To qualify for the
executive or managerial exemption from overtime under the federal Fair Labor Standards
Act (FLSA), a manager is required to customarily and regularly direct the work
of two or more full-time employees or the equivalent. But what if, in a small
store, the manager isn’t on site enough to physically supervise 80 employee
hours per week? According to a recent U.S. Department of Labor (DOL) opinion,1 the manager could still
qualify for overtime exemption.
Manager Not Always
Present
Members of a retail
store organization sought the opinion, asking whether a store manager must
supervise, in person, two full-time employees or their equivalent to qualify
for exemption, assuming they meet all other exemption requirements. According
to the organization, many retailers have small stores that are staffed by the
store manager and just one other employee at any given time. However, the store
manager has supervisory authority over all the store’s employees, often five to
eight of them. While the employees typically put in a combined 80 hours per
week or more, the store manager is not physically present for all of those 80
hours.
Even when the store
manager isn’t present in the store, he or she remains responsible for ensuring
that all store employees carry out his or her instructions and company
policies. For example, the manager follows up on assigned tasks on a daily
basis, monitors productivity, and ensures sales goals are met. Further, even
when not on duty, the store manager routinely calls or stops by the store to
make sure the assistant manager can handle situations in the manager’s absence.
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.
Exemption Factors
The DOL set out the four
key requirements for the executive overtime exemption:
1. The employee is
compensated on a salary basis of not less than $455 per week.
2. The primary duty is
managing the enterprise in which the employee is employed, or a customarily recognized
department or subdivision of the enterprise.
3. The employee customarily
and regularly directs the work of two or more other employees. “Customarily and
regularly” means a frequency that is greater than occasional but may be less
than constant. This means work that normally is performed every workweek but
doesn’t include isolated or one-time tasks.
4. The employee has
authority to hire or fire other employees, or his or her suggestions and
recommendations as to hiring, firing, advancement, promotion, or other change
of status are given particular weight.
Directing the Work of
Others
Assuming that all the
other factors were satisfied by the managers in question, the DOL focused on whether
supervision must be in person to meet the requirement that an exempt executive
customarily and regularly direct the work of two or more other employees.
The DOL said that a
store manager does not have to work at the same time or even within the same establishment
or location as his or her subordinate employees to satisfy this requirement.
This is true as long as the manager customarily and regularly directs the work
of subordinates, even when the manager isn’t present. The DOL noted that
several courts—including the Ninth Circuit Court of Appeals, which covers
the same conclusion that managers do not have to be physically present to qualify
for exemption.
The DOL concluded that,
based on the information provided in the opinion request, the store managers here
would be exempt. That’s because they continue, even when not in the store, to
direct the work of subordinate employees, such as by monitoring productivity, planning
workloads, handling complaints and discipline, and ensuring their instructions
are carried out.
Although this opinion
addressed only whether the managers qualified for the FLSA’s executive exemption,
managers in this situation might also qualify for exemption under
exemption, as set out in the Industrial Welfare Commission wage orders,
contains a similar requirement that managers must customarily and regularly
direct the work of two or more other employees to be exempt from overtime. And,
the wage orders incorporate the federal regulations that explain this
requirement. Thus, although not entirely clear,
interpretation permitting a manager to qualify for exemption even though not
all supervision is performed in person.
You can link to the new
opinion letter online at http://www.dol.gov/whd/opinion/opinion.htm.