Misclassification of “Managers” Under the FLSA: Many Employers Still Don’t Get It
November 24, 2015
Yet another nationwide employer is paying the price for alleged misclassification of purported managerial employees. Subject to the approval of a New York federal court, office supply retailer OfficeMax will pay current and former assistant store managers unpaid overtime wages of $3.5 million. The plaintiffs sued OfficeMax under the Fair Labor Standards Act (FLSA) claiming that they were misclassified as exempt from overtime pay requirements pursuant to the “executive” exemption. They alleged that despite being classified as “managers,” they primarily performed the same job duties as hourly paid, subordinate employees as opposed to tasks that were managerial in nature.
The FLSA generally provides that non-exempt employees must be paid the current minimum wage for all hours worked in a workweek. In addition, such employees are typically entitled to overtime pay of one and one half times their regular hourly rate for each hour worked over 40 hours in a workweek. However, the FLSA provides a number of exemptions from the overtime pay requirements. Among the exemptions are the so-call “white collar” exemptions including professional, administrative and executive. To claim the benefit of the executive exemption as to a given worker, an employer must satisfy the salary basis and primary job duties tests. The salary basis test is simple enough (well, relatively speaking)- the employee must regularly be paid a weekly salary of no less than $455 regardless of how few or many hours are worked. With certain exceptions, the employee is entitled to be paid his/her full salary if any work is performed during the workweek.
It is the job duties test where things most often go wrong for employers. The job duties test requires the following: (1) the employee’s primary duty must be management of the enterprise or of a customarily recognized department or subdivision; (2) the employee must customarily and regularly direct the work of two or more other employees; and (3) the employee must have the authority to hire or fire other employees (or their suggestions and recommendations as to hiring, firing, advancement, promotion or other change of status of other employees must be given particular weight). This does not mean that the exemption is unavailable if the employee performs any nonexempt work. For example, a store manager at an office supply retailer can still be lawfully treated as exempt even if he/she stocks, shelves, serves customers and performs other non-managerial tasks so long as the primary responsibilities are those enumerated above.
It is imperative that employers understand that simply calling employees “managers” or “supervisors” and paying them fixed weekly salaries does not alone satisfy the executive exemption. Job titles are largely irrelevant. Similarly, job descriptions listing managerial responsibilities are worthless if in practice, the subject employees do not actually have such responsibilities. Likewise, employees should not assume that just because they have been labeled “managers” or “supervisors” that they are not entitled to overtime pay, particularly where they are primarily performing the same job duties as their subordinates.