General Requirements for the Executive Exemption
Under California labor laws and employee rights, all employees are entitled to overtime pay for working more than 8 hours in a workday or 40 hours in a workweek. The burden is on the employer to prove that the employee meets the test of one of the exemption in order to not pay the worker overtime wages. In this post I will discuss the executive exemption which allows employers to deny employee wage and hour rights.
Executive employees are exempt under only if they:
- Receive a salary of at least $455 per week ($380 weekly if employed in American Samoa by an entity other than the federal government), exclusive of board, lodging, or other facilities;
- Have the primary duty of managing the enterprise in which they are employed, or a customarily recognized department or subdivision thereof;
- Customarily and regularly direct the work of two or more employees; and,
- Have the authority to hire or fire other employees or make suggestions and recommendations that are given particular weight about hiring, firing, advancement, promotion, or other changes in status.
An executive employee’s “primary duty" is” the principal, main, major or most important duty that the employee performs. An employee can only have one primary duty and it is determined on a case-by-case basis, focusing on the character of the employee’s job as a whole. In determining whether workers are entitled to overtime wages A court will look at the percentage of time that the employee spends performing exempt work.
Employees will generally satisfy the primary duty requirement only if he or she spends more than 50% of the time performing exempt job duties. Generally, exempt executives make their own decisions regarding when to perform nonexempt duties, and remain responsible for the success or failure of business operations under their supervision while they perform such tasks. In contrast, a nonexempt employee who does not make overtime pay may be directed by a supervisor to perform exempt work, or may perform exempt work only for a defined period of time.
Employees whose primary duties are ordinary production work or routine, recurrent, or repetitive tasks cannot qualify for the executive exemption. Assistant managers in retail establishments can perform nonexempt work such as serving customers, cooking food, stocking shelves, or cleaning and still be considered exempt executives, but only if they are performing managerial work more than 50% of the time. In contrast, relief or working supervisors whose primary duties are the performance of nonexempt work, such as on a production line in a manufacturing plant, do not become exempt merely because they occasionally have some responsibility for directing the work of other employees when the supervisor is unavailable.
Department or Subdivision Requirement
A customarily recognized department or subdivision, as opposed to a collection of temporarily assigned employees, must have permanent status and a continuing function. Where an enterprise has more than one establishment, the employee in charge of each establishment may be considered in charge of the recognized subdivision. Recognized departments or subdivisions need not be physically within the employer’s establishment, and may move from place to place. Thus, employees who work in more than one location can still be exempt executives if other factors show they are actually in charge of a recognized unit with a continuing function in the organization. Similarly, continuity of subordinate employees is not essential to the existence of a recognized unit with a continuing function. The exemption can apply to supervisors who draw employees from a pool, or supervise a team of workers drawn from other departments.
Two or More Employees Element
Exempt executives must direct the work of two or more full-time employees, or the equivalent, as part of their customary and regular duties. Supervision can be distributed among more than one executive employee, but to qualify for the exemption, each executive must customarily and regularly direct the work of two or more full-time or equivalent employees.
For example, a department with five full-time, nonexempt employees can have up to two exempt supervisors if each directs the work of at least two of those employees. An employee who merely assists a manager, or performs supervisory functions only on an occasional basis, is not an exempt executive. In counting the number of employees supervised, hours worked cannot be credited more than once for different supervisors, so shared responsibility for employees in the same department does not satisfy the requirement. However, when an employee works a specific number of hours for one supervisor and the rest for another supervisor, the work hours can properly be apportioned among the supervisors.
Authority to Hire and Fire
California labor laws require that exempt executives have the authority to hire or fire employees, or have particular weight given to their suggestions and recommendations as to the hiring, firing, advancement, promotion, or other change of status of other employees.
Factors considered when determining whether an executive’s suggestions and recommendations are given " particular weight" include whether making such suggestions and recommendations is part of the job, how often the executive makes such suggestions and recommendations, and how often management acts upon them. Generally, such suggestions and recommendations must pertain to employees the executive customarily and regularly directs.
An executive’s suggestions and recommendations can have “particular weight" even if they can be overruled by a higher level manager and the executive does not have authority to implement the suggestion or recommendation. Retail assistant managers were considered exempt executives where their suggestions and recommendations for hiring, retention, and promotion were given particular weight and the store managers frequently approved the recommendations because they trusted the assistant managers’ judgment.
Contact an experienced employment law lawyer today to learn more about whether or not you are exempt from overtime pay.