This week the First Circuit Court of Appeals, whose decisions govern Maine and other New England states, held that a reasonable jury could determine that two Dunkin Donuts store managers should have received overtime pay. The Fair Labor Standards Act (FLSA), a federal law, entitles employees to overtime pay equal to time-and-a-half of their hourly rate of pay unless the employees fit into one or more exemptions in the law. One of these exemptions is for “executive” employees and the stores’ attorneys argued that the store managers fit under this exemption. The First Circuit rejected this argument and held that a jury would have to decide whether the store managers were exempt “executive” employees.
To avoid paying overtime under the “executive” exemption, an employer must prove the following: (1) the employee’s salary is at least $455 per week, (2) the employee’s “primary duty” is management, (3) the employee “customarily and regularly directs the work of two or more other employees,” and (4) the employee “has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” The First Circuit’s decision in this case turned on the issue of whether the store managers’ “primary duty” was management.
The First Circuit held that a jury could reasonably find that the store managers’ primary duties were not management. The First Circuit noted evidence that the store managers’ spent the bulk of their time performing non-managerial work like serving customers and cleaning. The court held that a reasonable jury could find that the performance of this non-managerial work was equally important to the success of the store as the performance of managerial work.
The First Circuit also compared the hourly wages of non-exempt store employees to the store managers’ pay. The court found that if the non-exempt employees worked the same number of hours as the store managers, they would have made significantly more than one of the store managers and about the same as the other store manager. One of the reasons for the “executive” exemption is that managers earn a relatively high salary and, thus, do not need overtime protections. This pay comparison between the store managers and the non-exempt store employees undercut that rationale in this case and, thus, weighed in favor of treating the store managers as non-exempt employees.
The facts of this case are emblematic of a broader trend. Many employers classify employees who perform non-managerial work as exempt “executive” employees so that they do not have to pay them overtime. As we previously reported, the U.S. Department of Labor is working on revisions to the FLSA regulations that will seek to address this issue.