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;
2. The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
3. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
4. 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.
Here’s how the courts and the Department of Labor break down the above tests:
1. The courts and the Department of Labor define “primary duty” as “the principal, main, major or most important duty that the employee performs.
2. The term “managing” means activities like interviewing, training employees, setting pay rates and hours of work, directing work of employees, reviewing employee’s work for recommendations for promotions, handling employee complaints, disciplining employees, determining equipment to be used, planning and controlling the budget and implementing legal compliance measures.
3. The term “customarily recognized department or subdivision of the enterprise” means “a unit with permanent status and function” as opposed to a mere collection assigned from time to time to a specific job or series of jobs. In other words, it means a set department.
4. The term “customarily and regularly” does not include isolated or one-time tasks. The Department of Labor says it means “greater than occasional but less than constant” and includes work done every workweek.
5. The phrase “two or more other employees” means two full-time employees or their equivalent, e.g. one full-time employee and two half-time employees.
To find out more about the Executive Exemption under the FLSA, contact Martin & Martin for a free consultation.