What Is the Management or Executive Exemption Under the Fair Labor Standards Act (“FLSA”)?

Under the Fair Labor Standards Act (FLSA), most US employees must be paid at least a minimum wage and overtime pay for all hours worked over 40 in a workweek. But there are exemptions that remove employees from the FLSA's protection. One of those is the “executive” or “management” exception.

The management or executive exception is intended for employees who have a leadership role in the company. Unfortunately, employers frequently misclassify their employees under the management or executive exemption when they don't actually meet the requirements. Some employers will call someone a manager or assistant manager and pay them a salary even though their job duties are not truly management.

When that happens, the employee can seek a remedy in court—including back overtime pay, an additional amount as “liquidated damages,” interest, and attorney fees.

What Qualifies You for the Management or Executive Exemption?

To qualify as exempt, you must meet both the “salary test” and the “duties test”

The salary test is straightforward - You must earn a salary (not an hourly wage) of at least $684 per week. If you are paid on an hourly basis, regardless of the amount, your employer cannot claim the management or executive exemption.

The duties test involves a little more investigation. It requires that:

• Your primary job duties must involve leading and managing the company or a specific department of the company.
• You must regularly oversee and direct the work of two or more full-time employees or the equivalent.
• You must have the authority to hire and fire other employees. Or your opinion on hiring and firing must have significant weight with the actual decision maker.

What Does “Management” Mean under the FLSA?

To qualify for the executive exemption, your job must meet the description above. While some of these descriptions may seem confusing, the law is pretty good at defining them:

“Management” can include duties such as:

• Interviewing, hiring, and training new employees.
• Determining hours and pay.
• Supervising team members.
• Maintaining sales and production records.
• Evaluating employee performance and determining promotions, raises, and discipline.
• Addressing complaints and grievances from employees.
• Planning new projects; determining which techniques, materials, tools and supplies to be used; and assigning jobs to employees.
• Overseeing the safety and security of employees and company property.
• Planning and controlling budgets.
• Managing compliance with applicable laws.

What Does “Two or More Other Employees or Their Equivalent” Mean?

One of the requirements for an employee to be classified under the executive exemption involves regularly overseeing two or more full-time employees or their “equivalents.” This is straightforward. It just means that the work must be, at a minimum, the work of two full-time employees. For example, one full-time employee and two part-time employees would equal two full-time employees for this exemption. Or four part time employees equal two full time employees.

What to do if you're misclassified -

If you are misclassified under the management or executive exemption, you may be entitled to back pay for unpaid overtime and additional compensation as damages. You should contact a knowledgeable employment lawyer if you believe this has happened.

We have helped numerous of people in this situation get back pay from their employers. Call us at (616) 392-1821 or email us at [email protected] for a confidential consultation today. Click here to submit your contact info.

For more information from the Department of Labor, click here.