Ohio Appeals Court Holds Community Support Specialist Is Not Exempt from Overtime as An Administrator or Professional

Last week, the Court of Appeals for Cuyahoga County reversed summary judgment in favor of a non-profit community mental health center employer on a claim for unpaid overtime brought by a Community Support Specialist (CSS) formerly employed by the center. White v. Murtis M. Taylor Multi-Serv. Ctr., 2010-Ohio-2602. The trial court had found that the plaintiff was exempt from overtime under both the Fair Labor Standards Act and Ohio Revised Code § 4111.03 law as an administrative and/or learned professional employee. Both courts agreed that Ohio law follows the same standards as the FLSA in evaluating an employee's exempt status and that the burden was on the employer to justify by clear and affirmative evidence that the employee was exempt from overtime pay when working more than 40 hours in a week. However, the appellate court concluded that his job duties did not fit within the administrative exemption; he did not exercise enough independent judgment or discretion to fit within either exemption; and his job did not require a specialized academic degree as required to fit within the learned professional exemption.

According to the Court's opinion, the plaintiff filed suit in January 2008 -- just over three years after he left the non-profit employer -- seeking compensatory and punitive damages. While the employer contended that the plaintiff's job required him to perform managerial duties, the Court found that the employer failed to present any evidence to support its argument. The plaintiff denied that he possessed any authority over other employees. The Court then examined the regulatory examples of duties at 29 CFR §541.201(b) which typically would be performed by an administratively exempt employee and concluded that they indicated policy-making responsibilities which were not reflected in the plaintiff's job. Moreover, the employer failed to present evidence showing that the plaintiff's job required the exercise of judgment and independent discretion over matters of significance.

The exercise of independent judgment requires "the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. . . .[The plaintiff] simply assisted his clients in learning and completing everyday tasks, such as grocery shopping and locating community resources. Clearly, these are not matters of significance as contemplated by the FLSA. [The plaintiff] did not exercise independent judgment in the general business operations of [the non-profit employer]. He did not supervise anyone, nor did he perform any administrative functions such as human resources procurement or management decisions.

The Court rejected evidence that he was not required to routinely seek his supervisor's approval and that he sometimes worked unsupervised because " he was still required to submit all of his notes and case plans to [his supervisor] for approval." While most of his case plans were approved, his supervisor still impliedly rejected "some" of them.

Similarly, the Court concluded that the plaintiff did not fit within the learned professional exemption:

The first element [the employer] must satisfy to establish that [the plaintiff] is a learned professional, is that [the plaintiff] performs work that requires advanced knowledge. The work must either require advanced knowledge, or be of an artistic or creative nature. Specifically, the work is as follows:

"[P]redominately intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment, as distinguished from performance of routine mental, manual, mechanical, or physical work. An employee who performs work requiring advanced knowledge generally uses the advanced knowledge to analyze, interpret, or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level." . . .

29 CFR § 301(b). "While a degree is not always required, a degree is the best prima facie evidence that an employee is a learned professional." However, the plaintiff's job description did not require any advanced knowledge or education. Rather, it only required:

some course work in social work, counseling, psychology,or related disciplines beyond high school. Bachelor's degree in Social Work, Counseling, Psychology, or related field preferred. At least one year of experience in a mental health organization with a background in substance abuse[,] abuse treatment and/or prevention essential.

"Thus, the evidence showed that the employer did not require a specialized academic degree or experience. " Indeed, the job did not require the applicant to possess any degree.

The Court found that the trial court had erred by placing "significant weight on the actual education [a bachelors degree in research biology and theology] and training [that the plaintiff] has obtained, when the proper inquiry is the education that is actually required of the position." Although the plaintiff possessed experience and training "in chemical dependency and addiction counseling, he was instructed not to provide clients with counseling; therefore, such training was similarly irrelevant to his position as a CSS 1. Courts have concluded that highly trained individuals [ like pilots] who do not possess an academic degree are not learned professionals."

Moreover, the plaintiff testified that "his work included accompanying clients to appointments and referring them to community resources" and "he did not provide treatment to his clients." His duties also

consisted of teaching daily living skills to his clients. He accompanied them on legal and medical appointments, and assisted them in completing everyday tasks such as managing their finances and grocery shopping. Such duties clearly do not fall into the category of science and learning, as these duties do not require any specialized knowledge.

His employment offer letter also "clearly indicated that [his] position as a CSS 1 was a level 1, primary support position." The Court concluded that "[s]uch a vague description does not merit the type of specialized knowledge required of a learned professional."

Finally, the Court examined an opinion letter from the Department of Labor which indicated that social worker positions which require a master's degree in social work are exempt while case workers who were not required to have a specific degree were not. "The Ohio Supreme Court has previously recognized that opinion letters are persuasive authority in interpreting federal statutes and regulations."

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit: Managers’ Exempt Status Was Destroyed by Employer’s Recoupment of Overpayment of Incentive Bonuses.

Today, a unanimous Sixth Circuit addressed the Fair Labor Standards Act exempt status regulations in a class action lawsuit brought in Columbus alleging that the employer violated the salary basis regulations and owed the Plaintiffs overtime compensation. Baden-Winterwood v. Life Time Fitness, Inc., Nos. 07-4437/4438 (6th Cir. 5/19/09). The Court addressed compensation paid both before and after the revised FLSA regulations were issued by the Department of Labor in August 2004. The Plaintiffs were paid a mix of base salary and incentive bonuses. The Plaintiffs challenged employer policies which permitted the employer to recoup prior overpayments of incentive bonuses from employee salaries and actual deductions made from employee salaries in 2005 to recoup such incentive bonus overpayments. The employer’s compensation plan changed in 2006 to “hold back” 20% of potential incentive bonuses for possible future recoupment. The Sixth Circuit agreed with the district court that the actual deductions for “bonus recoupment” impermissibly reduced the Plaintiffs’ base salaries in 2005 due to the quality or quantity of their work and was not a permissible recoupment of an overpayment or advancement of wages or other compensation.

On July 10, 2007, District Judge Frost “granted in part Plaintiffs’ motion for summary judgment, finding “that the deductions from the salaries of eight Plaintiffs were deductions resulting from ‘variations in the quality or quantity of the work performed,’ in violation of the salary-basis test.” Baden-Winterwood v. Life Time Fitness, No. 2:06-CV-99, 2007 U.S. Dist. LEXIS 49777, at *42 (S.D. Ohio July 10, 2007) (quoting 29 C.F.R. § 541.602(a)).. . . . In his review of Plaintiffs’ overtime claims, the district court undertook a thorough three-part analysis. First, the district court determined the effect of the” DOL’s August 2004 salary-basis regulations in which “only an “actual practice of making improper deductions demonstrates that the employer did not intend to pay employees on a salary basis.’” Id. at *22 (quoting 29 C.F.R. § 541.603(a)). This meant that Plaintiffs’ claims covering the period of time before August 23, 2004 would be analyzed under the” Supreme Court’s 1997 opinion in Auer v. Robbins, 519 U.S. 452 (1997), which held that “the salary-basis test denies exempt status “if there is either an actual practice of making . . . deductions [based on variations in quality or quantity of work performed] or an employment policy that creates a ‘significant likelihood’ of such deductions.” Claims involving pay periods after August 2004 were to be governed by the DOL’s new regulation. Second, the district court determined that the employer did not violate the Auer test. Finally, the district court determined that the deductions from plaintiffs’ salaries in 2005 “specifically related to the quality or quantity of work each Plaintiff had performed” and that the Plaintiffs worked overtime during those pay periods. However, the district court limited Plaintiffs’ recovery to overtime pay for the three pay periods in 2005—the periods ending November 9, November 23, and December 9—during which Life Time Fitness took actual deductions from Plaintiffs’ salaries.” Both sides appealed.

On appeal, the Sixth Circuit rejected the Plaintiffs’ argument that Auer applied to all pay periods at issue, and instead, agreed with the district court’s decision to apply Auer only to pre-August 2004 pay periods and the “new” DOL regulation to pay periods after August 2004. Nonetheless, the Court reversed the district court’s decision that the employer complied with the Auer test and found that the employer’s pre-August 2004 policies impermissibly subjected the Plaintiffs’ salaries to the risk of deduction. Finally, the Court affirmed the district court’s decision that the employer made impermissible deductions from the employees’ salaries during three pay periods in 2005. Unlike other situations where an employer is permitted to recoup from salary prior advancement of wages or loans to employees,

Life Time Fitness did not provide loans to its employees. To be sure, it did make advance bonus payments. However, to recover overpayments, Life Time Fitness impermissibly dipped into Plaintiffs’ guaranteed salaries. Unlike the situation in both DOL letters [permitting recoupment of wage advances and loans], Life Time Fitness knowingly made salary deductions as part of a pre-designed bonus compensation plan. . . . The deductions were not made to recover irregular salary advances or payments mistakenly made by the payroll department. See id. The plain language of 29 C.F.R. § 541.602 provides, “[s]ubject to the exceptions provided in [section 541.602(b)], an exempt employee must receive the full salary for any week in which the employee performs any work . . . .” 29 C.F.R. § 541.602(a). Section 541.602(b) provides, generally, that deductions may be made for absenteeism, sick leave (in certain circumstances), penalties imposed in good faith for infractions of safety rules, unpaid disciplinary suspensions, and, under the DOL letters described above, for mistaken overpayments. But, there is no support for the contention that the FLSA allows for the reduction of guaranteed pay under a purposeful, incentive-driven bonus compensation plan.” (emphasis added).

The Court also rejected the employer’s argument that the incentive bonuses were not based on individual employee performance, but rather, were based on departmental performance, including a number of factors like “her supervisees’ performance, the size and location of a particular club, club-usage volume,” etc. As noted by the district court, “it is strange for Defendant to argue that individual performance was mainly irrelevant to the computation of bonus payments. [Life Time Fitness] offered, after all, that it created the bonus plans ‘[a]s a means for providing incentives for certain of its employees.”

Perhaps if the recoupment deductions had been limited to future bonus payments and had not invaded the employees’ base salaries, the employer would have avoided violating the FLSA.

Insomniacs can read the full opinion at http://www.ca6.uscourts.gov/opinions.pdf/09a0177p-06.pdf

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

DOL Releases New FLSA Opinions from Bush Era Including Letters Addressing Mandatory Use of Vacation or PTO During Temporary Shutdowns

On Friday, March 6, the Wage and Hour Division of the federal Department of Labor announced that it would be posting on its website 36 Administrator opinion letters (as well as and four Non-Administrator opinion letters) that were signed prior the January 21 Obama inauguration. Half of the posted Administrator opinion letters (which are designated with asterisk on the website) were not mailed before the inauguration and are, therefore, being withdrawn for further consideration by the Obama administration (even though they are being made available to the public for review on the website). This site will publish further details about some of the 18 Administrator letters which were both signed and mailed before the Obama inauguration. Today, this will include describing two of the Opinion Letters which address employers mandating use of vacation or Paid Time Off (PTO) during a temporary shutdown or closure of operations as a cost-savings measure during this recession.

In the first letter (FLSA Op. Ltr. 2009-2), the DOL addressed whether an employer “may require exempt employees to use accrued vacation time during a plant shutdown of less than a workweek without violating the salary basis test and thereby affecting their exempt status. The DOL indicated that this practice was permissible and had been approved as early as 2005:

Since employers are not required under the FLSA to provide any vacation time to employees, there is no prohibition on an employer giving vacation time and later requiring that such vacation time be taken on a specific day(s). Therefore, a private employer may direct exempt staff to take vacation or debit their leave bank account . . . , whether for a full or partial day’s absence, provided the employees receive in payment an amount equal to their guaranteed salary.

Wage and Hour Opinion Letter FLSA2005-41 (Oct. 24, 2005); see also 29 C.F.R. §§ 541.600, 541.602(a); 69 Fed. Reg. 22,122, 22,178 (Apr. 23, 2004) (“[E]mployers, without affecting their employees’ exempt status, may take deductions from accrued leave accounts.”). Therefore, the DOL opined “that the employer may require exempt employees to use accrued vacation time for any absence, including one resulting from a plant shutdown, without affecting their exempt status, provided that employees receive a payment in an amount equal to their guaranteed salary.” Notably, however, if “an exempt employee . . . has no accrued [vacation] benefits . . . or has a negative balance . . . [the employee must] still must receive the employee’s guaranteed salary for any absence(s) occasioned by the employer or the operating requirements of the business.” Wage and Hour Opinion Letter FLSA2005-41. In other words, exempt employees are entitled to be paid an amount equal to their full salary for every workweek in which they perform any compensable work (even just a few hours), and that payment may come from their accrued vacation/PTO bank or the employer’s payroll. Thus, if an employer wishes to avoid paying exempt salaries, the exempt employees must be furloughed in full week increments.

Insomniacs can read the full opinion letter at http://www.dol.gov/esa/whd/opinion/FLSA/2009/2009_01_14_02_FLSA.htm.

In contrast to the employer which mandated the use of vacation/PTO during brief plant shutdowns, the next employer sought clarification about whether it could “occasionally reduc[e] the hours worked by exempt employees due to short-term business needs (e.g., low patient census). In such cases, the employer [proposed to] offer[] “voluntary time off” (VTO) [on a first-come-first-served basis], where employees may, at their option, use paid annual, personal, or vacation leave, but continue to accrue employment benefits. . . . If there [were] insufficient volunteers for VTO, the employer [would] require[] “mandatory time off” (MTO) under a seniority-based rotational method. Exempt employees required to take MTO [could] use accrued paid leave or take unpaid MTO. If the employee elect[ed] not to use accrued paid leave or [did] not have sufficient accrued paid leave to cover the VTO or MTO, the employer [would] deduct[] the amount equal to the VTO or MTO from the employee’s salary, if it is shorter than one workweek. . . . [T]he employer does not pay [any] salary for [any] pay period [where the unpaid VTO or MTO lasts an entire workweek]. Salaried exempt employees may take VTO or be assigned MTO in one-day increments.”

The DOL noted that under 29 C.F.R. § 541.602(a), “[a]n employee will be considered to be paid on a 'salary basis' . . . if the employee regularly receives each pay period . . . a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed. . . . An employee is not paid on a salary basis if deductions from the employee’s predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.” (emphasis added).

According to the DOL, “salary deductions due to a reduction of hours worked for short-term business needs do not comply with § 541.602(a) because they result from 'the operating requirements of the business.' 29 C.F.R. § 541.602(a). Thus, '[i]f the employee is ready, willing and able to work, deductions may not be made for time when work is not available.' Id . Deductions from the fixed salary based on short-term business needs are different from a reduction in salary corresponding to a reduction in hours in the normal scheduled work week, which is permissible if it is a bona fide reduction not designed to circumvent the salary basis requirement, and does not bring the salary below the applicable minimum salary. See Field Operations Handbook § 22b00; Wage and Hour Opinion Letter FLSA2004-5 (June 25, 2004) (“[R]ecurrent changes in the normal scheduled workweek . . . more likely would appear to be designed to circumvent the salary basis requirement.”). Unlike a salary reduction that reflects a reduction in the normal scheduled work week and is not designed to circumvent the salary basis requirement, deductions from salary due to day-to-day or week-to-week determinations of the operating requirements of the business are precisely the circumstances the salary basis requirement is intended to preclude. Therefore, in this instance, salary deductions due to MTO lasting less than a workweek violate the salary basis requirement and may cause the loss of exempt status. The employer is not, however, required to pay the salary for MTO of a full workweek. See 29 C.F.R. § 541.602(a) (“Exempt employees need not be paid for any workweek in which they perform no work.”).” (italics added).

Of course, as already discussed above, “[f]or employees on MTO, the 'employer[], without affecting [the] employees’ exempt status, may take deductions from accrued leave accounts' [i.e., vacation or PTO] provided employees receive their guaranteed salary.” In short, for MTO, as long as the employer pays an amount equal to the employee’s full salary, the employer may make deductions from the MTO employee’s accrued vacation and/or PTO bank without jeopardizing the employee’s exempt status. The employer may not, however, reduce the MTO employee’s salary if s/he has not accrued vacation or PTO.

The DOL also reminded the employer that “[s]ection 541.602(b)(1) states that ‘[d]eductions from pay may be made when an exempt employee is absent from work for one or more full days for personal reasons.' Salary deductions, therefore, may be made when exempt employees voluntarily take time off for personal reasons, other than sickness or disability, for one or more full days. For instance, an exempt employee paid $500 per week on a salary basis may take VTO for personal reasons for four days in a workweek and receive one fifth of the salary. The employee’s decision to take VTO, however, must be completely voluntary and not “occasioned by the employer or by the operating requirements of the business.” 29 C.F.R. § 541.602(a).” (emphasis added). Therefore, if the employee’s decision to take VTO is entirely voluntary and is not the result of pressure from the employer based on business conditions, the employer may – in addition to taking deductions from the employee’s accrued vacation and/or PTO bank – also make deductions from salary in full-day increments if the employee does not have any accrued vacation or PTO.

Insomniacs can read this opinion letter in full at http://www.dol.gov/esa/whd/opinion/FLSA/2009/2009_01_15_14_FLSA.htm.

If employers shorten an exempt employee’s workweek, the employer could argue that a reduction in salary is permissible. The DOL has approved such realities since at least 1988. (“[W]e have consistently taken the position that a bona fide reduction in an employee’s salary does not preclude salary basis payment as long as the reduction is not designed to circumvent the requirement that the employees be paid their full salary in any week in which they perform work. . . . Consistent with this position, we have stated that a fixed reduction in salary effective during a period when a company operates a shortened workweek due to economic conditions would be a bona fide reduction not designed to circumvent the salary basis payment.“).

However, there are risks with this as reflected in last October’s decision in Archuleta v. Wal-Mart Stores, Inc. 543 F.3d 1226 (10th Cir. 2008). In that case, Wal-Mart shortened some pharmacists’ workweek during the slow periods each year (i.e., summer) and correspondingly shortened their salary. More problematic, however, was that some store managers informally reduced the workweeks of some pharmacists in order to save money. The District Court entered summary judgment for the employer, but the Court of Appeals reversed as to two plaintiffs in October on the grounds that it was a factual issue whether the store managers were as attempting to evade those two employee’s exempt status by basing their “salary” on hours worked.

The Court of Appeals had earlier held that “an employer could prospectively change its employees’ salaries without defeating the exemption for professionals . . . unless the purported ‘salary’ becomes a sham—the functional equivalent of hourly wages. . . . “If . . . the salary changes are so frequent as to make the salary the functional equivalent of an hourly wage, [the court] will treat the ‘salary’ as a sham and deny the employer the FLSA exemption for professional employees.”

According to the court’s opinion:

“in response to Plaintiffs’ theory—that Wal-Mart prospectively changed their base hours, on which their salary was calculated, with such frequency so as to make them, in effect, hourly employees—Wal-Mart presented a report summarizing the number of times it changed Plaintiffs’ base hours during the time period relevant to this case. That report indicated that 75% of the 573 Plaintiffs, or 432, did not experience any change in their base hours.8 Of the Plaintiffs who did experience a change in their base hours, 99 Plaintiffs, or just over 17%, experienced only one such change. Twenty-four Plaintiffs, or 4.2%, experienced two changes. But “the average length” of time “over which those two changes occurred was four years and seven months,” and the “average time between those two changes was 11.3 months. The shortest time between those two changes was eight weeks (for two pharmacists).” Aplt. App. at 269. Two such changes during this time frame are not sufficient to defeat an otherwise valid exemption. . . .
.
Wal-Mart’s report indicated that it had changed the base hours for eight Plaintiffs three times during the relevant time period. But “[t]he average length” of time over which these changes occurred “was four years and five months,” and “[t]he average length of time between those changes was 10.3 months.” Aplt. App. at 270. “The shortest time between those changes was six weeks (for one pharmacist).”

In addition, two Plaintiffs experienced four changes in their base hours. “[T]he average length” of time over which these four changes occurred, however, “was four years and six months,” and “[th]e average time between those four changes was 7.8 months. The shortest time in between those changes was ten weeks (for one pharmacist).” Id. For that one pharmacist, the report indicated that, after employing that pharmacist from August 29, 1993 through February 5, 1998, Wal-Mart changed the pharmacist’s base hours on January 6, 1995; January 5, 1996; March 15, 1996; and October 26, 1997. “For the other pharmacist who experienced four base hour changes during his relevant period (four years and eight months), the time between each of those changes was 12 weeks or longer.” Id. at 271. We conclude that the frequency of these prospective changes was not sufficient to create a factual dispute as to whether Wal-Mart was, in fact, treating these pharmacists as hourly employees.

However, “there were many other instances in which Wal-Mart ‘informally’ or verbally changed a pharmacist’s base hours. In support of this allegation, Plaintiffs offered the affidavits of twenty-one plaintiff-pharmacists. Only eight of these twenty-one pharmacists specifically mentioned experiencing one or, at most, two changes in their base hours. This evidence is insufficient to create a factual dispute as to whether Wal-Mart was treating these pharmacists as hourly, rather than salaried, employees.”

Insomniacs can read the court’s full opinion at http://www.ca10.uscourts.gov/opinions/07/07-1065.pdf. Insomniacs can review the index of all of the 2009 FLSA opinion letters at http://www.dol.gov/esa/whd/opinion/flsa.htm.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

DOL Explains that Training Program for Exempt Managers Does Not Destroy FLSA Exemption During Training Period Because “Holistic” Approach is Taken.

Yesterday, the federal Department of Labor released a number of administrative letter opinions from last month, one of which concerned a training program for long-time retail store managers who wished to be promoted to regional store managers. (FLSA 2008-19). Both the store managers and the regional managers constituted exempt managerial positions. The question posed was whether the store managers lost their exemption during the training period because the store managers would perform little or no exempt work during about half of the seven week training period (while they shadowed the regional managers).

According to the inquiry, “[d]uring the training period, each of the store managers accompanies an area sales manager on visits to area stores, reviews store paperwork, addresses issues with the managers of the stores visited, investigates inventory shortages and violations of company policy, and attends sales meetings. At the beginning of the training period, the trainee simply “shadows” the area sales manager, but as the training progresses, the area sales manager delegates more and more duties to the trainee. By the end of the training period, it is the area sales manager who “shadows” the trainee.” During the training period, “trainees analyze sales figures, product returns, and inventory data to determine store performance; review data with the store manager and suggest improvements; review the hours worked by employees; approve payroll; determine whether the store manager allocates labor hours effectively and, if not, suggest improvements; audit lottery ticket sales; and work with the store manager to control losses.” Thus, for the first few weeks, the trainee performs little or no exempt work. After the training period ends (or if the trainee fails to complete the program), the trainee returns to a store manager position until a potential regional manager position opens and the manager successfully applies for it.

The employer was concerned about the trainee’s exempt status because “29 C.F.R. § 541.705 states, “exemptions do not apply to employees training for employment in an executive . . . capacity who are not actually performing the duties of an executive . . . employee.” In addition, “exemptions normally apply on a workweek by workweek basis.” However, there is also a federal district court case in which the plaintiff was found to be exempt during a period of training that was between two periods in which he qualified as an exempt systems engineer. Booth v. EDS Corp., 799 F. Supp. 1086, 1093 (D. Kan. 1992). (“[The plaintiff] has pointed to no evidence in the record that indicates that he or EDS considered phase two of the [training] program to be a separate employment position.”).

According to the Acting Wage and Hour Administrator, “[t]he fact that, during at least some of the weeks of training, the store managers do not perform significant amounts of exempt work, in and of itself, does not cause the store managers to lose their exempt status because the primary duty test for executives need not be met each and every workweek in all cases. In its 2004 revisions to 29 C.F.R. Part 541, the Department included this discussion in the preamble to the final regulations:

“As stated in the 1949 Weiss Report at 61, the search for an employee’s primary duty is a search for the ‘character of the employee’s job as a whole.’ Thus, both the current and final regulations ‘call for a holistic approach to determining an employee’s primary duty,’ not ‘day-by-day scrutiny of the tasks of managerial or administrative employees.’ Counts v. South Carolina Electric & Gas Co., 317 F.3d 453, 456 (4th Cir. 2003) (“Nothing in the FLSA compels any particular time frame for determining an employee’s primary duty”). To clarify this ‘holistic approach,’ the Department has reinserted in subsection (a) the language from current 541.304 that the determination of an employee’s primary duty must be based on all the facts in a particular case ‘with the major emphasis on the character of the employee’s job as a whole.’ 69 Fed. Reg. 22,122, 22,186 (Apr. 23, 2004) (emphasis in original).”

In this situation, the DOL found that “there is no reason to believe that the seven-week training program itself is an employment position in the company. Nor is it reasonable to conclude that the store managers’ primary duty changes during the seven weeks of training. These employees, who we are to assume have been employed as bona fide exempt store managers for years, remain exempt during the seven weeks of management training because their primary duty continues to be that of an exempt store manager. The training provided is of limited duration and does not consist of the performance of work that would otherwise be performed by nonexempt workers. The managers return to their normal exempt store manager duties following the training. Under these circumstances, where the trainees are employed in exempt positions and are temporarily reassigned to training for a different exempt position, it is our opinion that the exemption is not lost during the training period.”

Insomniacs can read the full letter opinion letter at http://www.dol.gov/esa/whd/opinion/FLSA/2008/2008_12_19_19_FLSA.htm.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Sixth Circuit Finds FLSA Overtime Claim of Gas Station Manager to be Empty

Earlier today, the Sixth Circuit Court of Appeals in Cincinnati affirmed the dismissal on summary judgment of a FLSA overtime claim brought by a former store manager for Speedway SuperAmerica on the grounds that she was an exempt managerial employee. Thomas v. Speedway SuperAmerica LLC, No. 06-3768 (10/30/07). The manager (terminated in 2003 before the new FLSA exempt regulations were promulgated in August 2004) testified that she generally worked more than 50 hours each week and met with her own supervisor only once every 4-14 days.

She also testified that she “spent approximately sixty percent of her work time performing non-managerial tasks, such as stocking merchandise, sweeping floors, cleaning bathrooms, operating the register, and performing routine clerical duties. Even though [she] devoted a majority of her time to nonmanagerial activities, she testified that her “primary duty was to manage [her] store,” which required her to perform many management functions. She supervised, interviewed, hired, trained, and disciplined employees; she prepared weekly work schedule for her employees; she resolved employee complaints; she monitored her employees’ performance with formal evaluations; she recommended salary or merit increases for her employees (most of which were accepted by her district manager); she frequently recommended employee terminations to her district manager; and she even terminated some employees without prior approval from her district manager (although she would later notify her district manager of these unilateral termination decisions).

Because the plaintiff earned a base salary of $522 per week, the court applied the “short test” under the old FLSA regulations to determine whether she was a bona fide executive employee. “An employee qualifies for the executive exemption under the short test if: (1) her “primary duty consists of the management of the enterprise” and (2) her primary duty “includes the customary and regular direction of the work of two or more other employees.”

The central issue in the case was whether the plaintiff “had management as her primary duty. Numerous courts have addressed this issue in factually similar cases, and all have held that the plaintiff’s primary duty consisted of management.” In reviewing prior cases, the court stressed that it could not simply “rely upon the plaintiff’s or the employer’s description of the plaintiff’s position or authority; instead we must “look at the plaintiff’s actual duties” to determine whether she qualifies for the executive exemption.” “’Primary duty’ does not mean the most time-consuming duty; it instead connotes the “principal” or ‘chief’ — meaning the most important — duty performed by the employee. . . . Nevertheless, “[t]he amount of time spent in performance of . . . managerial duties is a useful guide in determining whether management is the primary duty of an employee.”

“[I]n situations where the employee does not spend over 50 percent of [her] time in managerial duties, [she] might nevertheless have management as [her] primary duty if the other pertinent [factors] support such a conclusion.” 29 C.F.R. § 541.103 (2003). These factors include: (1) “the relative importance of the managerial duties as compared with other types of duties”; (2) “the frequency with which the employee exercises discretionary powers”; (3) “[the employee’s] relative freedom from supervision”; and (4) “the relationship between [the employee’s] salary and the wages paid other employees for the kind of nonexempt work performed by [her].”

Under the first factor, the court “compare[d] the importance of the plaintiff’s managerial duties with the importance of her non-managerial duties, keeping in mind the end goal of achieving the overall success of the company.” In analyzing that first factor, the court compared the plaintiff’s non-managerial duties (which included stocking merchandise, sweeping floors, and cleaning bathrooms) with her managerial duties (which include hiring employees, training employees, and assigning the weekly work schedule) . The court observed that if the plaintiff failed to perform her nonmanagerial duties, the station would still function, albeit much less effectively. If, on the other hand, she failed to perform her managerial duties, the station would not function at all because no one else would perform these essential tasks.

The second factor examines “the frequency with which the employee exercises discretionary powers” or “the prevalence or regularity of the plaintiff’s discretionary decisions.” The court noted that an “employee’s exercise of discretion over matters of importance strengthens the employer’s showing under the second factor.” Even though her district manager was available by phone and frequently visited, he was not present enough to remove the plaintiff’s regular discretion in managing the station.

“The third factor considers the employee’s ‘relative freedom from supervision.’ [The plaintiff] was the most senior employee at her station; no other on-site employee was her equal. Thus, on a day-today basis, she generally operated without a supervisor looking over her shoulder, monitoring her every move.” “A ‘local store manager’s job is [no] less managerial for FLSA purposes simply because . . . she has an active [district manager].’” Only where the district manager was present virtually every day for several hours have courts found this factor to weigh in the employee’s favor.

The court compared the plaintiff’s salary to her subordinate employee’s wage rate in the fourth factor. Even considering the number of hours she worked, her regular salary equated to approximately 30% more than her subordinate employees without factoring in her eligibility for a monthly bonus or how much overtime the subordinates earned. Even if the subordinate’s overtime were considered, the plaintiff earned more than $7,000 more than the next highest paid employee at the store in the prior seven months. The court found that pay difference to be significant.

Finally, the court dismissed the plaintiff's claim for overtime wages under Ohio law because Ohio's overtime wage statute explicitly incorporates the FLSA exemptions. Ohio Rev. Code § 4111.03(A) (“An employer shall pay an employee for overtime at a wage rate of one and one-half times the employee’s wage rate for hours worked in excess of forty hours in one workweek, in the manner and methods provided in and subject to the exemptions of . . . the ‘Fair Labor Standards Act of 1938’”).

Insomniacs may read the full opinion at http://caselaw.lp.findlaw.com/data2/circs/6th/063768p.pdf

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.