FLSA Exemptions

FLSA exemptions may apply to any employee that is a bona fide executive, administrator, or professional

The FLSA does not apply to everyone. Under the regulatory framework that Congress and the Department of Labor have established, any employee who is a bona fide Executive, Administrator, or Professional is not entitled to a guaranteed minimum rate or overtime pay.

These three “exemptions” to the FLSA are commonly referred to as the “White Collar” exemptions. Unfortunately, in an attempt to save on overtime pay and to prevent from having to pay benefits for additional employees, many companies intentionally misclassify individuals under the White Collar exemption, when, in fact, they perform essentially the same duties as employees paid on an hourly basis. A great deal of the litigation over the last decade has been against companies who have claimed that certain employees are “Managers” or “Executives” when in fact they have little authority or job responsibilities beyond what the other hourly employees have. Similarly, many companies have classified their employees as “Administrators” when, in fact, the employee has little discretion and/or performs mainly production type work. Our firm has successfully prosecuted both types of cases,

Specifically, under the FLSA, for an individual to be considered an Executive:

  • The employee’s compensation is in the form of a salary of at least $455 per week (equal to $23,660 per year);
  • The employee’s primary duty is the management of the enterprise or of a customarily recognized department or subdivision thereof;
  • The employee customarily and regularly directs the work of two or more other employees (or the equivalent of 80 payroll hours); and,
  • The employee has authority to hire or fire other employees, or the employee’s suggestions and recommendations as to hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight. [29 C.F.R. §541.100]

To qualify for the Administrative exemption:

  • The employee’s compensation is in the form of a salary of at least $455 per week (equal to $23,660 per year);
  • The employee’s primary duty is 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. [29 C.F.R §541.200]

To qualify for the Professional exemption:

  • The employee’s compensation is in the form of a salary of at least $455 per week (equal to $23,660 per year); and,
  • The employee’s primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. [29 C.F.R. §541.301]

The most litigated section of the White Collar exemptions in our experience has been the “Executive” exemption cases. We have been involved in several cases and nationwide collective actions where employers have classified individuals as “managers” when they are really nothing more than a lead clerk or foreman. Under the FLSA, job titles are irrelevant. The focus of the litigation is always on what an employee actually does during his or her typical day at work. More often than not, we have found that many of the individuals classified as “managers,” “assistant managers.” “department managers” and/or “service managers” spend about the same amount of time performing non-managerial functions as all the hourly employees.

Many of the retail stores and service establishments have a district manager that makes most of the important decisions and the alleged “manager” only gets to make a relatively few, unimportant daily decisions. Under the FLSA, these facts will often not support a determination that the person is a “Bona Fide Executive.” Therefore, these individuals should be paid overtime for all the hours they work over 40 each week.

The types of companies we have seen that use this form of misclassification is wide ranging. There has been a great deal of litigation against retail stores under this theory. Additionally, a large number of automotive repair stores, service industry jobs, convenience stores and restaurant chains have been proven to misclassify their employees as managers when they really were not.

Although the majority of the FLSA litigation the last several years has centered on these White Collar exemptions, we are handling a lot of cases in newer areas of the FLSA.