Tuesday, December 23, 2008

Do you know? The FLSA’s Executive Exemption

Do you know? What does it take for an employee to qualify as exempt under the Executive Exemption of the Fair Labor Standards Act? Yesterday, we examined a $35.5M verdict in a wage and hour collective action over certain management-level employees misclassified under the FLSA’s executive exemption. As that case illustrates, job titles do not determine exempt status. For an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the DOL’s regulations.

Today, we’ll examine exactly what it takes for an employee to qualify under the executive exemption. Over the next several weeks, we’ll also look at exemptions for administrative, professional, computer, and outside sales employees.

To qualify for the executive employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;

  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent (such as one full-time and two part-time employees, or four part-time employees); and

  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

“Primary duty” means the principal, main, major or most important duty that the employee performs, with the major emphasis on the character of the employee’s job as a whole.

“Management” includes, but is not limited to, activities such as interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures.

“Customarily and regularly” means greater than occasional but not necessarily all the time. For example, work normally done every workweek is customarily and regularly, but isolated or one-time tasks are not.

Factors to be considered in determining whether an employee’s recommendations as to employment decisions are given “particular weight” include whether it is part of the employee’s job duties to make such recommendations, and the frequency with which such recommendations are made, requested, and relied upon. An employee’s recommendations may still be deemed to have “particular weight” even if the employee is not the ultimate decisionmaker.