The New York Times recently published an article which described how some employers are bestowing the title of “manager” or "assistant manager" on their rank-and-file workers to avoid paying them overtime. Under the Federal Fair Labor Standards Act (“FLSA”) and state laws such as the New Jersey Wage Payment Law, employers are required to pay their non-exempt employees an overtime premium of 1.5 times their regular hourly rate for each hour worked above 40. Bona-fide management level employees are exempt from overtime compensation. There are several tests used to determine if an employee is entitled to or exempt from overtime compensation. One test is the “salary test.” Under the salary test, to be exempt from overtime, the employee must earn no less than a guaranteed minimum of $684.00 per week. An employee who satisfies the salary tests is exempt from must also perform exempt job duties, as recognized by the executive exemption, the administrative exemption, and the professional exemption. There are also several other exemptions based on the type of work that the employee performs.
Federal regulations require that to be exempt from overtime, the employee’s primary duty must consist of exempt work. The amount of time spent performing exempt work is useful in determining whether exempt work is the primary duty of an employee. According to the Federal Department of Labor (“DOL”), the exemptions that are most applicable to managers and assistant managers in the food services industry are the “executive exemption” and the “administrative exemption.” Under the executive exemption, the employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent. In addition, the employee must have the authority to hire or fire other employees, or the employee’s recommendations must be given particular weight. With the administrative exemption, the employee’s primary duty must be the performance of office or non-manual work that is directly related to the management/general business operations of the employer. In addition, the employee’s primary duty must also include the exercise of discretion and independent judgment with respect to matters of significance. It can be a little gray. And that’s what some employers are banking on.
The New York Times article stated that “the practice of mislabeling workers as managers to deny them overtime…cost the workers about $4 billion per year, or more than $3,000 per mislabeled employee.” Some companies have created “dubious-sounding titles like “lead reservationist” and “food cart manager” as a means of avoiding their obligations to pay overtime. Other questionable titles include “Guest Experience Leaders" (i.e. hosts and hostesses), “Director of First Impressions” (front desk receptionist), Carpet Shampoo Managers (carpet cleaners), Grooming Managers (barbers), Price Scanning Coordinator (cashier), Lead Shower Door Installer (laborer), and on and on. The article goes on to say that “Experts say the denial of overtime pay is part of a broader strategy to drive down labor costs…" When stores are staffed with as few workers as possible, “the misclassified manager is often asked to perform the duties of a rank-and-file worker without additional cost to the employer.” According to the article, misclassifying employees as being exempt from overtime is especially common in low-wage industries like retail, dining and janitorial services. “Managers” in food services facilities typically work 60 to 70 hours a week and frequently spend much of their time serving customers and performing cleaning tasks, which is difficult to delegate when dealing with chronic short-staffing. These employees often wear the badge of “manager,” which is nothing more than a phony label given to them by their employers as a means of avoiding overtime obligations and adding to the bottom line.
If you believe that your employer has promoted you to a managerial position or has labeled you as a manager in an attempt to avoid paying overtime, call the Law Firm of Morgan Rooks. We’re on your side.