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Is Overtime Pay Required for Managers?

by Martin Salcedo, Esq. - The Human Equation on 9/17/2012
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Employers who rely on job titles when determining whether an employee is exempt from federal overtime pay requirements risk being named as defendant in a wage and hour lawsuit.

Employers often assume that the Fair Labor Standards Act’s (FLSA’s) executive exemption automatically applies to any employee given the title of “manager.” The reality, however, is that the manager title has virtually nothing to do with whether an employee qualifies for the executive exemption.

To be considered an exempt executive under the FLSA, all of the following requirements must be satisfied:

  • The employee must be compensated on a salary basis at a rate no less than $455 per week.
  • The employee’s primary duty must be managing an 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 full-time employees or their equivalent.
  • The employee must have the authority to hire or fire other employees, or the employee’s recommendations regarding hiring, firing, advancement, etc. must be given particular weight.

If an employee doesn’t satisfy all of these requirements, they cannot be treated as an exempt executive under the FLSA. Those who act otherwise are inviting serious trouble. Consider the case of a publicly-traded mattress retailer paying $1.6 million dollars after being sued by “managers” who were not really managers under the FLSA! A similar fate awaits others who make the same mistake.

When considering whether an employee meets the legal requirements for the executive exemption, be sure you understand the following terms:

Salary Basis: The employee must regularly receive a predetermined amount of pay which is not reduced because of variations in the quality or quantity of work performed, and which is not otherwise subject to improper deductions.

Primary Duty: Employees spending more than 50 percent of their time performing exempt work will generally satisfy the primary duty requirement. However, time alone is not the sole test. Other factors include the relative importance of exempt duties and the relative freedom from direct supervision. Since this is a fact-based inquiry, there are few absolute rules that apply to every situation.

Customarily and Regularly: To satisfy this requirement, exempt work must be done more than occasionally but does not have to be done constantly. Work that is regularly performed every workweek would qualify; isolated or one-time tasks would not.

If you would like to learn more about avoiding wage and hour lawsuits under the Fair Labor Standards Act, click here.

If you have any questions about the information contained in this article, or if you would like to discuss how we can serve you and your association, please contact us.

The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance and Risk.

 

Comments

5/9/2016 1:18:54 PM #

New FLSA White-Collar Overtime Exemption Rules Are Coming...Maybe Sooner Than You Think!

New FLSA White-Collar Overtime Exemption Rules Are Coming...Maybe Sooner Than You Think!

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