Whether salaried employees are qualified to be exempt from overtime is an issue that seems to come up over and over. We get asked this question repeatedly by clients of all sizes and across all areas. It is not as simple as paying an employee a salary and not tracking their time, as many people think. BNA recently provided an example case study of a common employment situation:
Was the Logistics Manager Owed Overtime Pay?
“You owe me overtime because my job is not considered administrative,” said Michael, a logistics manager. “I did not make final decisions.”
“But your tasks required you to use your judgment,” said Robin, a company supervisor. “That makes you exempt from overtime pay.”
Facts: A parts manager worked for a transportation services and delivery company for more than two years. While serving as a parts manager, he performed a variety of tasks, among them conducting scrap audits of tires.
The manager assessed the condition of tires to determine whether they were salvageable, could be retreaded and met warranty standards. A manual listed the standards to ensure that the company received an adequate return on warranty expenses. Travel was required to perform the audits and the manager had to receive permission to visit scrap sites to perform the audits.
The manager also conducted fleet inspections and terminal audits, which required him to travel to one of the company’s off-site terminals and pick a certain number of trailers and check the pressure of tires and the depth of treads. During the audits, the manager had to rate the facility on overall efficiency and effectiveness.
Shipping, receiving and issuing parts were other tasks, which the manager completed by loading and unloading trucks. Other duties were comparing inventory to a database, participating in company conference calls, training employees at company terminals and ordering supplies.
Additionally, the manager took on the role of regional tire manager for two months, which required meeting with vendors and dealing with problems, which he would report to supervisors for resolution. He also spent time training a replacement parts worker.
On one occasion, while working as regional tire manager, the manager recommended dismissing a vendor, and his managers complied.
The manager claimed that the company failed to pay him for hours worked in excess of 40 in a workweek during his time as parts manager, in violation of the Fair Labor Standards Act. The company disagreed, stating that the manager was overtime exempt because the FLSA’s administrative exemption was applicable.
Award: The parts manager was entitled to overtime pay because he did not meet the requirements for the administrative exemption under the FLSA, the U.S. District Court for the Eastern District of Michigan ruled June 12 (Stultz v. J.B. Hunt Transp. Inc., 2014 BL 163379, E.D. Mich., 2:13-cv-13705, 6/12/14).
Discussion: Although there was repeated testimony from the employer regarding the exceptional performance and skill that the manager possessed at his job, the court determined that his position involved minimal discretion and independent judgment that could not be considered his primary duties.
Despite the company’s claims that the functions that the manager performed were of extreme importance and required industry expertise, he consistently followed standard operating procedures, the court said.
Although the manager used his skill to apply standards outlined in manuals, most of his functions did not involve making choices between options, and did not make final decisions for the company, the court said.
The manager was not allowed to deviate from company standards in auditing, make choices on parts ordered, adjust inventory levels or determine vendors to use, the court said. The manager exercised some discretion during year-end inventory audits, but it was too minimal to be considered part of his primary duties, the court said.
His participation in company conference calls and training of other employees did not involve weighing options and decision making. In short, the court said, those decisions were left to others.
Pointers: Other FLSA exemptions apply to employees depending on the type of industry in which they are employed. In general, special tests and restrictions apply to each type of exemption.
To qualify for the administrative exemption, an employee must receive a salary of at least $455 a week, $910 biweekly, $985.83 semimonthly or $1,971.66 monthly, exclusive of board, lodging or other facilities.
The employee must have the primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers and have a primary duty that includes the exercise of discretion and independent judgment with respect to matters of significance.
If you have questions about whether your employees should be paid overtime or not, contact an HR expert today for an audit of your salaried exempt positions or leave a comment below and we will contact you. Doing so could save you from costly unpaid wage claims in the future.