Who is considered an executive under the Fair Labor Standards Act?
In order for the exemption to the FLSA requirement that workers be paid time and a half for overtime, the employee must:
- Have as his or her “primary duty” the “management of the enterprise in which the employee is employed”;
- “Customarily and regularly direct[ ] the work of two or more other employees”; and
- “Ha[ve] the authority to hire or fire other employees,” or have his or her “suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees [be] given particular weight.” 29 C.F.R. § 541.100(a).
The employer has the burden to prove its employee is an executive and therefore exempt. Madden v. Lumber One Home Center, Inc., 745 F.3d 899, 903 (8th Cir. 2014) (citing Fife v. Harmon, 171 F.3d 1173, 1174 (8th Cir. 1999)).
“The designation of an employee as FLSA exempt or nonexempt must ultimately rest on the duties actually performed by the employee.” 5 C.F.R. § 551.202(e). Employers must prove the employees meet each prong to be exempt. See, e.g., Perez v. Radioshack Corp., 552 F.Supp.2d 731 (N.D. Ill. 2005).
We argued in the City Water supervisor case that the City could not prove either the first or third requirements are satisfied. Plaintiffs’ “primary duty” is not “management of the enterprise.” They also do not have the authority to hire or fire and their suggestions or recommendations are not given “particular weight.”
The “primary duty” stated above in the first requirement is “the principal, main, major or most important duty that the employee performs.” 29 C.F.R. § 541.700(a). The regulations also provide a non-exclusive list of factors to consider:
- [T]he relative importance of the exempt duties as compared with other types of duties;
- [T]he amount of time spent performing exempt work;
- [T]he employee’s relative freedom from direct supervision; and
- [T]he relationship between the employee’s salary and the wages paid to other employees for the kind of nonexempt work performed by the employee. 29 C.F.R. § 541.700(a).
The regulations also set forth a list of management activities:
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. 29 C.F.R. § 541.102.
We argued that Water Distribution Supervisors do none of this and do not: have hiring or firing power; set employee pay; maintain production or sales records; have any ability to promote or demote employees; have any ability to suspend employees; make grievance decisions; enforce employee discipline; perform quality control; control the materials used on job sites; set safety policies or policies of any kind; or enforce legal compliance.
Water Distribution Supervisors only arguably “direct” employee labor, which is also something foremen, a non-exempt position, do.
For the relative importance of exempt duties as compared with other duties, Courts must consider whether the employer’s goals can be accomplished if the employee failed to perform either his managerial or non-managerial duties. Cort v. Kum & Go, L.C., 923 F.Supp.2d 1173, 1178 (W.D.Mo. 2013) (internal citations omitted).
The Court also considers the employee’s job description, performance review criteria, bonus plan, and training. Id. The plaintiffs’ testimony made clear their hands-on labor and on-site work keeping the City’s water up and running is their most important duty. Following Cort, the City’s “goals” of keeping the water running are not met if plaintiffs do not perform their on-site and hands-on labor.
“The amount of time spent performing exempt work can be a useful guide in determining whether exempt work is the primary duty of an employee,” though time is not the sole test. 29 C.F.R. § 541.700(b).
If a manager is closely supervised and earns little more than nonexempt employees, the manager will generally not meet the primary duty requirement. 29 C.F.R. § 541.700(a); Cort, 923 F.Supp.2d at 1181.
The fourth primary duty factor concerns the relationship between an employee’s salary and the wages paid to other nonexempt employees for the kind of nonexempt work performed by the employees. 29 C.F.R. § 541.700.
The regulations and cases do not prescribe a specific mathematical formula, rather the Court generally compares a manager’s weekly salary with the highest nonexempt weekly wage. Cort, 923 F.Supp.2d at 1183.
This comparison also proves the plaintiffs are not executives. The Water Distribution Supervisor base rate earns $1,781 every two weeks. The Water Maintenance Foreman base rate earns $1,601 every two weeks, but they earned more with overtime. So the pay disparity was absent.