I have often written about the scourge of Assistant Manager class actions. The employee category is particularly subject to this kind of lawsuit as these workers often perform some non-exempt work and it is unclear many times if they possess and exercise sufficient and proper supervisory authority. A recent case in New Jersey provides yet another example. A federal judge has just conditionally certified a class of Assistant Store Managers who work for Panera Bread. They allege that they were misclassified as exempt. Interestingly, the Court would not certify such classes in Massachusetts and New York.  The case is entitled Friscia v. Doherty Enterprises Inc. and was filed in federal court in the District of New Jersey.

Waitress carrying three platesThe judge concluded that the lead plaintiff Jacqueline Friscia made a “modest factual showing” concerning the alleged misclassification but refused to certify classes in other states. The court stated that “put simply, Friscia has not produced sufficient evidence to show that she is similarly situated to assistant managers in New York or Massachusetts.”

As is typical in these cases, the named plaintiff claims she worked 55-80 hours per week. She also claims that she performed many non-exempt tasks and that these tasks comprised the majority of her work time per week These tasks included preparing food, taking food orders, cleaning the store, working at the cash register and dish washing. Other than her weekly salary of $800, she asserted that she never received overtime for her long hours.

The company took the position that since the named plaintiff worked in only one store, she could not know conditions at other stores or whether the other Assistant Managers were “similarly situated.” The company also contended that there was an arbitration agreement in place and thus the workers could not be included all together in the same class actions. The judge was not impressed by these arguments, finding that the plaintiffs had met the “lenient burden” to receive conditional certification.

The Takeaway

The company can still defeat this class action by making a motion to de-certify the class later on. This would entail taking more discovery, perhaps many more depositions, in an effort to show that there is too much individual difference between the workers across the system to allow for class treatment. This will be expensive and may not be successful.

Or, the company can bite the bullet and settle…

Here is another exemption misclassification lawsuit, but this time coming from a different angle.  This time, it is a group of human resources employees who work for Lowe’s have filed a putative class action on the theory that they were misclassified as managers and are thus entitled to overtime.  This is very dangerous because the suit comes from people who are supposed to help the employer in making exempt and non-exempt determinations.  The case is entitled Lewis et al. v. Lowe’s Home Centers LLC and was filed in federal court in the Southern District of New York.

Tools and hardware retailer
Copyright: mihalec / 123RF Stock Photo

The five named plaintiffs, all Human Resource Managers (HRMs), allege that they worked at least fifty hours per week and were labeled exempt, even though their duties were not managerial in nature.  They estimate there are possibly 250 possible opt-in members of the class.  They seek damages that their attorney estimates could reach $15 million.  The Complaint alleges that “the policy of underpayment was a business decision to purposefully evade the provisions of the New York Labor Law and applicable regulations and saved the defendants tens of millions of dollars.”

The plaintiffs claim (as in many of these cases) that all they did was process clerical paperwork for payroll, benefits and new hires; they allege they also worked in other departments, including sales, customer service and cleaning break rooms and bathrooms.  They maintain that they had no supervisory responsibilities or decision-making authority.  According to their lawyer “they are store-level, low-level personnel employees.”

Although the lawyer conceded that these individuals conducted interviews for job applicants, they could only ask a designated series of questions, very well defined and limited, and then grade the answers.  He claims that they could not make recommendations on hiring decisions, but asserted rather cavalierly, that “a 10-year-old schoolgirl could ask these questions and mark down a score on the interview sheet.”

Significantly, a similar class action was filed against Lowe’s in Florida in 2012 and the Company settled that case for $3.5 million.  There were 900 HRMs involved in that matter and they made identical claims of misclassification.

The Takeaway

Human Resource Directors are clearly exempt under the administrative exemption (the toughest one to prove, by the way).  However, people with HR type responsibilities, such as “personnel clerks,” or classifications like that, often times are non-exempt.  The flashpoint issue is discretion and independent judgment, or lack of same.  If these folks are simply following a prescribed script or menu and then just adding numbers, without being able to evaluate the candidates to any extent, that is problematic. The earlier, big, settlement does not help either!

I believe, however, that an employer can enhance the exempt duties of perhaps otherwise non-exempt employees, or that non-exempts can “evolve” into exempt employees.  Some strategic, proactive planning can accomplish this worthy goal.

I have often preached that the administrative exemption is the toughest one to prove.  It is even more difficult when that exemption defense is not raised either in the Answer or early on in a case, because it might be deemed lost or waived.  That is precisely what has happened to the employer in a case entitled Diaz v. Jaguar Restaurant Group LLC.  In that case, the Court of Appeals for the Eleventh Circuit reversed the trial court which had allowed the raising of the defense very late in the case.

The Court of Appeals held that the employer could not use this affirmative defense because it was not included in the Answer and, significantly, the employer never sought to amend the Answer to include the defense before the trial commenced.  The lower court had found that since the plaintiff had injected the issue into the case through her testimony, the defense was permissible and the court granted the defendant company’s motion to amend its Answer to conform to the evidence.

The plaintiff had worked as a bookkeeper, which would normally be a non-exempt position which would not meet the administrative exemption test because the employee did not exercise discretion and independent judgment.  She also performed other job duties, such as opening bank accounts and working the cash register and more, also non-exempt duties.

She filed an overtime action, to which the Company raised five affirmative defenses, but not the exemption defense.  The only instances in which Jaguar raised the defense was in a joint pretrial stipulation and joint jury instructions; the plaintiff’s counsel, however, objected both times to the potential inclusion of this defense.  The Circuit Court stated that “if there ever there were a classic case of waiver, this is it.”  The Opinion emphasized that the company “repeatedly waived the administrative exemption defense by failing to plead the defense in its Answer and by failing to move to amend its answer before trial.”

This is dangerous for employers, but could have been easily prevented.  In any case involving an “office” worker suing for overtime, all that the employer-defendant need do in the Answer is assert that the employee “is exempt under 29 USC 213(a) of the Fair Labor Standards Act” and the corresponding state statute if another Count of the Complaint references state law.  With that done, the defense is raised and the interest at stake protected.

Sounds simple?  It is.

In a recent posting in the Connecticut Employment Law blog, Steve Lavelle wrote about a recent case in involving the exemption status of Store Managers for Family Dollar Stores.  The evidence showed that the employees rarely, if ever, discharged managerial duties and spent the vast amount of their time in performing duties identical to subordinates and thus their classification as exempt from overtime was erroneous.  He warns that the employer must always be be vigilant about properly classifying employees as exempt or non-exempt.

I have often advised clients that, sometimes, it is safer to treat titles such as Assistant Manager as non-exempt, from the outset.  Pay them hourly and time and one-half OT, but compute, or “back into” the proper hourly rate by determining the number of hours that will be routinely worked (e.g. 45, 50) in given weeks.  In such a manner, the exempt/non-exempt issue never becomes an issue.

The other option for employers is to enhance the actual job duties of these and similarly titled employees so that they do, insofar as possible, exercise managerial functions (e.g. hiring, firing, input into raise/promotions).  This is harder to do, takes significant managerial oversight and must be monitored.  It can be done, however, and then the person or persons will truly be exempt, whether under the Fair Labor Standards Act or any state wage-hour law.