Exempt vs. Non-Exempt Employees
By this point, you know that the minimum salary for an employee to be considered overtime exempt will be increasing to $47,476 effective December 1. To be overtime exempt, employees must fit 3 criteria. The salary test is the only one that is being updated, but the other two tests bear reviewing, especially as the renewed discussion of overtime exemption makes employees more aware of their rights under the Fair Labor Standards Act.
Two former employees are currently suing Dunkin Donuts, claiming that they should not have been considered overtime exempt. While they made $42,900 per year, well over the minimum salary at the time, and were both managers in title, they argue that their managerial responsibilities were not their primary duties. Managers at Dunkin Donuts are expected to work on the line when needed, and even take shifts for employees who call in sick. On top of that, the managers also had incredibly limited capacity to manage their own employees. The former managers allege that their managerial duties, which Dunkin Donuts labeled as the basis for their executive overtime exemption, took up only about 10% of their time. Based on this, a first circuit court concluded that Dunkin Donuts’ defense, based on an earlier decision regarding managers at a Burger King, was not applicable in this case. Instead, the court will leave it up to a jury to decide whether or not the workers’ duties were indeed exempt.
This case functions as an important reminder to businesses: when it comes to overtime exemption, what you call your employees matters less than what they do. If a jury decides that the ex-employees’ administrative duties were not, in fact, their primary duties, Dunkin Donuts will owe them back wages for all the overtime hours worked. To give you an idea, Gassan Marzuq, one of the employees, worked at a Dunkin Donuts store from 2007 to 2012. If he worked the bare minimum for a manager of 48 hours per week (though he often worked even more when covering for employees) over the course of those five years, Dunkin Donuts would owe him over $60,000 for the back wages alone. And that’s for one employee. When you factor in the second ex-manager along with other employees who may come forward as this case gains more publicity, this Dunkin Donuts franchise owner could be in some hot water.
This is the perfect time to review the status of all of your employees. A list of exemptions is available from the Department of Labor, Wage and Hour Division here (keep in mind that the fact sheet will not be updated with the higher salary exemption until December 1). While the changed salary level is the focus of most FLSA inquiries right now, it’s important to take this opportunity to review the status of all currently exempt employees. Make sure the duties that are the basis for their exemption are their primary duties. If they aren’t, this is the perfect time to adjust your compliance strategy (for exempt and non-exempt employees) going forward.