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.