Hannaford Supermarkets, one of Maine’s largest private employers, has announced it will start paying hundreds of midlevel managers for overtime hours that previously went unpaid.

The company says the move is meant to boost employee satisfaction, retention and recruitment amid a labor shortage that has many people working overtime.

But some impacted workers may see little change – or even a cut in pay – because they’ll have to work 45 hours per week to earn the same salary they got for 40.

The change follows recent federal lawsuits charging Hannaford with overtime violations, including one filed Wednesday in Maine that company officials declined to talk about for this story. The company also says the shift in overtime policy has nothing to do with the Biden administration’s ongoing effort to expand overtime pay requirements for middle managers.

Hannaford has notified department managers, evening operations managers and associate relations managers that starting Sunday, they will be reclassified from overtime-exempt salaried personnel to nonexempt salaried personnel.

“Impacted managers will now be paid for every hour they work,” Hannaford spokesperson Caitlin Cortelyou said. “They will be paid time-and-a-half for all hours worked that exceed the 40-hour mark each week.”

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The responsibilities of affected managers won’t change, and they will remain eligible for all salaried benefits, including annual performance bonuses, Cortelyou said.

But while working overtime isn’t mandatory, she said, the managers will see a pay cut if they work fewer than 45 hours per week – a move that’s legal as long as their base pay meets minimum wage requirements.

“In order to earn the same annual salary, associates will need to work 45 hours each week,” Cortelyou said in a statement. “The impacted associates have not been, nor will they be, required to work more than 40 hours each week. Our stores have always and will continue to support flexible schedules.”

The shift comes as the Biden administration is increasing the salary threshold required to exempt salaried workers from federal overtime pay requirements. It also addresses a labor shortage that has many employers scrambling to fill positions and many employees working more than 40 hours per week.

Following an increase in July, managers who earn annual salaries over $43,888 don’t have to be paid for overtime, but managers who earn less than that must be compensated for overtime at 1.5 times their hourly rate, according to the U.S. Department of Labor. That threshold is set to increase again in January.

RELATED LAWSUIT FILED

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As Hannaford moves to compensate middle managers for overtime they’ve been working, a former bakery manager at the Hannaford in Lewiston filed a lawsuit Wednesday in U.S. District Court in Portland.

The complaint by Tasha Vye, of Lewiston, charges Hannaford with violating overtime pay regulations of the federal Fair Labor Standards Act and requests certification as a class action to include all Hannaford employees in similar positions.

It seeks back pay for all unpaid overtime that Vye worked from April 2021 to September 2022 and for other employees who may join the suit. Vye’s attorneys declined requests for interviews.

Cortelyou said Hannaford still hadn’t been formally notified of the complaint as of Friday and declined to comment on the case.

The lawsuit claims that Hannaford purposely misclassified certain employees as managers who were exempt from overtime pay even though they often did the same work as regular employees who were eligible for overtime pay.

It notes that Hannaford recently “announced that it would be reclassifying (certain managers) to nonexempt overtime-eligible positions, effective within the next several weeks.”

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It references a 2021 class action case filed in U.S. District Court in Massachusetts that brought similar charges against the company.

Hannaford settled that case for $1 million last year, including $350,000 for lawyers’ fees and more than $600,000 for affected workers in that state, according to the final settlement order filed in February.

ADDRESSING STAFFING SHORTAGE

The salary reclassification that takes effect Sunday will affect about 4%, or 1,040, of Hannaford’s 26,000 employees at 173 stores across Maine, New Hampshire, Vermont and New York, Cortelyou said. That includes about 380 of the company’s 9,500 workers at 68 stores in Maine. The impacted employees are not union members.

Like many companies, Hannaford has experienced staffing challenges in recent years. Many associates in the impacted positions have routinely worked more than 40 hours per work week, but they haven’t been paid for overtime, she said. As a result, it has been a consistent challenge to fill these positions.

“They will now receive pay for each and every hour worked,” she said. “This change is the direct result of feedback from associates who prefer to be paid based on the hours they work. This new model allows us to stay competitive in a challenging hiring market while also giving our associates what they want and deserve.”

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Several Hannaford employees contacted at different stores declined to be included in this report, but impacted managers expressed a variety of concern, support and ambivalence to the change when interviewed for this story and in online forums.

The Biden administration has expanded overtime protections for millions of lower-paid salaried employees, increasing the salary threshold for overtime-exempt positions from $35,568 to $43,888 on July 1. A second increase to $58,656 is set to take effect Jan. 1, with updates to follow every three years.

The new federal rule follows a 2023 study that found companies were increasingly handing out managerial titles to avoid paying overtime, especially in the hospitality and retail sectors.

“Too Many Managers,” by professors at Harvard Business School and the University of Texas at Dallas, found that from 2010 to 2021, the number of managers grew 47%, from 6 million to nearly 9 million. That’s five times more than all other workers, whose numbers grew only 9%, from 121 million to 132 million, according to federal labor statistics.

The researchers found that doling out more management titles helped companies avoid paying roughly $4 billion in overtime per year, at an average loss of $3,194 per employee or 13.5% of their total salary.

SHIFTING LEADERSHIP STRUCTURE

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Employers have a range of options to accommodate the new overtime-exempt thresholds, according to the federal labor department.

They can increase salaries so employees retain their exempt status; pay time-and-a-half for any overtime; reduce or eliminate overtime hours; or reduce base salaries to offset overtime pay, as long as the base pay still meets minimum wage requirements.

Hannaford apparently chose the latter, although Cortelyou said the company’s salary change has nothing to do with the Biden administration’s effort.

“This change is the result of hard work and thoughtful consideration as to what is right for our associates and our business,” Cortelyou said. “Hannaford is constantly evaluating its pay practices to stay competitive and many factors were considered, including feedback from associates who prefer to be paid based on the hours they work.”

Hannaford’s retail leadership structure was unique across the industry and frequently posed challenges in filling open positions, Cortelyou said. The change reflects best practices within the industry and positions Hannaford to attract and retain staff in a competitive environment, she said.

A CHANGE THAT MATTERS

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What Hannaford does matters in Maine’s labor landscape. Founded in Portland in 1883 and headquartered in Scarborough, Hannaford’s 9,500 employees in Maine make it the state’s second-largest private employer after MaineHealth, which has over 21,000 employees, state data show.

It’s not surprising Hannaford took this action amid the Biden rule change, said Marc Cryer, a labor law attorney who is director of the Bureau of Labor Education at the University of Maine.

“I fully expected this to happen,” Cryer said. “They’re rearranging things so employees will be forced to work more for the same pay. These are not union employees, so the employer can basically adjust their pay as long as it’s above minimum wage.”

Still, Cryer questions whether the Biden increase will go unchallenged in court, especially the pending jump to $58,656 in January.

He noted that a 2017 court decision vacated an Obama-era rule that attempted to raise the threshold for overtime-exempt positions to about $47,476 and update it every three years. The Texas judge in that case said the salary threshold was too high.

The Biden rule followed a more modest 2019 increase from $23,660 to $35,568 by the Trump administration.

“But whether the increase in January will survive a court challenge remains to be seen,” Cryer said.

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