State:
Free Special Resources
Get Your FREE Special Report. Download Any One Of These FREE Special Resources, Instantly!
Featured Special Report
Claim Your Free Cost Per Hire Calculator
This handy calculator lets you plug in your expenses for recruiting, benefits, salaries, and more.

Graphs automatically generate to show you your annual cost per hire and a breakdown of where you are spending the most money.

Download Now!
May 24, 2022
Risk of Employees’ Losing Exempt Status Rises During Times of Short-Staffing

by Kau J. Guannu

For a Limited Time receive a FREE Compensation Market Analysis Report! Find out how much you should be paying to attract and retain the best applicants and employees, with customized information for your industry, location, and job. Get Your Report Now!

In times of short staffing, it’s important to remember exempt employees may lose their exempt status if they spend too much time performing nonexempt work. A recent ruling by the U.S. District Court for the District of Minnesota serves as a stark reminder that exempt employees may perform nonexempt work but only if their primary duty remains exempt.

Facts

Tammy Babbit was an executive team leader (ETL) for food and beverage sales in Target’s South Rochester, Minnesota, store in 2019. The company classified her as an exempt employee under the Fair Labor Standards Act (FLSA). In her position, she oversaw 75 employees and allegedly worked between 60 and 70 hours a week. She filed an FLSA lawsuit against the employer seeking overtime wages and claiming her main duty wasn’t management but hourly work.

Target argued Babbit was exempt under the FLSA’s executive exemption. The U.S. Department of Labor’s (DOL) regulations set forth a four-prong definition for the work of an executive employee who is exempt from overtime. The rule states, among other things:

  • An executive is one whose “primary duty” is “management of the enterprise or a customarily recognized department thereof”; and
  • The term “primary duty” means the “principal, main, major, or most important duty that the employee performs.”

Court’s Decision

The court reviewed whether Babbit’s primary duty was performing exempt management work or hourly, nonexempt work. Target argued her primary duty was managing the food department, and her managerial activities included:

  • Directing the work of team leads and ensuring they were accountable for their subareas;
  • Executing weekly sales and staffing plans;
  • Leading the completion of hourly tasks delegated by the store team leader;
  • Helping prepare for executive and regulatory visits;
  • Overseeing compliance with wage-and-hour requirements; and
  • Opening the store.

Babbit countered that her most important duty was performing nonmanagerial (in other words, nonexempt) work, including:

  • Stocking shelves;
  • Working the cash register;
  • Placing newly received merchandise;
  • Setting up displays;
  • Cleaning the store;
  • Folding clothes;
  • Unloading trucks;
  • Assisting customers; and
  • Filling Internet orders.

She contended she spent 80% to 90% of her workday performing the tasks.

The court denied Target’s request for summary judgment (dismissal without a trial) concluding there was a factual dispute about whether Babbit’s primary duty was exempt managerial work. Stated differently, she created a genuine issue of material fact by introducing evidence she performed hourly work the majority of the time. Babbit v. Target Corp., 2022 WL 313887 (D. Minn., Feb. 2, 2022).

Takeaways for Employers

Babbit’s case provides an example of how important it is for you to guard against allowing exempt employees to perform too much nonexempt work. Can they perform some nonexempt work? Certainly, but their primary duty (whether measured on a daily, weekly, monthly, or yearly basis) must be performing exempt work, or they may be able to make a claim for overtime wages because they won’t be considered to be exempt.

Kau J. Guannu is an attorney with Felhaber Larson in Minneapolis, Minnesota. Kau’s practice focuses on Labor & Employment, Business and Commercial Litigation and Immigration Law. You can reach her at kguannu@felhaber.com.

Featured Free Resource:
Cost Per Hire Calculator
   
   
 
 
Twitter  Facebook  Linked In
Follow Us
CT-WEB06
Copyright © 2022 Business & Legal Resources. All rights reserved. 800-727-5257
This document was published on https://Compensation.BLR.com
Document URL: https://compensation.blr.com/Compensation-news/Compliance/Exempt-Employees/Risk-of-Employees-Losing-Exempt-Status-Rises-Durin/