Dive Brief:
- Steak 'n Shake will pay more than $7.7 million after a U.S. district court judge granted $3 million in liquidated damages to the misclassified managers it denied overtime pay (Drake, et al. v. Steak N Shake Operations, Inc. No. 14-cv-01535 (E.D. Mo. May 10, 2019)).
- The plaintiffs argued that, in addition to the overtime back pay a jury decided they were owed in March, they are entitled to liquidated damages under both the Missouri Minimum Wage Law and the Fair Labor Standards Act (FLSA). The judge agreed.
- Steak 'n Shake argued that it did not owe the managers liquidated damages under the FLSA, as it acted in good faith. But the judge said the restaurant's "failure to pay overtime was not a good faith mistake," as evidence presented during the trial showed it knowingly staffed understaffed stores with managers who could perform the work of non-managerial employees without needing to be paid overtime.
Dive Insight:
An employer labeling employees as managers does not in itself enable the employer to treat them as such — in this case, deny them overtime pay.
Employers must pay employees minimum wage for all hours worked, plus a rate of time and one half their regular pay for all hours worked beyond 40 in a workweek, unless the employees pass a salary threshold and a duties test that proves their exemption from this rule, according to the FLSA. This means employers must treat the employees they claim to be managers as managers.
Steak 'n Shake's alleged mistake is a common one, Greensfelder, Hemker & Gale Associate Katherine L. Fechte previously told HR Dive. "A lot of employers, we find, wrongfully assume that their employees are exempt from overtime," she said. An employer cannot define employees as exempt in their job descriptions and deny them overtime, she cited as an example. The employees must be exempt under the act, she said.
