The Fair Labor Standards Act is the federal law governing wage payments. The FLSA guarantees minimum wage and overtime protections to most, but not all, workers in the United States. One of the most common exemptions is for executives. To be an exempt executive, an employee’s primary duty must be “management.” But to keep from paying overtime, employers often call some of their employees “managers” even though they spend most of their time performing labor like cooking, cleaning, and handling merchandise. When you really look at the numbers, these managers often make the same or LESS than the hourly workers and spend almost all of their time doing the exact same work.
Why is this a problem? One of the principal goals of the FLSA’s overtime provision is to encourage employers to spread work around amongst more employees, rather than make a few individuals work long hours. An employer is more likely to hire additional employees to meet its workload if it has to pay an overtime premium to existing employees. This, of course, reduces unemployment. Employers frequently use the executive exemption to avoid both hiring additional employees and paying overtime premiums. Recently, one court highlighted the tension between the executive exemption and the goals of the FLSA.
In a very important case, the United States Court of Appeals for the First Circuit vacated summary judgment in favor of an employer who classified two former Dunkin’ Donuts managers, Gassan Marzuq and Lisa Chantre, as exempt from overtime. Marzuq v. Cadete Enters., No. 14-1744, 2015 U.S. App. LEXIS 21301 (1st Cir. Dec. 9, 2015). Some of Marzuq’s and Chantre’s responsibilities included calibrating equipment to Dunkin’ Donuts specifications, keeping their stores and grounds properly maintained, training and supervising employees, and substantial paperwork. Marzuq considered himself as the person “in charge” and “the captain” of his store. But there was also evidence that Marzuq could not fulfill his duties as a manager because he spent 90% percent of his time doing the work of the crew members, such as serving customers, cleaning, and covering their shifts. Aaron Dermandy, a district manager, supervised Marzuq and Chantre. Dermandy determined staffing levels, arranged maintenance, and ordered the baked goods for the stores. He also visited each store every week and hired and fired crew members.
To determine whether an employee’s primary duty is management, courts look to four factors: (1) the relative importance of plaintiffs’ exempt and other duties; (2) the amount of time spent on exempt work; (3) freedom from direct supervision; (4) the relationship between plaintiffs’ salaries and the wages paid hourly employees for similar nonexempt work. In analyzing the Marzuq’s and Chantre’s job duties, the court focused on their inability to perform management functions because of the large amount of crew-member work that they had to perform. According to the court, this could support a finding that Marquz and Chantre’s management duties were least important. In addressing whether Marquz and Chantre had freedom from direct supervision, the court highlighted the involvement Dermandy had with the stores’ affairs. The record showed that they had little independence in running their stores.
The court also highlighted that Marzuq and Chantre actually made about the same or less than the hourly workers they supervised. The hourly employees made $8.50 to $10.70 per hour, including tips. But when considering the number of hours they worked, Marzuq made about $12.50 per hour and Chantre made about $9.00 per hour.
There are three major points to take away from this decision. First, an employee must actually have time to perform his or her management functions to be exempt, even if the employer says the manager is in charge. Second, an employee is not exempt just because he or she is called a manager. And third, a court may compare a plaintiff’s salary based on his or her claimed hours worked to the rates of pay of hourly employees to determine whether the executive exemption applies. Overall, this is a favorable decision for employees that protects the FLSA and one of its central policies—hire employees rather than overwork them.
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