Do you hire managers and assistant managers? Have you classified them as overtime exempt? Are they overtime exempt? You may be wondering why that is even a question. They hold managerial positions and they are paid a salary. Why wouldn’t they be exempt? Hooters, having just been served with notice of a nationwide misclassification lawsuit, is probably asking the same question. Let’s take a closer look at the issues and see if we can learn some lessons from them…
(image from c2essentials.com)
Let’s first address the small elephant in the room. I know our case example is Hooters. I know that not everyone likes or agrees with the business model or premise. The important facts of this case really have nothing to do with their waitresses though. So let’s focus on those key facts and see what we can learn.
The case, Stirewalt et al. v. Hooters of America LLC et al., case number 27-cv-00307, (US Dist Ct., N.D. Ala.) is a collective action for overtime pay, brought by 3 named plaintiffs on behalf of themselves and all other assistant managers at the chain’s affiliated stores/restaurants. The plaintiffs allege that the assistant managers often worked 80 hours a week, without even hope of receiving overtime pay because they were classified as overtime exempt managers. You may be thinking, “What’s the issue? If they are managers, why would they expect overtime pay?” Well, just because you call someone a manager ( or assistant manager) doesn’t mean they are a manager. ( I mean, I can call myself the Queen of Siam, but that doesn’t mean I am, the Queen of Siam. Just sayin’…) That’s the crux of the assistant managers’ argument. They were given the title, classified as exempt on that basis, but they’re not really managers.
Wait. Doesn’t the employer get to decide whether they are managers? Well, yes — and no. An employer can hire a manager, or decline to hire someone as a manager. The issue lies in how the employer then treats the employee. If the employer calls someone a manager and classifies him/her as overtime exempt, but does not really treat him/her in accordance with at least one FLSA exemption category, then there will be a problem. That, according to the assistant managers at Hooters, happened. Let’s look at some specifics and see how.
The assistant managers’ main argument is that their primary job function was not managing employees. They did not have the ability to hire and fire, and apparently their recommendations as to hiring and firing, even after interviewing candidates are not given any particular weight. Managing employees at the very least would include creating schedules. According to the plaintiffs, any schedules they did create were “almost always changed”. So what was their primary duty? According to the plaintiffs, sales, with no control over display or pricing of any goods.
What about their salaries though? Doesn’t receiving a set salary make them exempt? No, as I have said in previous posts. In this case, it would appear that Hooters was taking advantage of the Executive Exemption. Here are the criteria:
- The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;
- The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
- The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
- The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
Assuming that they were paid at least $455 a week on a salary basis, and that the employees’ allegations are true, it seems clear that they do not meet the above criteria and are not overtime exempt.
There’s more. The employees also allege that “Defendants have intentionally and repeatedly misrepresented the true status of managerial compensation … to avoid suspicion and inquiry by employees regarding their entitlement to monies owed to them,” As such, the assistant managers are asking that the statute of limitations be tolled, because “Plaintiffs, as well as other similarly situated present and former employees, relied upon these misrepresentations by defendants and [were] unable to determine [their] true status under the FLSA by the exercise of reasonable diligence because of those misrepresentations.” Let me translate that into English: Hooters misrepresented to the plaintiffs their true employment/managerial and exempt or non-exempt status in such a way that they could not reasonably ascertain whether they were entitled to overtime. Therefore, according to the plaintiffs, they should not be held to a strict time limit for filing overtime claims.
Wait, there’s still more. These same employees allegedly traveled to more than one store/restaurant, not only to check inventory, but also to perform other functions outside their job descriptions, such as kitchen and janitorial work, and–you guessed it–did not receive additional pay for that work. For all that and more, the assistant managers are seeking overtime pay, sales incentives, commissions, bonuses, vacation and sick time.
So, here are just a few takeaways for those of you with managers:
- Make sure that anyone with the title of “manager” or “assistant manager” or anything similar, really is managing people, if you want to claim that they fall within the Executive Exemption;
- Remember that primary job functions, not title, determines exempt or non-exempt status;
- When in doubt, assume they are not exempt and pay the overtime;
- Check wage and hour laws of all states in which you employ people. There may be an exemption category that provides greater protection to the employee;
- Consult with friendly employment counsel. (You can also join me on April 3 and 4 in Orlando, FLA for a 2-day seminar on wage and hour law under the FLSA. It’s a shameless plug, but I am offering something of value 🙂
OK, we’ll call that a wrap. See you next week!
Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.
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