Did You Know?
In order to be exempt from overtime, your managers need to do more than have “Manager” in their job title. In fact, the act of managing alone is not even enough. When classifying a manager as an exempt employee, you’re usually using what’s called the White Collar Executive Exemption under the Fair Labor Standards Act. To use this classification correctly, you must ensure that your employee passes all three parts of the following duties test:
- Their primary duty is the management of the enterprise or a customarily recognized department or subdivision; and
- They customarily and regularly direct the work of two or more full-time employees or equivalent (e.g., two 40-hour per week employees or four 20-hour per week employees); and
- They have the authority to hire, fire, or promote other employees or effectively recommend similar actions.
If an employee does not pass all three parts of the test above, they may not be classified as exempt from overtime—at least not under the White Collar Executive Exemption. If they do pass the duties test, you must also ensure that they are paid at least $455 per week on a salary basis. Being paid on a salary basis means they will not have their pay reduced because they worked fewer hours in a week or produced subpar work. (Note: some states, including California and New York, require that employees be paid more than $455 per week to be exempt or pass a slightly different duties test.)
Content provided by TPC HR Support Center.