Exempt vs. nonexempt is a question that continues to trip up even the most sophisticated employers. Recently, Bed, Bath & Beyond was sued in Illinois federal court by assistant store managers who claim the company incorrectly classified them as exempt and improperly denied them overtime pay. With overtime claims on the rise, employers can’t afford to hide under the covers when it comes to understanding the rules of employee classification.
“Olivia” and “Oscar” worked as assistant store managers at Bed, Bath & Beyond stores in Illinois and New York. On July 11, 2017, they sued the retailer in Illinois federal court on behalf of themselves and other assistant store managers. Olivia and Oscar claim that the company incorrectly classified them as exempt from overtime under the Fair Labor Standards Act (FLSA) and applicable state law, thus denying them overtime pay.
The FLSA and Illinois wage laws require employers to pay employees overtime at 1½ times their regular rate of pay for all hours worked in excess of 40 in a workweek. However, the laws provide an exemption for employees employed in bona fide executive, administrative, professional, and outside sales positions.
According to Olivia and Oscar, the company improperly classified them as exempt under the executive exemption to avoid paying overtime. Olivia and Oscar claim that they worked registers and the customer service desk, performed general customer service, packed shelves, and cleaned the stores by taking out trash, sweeping, and mopping, just as hourly employees did.
The case is just getting started, and Bed, Bath & Beyond has not yet responded to the claims. However, in order to show that the executive exemption applied to the assistant store managers, the company will have to establish that:
- Olivia and Oscar were compensated on a salaried basis at a rate of at least $455 per week.
- Their primary duty was managing a department or subdivision of a store.
- They customarily and regularly directed the work of at least two other full-time employees.
- They had the authority to hire or fire other employees, or their suggestions and recommendations regarding hiring, firing, advancement, promotion, or other changes of status of other employees were given particular weight.
Whether the company will be able to do that is a question for another day. Przytula v. Bed, Bath & Beyond, Inc., No. 17-cv-05124 (N.D. Ill., July 11, 2017).
Like that 20 percent off coupon you didn’t know you needed until it arrived in your mailbox, the suit against Bed, Bath & Beyond gives us something of value. It’s a reminder to carefully examine how you classify your exempt and nonexempt employees. Indeed, classifying employees as exempt or nonexempt from overtime is one of the most important HR tasks facing employers. Here are a few suggestions to consider when making such a classification.
First, ensure you have an accurate assessment of all the duties an employee actually performs. Don’t just look at duties listed on a written job description. Consider observing the employee in action and interviewing managers and colleagues about her tasks. If the written job description does not reflect what you observe, revise it.
Second, after you understand what the employee’s duties are, determine which of the duties is “primary” within the meaning of the FLSA. Some things to consider include but are not limited to (1) the amount of time the employee spends on the task each day, (2) whether the task is more important than her other duties, (3) whether she is supervised, and (4) whether she is paid more than other workers who do not perform exempt work.
Put It to Bed
Once you have a handle on an employee’s primary duties, it’s time to consider which exemptions may apply—e.g., executive, administrator, learned professional, or one of the other exemptions set forth in the FLSA. Each of the exemptions has a list of detailed, relevant requirements.
An overview of the requirements of each of the exemptions can be found on fact sheets on the U.S. Department of Labor’s (DOL) website. Finally, remember that if the employee does not meet those requirements, then she must be classified as nonexempt. No ifs, ands, or beds about it.