Under the Fair Labor Standards Act, employees can be exempt from the overtime pay requirement under the “Executive exemption” if the employee’s primary duty is managing the business. While there’s no hard-and-fast rule for exactly how much time must be spent managing—it’s safe to say that it needs to be more than the 5-10 hours per week. The Act requires employees to spend the majority of their time performing specific duties in order to be exempted from overtime compensation.
Many employers purposely misclassify staff as exempt employees because a company that operates thousands of stores can save tens of millions of dollars by doing so. Employers sometimes classify all employees with the title of manager as exempt from overtime under the executive exemption, even if the managers spend the majority of their time at work performing the same tasks as hourly employees. Payless ShoeSource Inc., for example, recently settled a class action wage and hour lawsuit in which its managers allege they were misclassified as overtime exempt.
The lawsuit was filed on behalf of all Payless managers who were not paid for the overtime work they performed. According to the lawsuit, managers at Payless spend the majority of their days at performing “non managerial duties such as operating cash registers, cleaning, greeting customers, and answering phones.” The lawsuit alleged Payless store managers were required to work overtime without pay.
Under the FLSA, any time spent working after eight hours a day or forty hours a week is defined as overtime. All nonexempt employees are entitled to one and one-half times their hourly rate of pay for all overtime worked.
Payless has agreed to settle the lawsuit for $2.9 million, but it may still have come out ahead by denying employees overtime due them for many years. Payless denied the claims and asserted it had complied with the law.