A jar on its side with coins spilling out onto the floor

Dollar General: Battle for Dollars

June 2006 — Dollar General Corp. will face a group of current and former store managers next month in federal court in Alabama over alleged violations of federal wage and hour laws.

More than 5,000 claimants are involved in the case, which is scheduled to begin July 31 in U.S. District Court in Tuscaloosa.

The lawsuit is akin to a class-action. The court decided in January 2004 to certify the case as a “collective action,” inviting all present and former managers to join the suit before a May 31 deadline. Five thousand did, including about 300 from Alabama and more than 20 from the Birmingham metro area.

The stakes are high for Dollar General (NYSE: DG), a Tennessee company that has more than 400 stores in Alabama, making the state the retailer’s fourth largest market. The company said in a June 1 filing with the U.S. Securities and Exchange Commission that “a negative outcome in the case could have a material adverse impact on the company’s financial statements as a whole.”

The suit, originally filed in 2001, has been gathering momentum ever since, says Roman A. Shaul, a lawyer with Beasley Allen Crow Methvin Portis & Miles PC of Montgomery, representing the plaintiffs. The case was referred to them in 2001 by Birmingham attorneys Allen Schreiber and Mark Petro, who are assisting with the case.

The suit was filed originally on behalf of Edith Brown and other salaried store managers who claim they have not been paid overtime they are owed and should not have been classified as exempt from overtime regulations under the Fair Labor Standards Act.

The plaintiffs, such as Wanda Womack of Pinson, say they repeatedly worked overtime and performed jobs such as unloading shipments and stocking shelves that are normally performed by hourly employees. The plaintiffs contend they should be paid as hourly employees are, including overtime.

“It was fun when I started to work for Dollar General, but then it got so bad and so big, and they wouldn’t give you more payroll,” says Womack, who worked for the company for 11 years at 37 stores, managing five. She is now on disability, partially a result, she says, of physical wear and tear during her career at Dollar General.

Womack says she often worked from before the store opened until after it closed, six days a week. Store hours during the years Womack worked were 8 a.m. to 9 p.m. She says there’s “no possible way” to estimate how many hours she was shorted, but that she never worked fewer than 50 hours, and that her work weeks typically ranged from 45 to 70 hours.

“I had to do everything,” she says. “All the managers’ work, the hiring and the discipline and making sure the registers were run right, plus I had to unload trucks and sling freight like everybody else. A lot of times it was just me and the cashier, so I had to do it.

“If you didn’t get the freight out, you didn’t get anything to sell,” she adds.

J. Trent Scofield, a lawyer with the firm representing Dollar General, Ogletree Deakins Nash Smoak & Stewart PC, says he is not authorized to comment, and a Dollar General spokeswoman in Goodlettsville, Tenn., says the company does not comment on pending litigation.

In its court filings, the company either denies the allegations or says it doesn’t have sufficient knowledge to form an opinion.

Shaul, the plaintiffs’ attorney, says the Fair Labor Standards Act was passed to ensure employees were not exploited by employers.

Plaintiffs such as Brown and Womack feel they were misclassified since they were in the trenches performing the “exact same jobs” as hourly employees, Shaul says.

Dollar General is hardly the only major retailer that has been accused of treating its employees unfairly.

Retail juggernaut Wal-Mart Corp. has been a frequent lawsuit target, and Family Dollar recently settled a similar suit, notes Anthony Chukumba, a Morningstar Inc. analyst in Chicago who follows discount retailers.

Jim Alexander, a labor and employment lawyer with Bradley Arant Rose & White LLP, says the cases emerged in the mid-1990s in California. According to Jim, California has a more restrictive, employee-friendly atmosphere, “so a lot of the big retailers and companies in the fast-food industry have been sued and have revised their practices,” he says.

Since then, he says, the cases have become steadily more prevalent and in recent years plaintiffs have had “a lot of success,” with awards in the millions of dollars.
Lawyers ‘feast’ on FLSA cases.

Both the number of lawsuits and size of settlements have been rising at a rate that should alarm employers, according to the April 2006 Fair Labor Standards Act Employee Exemptions Handbook.

Throughout the 1990s, between 1,000 and 2,000 FLSA actions were filed. In 2004, the last year for which data is available, there were 3,617 cases.

In 2005, according to the FLSA handbook, nearly half, or four of the largest collective action settlements in the private sector, involved wage and hour cases.

In December, for example, a California jury awarded Wal-Mart employees $172 million for missed meal breaks, the publication says.

“For the longest time, the Fair Labor Standards Act was well off the path of most law firms, because most of it was handled (by employers) administratively,” Alexander says. “Lately, it’s been a lawyer’s feast because there are so many issues about how the cases are tried.”

The Brown lawsuit may hurt Dollar General from a public relations perspective even if the company prevails, but Morningstar’s Chukumba says the discount retailer’s management has more immediate challenges to confront.

“Dollar General has plenty of capacity to withstand this lawsuit, and I think the market will look through this,” the analyst says. “But comparable store sales have been down because consumers’ spending power has been hurt by things like higher gas prices.”

Dollar General ‘s shares closed June 5 at $15.55, near its 52-week low of $15.52.

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