Christopher A. Bianco, Esq.
Egan & Golden, LLP
The U.S. Department of Labor has issued new rules under the Fair Labor Standards Act that will impact overtime pay for salaried workers. The salary threshold over which employers are exempt from paying the overtime rate to executive, administrative, and professional employees (EAP) will rise to $47,476 a year. Workers earning less than the new threshold will be eligible for overtime pay even if they are considered EAP workers. The new rules will take effect on December 1, 2016.
The $47,476 a year threshold is only one part of the test for overtime exemption. Even those employees earning more than $47,476 must be classified as executives, administrative personnel, professionals, sales people, or computer employees in order for the overtime exemption to apply. Employers in the restaurant industry will often classify their managers as executives to meet the exemption requirements. The executive exemption from overtime pay applies if the employee's annual pay exceeds $47,476 and
1) The employee’s primary duty is managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; and
2) The employee customarily and regularly directs the work of at least two or more other full-time employees or their equivalent; and
3) The employee has 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.
In evaluating whether a food service manager meets the above criteria and is properly classified as an executive, the courts have looked at the following factors:
Relative importance of the managerial duties: does the employee order and control inventory, decide who to interview and hire, train employees, draft the schedule for employees, monitor labor costs, discipline employees, conduct performance reviews, establish pay rates
Frequency of exercise of discretion and independent judgment : is the employee the highest ranked person at the site and do they exercise managerial responsibilities during most of their work day?
Relative freedom from supervision: is the manager supervised everyday or do higher level executives and management merely make periodic visits?
Comparative compensation: is the manager paid significantly more than non-exempt employees? does he receive more benefits and perks? (a large difference in compensation between manager and employee means makes it much more likely that the manager qualifies for the exemption)
Starbucks managers, Burger King assistant managers, J.C. Penney department managers, and K-Mart assistant managers have been found to be exempt from overtime pay under the executive exemption.
Egan & Golden, LLP has a diverse practice representing business owners in all aspects of their corporate legal needs, from formation and licensing, to business contracts and employee relations. Please contact the firm should your business need advice and guidance.
About the Author
Christopher A. Bianco, Esq. received his B.A., cum laude, in Political Science and Economics from the University of Notre Dame. He received his law degree from New York University School of Law, where he was an executive editor for the Journal of Law and Liberty. Full Profile