HR Support on the FLSA Executive Exemption

Editor's Note: The executive exemption is not just for CEOs; lower-level supervisors can be exempt from overtime, too.

Michael CardmanOverview: In the popular imagination, the word executive brings to mind images of a CEO or a company president, sitting in the corner office and overseeing hundreds or even thousands of employees. But under the Fair Labor Standards Act (FLSA), employees who supervise as few as two full-time employees can also qualify as executives under the employee classification definition. For this reason, a variety of employees one might not normally think of as executives - such as convenience store managers, chefs and construction superintendents - can qualify as executives and be exempt from the law's overtime requirements.

Besides directing the work of two or more employees, executives must also:

  • Be compensated on a salary basis;
  • Have a primary duty of managing the business or a recognized department or subdivision of the business; and
  • Make, or at least influence, hiring and firing decisions.

Trends: In recent years, there has been a significant amount of litigation concerning the amount of nonexempt work that managers may perform without forfeiting their exemption. Under the FLSA, management includes hiring employees, disciplining employees, setting rates of pay, planning work and other similar duties. These duties must be the "principal, main, major or most important" duties that an executive performs, but they need not necessarily occupy a majority of an executive's time. For this reason, many employers classify employees such as gas station managers as exempt executives, even though they spend most of their time performing nonexempt work such as manning a cash register or stocking shelves. Some of these managers have sued their employers, arguing that they were misclassified. Some won their lawsuits; others lost. But the trend of increased litigation is likely to continue as employers continue to push the envelope about who can qualify as an executive.

Author: Michael Cardman, Legal Editor

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