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News | Jan 01, 2011

Abuses of the “Executive” Employee Exemption to Overtime Coverage Continue to Flourish. What You Can do to Fight Back.

The Boss has found so many ways to violate federal and state overtime law that it’s not really possible to say which violation is most pervasive.  In this edition of The Wage and Overtime Quarterly, however, we explore a violation that certainly ranks near the top of the list of overtime rip-offs: Misclassifying salaried employees as “executives” who are exempt from overtime coverage.

This is an important topic for all you Trial Lawyers, advocates, and Winebrake Law Firm clients who receive this newsletter.  Government investigators cannot possibly clean up America’s wasteland of wage and overtime violations.  So it is up to Trial Lawyers and Workers to recognize workplace abuses and refer the abuses to lawyers who are dedicated to wage and overtime litigation.  History has proven that lawsuits are the most effective way to vindicate the rights of American workers.

The “Executive” Employee Exemption from Overtime Coverage
The Fair Labor Standards Act (“FLSA”) and state laws such as the Pennsylvania Minimum Wage Act (“PMWA”) generally require that employees receive overtime pay equaling one-and-one-half-times their regular rate of pay for hours worked over 40 during the workweek.  Under these laws, however, “executive” employees are exempt from receiving overtime pay.

The Executive Exemption makes good sense.  After all, real company “executives” are not the types of employees who need the protections of the FLSA’s overtime provision.  That is because real executives have the clout and bargaining power to fend for themselves in negotiating with The Boss for fair pay.

Unfortunately, as discussed below, many companies use the Executive Exemption to deny overtime pay to mid-level and low-level employees who lawmakers never intended to exempt from overtime pay protections.  Year after year, these abuses of the Executive Exemption illegally deprive working American families of millions of dollars in hard-earned wages.

Corporate America’s Abuse of the Executive Exemption
The Executive Exemption is a bonanza for American business.  And far too many companies abuse the exemption to force supposedly exempt “Managers,” “Assistant Managers,” “Department Managers,” “Office Managers,” and “Team Leaders” (the list of exaggerated job titles is endless) to work absurdly long hours performing routine tasks for free.  For sure, there is nothing “executive” about the day-to-day work performed by many of these employees.  Working the cash register, completing routine paperwork, stocking the shelves, unloading delivery trucks, taking inventory, cleaning the work area, and performing manual labor are not the types of job duties that are supposed to fall within the Executive Exemption to overtime coverage.

Abuse of the Executive Exemption is devastating to America’s working families. I am very sorry to report thatThe Winebrake Law Firm represents many supposedly exempt “executives” who  routinely work 60, 70, and even 80 hours per week.  Some of these individuals barely make minimum wage when their weekly salaries are divided by their hours worked.  Their classification as exempt from the overtime laws is disgraceful.

Recognizing Abuses of the Executive Exemption
The Executive Exemption rip-off thrives when employees do not understand their rights.  Too many employees believe they are “exempt” from overtime coverage just because they are “salaried.”  This belief is simply wrong.  Under the law, a salaried employee qualifies as an exempt “executive” only if the employee’s real-life job duties entail work of a truly executive nature.

Most overtime misclassification lawsuits turn on whether the employee’s real-life job duties actually entail executive work.  Importantly, in determining whether the Executive Exemption applies, the employee’s job title is not particularly relevant.  The federal regulations specifically state that “[a] job title alone is insufficient to establish the exempt status of an employee.”  29 C.F.R. § 541.2.  Thus, it does not matter whether the supposedly exempt employee has the term “Manager” in his or her job title.

To qualify for the Executive Exemption, all of the following requirements must be satisfied:

  • The employee must receive a guaranteed weekly salary of at least $455 per week;
  • The company generally may not make deductions from the fixed weekly salary;
  • The employee’s primary duty must be managing the business operation or a recognized department or subdivision of the business operation;
  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  • The employee must have the authority to hire and fire other employees, or, at least, his/her recommendations as to hiring and firing must be given particular weight.

Moreover, under Pennsylvania law, any employee classified under the Executive Exemption must spend at least 60% (and, sometimes, 80%) of his/her time performing the types of tasks listed above.

Application of the above requirements requires a careful analysis of the employee’s actual job experience and a detailed review of federal/state regulations and court decisions.  If you have any reason to suspect that you, a co-worker, or a client might have been improperly denied overtime under the Executive Exemption, you should call a law firm that concentrates in wage and overtime law (e.g. The Winebrake Law Firm!!!) for a detailed evaluation.

Examples of Salaried Employees who are Commonly Misclassified as Exempt from Overtime Coverage
Here are some examples of salaried employees who commonly are misclassified as exempt from overtime coverage under the Executive Exemption and other “white collar” exemptions:

  • Managers and Assistant Managers of small retail stores such as “dollar stores,” “convenience stores,” and retail shops within shopping malls;
  • Managers of departments within larger retail establishments such as department stores, “big box” stores, supermarkets, and drug stores;
  • Newspaper sales managers;
  • Bookkeepers or Accountants without CPAs;
  • Social Workers and Case Managers working for social service agencies;
  • Licensed Practical Nurses (LPNs), Medical Assistants, and similar line-level health care employees;
  • Computer technicians and computer support staff (including help desk staff) who do not regularly write code;
  • Warehouse managers and supervisors;
  • Work crew captains or foremen;
  • Mortgage loan officers;
  • Home health aids or visiting nurses employed in Pennsylvania;
  • Call center sales representatives; and
  • Trainees for exempt positions.

“Only YOU Can Prevent Overtime Abuse”
Smokey the Bear used to appear on TV to tell us: “Only You Can Prevent Forest Fires.”  Well, the same can be said of overtime abuse.  Too many Trial Lawyers, advocates, and workers believe that the overtime laws are too complicated for them to understand, so they leave it to The Boss to interpret the law.

But The Boss is under pressure to feed the bottom line, so his interpretation of the overtime law might not be too worker-friendly.  If you believe the overtime rights of you or your client are being violated, give us a call.  Stop guessing at your overtime rights.

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