hour, while hourly employees at the same stores made between minimum wage and $9.00 per hour. Thus, Plaintiffs alleged that they were Store Managers “in name only.” Plaintiffs asserted that because they performed essentially the same duties as the nonexempt Family Dollar employees, they should not be treated as “supervisors” for the purpose of deciding whether of not they were required to receive overtime pay, mandatory rest breaks, and additional compensation due for working seven days a week.
The Court, in finding in favor of Family Dollar, held that unlike the federal wage and hour regulations contained in the Fair Labor Standards Act, Kentucky law places the burden of proving that he or she is not an exempt employee on the plaintiff. In contrast, the FLSA contains narrower exemptions to its application and places the burden to prove an exemption upon the employer, rather than the employee. Under the Kentucky statute, for an employee to be considered an exempt employee, the employee must generally supervise or direct the work of two or more employees and must be compensated at a rate of more than $455.00 per week. Judge Heyburn held that the Plaintiffs in this case fit this supervisor exemption, in that, as store managers, Plaintiffs set employee schedules, apportioned job responsibilities, supervised other employees’ job duties and tasks, and gave directives to other employees in their stores. Additionally, Plaintiffs customarily had two or more employees working in their stores under their “supervision.”
While Judge Heyburn agreed that Plaintiffs had shown that much of their time was spent attending to nonsupervisory activities, he concluded that such a showing was not conclusive evidence under Kentucky law of Plaintiffs’ “primary” duty. Rather, Judge Heyburn indicated that what mattered was the crucial nature of the supervisory duties performed by Plaintiffs in their role as Store Managers. Judge Heyburn stated that without Plaintiffs’ direction as Store Managers, the other employees at Family Dollar would not perform their jobs and “Family Dollar…could not function.”
Judge Heyburn’s decision in this case will likely be appealed to the United States Court of Appeals for the Sixth Circuit. However, the lesson for employers from this decision is that where an employer has supervisory employees who perform a majority of non-supervisory duties, employers must take care to ensure that employees who are placed on salary, and who the employer considers to be exempt, meet both the salary basis and duties tests under applicable federal and state statutes. Employers should review with their labor and employment counsel decisions as to who is a “supervisor” in their workforce with a careful eye on both federal and state law.