Scope of duties determines whether executive exemption applies

The government classifies workers in every fathomable way: skilled or unskilled, professional or labor, public or private sector, civilian or military. State law—specifically Section 510 of the California Labor Code—determines which employees earn overtime for work exceeding 40 hours in a pay period. One of exceptions under both laws denies time and-a-half compensation to “executive” employees.

Six-prong test

The exemption applies only if the employee satisfies a four-part test under federal law. The employee must:

1. Earn weekly compensation on a salary basis of at least $684.
2. Primarily manage the enterprise or a department within it.
3. Customarily supervise at least two or more full-time employees.
4. Have the authority to hire and fire employees or have their suggestions regarding those receiving consideration.
5. Be primarily engaged in the duties that meet the exemption.
6. Earn a salary no less than two times the minimum wage for full-time employment.

What does “primarily engaged” mean?

A recent court case reveals how the analysis of specific facts helps determine whether to apply the exemption. A business appealed a jury verdict awarding nearly $40,000 in unpaid overtime to a salaried manager. The business argued at trial that a wage order under the eliminated Industrial Welfare Commission establishing an “executive exemption” applied. The jury had answered a question in jury instructions that addressed whether the manager had been “primarily engaged” in the duties of the exemption.

The original question asked whether the manager performed exempt duties more than half of the time. The appellate court recognized previous decisions on overtime exemptions involving the “primarily engaged” requirement involving more than a quantitative totaling up of hours. The questions and jury instructions ignored two important issues: the duties the manager was expected to perform and actually performed and those duties directly and closely related to exempt. The court concluded it was reasonably probable that the jury would have given a result favorable to the business had the questions been worded differently.

Employee classification in California involves consideration not only to the day-to-day responsibilities of the position but also to those expected and the duties carried out. Details of the work can mean either overtime for employees or set paychecks for salaried workers. Attorneys who understand these distinctions can offer guidance.