Are overtime class actions deterring employers? Evidently not!
In 2008, BJ’s Wholesale Club was sued for not paying overtime wages to its “mid-managers.” That lawsuit alleged that “mid-managers” worked over 40 hours per week without any extra pay and that they did not qualify for the “executive” exemption because their primary duty was not management. Employees who spend most of their time and efforts performing hourly tasks and only occasionally act as managers cannot be considered “executives” under the law.
This first lawsuit settled for over $9 million dollars within one year. Despite this multi-million dollar payout, BJ’s continued to deny its mid-managers overtime pay. They maintained their “exempt” classification and benefited from the many long hours these employees worked without overtime premiums.
In 2012, BJ’s was hit with another overtime lawsuit for a smaller group of mid-managers. That case settled for $2.7 million, and, again, you guessed it – BJ’s continued to maintain the “exempt” classification of its mid-managers.
This time, however, BJ’s took internal steps to prevent another class action lawsuit. In April 2013, it rolled out a new employee handbook which contained language designed to keep employees away from the courts and to prevent class actions. It called its program the Open Door Solutions plan, BJ’s President Laura Sen introduced this plan as a way to “keep the lines of communication open” with her “Team Members.” She also claimed that the plan allowed BJ’s employees to “achieve a thoughtful resolution of any issues.” In fact, this plan’s central purpose was to avoid future costly class action litigation and to enable BJ’s to continue its exempt classification of its mid-managers. The documentation included a “Class Action Waiver”, which was designed to prevent class actions by BJ’s employees.
Well, it didn’t work. Recently, a third class action was filed against BJ’s by mid-managers. This lawsuit is on file in the District of Connecticut. It claims, like the lawsuits before it, that mid-managers spend most of their time doing hourly work (i.e., not managing) and that they should be compensated for their overtime hours. One interesting note, the class action waiver prohibits class arbitrations, but not class actions in court:
“Notwithstanding this section, BJ’s agrees that I am not waiving my right under Section 7 of the National Labor Relations Act to file or participate in a class or collective action in court,…”
This language leaves the door wide open to a class or collective action in court.
Final thoughts? Wouldn’t it be easier and fairer to simply pay these hard working employees their fair wages? Is it so important to BJ’s bottom line to classify these employees as “executives?” Wouldn’t it be better to pay them rather than BJ’s lawyers? Like I said, as expensive as these class actions are to defend and settle, companies still find it profitable to classify workers as exempt wherever they can. The amount they save in labor costs is usually far greater than what they pay in settlements and attorneys’ fees. Too bad for hard working mid-managers. They deserve to be paid for the hours they work – all of them!