It’s the wage and hour question that your business must be able to answer

Question mark.svg

Public Domain, Link

I conduct Fair Labor Standards Act (wage-and-hour) audits for clients. Among other things, I help them determine whether they are paying at least the minimum wage to all employees. But, more importantly, I confirm which employees are entitled to overtime (time-and-a-half for working more than 40 hours in a workweek) and ensure that the company is paying these employees all that they are owed.

This employee is exempt because ____________

One way that I go about analyzing these situations is by reviewing job descriptions. Often, somewhere near the top or bottom of the job description is a line that describes the position is one of two ways: (1) “FLSA Status: Exempt”; or (2) “FLSA Status: Non-Exempt”. If it’s the former and the company is paying the employee a salary, I often ask the employer, “Why does the company consider this employee to be exempt?”

(Because if an employee is “exempt,” that means that s/he is not entitled to overtime.)

When I ask that “exemption” question, I often get one of the following responses:

  • “This employee is exempt because we pay the employee a salary.” (Gulp!)
  • “This employee is exempt because that’s, err, how it was when I got here.” (Oh really…)
  • “This employee is exempt because s/he is an assistant manager.” (Maybe.)

Ah yes, assistant managers.

The FLSA contains several exemptions; among them, the “executive,” “administrative,” and “professional” exemptions.

All of these exemptions require that the employee in question receive a salary of at least $455/week ($23,660 per year). But, wait, there’s more.

To qualify for the “executive employee” exemption, all of the following additional tests must be met:

  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  • 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.

To qualify for the “administrative employee” exemption, all of the following additional tests must be met:

  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

To qualify for the “professional” exemption, one of the following additional tests must be met:

  • The employee’s primary duty must be the performance of work requiring advanced knowledge, and which includes work requiring the consistent exercise of discretion and judgment; or
  • The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor

Generally, for assistant managers, the professional exemption does not apply because the employee lacks the required advanced knowledge/skill. Sometimes the administrative exemption works, but these employees often come up short when it comes to the exercise of discretion and independent judgment with respect to matters of significance.

That leaves the executive exemption, where it can also get dicey. Questions arise like does the individual truly manage a recognized unit of the business? (As opposed to reporting to someone else within the unit.) Also, does the person truly have say-so or at least some real input on personnel decisions?

Since it’s up to the employer to establish that an exemption applies (not the other way around; i.e., for an employee to disprove an exemption), answering these questions can be both difficult and nuanced. So, it’s not enough to rely on a job description alone. That will hopefully talk the talk, but the employee also has to walk the walk.

Checking all of those boxes for assistant managers can happen, but it’s not easy. That’s why businesses often get sued for misclassification of assistant managers. And often, those cases settle. Like this lawsuit filed in 2017 against a local gas and convenience store chain which recently settled for seven figures, including nearly half a million dollars in attorney’s fees.

The employer did not admit any liability as a result of the settlement. But that’s a spicy meatball to swallow.

So, can you answer the question?

If I ask you, “Why does the company consider this employee to be exempt?” You must be able to complete this sentence: This employee is exempt because ______________.

If you can’t, it’s time to call an employment lawyer for help.

“Doing What’s Right – Not Just What’s Legal”