PetSmart Settles Employee FLSA Lawsuit for $3.8M

PetSmart Inc. and a collective of over 300 of its operations managers have agreed to a $3.8 million settlement of a Fair Labor Standards Act lawsuit.

Plaintiff Nicholas M. originally filed this collective action wage and hour lawsuit in September 2012, alleging misclassification of employees by PetSmart. The Fair Labor Standards Act, or FLSA, is a federal employment law that sets certain standards for employee compensation for certain types of employment.

For jobs that qualify for FLSA protection, non-exempt jobs for instance, any hours worked over 40 in a single week are subject to overtime compensation. However, other types of jobs are deemed exempt and do not get FLSA protection.

Historically these were jobs such as management or executive positions that came with better compensation, job security, and bargaining power, and so were not as much in need of legal protection.

The FLSA lawsuit alleges that PetSmart purposely misclassified its operations managers as exempt employees under the FLSA, to avoid paying them overtime for work performed in excess of 40 hours in a week. The plaintiff claimed the work done during the extra time was non-managerial work that would not qualify for FLSA exemption.

A collective action is a type of lawsuit particular to the FLSA. It is similar to a class action lawsuit. The main difference is that in a collective action, the members of the collection must opt in to participate, whereas in a class action lawsuit, members are included in the Class by default unless they opt out. Out of 1,100 potential collective action members who received notice of the PetSmart lawsuit in February 2014, 331 opted into collective membership.

Nicholas and PetSmart went through an initial stage of discovery, the process of exchanging evidence and interviewing witnesses. Following the court’s preliminary certification of the collective in December 2013, discovery continued into a second stage.

Starting in December 2014, the parties spent over two months in mediation. They reached the current settlement agreement in February and since then have worked out the terms.

On average, the settlement amount represents $11,838 per collective member. The actual payments will be determined by the amount of time each employee worked. Up to one-third of the settlement amount is allocated for attorneys’ fees and up to $330,000 for expenses. Collective members will receive formal notice of the settlement via direct mail.

Both parties agree that the settlement is fair and reasonable. However, the FLSA still requires the court to approve the settlement before it can be implemented. Collective members will also have an opportunity to object to the settlement or to the request for attorneys’ fees and expenses.

Despite agreeing to the settlement, PetSmart does not admit liability. The company maintains, as it has throughout this FLSA lawsuit, that Nicholas’ claims are without merit and that PetSmart acted out of good faith at all times. The company said it agreed to the settlement to avoid the time and expense involved in further litigation.

This FLSA collective action is not the only employment litigation PetSmart has faced recently. In 2014 PetSmart settled a claim for $10 million. The plaintiffs in that action were animal groomers who claimed they had not been paid for non-grooming work.

The PetSmart FLSA Lawsuit is Case No. 1:12-cv-01117-SLR-SRF, in the U.S. District Court for the District of Delaware.

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