The upcoming change to salary requirements to the so-called “white collar” overtime exemptions under the Fair Labor Standards Act (FLSA) has garnered a lot of attention. However, even with a strong emphasis on the changes to the salary requirement, employers should not lose focus on the duties portion of the test.

The white collar exemptions (executive, administrative and professional) generally have two components – payment on a qualifying salary basis and satisfaction of a duties-test requirement unique to each exemption. A recent decision from the United States Court of Appeals for the Eighth Circuit (covering Arkansas, Iowa, Minnesota, Missouri, Nebraska, and North and South Dakota) reminds employers that even though most recent focus has been on the salary test component, the duties test inquiry remains as critical as ever.

[Image Credit: Bloomberg]
[Image Credit: Bloomberg]

In the recent decision, the appellate court affirmed a lower court’s conclusion that the executive exemption applied to positions called “Team Leaders,” meaning the Team Leaders were exempt from overtime requirements. The duties test for the executive exemption generally requires the position:

1. Manage a department or subdivision
2. Routinely manage at least two employees (or full time equivalents)
3. Have authority to hire and fire or be in a role where recommendations about personnel matters are given particular weight

The recent decision focused on the last element – both sides agreed the Team Leaders did not have authority to hire and fire, but the company argued their recommendations were given “particular weight.”

In agreeing with that argument by the company, the court relied upon testimony from the employees about the responsibility Team Leaders had to evaluate and provide feedback about the behavior of hourly employees, specifically mentioning their role in identifying rules violations or performance issues. The employees also acknowledged that Team Leaders had authority to make temporary reassignments and could recommend discipline. Evidence cited by the court included multiple examples of recommendations from Team Leaders being adopted – including discharge or retention of probationary employees, recommendations regarding promotions or demotions, and management of schedules and the ability to fill temporary vacancies through reassignments.

Interestingly, even though some of the employees challenging their exempt classification offered written statements about their lack of authority, the court ignored these statements because it considered them to be contradictory to the deposition testimony those same individuals had provided. One lesson here is the value in documenting the input of Team Leaders or similar positions – so there is written evidence to support the recommendations and ultimate decisions, establishing that particular weight was given to their recommendations or that the individual had authority to make such decisions.

Finally, in what feels like poetic justice, you may be interested to know that your company is not alone in dealing with FLSA issues. It was recently announced that the Department of Labor agreed to pay $7 million dollars to settle an overtime lawsuit with its own employees, from claims dating back to 2006. Apparently, even the folks who are supposed to know this best do not always get it right.

This article originally appeared on the Foley & Lardner website. The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

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