By Nicholas Fortuna and Paula Lopez
Retailers are facing a growing onslaught of lawsuits from current and former managers and assistant managers who claim their employers should have paid them for overtime under the Fair Labor Standards Act (FLSA). The managers’ assert that much of what the work managers and assistant managers do is not truly managerial and, therefore under the FLSA, they should not be exempt from receiving overtime pay for any time worked over 40 hours in a week. Generally, managers have prevailed in these suits because many of their duties also included manual labor such as stocking shelves, cashier work and cleaning spills.
The FLSA establishes minimum wage, overtime pay eligibility, record keeping, and child labor standards. It mandates that employers cannot pay employees an amount below the statutory minimum wage. It also requires that employers must pay most employees working more than 40 hours per week overtime at a rate of one and one-half the employees’ regular rate for any excess hours worked.
Employees not covered by FLSA’s overtime requirements fall into one of the “exempt” classifications under federal or state law. Employers should act with caution in categorizing employees as “exempt” or “non-exempt.” To qualify as an employee “exempt” from FLSA’s overtime requirements, an employee must meet a salary basis test and a job duties test, the specifics of which vary depending on the type of exemption being claimed.
These include executive (managerial) exemption, administrative exemption, professional exemption, highly compensated employee exemption, or outside salesperson exemption.
To qualify as an exempt executive, or managerial employee, the employee must:
- Manage other workers as a primary job duty;
- Direct the work of two or more full-time employees;
- Have authority to hire, fire, discipline, promote, and demote others or make recommendations about these decisions;
- Earn a salary of at least $455.00 per week (more in some states).
This summer, managers of Papa Gino’s, an Italian restaurant chain in New England, brought a class action for overtime violations. The named plaintiffs, who held titles of assistant manager, manager in training, and general manager, performed the same mostly non-exempt, non-managerial work that hourly employees also performed.
Their duties included answering phones, taking and preparing food orders, working at the grill and cash register, and cleaning. If successful, the plaintiffs would be entitled to back pay, statutory liquidated damages, and attorneys’ fees.
The Papa Gino’s case is typical of the cases being brought against retailers throughout the country. Frequently, managers of retail establishments are not paid overtime, yet are required to perform the duties of hourly workers. An employer found liable under the FLSA must pay back pay, plus liquidated damages, consisting of 100% of the back pay award, and attorney fees. Some states, like New York, add additional liquidated damages to the award under state law. Considering that such claims may be brought as a class action containing numerous plaintiffs, the potential damage awards are enormous.
The number of costly FLSA lawsuits and settlements paid by retailers is growing. Recently, TD Bank agreed to settle an action for $9.9 million for failure to pay its assistant managers overtime wages. Actions have been brought against Dunham’s Sports; a Michigan-based chain, and the National Cracker Barrel restaurant chain for failure to pay assistant managers overtime. In both instances, the assistant managers claimed that they spent a majority of their time performing non-managerial duties.
Many other retailers are also reported to be dealing with overtime pay claims. Overtime pay for retail store managers and assistant managers is an area of tremendous exposure for the retail employer.
Managers and assistant managers at most retail chains perform the duties and assume the responsibilities of management. But at times, their employers also need them step in to supplement the manual labor performed by hourly workers. Under the FLSA, if a significant amount of the manager’s time is spent handling matters that are not managerial in nature, overtime benefits will have to be paid to that manager.
In March, President Obama directed the Department of Labor to issue new regulations under the FLSA, narrowing the exemptions to overtime pay. President Obama did not specify the changes he wanted the DOL to make, but they are likely to be in three areas:
- The minimum salary requirement for exempt employees will probably be increased from the current $455.00 per week minimum, which would mean that lower wage exempt employees will be entitled to overtime pay.
- The DOL will require some minimum regular rate of pay for all hours worked by exempt employees.
- Development of a more specific definition of what duties are outside exempt employees’ responsibilities (e.g., stacking shelves).
Some of the regulations will likely focus on retailers, with the intent of forcing them to pay managers and assistant managers overtime pay if their responsibilities do not meet the tougher standards set for exempt managerial employees. The proposed regulations have not yet been released, but will be available for public comment before the regulations are finalized.
Nicholas Fortuna is founder and managing partner of the law firm Allyn & Fortuna LLP (alynfortuna.com). Paula Lopez is a partner of Allyn & Fortuna LLP.
Streamlining the DC
By John Lowe and Sundip Naik
It’s the holidays, and a parent is seeking the hot toy of the shopping season. Whichever retailer can be the go-to supplier of the prized gift can make a child happy — and also win the loyalty of a grateful parent and customer. From online to in store, retailers have multiple channels through which they can save the day for desperate parents. Unfortunately, until very recently, this type of opportunity has actually been more a challenge than a benefit for retailers.
The reality is that multiple channels have meant multiple distribution centers that frequently do not interact well, creating inefficiencies across the supply chain and insufficiently meeting the expectations of retailers and consumers. But this is gradually changing as many organizations have begun implementing new technologies, automation and process changes to optimize their product DCs.
This streamlining of DCs has helped retailers to better manage multiple fulfillment channels in the same facility (a process referred to as all-channel fulfillment) and has enabled the speed and quality that consumers demand.
With these improvements, retailers are able to fully integrate their online and in-store operations to leverage the rapid growth of online opportunities with the customer service aspect of the in-store experience. Improvements in technology and technique are allowing retailers to transform the DC from a cost center into a competitive differentiator.
BIG DATA: By leveraging analytics and big data, organizations can better allocate inventory across channels within the same DC footprint to optimize sales, minimize markdowns and drive increased levels of profitability. Big data and predictive analytics can also allow organizations to proactively shift inventory across channels within the center, enabling increased revenue and the ability to respond rapidly to changing consumer demand.
Retailers are installing advanced technologies, such as RFID tagging and robotic voice-directed systems, to receive, locate and distribute products to customers. Additionally, they are improving the assortment of inventory carried and the effectiveness of DCs by complementing the inventory management aspects of the centers with operational analytics that leverage sensors and network logs. Stocked with products that are more likely to be in demand, optimized DCs provide greater flexibility while improving customer service opportunities.
By bringing all channels under one umbrella and supporting them with an optimized DC, retailers will have one solution for order management, inventory tracking, fulfillment and consumer interface to improve costs — and to give consumers greater flexibility for arranging delivery, pickup or returning a purchase.
As consumers increasingly use mobile devices to shop, research, purchase and track products, it is critical that retailers have the most up-to-date information on inventory, regardless of channel, and tracking from order to delivery in order to increase competitiveness and customer retention.
ORDER MANAGEMENT: But achieving inventory visibility across channels and optimizing product flow within the four walls of the DC is not enough. Companies must also optimize how and where orders are fulfilled based on cost, capacity, speed, markdown risk, etc. Integrating distributed order management into a warehouse management system combines the routing intelligence of distributed order management with the four-wall optimiza-tion/track/trace capabilities of warehouse management systems. This helps organizations optimize their overall distribution network.
Optimized DCs with a more optimized product mix determined by analytics can also result in faster delivery and a reduction in overall inventory dollars. Retailers such as Amazon, American Eagle Outfitters, Bobcat, Chico’s and Costco are already implementing these optimizations to their DCs, enabling such capabilities as same-day delivery, all-channel fulfillment and real-time track/trace capabilities from the receiving dock right to the front door.
John Lowe is senior manager, North America supply chain technologies at Capgemini, a global provider of consulting, technology and outsourcing services. Sundip Naik is VP supply chain technologies, innovation and digital services, Capgemini.
Going to Market
When Gordmans Stores Inc., the Omaha, Nebraska-based chain of 95 Midwestern discount stores, decided to expand into underserved markets in the central U.S., the retailer discovered its legacy IT systems would not adequately support its planned growth. Outmoded applications across a range of functions in the enterprise created such problems as the setting of a double-digit limit for location numbering. This limitation meant that Gordmans could not add stores or distribution centers in its system past a double-digit amount.
An Enterprising Approach
To help overcome these and other challenges, Gordmans enlisted IT consulting firm OLR, an Oracle Gold implementation partner, to reduce the risk and complexity involved in replacing its legacy IT systems. OLR helped Gordmans select and implement the Oracle Retail Merchandise Operations Management platform, including the Oracle Retail Merchandising System, Oracle Retail Sales Audit, Oracle Retail Price Management and Oracle Retail Trade Management. Gordmans also leveraged the Oracle Retail Integration Bus and UC4 Application Manager, in conjunction with a JBoss middleware platform, in the implementation process.
“Gordmans’ legacy, mainframe-based merchandising system had an inherent design that precluded it from supporting more than 75 locations,” said Richard Heyman, senior VP and CIO of Gordmans.
The immediate benefit Gordmans gained from implementing the Oracle suite was the ability to grow, according to Heyman.
“Gordmans currently operates 98 stores and two distribution centers,” he explained. “Early next year, we will exceed 100 stores and enable an e-commerce channel. The implementation of the Oracle platform has enabled this growth.
As a result, Gordmans has achieved much stronger and more comprehensive enter prise management of its inventory, pricing, retail financials, warehouse receiving and sales auditing processes. The Oracle Retail platform has also been implemented in a scalable configuration to support continuing growth.
Since the project’s ‘go-live’ date, Gordmans has experienced tremendous growth, and the store base has expanded by almost 40% in three years.
As a strategic partner, OLR continues to provide Gordmans with day-to-day Oracle Retail platform support and resources. This has enabled the retailer to focus on key strategic initiatives to drive the business forward.