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October 26, 2009
FLSA's Executive Exemption: What is 'Management'?

The Fair Labor Standards Act's (FLSA) executive exemption from overtime is tricky for many employers. What does the FLSA mean when it says an employee's primary duty must consist of a management role in the company?

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The FLSA regulations on overtime clearly outline what factors comprise a management role. They include:

  • Interviewing, selecting, and training employees
  • Setting and adjusting the rates of pay and hours of work of employees
  • Directing the work of employees
  • Maintaining production or sales records for use in supervision or control
  • Appraising the productivity and efficiency of employees for the purpose of recommending promotions or other changes in their status
  • Handling employee complaints and grievances
  • Disciplining employees
  • Planning the work of employees
  • Determining the techniques to be used
  • Apportioning the work among the employees
  • Determining the type of materials, supplies, machinery, equipment, or tools to be used, or merchandise to be bought, stocked, and sold
  • Controlling the flow and distribution of materials or merchandise and
    supplies
  • Providing for the safety and security of the employees or the property
  • Planning and controlling the budget
  • Monitoring or implementing legal compliance measures

The FLSA overtime regulations state that in some departments or subdivisions of a company, an employee has broad responsibilities similar to those of the owner or manager of the company, but generally spends more than 50 percent of his or her time in production or sales work. If the employee directs the work of warehouse and delivery personnel, approves advertising, orders merchandise, handles customer complaints, authorizes payment of bills, or performs other management duties as the day-to-day operations require, he or she will be considered to have management as his or her primary duty, and will be exempt from overtime.

Under the FLSA, the concurrent performance of exempt and nonexempt work does not disqualify an employee from the executive exemption. FLSA regulations allow concurrent duties because, generally, exempt executives make the decision regarding when to perform nonexempt duties and remain responsible for the success or failure of business operations under their management while performing the nonexempt work. In contrast, the nonexempt employee generally is directed by a supervisor to perform the exempt work or performs the exempt work for defined time periods. For example, an exempt store manager will sweep the floor when he or she desires or needs to do so. A nonexempt janitorial employee, on the other hand, will sweep the floor at the order of the manager.

More Resources on FLSA and White Collar Exemptions

 

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