Are You Really a Bona Fide Executive Exempt From Receiving Overtime?

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© Paolese - Fotolia.com

By John A. Gallagher

Here’s a question I get a lot: Is it possible I am entitled to overtime even though my employer says I am a bona fide executive?

The job title given to the employee does not matter; paper job descriptions do not matter. What matters is what the employee actually does on a regular basis.

In fact just this week, the 9th U.S. Circuit Court of Appeals in San Francisco held that employers may not categorically define a class of employees (in that case, junior accountants) as either exempt or non-exempt, requiring instead that employers consider the specific job duties of each employee.

How do I know if I am exempt from overtime?

One of the most common misclassification errors has to do with the bona fide executive classification. The general rule for exemption of executive employees provides in relevant part that:

(a) The term “employee employed in a bona fide executive capacity” . . . shall mean any employee:

  1. Compensated on a salary basis at a rate of not less than $455 per week . . . exclusive of board, lodging or other facilities;
  2. Whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;
  3. Who customarily and regularly directs the work of two or more other employees; and
  4. Who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight. 29 C.F.R. § 541.100 (2005).

This is a conjunctive legal test. That means that the employee must meet all four of these test parts in order to be qualifed as a bona fide executive exempt from receiving overtime.

The financial terms of the test are outdated ($23,660 per year?!); the remaining prongs really go to the heart of the issue. These are the prongs that attorneys typically delve deeply into when trying to win lawsuits for misclassified “executives.”

The FLSA bona fide executive rule

One court has explained this exemption as follows:

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The FLSA provides generally that covered, nonexempt employees must receive not less than a stated minimum wage for all hours worked, and overtime premium pay for all hours worked over 40 hours in a workweek. See 29 U.S.C. §§ 206(a)(1), 207(a)(1). Exemptions are made for certain “white collar” salaried employees. Among the statutory exemptions from these requirements is the exemption contained at 29 U.S.C. § 213(a)(1) for persons employed in a bona fide executive capacity. This exemption…is defined and explained in DOL regulations at 29 C.F.R. §§ 541.100 -.106 (2005).

See 29 C.F.R. § 541.3 (2005). (“The . . . exemptions and the regulations in this part do not apply to manual laborers or other ‘blue collar’ workers who perform work involving repetitive operations with their hands, physical skill and energy. Such nonexempt ‘blue collar’ employees gain the skills and knowledge required for performance of their routine manual and physical work through apprenticeships and on-the-job training, not through the prolonged course of specialized intellectual instruction required for exempt learned professional employees such as medical doctors, architects and archeologists.”).

Can an employee sue to collect unpaid overtime?

Yes. Since FLSA is a federal statute, you can sue in your local federal court. And, if you win, you get $2 for every $1 the employer failed to pay to you.

There is essentially a presumption that most federal courts courts draw in favor of employees being entitled to overtime. Hence, courts construe overtime laws narrowly against employers.

Many states have state laws governing overtime laws as well. While many of them are interpreted the same as the FLSA, it is still a good idea to familiarize yourself with the laws of your state before filing suit.

What is the statue of limitations for OT claims?

The statute of limitations for an FLSA overtime claim is three years if the failure to pay is deemed intentional (which it often is) and two years if it is deemed inadvertent.

Some states may have different statutes of limitations.

This was originally published on attorney John A. Gallagher’s Employment Law 101 blog.

John A. Gallagher, Esquire, is the president of the Gallagher Law Group, P.C., a Philadelphia-area law firm concentrating its practice almost exclusively on representing individuals with workplace issues. After 15 years of representing major corporations in employment litigation, John Gallagher opened his firm in 2006, and since that time has represented only employees. Contact him at jag@johnagallagher.com.

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