Dive Brief:

• The parent companies of T.J. Maxx, Marshalls and HomeGoods have agreed to pay $31.5 million to settle class action claims brought by assistant store managers under the Fair Labor Standards Act (FLSA) and New York labor law alleging they were improperly classified as exempt and denied overtime (Roberts, et al. v. The TJX Companies, Inc., et al., No. 1:13-cv-13142 (D. Mass. July 7, 2020)).
• Attorneys for the plaintiffs called the recovery "a truly excellent result," saying that it is the "second largest wage and hour settlement in the First Circuit in terms of total dollars." The 1,900 current and former assistant store managers will receive a settlement payment based on the number of weeks, among other factors, they worked for the defendants in Marshalls, HomeGoods and combination stores, according to court documents.
• The parties have asked the court to sign off on the unopposed proposal. A representative for TJX Companies said via email that the company does not comment on pending litigation.

Dive Insight:

Misclassification of workers is a common issue. As this case illustrates, it tends to affect multiple workers at a time, giving the mistake potential to be expensive.

Federal law requires that workers be paid at least the minimum wage and overtime for all hours worked over 40 in a workweek, unless an exemption applies. To determine whether workers are exempt from the overtime pay requirement, employers should consider both salaries and job duties, sources previously told HR Dive. All of the exemptions except the outside sales exemption require employees to make more than $684 per week. Once the salary threshold is met, the employee's job duties are considered. The required job duties vary, depending on the exemption.

DOL recently expanded the FLSA exemption for commissioned retail. Previously, federal regulations outlined a list of establishments that were unable to claim the FLSA's Section 7(i) exemption, which permitted some retailers to forgo paying overtime to employees who were paid on a commission basis. The May 19 final rule withdrew these lists in favor of a "generally applicable analysis" that, according to the agency, "is better suited for today's industries in determining whether they are retail."

A retail or services sector employer seeking to use the Section 7(i) exemption for commissioned employees must meet three conditions, according to a DOL fact sheet:

• "The employee must be employed by a retail or service establishment."
• "The employee's regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked."
• "More than half the employee's total earnings in a representative period must consist of commissions."

Unless all three conditions are met, the exemption is not applicable and the employer must pay overtime for all hours worked beyond 40 in a workweek at time and one-half the employee's regular rate of pay, according to DOL.