Store Manager Duties Key to Avoiding Overtime Eligibility

In a recent case the Eleventh Circuit Court of Appeals found a Florida grocery chain violated the Fair Labor Standards Act (“FLSA”) when it failed to pay overtime to store managers working more than forty hours per week. Rodriguez v. Farm Stores Grocery, Inc., 2008 U.S. App. LEXIS 4817 (11th Cir. March 6, 2008).

Farm Stores operates 103 drive-through grocery stores in Florida. Each store is managed by a store manager reporting to a district manager. Each store manager supervises three to six employees and is paid a weekly salary. The company failed to pay store managers overtime based on the FLSA’s executive exemption. To claim the executive exemption the employer must show the employees received a statutorily defined minimum salary that does not fluctuate based on the number of hours worked.

Farm Stores met these requirements, but failed to show the jobs satisfied the “job duties test,” which requires that the employees’ primary duty is “management of a recognized department or subdivision.” In determining this test was not satisfied the court considered the amount of time spent performing management duties, the relative importance of the employees’ managerial duties, the frequency with which employees exercised discretionary powers, and the relationship between the alleged managers’ wages and those paid to others performing similar non-exempt work.

While Farm Stores argued their employees met this test the jury found the employees’ testimony more persuasive. The employees stated they spent almost no time each week performing managerial duties, lacked real authority over their stores and employees, and were required to consult with district managers before making important decisions. The Appellate Court found ample evidence to support the jury’s findings and affirmed its decision. It also held there was sufficient evidence for the jury to find the employer’s actions willful because Farm Stores, in part, failed to consult with experts prior to classifying the employees as executives. As a result the company was required to pay plaintiffs double damages.

This case highlights the importance of classifying employees properly and using experts when making such decisions. Getting it wrong can be extremely costly and doing so without the benefit of expert advice may lead to a doubling of awarded damages.