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August 6, 2014
Most Amercians are entitled to receive overtime pay. The Fair Labor Standards Act, the law that established such now common concepts like the outlawing child labor, the minimum wage, and the 40-hour work week, also introduced the “time-and-a-half” overtime premium into our vocabulary. The general rule under the FLSA is that all employers must pay their employees time and a half for hours an employee works in excess of 40 hours per week. 29 U.S.C. § 207(a)(1); Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1265 (11th Cir. 2008). Thus, entitlement to overtime is the status quo, with employers bearing the burden of proving that certain of their employees are “exempt” from the requirement.
So, you may ask, “am I entitled to overtime pay?” There are several factors to look at; some are simple and some require more in-depth analysis. Below I discuss the most frequently abused exemption, the “executive” exemption.1. Hourly vs. Salary
The first and most basic test to determine whether you are entitled to overtime is whether you are paid hourly or by salary. If you are paid hourly, you are entitled to receive the overtime premium of one and one half times your hourly wage for each hour you work over 40 in a seven day work week. I am not referring here to hourly contractors, psychiatrists, doctors or lawyers who receive hourly rates for their work. I am talking about full time, W-2 employees who are paid by the hour by their employer. Be aware that it is not just employees paid by the hour who are entitled to overtime pay. Most employees earning a salary are also entitled to overtime.
Salaries fall into two categories. If your salary is below $455 per week, then, like employees paid hourly, you are entitled to overtime wages regardless of receiving a salary. But what if your salary is $455 or more? In that case, we’ve got more investigating to do.
Do not make the mistake of thinking that all salaried employees are exempt from overtime. They are not. Even if you earn more than $455 per week in salary, you are only exempt if you perform duties that are deemed to be “exempt duties” under the law.2. Highly Compensated Employee
We can also eliminate you as the recipient of overtime if you earn more than $100,000 per year and you primarily perform at least one exempt duties of an “executive,” “administrative,” or “professional” employee.3. Titles Don’t Matter
Having the title “manager” is irrelevant to the analysis. Regardless of your title, you MUST actually be performing exempt duties to be denied overtime pay. “The exempt or nonexempt status of any particular employee must be determined on the basis of whether the employee’s salary and job duties meet the requirements of the regulations.” 29 C.F.R. § 541.2.4. What Are Your “Real” Job Duties?
Once we determine that you earn more than $455 per week in salary and you earn less than $100,000, we have to move on to investigate the nature of your work responsibilities. Even if you earn more than $100,000, we still have to make sure that you perform at least one exempt duty on a regular basis.
The basic concept, in very crude terms, is that if you work with your hands, you should receive overtime. That overstates the simplicity of the analysis, but basically means that exemptions primarily apply to “white collar” positions, like managers, executives, professionals, and educators. As with most things in the law, it sounds easier to make these distinctions than it really is. While there are other examples of exempt positions, below I focus on the executive exemption because it arises frequently.
Employees “employed in a bona fide executive . . . capacity” are exempted from the overtime requirement. 29 U.S.C. § 213(a)(1). Exemptions are construed narrowly and the employer has the burden of showing that it is entitled to the exemption. Avery v. City of Talladega, 24 F.3d 1337, 1340 (11th Cir. 1994). “[T]he exemption ‘is to be applied only to those clearly and unmistakably within the terms and spirit of the exemption.’” Morgan, 551 F.3d at 1269 (quoting Brock v. Norman’s Country Market, Inc., 835 F.2d 823, 826 (11th Cir. 1988)). The application of the executive exemption is determined in large part by reference to the Department of Labor’s interpretive regulations, after a fact-intensive review.
The DOL regulations make several things very clear. First, “a job title alone is insufficient to establish the exempt status of an employee. The exempt or nonexempt status of any particular employee must be determined on the basis of whether the employee’s salary and job duties meet the requirements of the regulations.” 29 C.F.R. § 541.2. The scope of the exemption is also limited to employees performing truly exempt responsibilities. The regulations indicate that “[t]he section 13(a)(1) exemptions and the regulations in this part do not apply to manual laborers or other ‘blue collar’ workers who perform work involving repetitive operations with their hands, physical skill and energy.” 29 C.F.R. § 541.3 (emphasis added).
The regulations set out a four part test to determine whether employees are exempted from overtime. In order to be exempt under 13(a)(1), an employee must (1) be compensated on a salary basis at a rate of not less than $455 per week, (2) have the primary duty of management of the enterprise or of a customarily recognized department or subdivision of the enterprise, (3) must customarily and regularly direct the work of two or more employees, and (4) have the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight. 29 C.F.R. § 541.100.
“Management” responsibilities include:
29 C.F.R. § 541.102. Management responsibilities must constitute the “primary” duties of the employee. “Primary duty” refers to “the principal, main, major or most important duty that the employee performs.” 29 C.F.R. § 541.700(a). In determining whether or not an employee’s primary duty consists of management, the court should consider “the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee’s relative freedom from direct supervision; and the relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.” Id. With respect to the amount of time spent performing exempt work, the regulations provide that “employees who spend more than 50% of their time performing exempt work will generally satisfy the primary duty requirement,” even though “time alone . . . is not the sole test.” Id.
The next considerations are fairly straight forward. Do you regularly supervise the work of 2 or more employees? Do you have the authority to hire or fire employees (or participate in those decisions)? If so, then you meet these parts of the test. Keep in mind that even if you are occasionally supervising other employees by providing training, you are still exempt if this is not your “primary” function. This most often happens in positions of “assistant manager” in which you train new employees on the cash register or inventory, but you still spend the majority of your time performing manual, non-exempt duties, i.e., stocking shelves, cleaning, answering the phone, or running the cash register. Finally, are your suggestions or input into hiring, discipline or pay of other employees given particular weight?
Under 29 C.F.R. § 541.105, courts consider several factors to determine whether recommendations are given particular weight, including (1) “whether it is part of the employee’s job duties to make such suggestions and recommendations;” (2) “the frequency with which such suggestions and recommendations are made or requested;” and (3) “the frequency with which the employee’s suggestions and recommendations are relied upon.” Id. The regulation also makes clear that particular weight is not shown by “an occasional suggestion with regard to the change in status of a co-worker.” Id. In other words, are you really being treated like a manager, or are you being treated like a glorified front-line worker?5. Job Descriptions and Pay Rates
Although related to the above review of your actual duties, it is worth noting that your job description is deemed to be very important to the analysis. For example, if your job description does not include exempt responsibilities, it is unlikely that you will be considered exempt from overtime. It is also to see how your job description compares to other employees who the employer does not treat as exempt.
Pay rates also matter. If, for example, the difference in pay between exempt and non-exempt employees, or “managers” and non-managers, then it is more likely that the title is being used to avoid overtime pay. After all, a true manager – one that should be exempt under the overtime laws – is more likely to receive a higher salary commensurate with his or her responsibilities.
I hope that by looking over these considerations, you’re able to determine your exempt status. Many employers give employees titles of “manager” in hopes of sticking them under the exemption and avoiding the costs of paying overtime. If you have any questions, please contact us so we can tailor our review to your situation and provide a legal opinion on your entitlement to overtime pay.