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Executive Exemption to Overtime Pay Requirement

by The Human Equation, Inc. on 10/16/2008
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We recently hired a full-time employee to assist our warehouse manager, who earns a salary of $500 per week, supervises and directs the assistant's work, and has the authority to report on the assistant's performance to management. Since our warehouse manager now supervises an employee, can we classify him as exempt from the Fair Labor Standards Act's overtime pay requirements?

No. Subject to specific exemptions, the Fair Labor Standards Act (FLSA) is the federal law requiring that employees be paid not less than time and one-half the employee's regular rate for time worked over 40 hours in a workweek. One such exemption is the executive exemption, which applies to employees: 1) who are compensated on a salary basis at a rate of not less than $455 per week; 2) whose primary duty is management of the business or of a recognized subdivision of the business; 3) who customarily and regularly direct the work of two or more other employees; and 4) who have the authority to hire or fire other employees or to recommend the hiring, firing, advancement, or promotion of other employees.

Although the employee in this situation appears to satisfy the first, second, and fourth requirements of the executive exemption, he clearly fails to satisfy the third requirement. The warehouse manager directs the work of only one employee, the newly-hired assistant, rather than the required minimum of two employees. Accordingly, the warehouse manager does not qualify for the executive exemption. While in some cases the facts clearly support the conclusion that the employee in question does not qualify for the executive exemption, as in this one, determining eligibility in other situations may require a detailed and fact-specific inquiry. This is especially true in cases in which either an evaluation of the employee's primary duties or of the employee's authority over subordinates is an issue. Employers who improperly classify an employee as exempt when that employee does not in fact qualify for the executive exemption face a much higher risk of being sued for unpaid overtime compensation and stand a much greater chance of losing that suit.

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Categories: 2008

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