Rite Aid Settles Class Action Overtime Lawsuit for $20.9 Million

Author: Beth P. Zoller, XpertHR Legal Editor

Retail employers should take note that improperly classifying employees and failing to pay overtime wages can lead to significant employer liability. A federal judge on January 7, 2013, approved a $20.9 million dollar settlement against well-known drug store chain Rite Aid for allegedly violating the Fair Labor Standards Act (FLSA)'s overtime laws and state wage and hour laws by improperly designating assistant store managers and co-managers as exempt employees and, therefore, ineligible for overtime pay.

The settlement effectively ends 14 consolidated collective and class action lawsuits that had been waged against the corporation, which involved 4,700 Rite Aid stores with 7,426 class members in 31 states. See Craig v. Rite Aid Corp., 2013 U.S. Dist. LEXIS 2658 (M.D. Pa. 2013). As part of the settlement, each of the employees will receive approximately $1,800, and their attorneys will receive almost $7 million in fees and costs.

The settlement of this case reinforces the notion that employers can face significant liability if they fail to comply with both federal and state wage and hour laws in terms of overtime pay, employee classification, hours worked and minimum wage. This is especially true in the retail sector in which many employees are young, seasonal and temporary workers being paid minimum wage and who do not fall under an administrative, professional, executive or other exemption.