Sears Holdings Management Corp. has agreed to pay $5 million to end a proposed class action accusing the retail giant of misclassifying about 700 employees at Sears and Kmart retail stores as “overtime exempt” in violation of the Fair Labor Standards Act (FLSA). If approved by U.S. District Judge Milton I. Shadur, the settlement will end the Illinois federal court suit that was filed in July 2011 by named Plaintiff Robert O’Toole on behalf of current and former loss prevention managers at Sears and Kmart stores across the country who were denied overtime compensation. The motion for approval of the settlement said:
This settlement resolves all current and potential litigation concerning the classification of the LPM position. The parties believe that the settlement is fair and reasonable and in the best interests of the class members [and it] spares the litigants the uncertainty, delay and expense of a trial, while simultaneously reducing the burden on judicial resources.
The O’Toole lawsuit, which was amended in April 2012 to include 13 more named Plaintiffs, claimed Sears and Kmart had a “policy and practice” of refusing to pay employees overtime for working more than 40 hours per week. As part of the deal, the parties are seeking certification for a collective class of employees making claims under the FLSA as well as seven classes of employees in Illinois, California, Oregon, Washington, New Jersey, New York and Pennsylvania making claims under each of the states’ various wage laws, according to court documents.
Judge Shadur had conditionally certified the collective action under FLSA in October 2011. To date, 657 class members have opted into the collective action, according to the settlement. The FLSA class would include all Plaintiffs who opted into O’Toole’s suit as well as class members from a second related class action as of July 14. The state wage law classes, excluding the New York group, would include Sears or Kmart employees who worked for the retail chains from as far back as 2009. Unlike all the other subclasses, however, the proposed New York class would not include Kmart workers and would cover Sears employees in the state stretching back to 2006.
The related suit, filed in January by named Plaintiff Michael Nowalski, includes a proposed class of 36 individuals who did not opt into the O’Toole class. As part of the settlement, the Nowalski suit will be voluntarily dismissed and its class members would be eligible to receive funds from the recent settlement.
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