Articles Posted in Managers Entitled To Overtime

The administrative exemption of the Fair Labor Standards Act (“FLSA”) is one of the most litigated areas of overtime law. Because the administrative exemption regulations can be confusing, it provides a prime opportunity for employers to violate the law. One of the elements of proving the administrative exemption is evidence that the employee exercised discretion and independent judgment with respect to matter of significance.

In order to establish the narrowly construed affirmative defense of the administrative exemption, employers must also show, with clear and convincing evidence, that the employee’s primary duty involved the performance of exempt work involving “the exercise of discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200. Such work is defined as involv[ing] the comparison and evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.” 29 C.F.R. § 541.202(b). Additionally, the following factors should be considered when determining whether an employee exercises the requisite discretion and independent judgment:

whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices; whether the employee carries out major assignments in conducting the operations of the business; whether the employee performs work that affects the business operations to a substantial degree, even if the employee’s assignments are related to operation of a particular segment of the business; whether the employee has authority to commit the employer in matters that have significant financial impact; whether the employee has authority to waive or deviate from established policies and procedures without prior approval; whether the employee has authority to negotiate and bind the company on significant matters; whether the employee provides consultation or expert advice to management; whether the employee is involved in planning long- or short-term business objectives; whether the employee investigates and resolves matters of significance on behalf of management; and whether the employee represents the company in handling complaints, arbitrating disputes or resolving grievances. 29 C.F.R. § 541.202(b).

Many times companies automatically classify its “managers,” “supervisors,” or “bosses” as exempt from overtime under the Executive Exemption when in reality the employees are actually entitled to overtime. In order to determine whether an employee is entitled to overtime, you must look at the employee’s job duties – not their job title.

To qualify under the Executive Exemption, an employee must meet the following tests:

1. The employee must be compensated on a salary basis at a rate of not less than $455 per week;

Recently, a United States federal district court granted employees’ request for conditional certification in an overtime case filed by assistant store managers (“ASM”). The ASM filed an overtime collective action alleging that Burlington Coat Factory failed to pay them overtime wages for the hours they worked over 40 in a workweek. The ASM asserted that their employer misclassified these salaried employees as exempt from overtime but, in fact, the ASM were nonexempt and entitled to overtime. The employees sought permission to send notice about the lawsuit to all other similarly situated employees so that they could join.

The Fair Labor Standards Act (“FLSA”) requires employers to pay its employees overtime pay for all hours worked over 40 in a workweek. There are some exemptions to the FLSA overtime rules, including an exemption for executives. However, although the ASM in the Burlington case were called “managers,” they argued that they were entitled overtime because their job requires little skill and their duties and responsibilities do not include any real managerial responsibilities or the exercise of independent judgment. The managers also argued that they did not have authority to hire or fire other employee and that they spent the majority of their time performing work typical of the other employees like working on the sales floor, opening boxes, ticketing merchandise, stocking shelves, cashiering, unloading trucks, and cleaning the bathrooms.

The federal district court hearing the case agreed with the ASM to conditional certify the overtime case as a collective action pursuant to the United States Supreme Court case Hoffman v. La Roche as well as the legislative purpose of Section 216 of the FLSA. This means that the employees will be permitted to send notice of the lawsuit to other managers about their rights to join the lawsuit and seek their overtime pay.
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