A new federal appeals
court decision highlights that an employee’s primary duty must be management
work for the person to qualify for the executive or managerial overtime exemption.
We’ll explain what happened— and point out key differences between the federal
and
employers need to be aware of.
Managers Perform Many
Nonmanagement Tasks
Speedway SuperAmerica
LLC operates a nationwide chain of more than 600 gas station/convenience
stores. Each station is run and operated by a store manager (SM) who is
supervised by a district manager (DM). DMs typically visit stores once or twice
a week, although up to two weeks might elapse between visits.
operating procedures to maintain consistency among its many stores.
work at least 50 hours a week and to always be on call. They were paid a base salary
of $522 a week and were eligible for a bonus program.
Mabel Kay Thomas was a
Speedway SM in
She spent about 60 percent of her time performing nonmanagement tasks, such as
stocking, sweeping, cleaning bathrooms, operating the cash register, and the
like. The rest of her time was spent on management functions, including
supervising, interviewing, hiring, training, preparing work schedules,
resolving employee complaints, and recommending employee terminations to the
DM. In Thomas’s own words, she was “in charge.”
Suit Challenges Overtime
Exemption
Thomas was eventually
discharged. She then sued
Fair Labor Standards Act (FLSA) for not paying her overtime wages. She filed
the suit as a “collective action,” which is similar to a class action, on
behalf of all Speedway SMs who worked more than 40 hours a week and didn’t
receive overtime compensation. A trial court dismissed the suit, finding that
the SMs were properly classified as exempt from overtime. Thomas appealed.
Paying Overtime: 10 Key Exemption Concepts
Only one thing really matters in the determination as to whether or not an employee is exempt: The duties the employee performs. Learn how to avoid costly, preventable mistakes with our free White Paper, Paying Overtime: 10 Key Exemption Concepts.
Employer Wins
The federal appeals
court affirmed the dismissal.1 The key dispute in the case was whether the primary duty of Thomas
and other Speedway SMs was management, as required for exemption under the
FLSA. Making this determination, said the court, required an examination of the
employees’ actual duties, and not relying on an employer’s or employee’s
description of the position. Thus, even Thomas’s own contention that she was in
charge wasn’t dispositive in the employer’s favor of whether management was her
primary duty.
The court went on to
cite FLSA regulations, which state that the primary duty isn’t necessarily the
most time-consuming but rather is the principal, chief, or most important duty
the employee performs. Nevertheless, the amount of time spent is a useful guide
in determining whether management is a primary duty. Although employees who
spend more than 50 percent of their time performing management duties generally
satisfy the primary duty requirement, employees who don’t spend more than 50
percent of their time on management may still be exempt if other factors point in
that direction. Here, the relative importance of Thomas’s managerial duties was
such a factor, outweighing the fact that Thomas spent about 60 percent of her
time on nonmanagement tasks.
Management Was Primary
Duty
The court found that the
managerial tasks Thomas performed were much more critical than her
nonmanagerial duties to
and success: “If … Thomas failed to perform her managerial duties, her
not function at all because no one else would perform these essential tasks. Surely,
a gas station cannot operate if it has not hired any employees, has not
scheduled any employees to work, or has not trained its employees on
rudimentary procedures such as operating the register.”
Other factors that
weighed in favor of finding that Thomas’s primary duty was management included:
1) she frequently had to exercise discretion over important matters; 2) she was
relatively free from supervision because she was the most senior employee on-site
and generally operated without a supervisor looking over her shoulder, except
for the DM’s occasional visits; and 3) her salary and bonuses, when broken down
into an hourly rate, were well above what nonmanagerial employees earned.
This case provides a
useful look at the factors the U.S. Department of Labor and federal courts will
consider to determine whether an employee qualifies for the managerial
exemption from overtime under the FLSA. Private employers in
state overtime exemption standards, which are stricter. And it’s possible that
the
law.
To qualify for overtime
exemption under California law, the employee must be “primarily engaged in” exempt
activities, meaning that more than half of the employee’s work time must be
spent on managerial tasks or performing work that’s “directly and closely related”
to those tasks. Determining whether otherwise nonexempt work is directly and
closely related to the exempt work depends on the organization’s size and nature
and the context in which the work is performed. Small tasks that would otherwise be nonexempt but
are performed only occasionally may also qualify as exempt if they aren’t
otherwise specifically assigned to subordinates and do not tend to be
repetitive or frequently recurring.
For more on the
executive exemption and
and federal differences, consult our exclusive Employer Guide, “Who’s Entitled
to Overtime: How to Avoid Mistakes When Classifying California Employees.”
You can read the new
decision online at www.
ca6.uscourts.gov/opinions.pdf/07a0436p-06.pdf.
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1 Thomas v.
U.S.C.A. 6th Cir. No. 06-3768, 2007