Family Dollar Stores Inc. has reached a preliminary settlement of up to $14 million for a class action suit involving over 1,700 New York store managers regarding their claims for overtime wages.
The deep discounter will record a one-time charge in the fourth quarter related to the litigation and its settlement. Settlement terms haven't been finalized and anything that is finalized would require court approval.
In May, competitor Wal-Mart Stores Inc. (WMT) agreed to pay employees $4.8 million in back wages and damages, as well as $463,000 in civil penalties, after the U.S. Department of Labor found the company failed to pay overtime to more than 4,500 workers.
The federal Fair Labor Standards Act mandates employees be paid at least a $7.25 minimum wage, plus time and a half their regular rates for hours worked beyond 40 per week. Some employees, such as executives and administrative workers who are paid a salary of more than $455 a week, are exempt from overtime rules.
Family Dollar and its rivals fared well during the economic downturn and have been building on that growth with store additions and expanded private-label offerings. Recently the company has been getting more aggressive with plans to make itself a one-stop shop for its low-income customers.
In June, Family Dollar said its fiscal third-quarter earnings rose 12% as initiatives, like adding more food products, provided a lift, but there was some disappointment on the store-side and from hampered customers.