Are You Sure He’s a Manager?

Have you given some of your employees the oh-so-important title of “manager” in order to avoid paying them overtime?  Burlington Coat Factory reportedly settled a class action lawsuit brought by its assistant managers this week for $5.7 million.  The employees claimed that the company failed to pay overtime and vacation pay for assistant managers.

A designation of “manager” may work to avoid the payment of overtime, but the title has to be meaningful. The Fair Labor Standards Act exempts executive, administrative, and professional employees from the minimum wage and overtime requirements of the FLSA.  For each of these three categories, an employee must meet the “duties” test for the respective exemption, but first the employee must meet the salary and salary level test.  An employee is paid on a salary basis, as contemplated under the FLSA, if she receives a full salary for any work week in which any work is performed without regard to the number of days or hours worked.  An employee must meet a minimum salary level in order to meet the exemption.  To meet the requirement the employee must be compensated on a salary basis at a rate not less than $455.00 per week ($23,660.00 annually).

If the employee meets the salary test above, she still has to have job duties that qualify her as a manager. Most managers would have to fit into the executive or administrative categories.  In order to meet the duty requirements for the executive exemption, the employee’s primary duty must be to manage a department or subdivision of an enterprise; the employee must regularly direct the work of at least two or more other full time employees; and the employee must have authority to hire or fire other employees or at the very least the employee’s suggestions and recommendations as to the hiring and firing must be given particular weight.

To be entitled to an administrative exemption, 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.