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PEREZ v. RADIOSHACK CORPORATION

September 9, 2005.

ALPHONSE L. PEREZ, DOUGLAS G. PHILLIPS, individually and on behalf of an "opt in" class of others, Plaintiffs,
v.
RADIOSHACK CORPORATION, Defendant.



The opinion of the court was delivered by: REBECCA PALLMEYER, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs are members of an "opt-in" class of persons who work or have worked as "Y store" managers for Defendant RadioShack Corporation, routinely logging more than 40 hours of work per week. They bring this action under the Fair Labor Standards Act, 29 U.S.C. § 207, et seq. ("FLSA"), for recovery of overtime pay. The FLSA requires employers to compensate their employees for any hours worked over 40 in a week at a rate of one and one-half times the employee's regularly hourly rate of pay. This requirement contains an exemption for "executive" or managerial employees, whose primary duties are managerial and who customarily and regularly supervise two or more other employees. In April 2003, the court heard evidence in order to determine the propriety of allowing Plaintiffs to proceed as an "opt-in" class. During that hearing, Plaintiffs presented evidence that management was not their primary duty, and thus that they did not qualify for the executive exemption from FLSA's overtime provisions. In the resulting opinion, the court expressed its view that "persons responsible for retail store management are likely exempt from the Act's overtime provisions," but agreed to allow Plaintiffs to proceed as an "opt-in" class. The ensuing discovery revealed that at least some subset of the opt-in class members appeared not to meet the second of the two prongs for exemption in that they did not supervise two or more employees. Plaintiffs now move for partial summary judgment in favor of those class members who were classified as exempt under the FLSA despite not regularly supervising two or more employees. Defendant moves for a declaration that it has satisfied this "subordinate supervision" requirement of the exemption with respect to all class members. For the reasons set forth below, Plaintiffs' motion is granted in part and denied in part and Defendant's motion is denied.

FACTUAL BACKGROUND

  Plaintiffs are an "opt-in" class of people who work or have worked as managers at RadioShack "Y stores."*fn1 Y stores are RadioShack retail stores that have annual sales volume of $500,000 or greater. (Plaintiffs' Local Rule 56.1(a) Statement of Uncontested Facts, hereinafter "Pls.' 56.1(a)," ¶ 9.) In contrast, "V stores" are RadioShack retail stores with less than $500,000 annual sales volume. (Id.) Managers at both Y and V stores are frequently called upon to work more than 8 hours a day and/or 40 hours per week. (Id. ¶ 11.) When they do, managers at V stores receive "time and a half" pay for any hours worked over 40 in a given week, as required by the FLSA. (Id.) Managers of Y stores do not receive overtime compensation, because RadioShack has designated their position as exempt under the FLSA in light of the fact that such managers ordinarily supervise only a single employee. (Id. ¶ 8.) As discussed in the court's previous memorandum order and opinion, managers (of both Y and V stores) are the highest-ranking employees on site at the stores to which they are assigned. Perez v. RadioShack Corp., No. 02 C 7884, 2003 WL21372467, *2 (N.D. Ill. June 13, 2003.) The managers are responsible for tasks generally characterized as managerial, including interviewing potential sales associates; reviewing daily, weekly, and monthly productivity reports generated by RadioShack's headquarters; and reviewing time cards completed by store staff. In addition, managers are responsible for making work assignments, assigning work schedules, and completing monthly evaluations of sales associates. Managers earn substantially more than their subordinates; named Plaintiffs Perez and Phillips, for example, earned approximately $19 and $17 per hour, when their sales associates averaged only $7 and $8 per hour.*fn2

  RadioShack employs both full and part-time sales associates. Pursuant to corporate policy, employees averaging 32 or more hours per week are classified as full-time. (Addendum to RadioShack Team Answer Book, Ex. 5 to Def.'s Motion for Partial Summary Judgment.) Full-time employees are entitled to health care and vacation benefits. (Memo from Evelyn Follit, dated Apr. 23, 2003, Ex. 4 to Def.'s Motion for Partial Summary Judgment, at 2.) Employees averaging less than 32 hours per week are classified as part-time. (Ex. 5 to Def.'s Motion for Partial Summary Judgment.) Although not entitled to health care benefits, part-time employees averaging 20 or more hours per week are entitled to vacation benefits. (Id.)

  Plaintiffs argue that nearly half of the opt-in class members do not qualify as exempt because they do not "customarily and regularly" supervise two or more full-time employees. In support of this allegation, Plaintiffs offer a report setting forth the total number of subordinate employee hours worked on a weekly basis in the stores of 2978 of the 3288 opt-in class members.*fn3 (Ex. 1 to Pl.'s Statement of Uncontested Facts.) According to Plaintiff, this report was prepared and adapted from records turned over by RadioShack during discovery. (Pl.'s 56.1(a), ¶ 13.) According to Plaintiffs, these records indicate that 1521 opt-in class members supervised 80 subordinate hours or more per week less than 87 percent of the time while employed as a Y store manager. (Id. ¶ 14.) Defendant disputes both the validity of this data and Plaintiff's conclusions on a number of grounds. Specifically, Defendant contends the data reveals that only 726 class members failed to meet the 80-hour subordinate supervision requirement 87 percent of the time or more and that the class as a whole met the 80-hour requirement 93.6 percent of the time. (Def.'s 56.1(a), ¶ 25.)

  DISCUSSION

  Summary judgment is proper where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R.CIV.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). In ruling on a motion for summary judgment, the court's function is not to weigh the evidence, but rather to determine whether there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In a motion for partial summary judgment, the court "merely decides one or more issues in advance of trial." Reeves v. Federal Reserve Bank, No. 00 C 5048, 2003 WL 21361735, *8 (N.D. Ill. June 12, 2003), citing ODC Communications Corp. v. Wenruth Invs., 826 F.2d 509, 515 (7th Cir. 1987). Thus, summary judgment will be appropriate only as to those issues for which, on the record as a whole, no rational trier of fact could find for the non-moving party. Rogers v. City of Chicago, 320 F.3d 748, 752 (7th Cir. 2003). This court was concerned that a group of employees who are non-exempt under any circumstances (because they do not meet the supervision requirement) might be required to await any recovery until after the lengthy trial on much more complicated issues. The court therefore invited the parties to file motions for partial summary judgment on this issue.

  I. The "Executive" Exemption

  The Fair Labor Standards Act, 29 U.S.C. § 201 et seq., provides that an employer must compensate an employee for any hours worked over 40 in a week at a rate of one and one-half times the employee's regularly hourly wage. The overtime requirement is subject to a number of exemptions, however, including an exemption for persons "employed in a bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213(a)(1). Such exemptions are construed narrowly against the employer seeking to assert them. See Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960). The employer bears the burden of demonstrating an employee's exempt status. Id. at 394.

  At the time of the court's earlier opinion, federal regulations established two tests for determining whether an employee qualifies for the exemption, commonly referred to as the "long test" and the "short test." 29 C.F.R. §§ 541.1(f), 541.119 (July 1, 2004). Because the Y Store managers earn more than $250 per week, the parties agreed that the "short test" applies. Under the short test, an employee is exempt if: (1) his or her primary duties are management of the enterprise or a subdivision thereof; and (2) the employee regularly and customarily directs the work of two or more other employees within that enterprise or subdivision thereof. 29 C.F.R. § 541.1(f) (July 1, 2004). The Department of Labor has since amended the regulations and significantly altered the "short test." Under the current regulations,
An employee with total annual compensation of at least $100,000 [of which, at least $455 must be paid on a salary or fee basis] is deemed exempt under section 13(a)(1) of the Act if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee identified [in the regulations].
29 C.F.R. § 541.601(a); § 541.601(b). Employees earning less than $100,000 annually are only deemed exempt if they satisfy all four aspects of the executive exemption test. Under the four-part test, the executive exemption applies to any employee: (1) who receives weekly compensation of at least $455; (2) whose "primary duty" is management of the enterprise or a recognized subdivision thereof; (3) who "customarily and regularly directs the work of two or more other employees;" and (4) who has the authority to hire and fire persons or whose recommendations and suggestions as to hiring, firing, and promotion "are given particular weight." 29 C.F.R. § 541.100. Neither party has commented on these changes, and because this action concerns a time period prior to these regulatory amendments, they do not alter the analysis of the issue.

  In its previous memorandum order and opinion, the court discussed the first prong of the short test: whether the primary duties of Y store managers include management of sales associates. See Perez v. RadioShack Corp., No. 02 C 7884, 2003 WL 21372467 (N.D. Ill. June 13, 2003.) Specifically, the court offered its opinion that "Plaintiffs face an uphill battle in arguing that management was not their primary duty." Id. at *7. The court did not, however, analyze the second element of the short test: whether the class members were engaged in the "customary and regular supervision or direction" of "two full-time employees or the equivalent." The parties' cross-motions motion focus on this latter requirement. The Plaintiff class urges that they are entitled to partial summary judgment as to those class members who did not customarily and regularly direct two or more employees, and Defendant, in turn, argues that the requirement has been met with respect to all class members.

  A. Subordinate Supervision

  The requirement that exempt employees customarily and regularly supervise two or more full-time employees has two components, both of which are disputed. First, exempt employees must be responsible for supervising "two or more other employees or the equivalent." The parties dispute the number of subordinate hours of supervision necessary to satisfy this requirement. Plaintiffs urge that the Regulations establish 80 hours of subordinate work per week (the hourly equivalent of two 40-hour per week employees) as a bright-line rule. Defendant, on the other hand, contends that, in this case, the supervision of 64 hours of subordinate work per week is sufficient to meet the requirement, in light of RadioShack's own recognition of a 32-hour workweek as full-time. Second, this supervision must be "customary and regular." Plaintiffs argue that an employee must meet the above 80-hour standard at ...


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