BOURGON HR Solution Blog

Payroll Practices: White Collar Exemptions Part Two

Posted by Mike Bourgon on Fri, Sep 26, 2008

Employers often assume that if someone has the title of supervisor or manager, they are automatically considered to be exempt as an “executive” under the white collar exemption rules.

This assumption, however, does not always hold true. The regulations give very specific criteria in order for an employee to qualify as an exempt executive. The primary duty must be the management of an enterprise, department or subdivision of the organization.

In addition, it is critical that this employee regularly direct the work of at least two other employees. The direction of work of these other employees must include either the full authority to hire and dismiss or the ability to give a recommendation regarding hiring and dismissal that is given “particular weight” by another decision maker. Thus, the analysis depends on the employee’s actual job duties and not just their title.

There have been recent court cases where there was a close examination by the court, at the federal level, to examine the employee’s primary duty in managing an enterprise or subdivision of the employer. There is a safe harbor for an exempt executive classification if the amount of time spent in the performance of managerial duties is the majority of the employee’s time.

However, short of the majority of time being spent in managerial duties, management can still be the primary duty based on the following factors:

  • The relative importance of the managerial duties as compared with other types of duties.
  • The frequency with which the employee exercises discretionary powers.
  • The employee’s relative freedom from supervision.
  • The relationship between his/her salary and the wages paid other employees for the non-managerial work performed by the executive.

A significant Florida case was recently decided and is worthy of note. In the Florida situation an employee had authority over a large number of employees in the area of safety. However, the employee did not regularly direct the work of any of these employees and only had the ability to discipline an employee for a safety violation.

The court determined that this employee was not an executive because he did not regularly direct the work of at least two employees, notwithstanding the fact that he had the ability to discipline large numbers of employees for specific safety violations.