Over the past several years, many employers have been blind-sided by big class action lawsuits claiming employees were misclassified as exempt from overtime and owed millions—sometimes tens of millions—in back pay. Employers who have been hit include Taco Bell, Farmers Insurance Exchange, Mervyn’s California, U-Haul International Inc., Ross Dress For Less and Rent-A-Center. But a new ruling from a California Court of Appeal in Los Angeles may put the brakes on the overtime class action trend.
Drug Store Managers Sue For Back Overtime
The new class action lawsuit was filed on behalf of about 1,400 store managers and assistant managers at approximately 300 Sav-On Drug Stores in Southern California. The suit charged that the managers were improperly classified as exempt managerial employees. They claimed they spent more than half their time performing non-exempt tasks and often worked more than 40 hours a week or eight hours a day but weren’t paid overtime.
Sav-On argued that managers’ job duties and the time spent on them varied significantly from manager to manager and from store to store. Consequently, whether a particular manager was properly classified as exempt had to be determined individually, not as part of a class action.
The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.
Class Action Not Appropriate
Now an appeals court has concluded that the case cannot proceed as a class action. According to the court, the simple fact that Sav-On’s policy was to treat all of its managers and assistant managers as exempt didn’t justify a class action. Showing that some managers spent more than half their time on non-exempt tasks wouldn’t prove all managers did.
The court pointed out that many factors influenced the type of work managers performed, including store size and layout, store hours, sales volume and employee turnover. Managers with large staffs spent virtually all their time supervising and delegating, while managers with few employees may have spent more time on nonmanagerial duties. And managers at stores with high turnover spent a greater portion of their time interviewing, hiring and training than managers with low turnover. Lawyers for the Sav-On employees have said they plan to appeal to the state Supreme Court.
Impact on Employers
This ruling signals that not every overtime misclassification lawsuit can be easily turned into a class action. As a result, employers may see fewer misclassification lawsuits because employees who claim they’re owed back overtime may only be able to file individual cases—and the time and cost involved in filing each case could deter many workers.
But this decision doesn’t spell the demise of all overtime class actions. The court pointed out that there could be cases in which the hours spent by managers on nonexempt tasks are so uniform that proceeding on a class basis is justified.