Managers Are Not Always Exempt from Overtime Pay

To determine whether an employee is exempt from overtime, the law requires more than an examination of the employee’s title. Thus, a manager is not automatically exempt from overtime pay.

California has been hit particularly hard by the current economic slow-down. The most recent unemployment rates in the state are hovering around 11% according to the US Department of Labor. In this tough economy, employers are doing whatever they can to cut expenses and meet bottom lines. For some employers, this includes lay-offs, hiring freezes, cutting back on benefits and requiring employees
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The reduction in workforce can mean more work for employees who remain on-the-job. For those in managerial positions, this can result in increased job duties, longer working hours and less compensation. It can also result in managers doing the work of lower level employees who are laid off as part of a reduction in force.

Managers generally are exempt from overtime compensation under state and federal wage and hour laws. However, it is important to remember that it is job duties and not job titles that determine whether or not an employee actually is exempt from this important source of increased compensation.

Those currently in managerial positions should examine their day-to-day job duties and determine whether they now are spending a majority of their time managing others or performing the same tasks as those they supervise. Even though employees may have started their jobs as exempt, this doesn’t mean their status cannot change. Employees who once may not have been eligible to receive overtime pay may be surprised to discover they now are entitled to receive time and one-half and, in some cases, double time for hours worked in excess of eight hours in a day or 40 hours in a week.

When a Manger May Not be a Manger

In determining whether an employee is exempt from overtime, the law requires more than just an examination of the employee’s title. Merely classifying an employee as a manager does not automatically make the employee exempt under wage and hour laws.

Whether or not an employee is exempt from overtime pay depends on what job duties the employee actually performs and how long the employee performs them. According to California law, to be exempt under the managerial category, an employee’s primary job duties must be consistent with those necessary for managing, including:

-Customarily and regularly directing the work of at least 2 or more employees
-Customarily and regularly exercising discretionary power
-The authority to hire and fire employee
-The ability to make comments and suggestions about personnel matters that are given weight by the employer

To be exempt, the employee must spend more than 50 percent of his/her time performing the above-listed duties. For example, if an employee spends only half of his or her time in a managerial role and the other half performing the same duties as those he or she supervises, the employee may lose exempt status.

Additionally, to be considered a manager, an employee must earn a monthly wage equal to at least 2 times the state minimum wage for full-time employment, which currently is $2,560.00 per month.

If an employer treats an employee’s status as “exempt,” but the employee does not meet these requirements, the employee may have a claim against the employer for unpaid overtime compensation.