Join The Booming Dollar Store Economy! Low Pay, Long Hours, May Work While Injured

08/29/2013 07:30 am ET | Updated Oct 25, 2013
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Dawn Hughey had worked at Dollar General for just four months when she was named manager of a store in the Detroit suburbs in 2009. Having recently moved home after a stint in California, Hughey hoped the new honorific -- and its attendant annual salary -- would help her start a new life in Michigan.

But like other managers in America's booming dollar store industry, Hughey quickly came to believe she was a manager in name only. The major dollar store chains -- Dollar General, Dollar Tree and Family Dollar -- have thrived by offering customers rock-bottom prices that rival Walmart's, a business model that requires shaving labor costs wherever possible. For a manager like Hughey, that meant working far beyond a 40-hour week.

Each week, the company allotted Hughey around 125 hours to assign to the four workers in her charge, most of whom were earning close to minimum wage, she said. But according to Hughey, as well as recent lawsuits against Dollar General and its competitors, the hours that dollar store managers are allowed to assign rarely cover the work that needs to be done. The stores operate on something close to a skeleton staff, workers say.

Pressured to keep payroll down, Hughey spent most of her time unloading trucks, stocking shelves and manning the cash register, often logging 12-hour days, six days a week, to keep the store operating. She said she felt less like a manager than a manual laborer.

Dollar General saved a bundle by having Hughey do much of the grunt work. As a salaried manager, she was exempt from overtime protections and didn't get paid for extra work. Given that she often worked 70 hours a week, at an annual salary of $34,700, her pay sometimes broke down to less than $10 per hour -- hardly a managerial haul.

She and her fellow store managers didn't like thinking about the math, she said. After all, these were supposed to be the good, middle-class jobs in the low-paying retail world.

"It was always depressing," Hughey, 49, said. "We didn't want to know what it broke down to. Employees would say, 'You're the boss, you get the big bucks.' But, really, you're making [as much as] I am."

The physical demands of the job took their toll. As Hughey was loading 25-pound boxes of books off a cart one day in July 2011, she felt a pinch in her neck, and "an immediate stabbing pain," she recalled. The strain would eventually lead to X-rays, MRIs, physical therapy and recommendations to see a neurosurgeon, according to Hughey's medical records. Hughey was put on work restrictions by her doctor, but continued clocking in.

As the pain got worse, her doctor told her to take two weeks off. On her third day back on the job, she was called into a meeting with her district manager, according to Hughey. "He told me we were going to part ways," Hughey recalled. The manager said Hughey was being let go due to productivity problems that predated her injury. Hughey then began what would turn out to be a two-year battle over workers' compensation due to her health problems.

Recent strikes by workers at fast food restaurants and at Walmart have helped spark a national discussion about pay and working conditions in the retail sector. Dollar stores like Hughey's are a growing piece of that world, as companies like Dollar General have managed to take on Walmart in the discount retail game. The New York Times Magazine wrote that the influx of more affluent shoppers at these stores has helped create a "dollar store economy" in the wake of the Great Recession.

But the stingy payroll required by the dollar store business model leaves many employees overworked, underpaid and even injured, according to workers and litigation filed over labor practices. While further promotions await some managers, for many the leadership job they longed for isn't a road to the middle class so much as a glorified manual labor gig that quickly burns them out.

In interviews and court documents, former and current store managers claim major dollar store companies classify them as managers merely to evade overtime obligations and to pay them less money. Those managers' employees, in turn, have accused the companies of illegally shorting them on pay and forcing them to work off the clock due to payroll constraints.

Several workers told The Huffington Post that they lost their jobs or their hours once they got hurt or encountered health problems, leading to bitter feelings and long legal battles.

"We're disposable," Hughey said.

A NEW STORE EVERY SIX HOURS

The number of dollar stores in the U.S. has roughly doubled over the past decade, the full tally now approaching 25,000 nationally, according to the brokerage firm Sterne Agee. Such stores are much smaller than a Walmart -- about 8,000 square feet, compared with the 182,000 of a typical Supercenter -- but they're also becoming far more accessible to U.S. shoppers than the nation's top retailer. There are now approximately five dollar stores in the U.S. for every Walmart.

Dollar General, Family Dollar and Dollar Tree are on pace to open one new store every six hours this year, according to Sterne Agee's analysis, and they now employ more than 220,000 full-time and part-time U.S. workers, according to the companies' annual reports. Dollar General alone has 90,000 employees. Unlike with Walmart's employees, dollar store workers are siloed in small stores with few coworkers, leading to little workforce identity and no labor union presence.

Much of the industry's growth has come courtesy of the Great Recession. As the worst downturn in a generation settled in, shoppers increasingly looked for bargain bins close to home, steering them to the discount detergent, toilet paper and other so-called consumables that Dollar General and its competitors thrive on.

Many of the new shoppers at dollar stores are people who wouldn't have stepped foot in one a decade ago. The big chains bore a reputation for operating dingy stores in run-down, high-crime neighborhoods, selling 99-cent items mostly to the poor. Sensing an opportunity to poach shoppers from big retailers and grocers, the main dollar store chains have spruced up their shops and broadened their inventory to make them more inviting to middle-class customers.

"People have migrated there and stayed there," said Joan Storms, an analyst at Wedbush Securities.

Storms said the chains have improved stores to make them pleasant places to shop and to work.

"When you shopped those stores before, you really felt poor," Storms said. "Over the last few years they've really upgraded the shopping experience and the working experience by reformatting stores, cleaning them up and adding better merchandise."

Retail is one of the lowest-paying jobs in the economy, with a median annual salary of about $25,000, according to the Bureau of Labor Statistics. That's well below what a family needs to support itself in most parts of the country. Retail workers are also unlikely to have employer health insurance, either because it isn't offered or it's prohibitively expensive. (As full-time employees, most dollar store managers do have health care coverage and other basic benefits.)

This low compensation -- driven in large part by the cheap prices consumers demand -- has been an essential ingredient in retail growth, including dollar stores. In the case of Dollar General, the company's success has helped make it a poster child for the private equity industry. As private equity was assailed as "vulture capitalism" during last year's presidential election, a trade group for the industry boasted that Dollar General had added more than 20,000 jobs since the firm Kohlberg Kravis Roberts acquired it in 2007. (The company went public again in 2009.)

But the growth of dollar stores has come with a boom in litigation from employees on the lower rungs of the economic ladder. Since just 2010, more than 30 federal wage-and-hour lawsuits have been filed against the three primary dollar store chains, according to court records. Such lawsuits are now common across industries, as workers sue employers under the Fair Labor Standards Act. But the dollar store world in particular has become a breeding ground for allegations by workers that they were shorted on pay.

For the dollar store chains, worker lawsuits have simply become a cost of doing business. Earlier this year, 6,000 Dollar Tree workers joined a lawsuit against that company. They claimed they were forced to clock out for breaks, but had to continue working unpaid anyway.

"The number of employment-related class actions filed each year has continued to increase," Dollar General, which had sales of $16 billion last year, wrote in its 2010 annual report. In addition to litigation under the Fair Labor Standards Act, female managers sued the company in a class action alleging the company systematically underpaid them compared with male counterparts. The case was settled for $19 million last year.

Wanda Womack, the lead plaintiff in the sex discrimination case, worked as a manager for 11 years at different stores in Alabama. Like other longtime managers, Womack said the heavy workload at her store led to wear and tear on her body. She eventually got hurt lifting heavy boxes and required a series of rotator cuff surgeries, she said.

She went on a leave of absence with workers' comp, but her job came to an end when it was apparent she could no longer lift 40 pounds, according to court filings. Womack filed her lawsuit after she was let go.

"It really took 20 years off my life because of all the muscle pains. I have back injuries, I have neck injuries," Womack said.

As for Dollar General, "They're popping up everywhere," she said. "They just keep getting bigger and bigger and bigger."

A SQUEEZE ON WORKERS

Like other retailers, the dollar store chains budget payroll hours to individual stores based on sales, geography and other closely watched metrics. It's up to store managers to find a way to hit their sales goals and remain operational while coming in under their payroll ceiling.

Managers' quarterly bonuses -- a critical supplement for many, given average salaries in the mid- to high-$30,000s -- hinge on their ability to keep stores profitable on thin margins. (According to salary data from Glassdoor.com, Walmart store managers earn well over twice the salary of dollar store managers, likely because their stores and workforces are so much larger.)

For managers, that means being stingy with the hours given to part-time workers, and then handling whatever work gets left behind. Many managers said they feel no different from the people they supervise, except that their hours are longer. The per-hour pay rate often works out to be roughly equal.

"I've managed other retail stores. This was different," said Berdie Gillis, a former Dollar General store manager. "There are not enough hours, and not enough people. The turnover was horrible."

Dollar store managers don't benefit much from the Fair Labor Standards Act. Enacted in 1938, the bedrock labor law established the country's minimum wage and overtime protections, and to this day serves as the primary governor on the 40-hour work week. By requiring that companies pay workers time-and-a-half for overtime, the law makes bosses pay a price for making their employees work long hours. It also encourages companies to spread the work to different employees to avoid paying a premium. Because they're part of management and work on salary, white-collar supervisors are exempt from the overtime law.

The problem, according to Jennifer Klein, a Yale history professor, is that the law is still predicated on the industrial economy of the mid-20th century, when the lines between managers and rank-and-file workers were clear. The modern service economy, she said, is full of workers who may have "manager" in their title, but largely function as manual laborers and clerks.

The system "actually forces the management to squeeze people, to squeeze them and make them work hours off the clock, and for managers to pick up the slack," said Klein.

"The model was based on full-time employment in an industrial enterprise, where there was a clear recognition of who was the boss and who was the employee," Klein continued. "Employers obviously have a lot of incentive to exploit the ambiguities and continue to manipulate the meaning of 'employee.'"

The number of lawsuits alleging misclassification and wage violations in all industries has skyrocketed over the past decade, hitting record highs. According to an analysis from the Federal Judicial Center, nearly 8,000 such lawsuits were filed under the Fair Labor Standards Act in the last reporting year, after hovering around 1,500 a year in the 1990s and early-2000s.

Businesses often say this boom in litigation comes courtesy of money-hungry lawyers seek big-dollar settlements. But worker advocates say the rise in lawsuits is because employers game the system and workers aren't being paid what they're owed. Workers may also be more sensitive to getting shorted on their pay these days, given that a lot of paychecks in low-wage industries like retail haven't kept up with the cost of living.

In a statement to HuffPost, Dollar General said that its managers have played "a critical role" in the company's success, and that their status as salaried, "exempt" employees is appropriate. (The company declined to address individual workers' claims, citing litigation.)

"Based on the nature and importance of store manager responsibilities, Dollar General classifies its store managers as full-time, salaried employees who are eligible for company-supported health care coverage and a competitive bonus system for the retail industry," the company said.

Dollar General added that off-the-clock work is "absolutely" prohibited.

"Store managers are responsible for staffing and scheduling at their stores," the company said. "They are provided with the tools and training to ensure that their stores’ business needs are met and employees are paid in accordance with company policy and the law."

Dollar Tree didn't respond to a request for comment. In an email to HuffPost, Family Dollar spokeswoman Bryn Winburn said the company believes its managers are "properly classified as exempt" from the Fair Labor Standards Act.

"The number of hours worked by Family Dollar store managers varies due to many factors, including the skill and experience of the specific manager," Winburn wrote. "Because store managers are responsible for the entire operation of their stores, they are also responsible for setting the weekly schedule for the employees in that store, including their own, and in assuring that all employees in their stores receive the appropriate breaks."

Winburn noted that Family Dollar was "not alone" in believing its managers should be exempt from overtime and minimum wage laws, noting the company's many victories in federal court. A North Carolina federal court "has ruled 46 times in the past few years that individual Family Dollar store managers are classified properly," she said.

Andrew Frisch, a lawyer who's sued Chesapeake, Va.-based Dollar Tree on behalf of assistant managers, said it's the companies' taut payroll that lead to lawsuits. Many workers end up working through legally mandated unpaid breaks or doing other off-the-clock work, he said.

"It's an untenable amount of work," Frisch said.

In addition to working through unpaid breaks, Frisch said there are other, smaller ways in which dollar store employees get shorted. "At virtually every dollar store chain, there are people responsible for bringing bank deposits," Frisch said. "The people at the end of the day get screwed. They clock out and leave, and then have to do the deposit."

John Nicoletti is familiar with the dollar store labor model.

In early 2012, Nicoletti took a manager's job at a Dollar General store in Martin, Tenn, he said. He'd put together a long career in retail, managing gas stations for years before starting the new job. He'd heard stories of brutal hours at dollar stores, but a supervisor told him when he started that he'd be working about 45 hours per week. Nicoletti couldn't work much more than that because of neuropathy, a painful form of nerve damage caused by his diabetes that limited how long he could be on his feet each day.

Nicoletti said he was quickly working 60 or 70 hours per week, often putting in 12-hour days or longer, doing nearly everything on his own because his staff was short-handed. Nicoletti said he believes many managers take the job believing they've attained a supervisory role with some cachet, only to be disappointed.

"Psychologically, they get you to believe that you are actually a manager.... But we're stock people," Nicoletti said. "They want you to continuously work. There's no stop. It's just a continuous productivity thing with them. They really worked people into the ground until they got everything they could get out of you."

Nicoletti said he soon found himself pleading with a regional manager for more hours to give employees. He said his own workers were shifted to other, similarly understaffed stores nearby. As the stress of the job mounted, Nicoletti's doctor informed him he'd developed hypertension.

"I never had a blood pressure problem until October," Nicoletti said. "It was only caused by the fact that they were taking people from my store and bringing them to another."

Eventually, the stress was so bad that Nicoletti developed muscle spasms, he said. He left in the fall, having lasted about seven months.

Nicoletti said he couldn't help but do the salary math that bothered Hughey so much. He said said his pay often broke down to a little more than $8 per hour, less than minimum wage in some states.

'THE ONLY THING IN TOWN'

Dollar stores may have lured middle-class customers in recent years, but they still predominate in low-income areas. A "dollar store belt" stretches from Indiana and Ohio south to the Gulf Coast. It's no accident that West Virginia and Mississippi -- two of the poorest U.S. states -- are also the two states with the greatest number of dollar stores per capita, according to an analysis by the Martin Prosperity Institute.

"Retail salesperson" has become the most common occupation in America, with 4.3 million people working the country's sales floors and registers. In down-and-out areas, particularly where manufacturing or energy jobs have vanished, dollar stores now hold some of the only work that's available.

"It's the only thing in town," said Sheila Sheneman.

Until late last year, Sheneman worked in a Dollar General store in Montcalm County, Mich. The unemployment rate there was above 17 percent in 2010. It's dropped since then, but remains a stubborn 10.2 percent.

After about five years on the job, Sheneman said she was making $8.65 per hour as a "keyholder" -- a low-level store management position. She and her husband carried debt, and the modest paycheck helped them tread water. But she said it was "impossible to try and live on those wages," especially when full-time hours are elusive for non-managers.

If dollar stores are to hold good, middle-class jobs, Sheneman said, the companies need to provide managers with enough payroll to run their stores safely, even if that means taking less profit or passing some of the cost on to customers. The current labor model comes with its own unseen costs, like high turnover and stress for employees, she said.

There's also the intangible factor of employee morale.

One day in 2010, Sheneman woke up with a wrenched back, nearly unable to get out of bed. She was all but certain the injury was due to moving the store's "rolltainers" -- massive cages that hold hundreds of pounds of products. She went to the doctor and ultimately worked despite the pain, but she filed a workers' compensation claim to help cover her copays and medicines.

The company challenged the claim, arguing that Sheneman's injury wasn't due to work. Once Sheneman fought back, she said the company's lawyers quickly capitulated in a conference call with her and her lawyer. According to workers' comp records, Sheneman got a check for $250 to cover her out-of-pocket costs, but she said the experience was dispiriting.

Then, last September, Sheneman broke her left arm in a motorcycle accident. She claimed she was soon taken off the schedule.

"If they said I could come back, I would probably swallow my pride and go back, just to have some income coming in," Sheneman said.

Dollar General disputed her unemployment claim, according to records with Michigan's unemployment agency. Sheneman said she was fired; her employer questioned her ability to work. The state's unemployment agency sided with Sheneman.

Dawn Hughey, the Dollar General manager from Michigan who hurt her neck, agreed to a preliminary settlement with the company for an undisclosed sum in August. Hughey's unemployment insurance ran out a few months ago, and she's been relying on food stamps to get by. She even looked into selling blood. She was recently evicted from her apartment and moved in with a cousin.

"Sometimes my neck is in a lot of pain, and I have to lay down and get the pillows just right to get it to stop," she said.

While she had viewed her job at Dollar General four years ago as the start of a new life, Hughey said she's now hoping the workers' compensation settlement will help her get back on her feet and settle some debts. When she finally ran out of money, the minister at her church helped her make the final payments on her car so that it wouldn't be repossessed.

"I'm going to pay her back when it's all said and done," Hughey said.

This story appears in Issue 69 of our weekly iPad magazine, Huffington, available Friday, Oct. 4 in the iTunes App store.

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