When is a “Manager” Not a “Manager” for Purposes of Overtime Pay?

Last updated Oct. 30, 2017.

Both the federal Fair Labor Standards Act, 29 U.S.C. Sec.201-219 (the “FLSA”) and the New Jersey Wage and Hour Law, N.J.S.A. Sec. 34:11-56a-34:11-56a30, require employers to pay overtime (or 1.5 times the regular rate of hourly pay) to all covered, non-exempt employees for all hours worked over forty (40) hours in a single work week. Both laws, however, classify “executive” employees as “exempt” from the overtime pay requirement.

The question for many workers, then — especially those in retail and service jobs — is whether they qualify as “executives” who fall outside the scope of the overtime mandate. Does a job title of “Sales Manager” at a clothing store automatically make you an “executive”? Or does the fact that, job title notwithstanding, you still spend the bulk of your workday working the sales counter, folding clothes, and stocking inventory come into play?

How an “Executive” is Classified in New Jersey

The answer is that the law classifies an “executive” based upon an employee’s actual job duties, rather than mere title. New Jersey has amended its Wage and Hour Law to define “executive” employees in the same manner as the federal regulations promulgated under FLSA. This means that, under either law, an “executive” must meet all of the following four requirements:

1. Must be paid on a salary basis at a certain rate (as of the date of this article, at least $455 a week).
2. Must have the primary duty of managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise.
3. Must customarily and regularly direct the work of two or more other full-time employees or their equivalent; and
4. 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.

29 C.F.R. Sec. 541.100(a)(1)-(4).

The above test raises some important and, in some cases, tricky questions.

What does “managing the enterprise” mean?

In other words, what kinds of job duties are legally recognized as managerial?

Under the federal regulations, some management duties include:

• Interviewing, selecting, and training employees;
• Setting and adjusting employee rates of pay;
• Directing employee work;
• Appraising employee performance;
• Disciplining employees;
• Determining the type of materials, supplies, machinery or tools to be used or merchandise to be bought, stocked and sold;

29 C.F.R. Sec. 541.102

The common link in these duties is that they involve exercising control over the terms and conditions of another worker’s employment to ensure that the business is run smoothly and profitably.

What is “primary duty” under FLSA?

Does “primary” refer to the number of hours an employee dedicates to managerial work?

NO. The regulations do not specify a hard-and-fast number or percent of hours of managerial work that automatically designate a worker as an executive. Instead, the regulations define “primary duty” as the “principal, main, major or most important duty” performed by the employee, regardless of the amount of time involved. As such, courts must take a qualitative look at an employee’s workday to determine whether management is the “primary duty.”

This requires consideration of “all the relevant facts”, as well as:

• “The employee’s relative freedom from supervision”;
• “The frequency of the employee’s exercise of discretion”;
• “The relative importance of managerial and non-managerial tasks”;
• “The time spent on managerial duties”; and
• “The employee’s salary relative to the wages of workers supervised”.

Donovan v. Burger King Corp., 675 F. 2d 516, 520-21 (2d. Cir. 1982)

This means that you may still fall under the executive exemption, even if you spend very little time on executive duties as compared to non-executive ones.

Recent FLSA Case Explains “Primary Duty” Further

A recent Third Circuit FLSA case illustrates this point. In Soehnle v. Hess Corporation, 399 Fed.Appx. 749 (C.A.3 (Pa.)), the plaintiff was the sole site manager at a Hess gas station. As manager, she was responsible for supervising several employees, over whom she had hiring, firing, training, and disciplinary authority. Moreover, she was minimally supervised herself, yet responsible for the profitability of the station.

The plaintiff sued Hess for overtime pay under the FLSA, arguing that she was not an exempt executive, as 85% of her workday was spent operating the cash register. In fact, she claimed she only dedicated a half hour to supervisory duties each day. The court, however, ruled that she fell squarely within the FLSA’s executive exemption. The court noted that “primary duty” did not refer to the most time-intensive duty, and that a thorough look at her duties revealed that her main job was to manage the station’s business and employees.

An earlier New Jersey state court exercised similar reasoning in Marx v. Friendly Ice Cream Corp., 380 N.J.Super. 302 (2005). Here, the plaintiffs were general managers for Friendly’s stores who sought overtime under the New Jersey Wage and Hour Law. The managers argued that they were not exempt executive employees, as low staffing levels demanded they spend most of their time “filling in” for employees by cooking, serving food, clearing tables, and otherwise performing non-executive work.

The court, however, disagreed, stating: “relative allocation of time is only one factor that is not determinative of ‘primary duty’. . . the time plaintiffs spend cooking, serving food or clearing and wiping tables does not preclude simultaneous performance of their supervisory duties. Cooking, serving and clearing tables is not necessarily inconsistent with effective supervision. It can permit a general manager to teach techniques that improve performance and efficiency . . .” Id. at 382.

In other words: as manager, you always have authority over your underlings, regardless of the work you may be doing at a particular point in time.

Get Help with Overtime Pay and the Law

If you have questions about whether or not you are entitled to overtime pay, don’t hesitate to give our offices a call today for a free consultation. The experienced employment law attorneys of Zatuchni & Associates specialize in employment discrimination law and can best advise you as to next steps to take with your employer.