Labor/Employment
May 30, 2001
Pay Dirt
A growing number of the managers and associate managers who work in retail and fast-food across the state have a beef with their employers. They want to receive pay for overtime hours.
At our favorite fast-food joints, they ensure that our burgers, fries and shakes are prepared in record time.
At our favorite boutiques, they keep the rounders stocked, the dressing rooms clean and the lines moving.
When things go wrong, they placate our gripes.
And when the store gets hopping, they help out their staff by operating a register or taking orders.
They are the managers and associate managers who work in retail and fast-food across the state and, as of late, a growing number have a beef with their employers.
Workers at national franchises such as Taco Bell Corp. and Gap Inc. - along with, by one estimate, 200 other companies - believe they're wrongly classified as managers.
In fact, some salaried employees contend that their duties hardly differ from those of their hourly paid cohorts, except that the latter receive overtime pay, and they do not.
Whether an employer pays hourly or salary can significantly affect managers, who, according the U.S. Department of Labor, earn an average of $29,000 for retail establishments and $26,000 for fast-food restaurants.
Thus far, workers have been mostly successful in court. In March, Taco Bell, based in Irvine, shelled out $9 million to 3,000 current and former employees in an out-of-court settlement. In a similar overtime class action, Mervyn's California of Hayward paid $11.3 million to its disgruntled managers.
At the heart of the legal battles is California's classification of employees. Unlike federal law, which exempts employees from overtime pay if they carry the title of executive or manager, California requires more, according to Lloyd Loomis, partner at Los Angeles' Sonnenschein Nath & Rosenthal and a member of a pro-business organization, Employer's Group in Los Angeles.
Instead, the state injects a quantitative test which requires that more than 50 percent of a supervisor's duties consist of managerial work before exempt status kicks in.
"If the crew gets busy, the manager may spend more than 50 percent of the time handling customers - making the business go better," Loomis says. "I don't think the employer intended them to spend their time this way."
Loomis admits that he isn't a fan of California's 50 percent rule but believes it has become the latest twist in class actions among plaintiffs' lawyers who try to find some reason - any reason - to take an employer to court.
Loomis also believes a majority of these lawsuits have less to do with overtime violations than with disgruntled employees.
Edward Lynne, a partner at Righetti Law Firm in San Francisco who specializes in employment class actions, disagrees.
"The fact that these former employees have been terminated doesn't mean that the defendant hasn't violated the law," he says, adding that for every ex-employee who sues a company there are many others who continue to work - and may even be promoted - more like an hourly employee than a manager.
Currently, Righetti has a full plate of overtime lawsuits against employers like drug-store chain Rite-Aid Corp. and Chuck E. Cheese Pizza franchiser CEC Entertainment Inc. The firm is finalizing an out-of-court settlement with fast-food chain Pizza Hut Inc.
Like Loomis, Wynne believes California's employee classification and other labor laws are employee friendly.
Unlike Loomis, Wynne believes that this is a good thing.
"It's important to look at what people are doing rather than their titles," Wynne says.
Banana Republic, owned by San Francisco clothing retailer Gap Inc., is one of the few companies to avoid an overtime class action. Sullenger v. Gap, GIC742608 (San Diego Super. Ct., class certification denied April 10, 2001).
Banana Republic executives can thank - and Banana Republic employees can blame - Lynne Hermle, partner in the Menlo Park office of San Francisco's Orrick Herrington & Sutcliffe.
Aware that many plaintiffs' lawyers have successfully obtained class-action certification, Hermle had Banana Republic employees testify to their job duties, disclosing in their own words the discrepancy in duties.
In the end, San Diego Superior Court Judge Raymond F. Zvetina sided with Hermle.
"The competent evidence submitted shows at the most, that the actual responsibilities, allocation of time to these responsibilities and level of autonomy and discretion of an [associate manager] varies significantly, and at the least, that the court would have to look at each individual [associate manager] to determine whether such was the case," Zvetina wrote in his opinion issued last month.
However, the lack of certification doesn't mean that Gap's legal problems are over. Hermle still has to defend the retailer for wage violations. The key difference is that now she has to defend the company against a handful of managers instead of thousands of employees and former employees. In other words, Hermle helped Gap get out of what could have been a multimillion-dollar lawsuit.
"The biggest issue in these cases is treating them as class actions," says Loomis, who says class actions are exhaustive and costly. Because of this, the fight over class-action status can be more significant than the basis of the claim.
Lawyers from both sides of the issue agree that wage-violation suits are on the rise. Hermle further estimates that approximately 200 similar cases are circulating in California courts.
What is causing this apparent increase in overtime class actions? The quick answer: plaintiffs' attorneys' successes in court.
"These laws have been on the books, and [plaintiffs' attorneys] have finally started to enforce them," Wynne says. "Some of these cases have gone to court and they have been resolved for substantial sums of money."
Every success motivates others to "pursue these types of cases," Wynne says.
Hermle believes employment law operates on trends much in the same way her client, Gap, does. And what's hot this season is overtime lawsuits.
"You see transient employment litigation," says Hermle, citing other trends, such as sexual-harassment cases, the number of filings of which have since decreased. "Plaintiffs' lawyers seem to be interested in different cases at different times."
Marisa Navarro
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