Tuesday, March 6, 2012

Have I Been Properly Labeled as an Exempt Manager for Overtime Purposes Under the FLSA?

As many people are aware, some employees are exempt from over time pay but don't necessarily know why.  The Fair Labor Standards Act (FLSA), the law that governs wage & hour law and overtime pay, specifically excludes--or exempts--from overtime pay, “any employee employed in a bona fide executive, administrative, or professional capacity.”  However, simply labeling an employee a "manager" or "supervisor" will not automatically exempt that employee from receiving overtime pay.  

The FLSA sets forth specifics guidelines that must be met for an employee classified in a managerial or other exempt status to be classified correctly.  To qualify for the executive exemption under the FLSA, an employee must perform office or non-manual work, and the employee’s duties must meet all of the following criteria:
  • The employee must have a “primary duty” of managing the enterprise or a customarily recognized department or subdivision of the enterprise;
  • The employee must customarily and regularly direct the work of at least two or more other full-time employees (or the equivalent); and
  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.
An employee classified as exempt must also be an authority over a legitimate subordinate set of employees.  That is, an employee will not qualify as an exempt executive unless the employee manages a “customarily recognized department or subdivision.” The “department or subdivision” must be a recognized unit within the employer’s organization; it cannot simply be a collection of individuals. The employee must do more than merely supervise two or more employees; he or she must be in charge of and have as his or her primary duty the management of the recognized unit.

Most employers are accurate and in good faith properly classify their employees though some court cases have shed light on those who have classified improperly.  In  Goodrow v. Lane Bryant, Inc., 432 Mass. 165, 173 (2000), the court held that having "manager" in an employee's title is not enough to qualify as exempt if they merely manage a function, project, account, etc.  In  Ely v. Dolgencorp, LLC, 2011 U.S. Dist. LEXIS 140882 (E.D. Ark. 2011), the Court noted that areas of business like retail need to be careful as many employees labeled in management may spend the majority of their time performing non-exempt work as part of a multi-level management system.

In addition to the work performed by an employee in an exempt position is the compensation they receive.  The FLSA requires the exempt employee must regularly receive a pre-determined amount of compensation every pay period, regardless of the quality or quantity of the employee’s work. The minimum amount required by the FLSA is $455 per week. Some states, such as California, require higher minimum salaries. Certain deductions from the employee’s salary could cause the employee not to meet the salary basis requirement and, therefore, not qualify for the exemption.

Thus, it is not always black-and-white or so easy to determine whether an employee has been properly classified as exempt from overtime pay under the FLSA so if you believe you are improperly classified, contact a wage & hour attorney to assess your case.

2 comments:

  1. Do these rules apply only to an employer with a title of manager or supervisor? Are there exceptions to this?

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  2. Your question is a bit unclear. This post is about EMPLOYEES and their classification as "manager" or "supervisor" for purposes of overtime pay under the FLSA. Feel free to telephone my office to discuss further.

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