Fastenal Agrees to Settlement in Wage-Hour Case

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Fastenal Faces Wage-Hour Lawsuit

MDM Blog: The Sticky Areas of the Fair Labor Standards Act

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August 29, 2008

Fastenal Agrees to Settlement in Wage-Hour Case

Industrial and construction supplies distributor Fastenal Company, Winona, MN, has agreed to settle a class action wage-hour lawsuit that claims Fastenal misclassified Fastenal employees as assistant managers and as a result those employees were denied overtime as required under the Fair Labor Standards Act and several state statutes.

Two former employees originally filed the suit against Fastenal on Oct. 18, 2007. Fastenal has agreed to pay $10 million in cash to cover claims by eligible class members, plaintiff attorneys' fees and costs and payments to named plaintiffs. The settlement is still subject to court approval.

The distributor denies the allegations in the lawsuit, but says it has agreed to enter the settlement to avoid significant legal fees, the uncertainty of a jury trial, distractions to operations and other expenses and management time. Lawsuits filed under the FLSA are often lengthy and costly for an employer.

The 60-year-old federal Fair Labor Standards Act is known more commonly as the wage-hour law. FLSA prescribes standards for basic minimum wage and overtime pay and affects most private and public employment. More than 130 million workers in 7 million workplaces are covered by the FLSA, or close to 90%, according to the U.S. Department of Labor. (Click here for a government guide on FLSA.)

Under the law, employers must pay employees at least the minimum wage for hours worked; must keep accurate records of daily and weekly hours worked; and must pay the 1.5 times their regular hourly rate for all time worked over 40 hours, unless they are exempt as defined by the law.

The latter is the sticking point for the former Fastenal employees who have filed suit against Fastenal. The former Fastenal employees claim that the distributor misclassified them as assistant general managers to avoid paying them overtime wages.

The case was originally reported on Fastenal's 10-Q form for the quarter ended Sept. 30, 2007.

The details of the settlement can be found in the Form 8-K filed with the United States Securities and Exchange Commission on Aug. 29, 2008. (Click here to find the 8-K report.)

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