Mervyn’s to Settle Suits on Overtime for $11.3 Million

Ending a closely watched workplace dispute, Mervyn’s department store chain has agreed to pay $11.3 million to settle allegations that the company cheated thousands of employees out of overtime at its stores throughout California.

In a settlement granted preliminary approval Friday in Orange County Superior Court, Mervyn’s will pay $7.3 million to settle claims by 1,600 salaried managers who said they should have received overtime because most of their time was spent on chores such as stocking shelves.

The managers have a chance to opt out or even object to the settlement if they have problems with it. There will be a hearing March 1 before the agreement receives final approval.

Earlier, the chain quietly agreed to pay $4 million to settle a companion lawsuit on behalf of 3,000 assistant managers.

The dispute was one of several involving major restaurant and department store chains and other retailers, an indication of growing employee complaints that they have been under increased pressure to work longer hours--without extra pay.

In some cases, companies have been accused of misclassifying workers as supervisors exempt from overtime. Other employers have been accused of pressuring workers to put in hours “off the clock.”

The list of companies ranges from Taco Bell and Denny’s restaurants to Nordstrom department stores to Rite Aid drugstores.

Disputes involving Mervyn’s and Rite Aid, which operate hundreds of stores in the state, are being watched closely by other retailers, said Mae Lon Ding, an Anaheim Hills management consultant specializing in wage issues.

“The great majority of retail organizations follow somewhat similar practices--using department managers to do significant amounts of hourly work the same as performed by sales clerks,” Ding said.

Some labor lawyers say recent settlements of cases, including a federal suit involving Albertson’s stores, has made it easier to get companies to change questionable practices and pay back wages. Albertson’s set aside $37 million in November to settle union-financed lawsuits accusing it of fostering “off-the-clock” work. The cases, consolidated in Boise, Idaho, involved workers in 20 states.

But other experts, noting that the suits challenge long-standing pay practices in industries such as retailing and restaurants, say most settlements and changes in policies are hard-won.

The Mervyn’s cases originated in Orange County, where one $28,000-a-year department manager told The Times she regularly logged 70-hour weeks at the Cypress store with no overtime, and once was pressured into working against doctor’s orders while in searing pain from a kidney stone. A Superior Court judge broadened the case to include similar employees statewide.

Mervyn’s and its Minneapolis parent, Dayton Hudson Corp., admitted no wrongdoing in the settlements.

Many overtime problems stem from confusion over state and federal laws and gray areas they create.

One misconception is that salaried workers, who get fixed pay rather than hourly wages, are automatically exempt from overtime pay. In fact, most are not exempt unless they have managerial, creative or intellectual jobs and spend most of their time working independently, without direct supervision or a company task list.

Under a stringent California rule, companies that deny overtime to salaried employees must be able to prove that the workers spend more than half their time on management, administrative or professional duties. Jobs such as inside sales representatives and administrative secretaries are often misclassified, labor experts say.

The Rite Aid dispute, in San Diego Superior Court, involves managers and assistant managers in more than 630 California drugstores.

The company said employees who observed written policies would have spent most of their time on management duties. But a Superior Court judge in October granted class-action status to the case, which contends the employees spent most of their time scooping ice cream, ringing up sales and stocking shelves.

Employers have lobbied to have California’s overtime rules relaxed to conform with federal regulations, which are generally less stringent.