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FLSA: Be careful when classifying your employees

published in Oklahoma Employment Law Letter | February 1, 2012

Four employees of a private security firm claimed their employer misclassified them as exempt supervisory employees, thus depriving them of overtime. The district court agreed that the employees were exempt under the “executive exemption” and dismissed the case in the employer’s favor. Applying the “primary duty” test, the Tenth Circuit disagreed with the lower court’s finding on three of the employees. Under the Fair Labor Standards Act (FLSA), for an employee to be considered “exempt,” his primary duty must consist of “exempt activity.”

Facts

The employer argued that the employees’ duties were managerial or administrative in nature and, therefore, that the executive, administrative, or a combination of both exemptions applied. The Tenth Circuit first said that a determination about the nature of an employee’s primary job duty is a question of fact for a jury, not the court, to decide. The court explained that a jury must consider:

  • the amount of time devoted to each job duty;
  • the relative importance of each duty;
  • the degree of freedom from direct supervision that the employee enjoys; and
  • the employee’s pay as it relates to the pay rate of his subordinates.

The four employees contended they performed both exempt and nonexempt duties. The first employee spent no more than 10 percent of his time performing exempt duties, was subject to supervision, and received only 10 percent more in salary than his subordinates. The second employee performed exempt duties approximately 50 percent of the time, but he also was paid only 10 percent more than his subordinates. The Tenth Circuit found that a reasonable juror could conclude that these two employees’ primary duties entailed performing nonexempt work.

There was insufficient evidence about how the third employee should be classified, although he clearly had greater managerial responsibilities, enjoyed more freedom from direct supervision, and was paid more in relation to his subordinates. The court held that the employer’s lack of evidence made dismissal of the third employee’s claim improper.

The fourth employee was the highest-ranking field officer on site. He was in charge of daily briefings, distributing and collecting weapons from subordinates, and supervising the staff, all of which are managerial duties. As the highest-ranking field official, he also enjoyed greater independence from supervision. Even though there was no evidence of his salary relative to his subordinates, the court found that he clearly performed managerial tasks as his primary duties. Therefore, dismissal of his claim was proper. The case was sent back to the district court for trial on the FLSA status of the first three employees. Maestas v. Day & Zimmerman, LLC.

Lesson learned

Employers often designate a team lead or assistant manager to perform supervisory tasks in addition to the same duties performed by their subordinates. Simply giving an employee some supervisory duties doesn’t automatically convert his job to an exempt position. Instead, when an employee is performing both exempt and nonexempt duties, you must determine what his primary duty is and if that duty is exempt. Further, the actual amount of time spent on the primary duty isn’t entirely determinative; it can fill less than half the employee’s time if it is significant to the operation.

Additionally, you must bear in mind that exemptions are always narrowly construed by the U.S. Department of Labor and the courts. When in doubt about an employee’s FLSA status, a prudent employer either (1) reconfigures the employee’s duties to clarify his status or (2) classifies him as nonexempt, thus enabling him to earn overtime. You should review your exempt employees’ actual job duties (don’t rely on job descriptions) to ensure the accuracy of their exempt status.