December 19, 2025
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Are Store Managers Being Mistreated by Missing Overtime Pay?
An investigation by The Cincinnati Enquirer found Kroger has faced more than 20 lawsuits across its banners since 2020 — for promoting workers to managers to avoid overtime pay — in an alleged broader practice a lawyer told the newspaper is “retail’s dirty little secret.”
The article noted that Walmart, Costco, Target, Giant Eagle, Food Lion, and Staples have also been sued for allegedly improperly classifying managers to avoid overtime pay.
The Enquirer found Kroger recently settled a lawsuit with 2,500 current and former assistant store managers over charges of “thousands of hours” of uncovered overtime pay, is finalizing related settlements in two other lawsuits, and has other similar litigation pending.
The Enquirer talked to Thomas Schell, a former assistant store manager in an Ohio Kroger banner. Schell was promoted to assistant manager after three years at an annual salary of $49,000, worked an average of 50 to 60 hours weekly, and found himself regularly filling store shortages rather than handling typical manager duties such as hiring, firing, budgeting, or training.
Schell, who quit in December 2020, told the Enquirer, “It was basically ‘What department is on fire today?’”
Kroger told the Enquirer it can’t discuss settlements or pending litigation, but added, “Kroger has not been found to have misclassified anyone or engaged in any form of wrongdoing and has denied any unlawful or wrongful treatment.”
Abuse of Retail Managers (via Empty Promotion) May Be Widespread, Critics Claim
Researchers from Harvard University and the University of Texas-Dallas, in a 2023 study, concluded many retailers are increasingly giving workers promotions with “fabricated” managerial titles but no wage upgrade. These entities are doing so to avoid paying overtime, in what the study authors saw as an exploitation a loophole in the Fair Labor Standards Act, which was first established in 1938 as a result of the Great Depression.
The act established a national minimum wage, a standard 40-hour work week, and time-and-a-half pay for weekly work past 40 hours — although managerial roles are often exempt from overtime pay.
Covering the study at the time, the New York Times said critics see workers’ promotions to managers exempt from overtime pay as “part of a broader strategy to drive down labor costs in recent decades by staffing stores with as few workers as possible.” Those promoted help stores manage in-store labor shortages while avoiding overtime expense.
However, the Times also reported that “many employers say managers who earn relatively modest salaries have genuine responsibility and opportunities to advance.” Other university studies and statements from government agencies and law firms around alleged overtime violations also downplay the benefits of manager promotions — which may include higher pay, stronger benefits, more employee discounts, bonuses and stock options, and educational assistance.
BrainTrust
Neil Saunders
Managing Director, GlobalData
Pamela Kaplan
Principal, PK Consulting
Mohamed Amer, PhD
CEO & Strategic Board Advisor, Strategy Doctor
Discussion Questions
How confident are you that retailers largely promote associates to managerial roles to avoid paying overtime?
Can retailers do a better job transitioning and reducing the sting of losing overtime pay for newer store managers?
Poll
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A promotion should earn extra money and benefits. If it doesn’t, then it’s not really a promotion. Of course, it’s up to staff whether they accept the promotion or not.
I’m not of the view that most retailers broadly promote associates into managerial roles primarily to avoid paying overtime — at least not at the larger, sophisticated retailers that have robust HR/legal teams and a strong compliance culture. Federal law under the Fair Labor Standards Act (FLSA) clearly lays out that overtime pay is required for non-exempt employees who work more than 40 hours in a week, and that an exemption from overtime for managers only applies when specific criteria are met — including salary basis, a minimum weekly salary, and bona fide managerial duties such as supervising at least two full-time employees and exercising hiring/firing authority. Job titles alone don’t determine exempt status; actual duties and pay tests do.
In large, legally sophisticated retail organizations, there are typically checks and balances to ensure that store managers genuinely meet exemption criteria before reclassifying them, precisely because misclassification can result in expensive litigation and settlements — as recent news around Kroger and other banners illustrates. That said, the story resonates because misclassification and aggressive exempting do happen in parts of the industry, especially where compliance infrastructure is weaker or where incentive structures push for cost containment. Smaller or less sophisticated retailers — or those under financial pressure — may be more prone to treat managerial promotions as a mechanism to sidestep overtime obligations, knowing that many frontline managers feel they have limited leverage to challenge such decisions.
Retailers can do a better job of smoothing transitions when associates move into store management, especially around the “sting” of losing overtime pay. Clear communication about why the exemption applies, thoughtful compensation structures that account for more extended hours (e.g., higher base salaries, performance incentives, or defined bonus opportunities), and legal compliance training reduce the perception of unfairness and litigation risk. Fundamentally, reputable retailers that adhere to wage-hour laws are not trying to exploit associates; they are applying long-standing legal frameworks that balance managerial responsibility with exemption status, while smaller, under-resourced chains may need extra support to align practice with both the letter and spirit of wage laws.
Retail – like any profession – has its share of lateral moves, with more responsibility (and stress and hours…) without more pay. In each situation, the associate must assess the long-term implications of the move, and whether it can lead to a big(ger) promotion down the road.
This seems to be phrased as a nonsequitir:
while I’m highly confident that many retailers do this – improperly classify as “exempt” – that’s not at all saying that I think most promotions are for that purpose.
The difference? I guess between gaming the system, and being a fundamentally dishonest organization
I don’t believe that retailers promote people to management positions to avoid paying overtime. It is, however, no secret that accepting a management role means going from being an hourly employee who enjoys overtime to a salaried employee who does not.
I agree with Neil: You should be paid more when promoted, and that the choice to accept or not is up to the individual.
Being a Store Manager is such a hard job, you have to wear so many hats. The compensation should be much more than a promotion from hourly, they need to be a janitor, logistics, manager, Inventory specialist, VM expert, head of Marketing, I can’t imagine anyone would accept that job unless they were being compensated fairly.
Although it is hard to know exactly, I believe that if “empty promotions” exist, they are in the minority. First, if a retailer promotes an associate to manager, there is typically an increase in salary that should be higher than what the employee was earning – including overtime – as a sales associate. Second, if the sales associate is not qualified to assume the responsibilities of a manager, it would be foolhardy for the retailer to promote that associate just to save money (and potentially lose more money on the back side).
Can’t lump all promotions this way, but the temptation is too strong. Retail’s structural incentive is simple: chronic understaffing creates perpetual fires, and “managers” who can’t say no to overtime are cheaper than proper coverage. Retail’s labor model, built on thin margins and thinner staffing, can’t survive transparency.
You make a good point. Is the “promotion” not a plan for cutting overtime, but a plan for cutting staff?
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A promotion should earn extra money and benefits. If it doesn’t, then it’s not really a promotion. Of course, it’s up to staff whether they accept the promotion or not.
I’m not of the view that most retailers broadly promote associates into managerial roles primarily to avoid paying overtime — at least not at the larger, sophisticated retailers that have robust HR/legal teams and a strong compliance culture. Federal law under the Fair Labor Standards Act (FLSA) clearly lays out that overtime pay is required for non-exempt employees who work more than 40 hours in a week, and that an exemption from overtime for managers only applies when specific criteria are met — including salary basis, a minimum weekly salary, and bona fide managerial duties such as supervising at least two full-time employees and exercising hiring/firing authority. Job titles alone don’t determine exempt status; actual duties and pay tests do.
In large, legally sophisticated retail organizations, there are typically checks and balances to ensure that store managers genuinely meet exemption criteria before reclassifying them, precisely because misclassification can result in expensive litigation and settlements — as recent news around Kroger and other banners illustrates. That said, the story resonates because misclassification and aggressive exempting do happen in parts of the industry, especially where compliance infrastructure is weaker or where incentive structures push for cost containment. Smaller or less sophisticated retailers — or those under financial pressure — may be more prone to treat managerial promotions as a mechanism to sidestep overtime obligations, knowing that many frontline managers feel they have limited leverage to challenge such decisions.
Retailers can do a better job of smoothing transitions when associates move into store management, especially around the “sting” of losing overtime pay. Clear communication about why the exemption applies, thoughtful compensation structures that account for more extended hours (e.g., higher base salaries, performance incentives, or defined bonus opportunities), and legal compliance training reduce the perception of unfairness and litigation risk. Fundamentally, reputable retailers that adhere to wage-hour laws are not trying to exploit associates; they are applying long-standing legal frameworks that balance managerial responsibility with exemption status, while smaller, under-resourced chains may need extra support to align practice with both the letter and spirit of wage laws.
Retail – like any profession – has its share of lateral moves, with more responsibility (and stress and hours…) without more pay. In each situation, the associate must assess the long-term implications of the move, and whether it can lead to a big(ger) promotion down the road.
This seems to be phrased as a nonsequitir:
while I’m highly confident that many retailers do this – improperly classify as “exempt” – that’s not at all saying that I think most promotions are for that purpose.
The difference? I guess between gaming the system, and being a fundamentally dishonest organization
I don’t believe that retailers promote people to management positions to avoid paying overtime. It is, however, no secret that accepting a management role means going from being an hourly employee who enjoys overtime to a salaried employee who does not.
I agree with Neil: You should be paid more when promoted, and that the choice to accept or not is up to the individual.
Being a Store Manager is such a hard job, you have to wear so many hats. The compensation should be much more than a promotion from hourly, they need to be a janitor, logistics, manager, Inventory specialist, VM expert, head of Marketing, I can’t imagine anyone would accept that job unless they were being compensated fairly.
Although it is hard to know exactly, I believe that if “empty promotions” exist, they are in the minority. First, if a retailer promotes an associate to manager, there is typically an increase in salary that should be higher than what the employee was earning – including overtime – as a sales associate. Second, if the sales associate is not qualified to assume the responsibilities of a manager, it would be foolhardy for the retailer to promote that associate just to save money (and potentially lose more money on the back side).
Can’t lump all promotions this way, but the temptation is too strong. Retail’s structural incentive is simple: chronic understaffing creates perpetual fires, and “managers” who can’t say no to overtime are cheaper than proper coverage. Retail’s labor model, built on thin margins and thinner staffing, can’t survive transparency.
You make a good point. Is the “promotion” not a plan for cutting overtime, but a plan for cutting staff?