Employees Make Overtime; Executives Make Sandwiches

by Kyle Barton

Earlier this month, the restaurant chain Jimmy John’s was sued for misclassifying its assistant managers as “executives” under the Fair Labor Standards Act (FLSA), relieving itself of having to pay overtime to these employees.[1] The story of these assistant managers is nearly identical to those who sued Chipotle for the same reasons in 2013.[2] The defendant companies in these cases failed to pay overtime where it was deserved, in reliance on the exemption from paying overtime to certain classes of employees, including “bona fide executives.”[3] However, the FLSA’s definition of executives, as expected, involves job duties far more involved than regular blue collar workers. In order to elevate one’s status from a “blue collar worker” to an “executive,” an employee must have the primary duty of management,[4] which includes regularly directing the work of two or more other employees[5] and having the power to hire and fire other employees.[6] The regulation further specifies which employees are not exempt from overtime compensation. A worker whose primary duties are manual labor, involving repetitive tasks with one’s hands while using physical skill and energy, cannot be considered an executive under the Act, despite other factors present.[7] An employer cannot simply shift an employee’s classification by altering his job title to sound like an executive.[8]

The plaintiffs in these cases primarily spent their time in the same ways as typical employees: working the line, preparing food, providing customer service, and operating the cash register, which are duties not exempt under FLSA.[9] The assistant managers also claim that their duties never included hiring, firing, or disciplining employees, as would be routine for supervisors.[10] While it may seem clear that these plaintiffs could not possibly be qualified under the law as executives, the defendant corporations may be able to claim that these blue-collar duties were performed concurrently with supervisory duties. According to an example supplied by the Code of Federal Relations, an assistant manager can serve customers, cook food, and clean while simultaneously be supervising or directing employees.[11] This situation would render the manager exempt from overtime requirements.

The penalty for employers failing to properly classify their workers can be harsh. The FLSA allows victimized employees to sue for double the amount owed in unpaid wages,[12] plus the value of reasonable attorney fees.[13] Although the plaintiffs in the cases here are not seeking punitive damages, the employers could be subject to hefty civil penalties amounting to $11,000 for each employee whose job title was misclassified.[14] It is highly common in these employment suits for large numbers of plaintiffs to come together and file a class action suit. The amount of money at stake for the employer, therefore, can reach astronomical figures. It is becoming increasingly important for employers to closely evaluate the classification assigned to employees and, perhaps in some cases, to safely err on the side of the classification that grants the employee more rights and wages.

[1] Eric Snider, Suit Filed in Jacksonville Against Jimmy John’s, Alleging Unfair Labor Practices, Am. City Bus. Journals (Jan. 6, 2015, 3:04 PM), http://www.bizjournals.com/jacksonville/news/2015/01/06/suit-filed-in-jacksonville-against-jimmy-johns.html.

[2] Fitapelli & Schaffer, LLP, About the Chipotle Lawsuit, Chipotle Class Action Lawsuit, http://www.chipotleclassactionlawsuit.com/about-the-chipotle-lawsuit.html (last visited Jan. 24, 2015).

[3] 29 U.S.C. § 213(a)(1) (2006).

[4] 29 C.F.R. § 541.100(a)(2) (2004).

[5] 29 C.F.R. § 541.100(a)(3) (2004).

[6] 29 C.F.R. § 541.100(a)(4) (2004).

[7] 29 C.F.R. § 541.3(a) (2004).

[8] 29 C.F.R. § 541.2 (2004).

[9] First Amended Class Action Complaint at 94-96, Scott v. Chipotle Mexican Grill, Inc., No. 1:12-cv-08333 (S.D.N.Y. filed Feb. 13, 2013).

[10] Id. at 97.

[11] 29 C.F.R. § 541.106(b) (2004).

[12] 29 U.S.C. § 216(b) (2012).

[13] Id.

[14] 29 U.S.C. § 216(e) (2012).

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