Question:

I am the shift manager at a local restaurant. During the course of my shift, I spend some of the time helping customers and some of the time supervising the five other employees that work the shift. Because I am the manager, I don’t receive overtime. I am paid $30,000 a year and I suspect that some of the people that report to me make more than that when you take into account overtime. I have asked the owner if I could be converted to an hourly employee so that I could receive overtime, and he indicated that as a manager, I am not entitled to overtime. This does not seem right.

Answer:

Your letter raises a couple of issues regarding the treatment of employees that may be considered exempt from overtime, and whether your position is in fact exempt. Initially, assuming that you are properly categorized as exempt, there is no prohibition against an employer voluntarily paying an exempt employee on an hourly basis. However, if an employer chooses to pay an otherwise exempt employee on an hourly basis, the employer must also treat the employee as non-exempt with respect to other issues such as overtime, split shifts, minimum wage, and entitlement to meal and rest periods.

The other issue raised by your letter is whether you are in fact properly categorized as an exempt employee. Under both federal and state law, individuals who work in executive, administrative, or professional positions are exempt from most wage and hour regulations. To fall within the executive, administrative, or professional exemptions, an employee must perform certain defined duties, must customarily and regularly exercise discretion and independent judgment in performing those duties, and his/her monthly salary must meet a set minimum. Additionally, in California, employees who perform work in several listed professions, and whose annual salary meets a set minimum, fall within the professional exemption.

As a “manager” you may qualify under the executive exemption. To meet the duties requirement of the executive exemption, an employee must:

  • (1) Be primarily engaged in the management of an enterprise; and
  • (2) “Customarily and regularly” direct the work of at least two other full-time employees or the equivalent; and
  • (3) Have the authority to hire or fire employees or have the ability to command serious attention regarding these matters; and
  • (4) “Customarily and regularly” exercise discretion and independent judgment in performance of their duties; and
  • (5) Spend less than fifty percent (50%) of their work time engaged in nonmanagerial work. “Nonmanagerial work” includes performing the same work as subordinates or performing production or service work that is not part of a supervisory function.

Employees like yourself, who are “working managers,” are often misclassified as exempt employees. “Working managers” will not be considered exempt if they spend more than fifty percent (50%) of their time engaged in non-exempt duties, such as helping customers. Because it is unclear from your question whether you help customers 50% or more of your time, it is unclear whether you meet the duties requirement of the executive exemption.

You indicate that you are paid an annual salary of $30,000. Under California law, the minimum salary for an exempt employee is an amount equal to at least two (2) times the state minimum wage for full-time (40-hour) employment. Effective January 1, 2007, the annual remuneration requirement for white collar exempt employees increased, and is now approximately $31,200 per year based on the minimum wage of $7.50 per hour. Because the remuneration standard is tied to the minimum wage rate, it will increase any time the minimum wage increases. For example, the California minimum wage will increase on January 1, 2008 to $8.00 per hour and, as a result, the required minimum remuneration requirement as of that date will be $33,280. Because you are currently only paid $30,000, which is $1,200 less than the current remuneration requirement, you are not appropriately categorized as exempt, and should therefore be paid by the hour and provided with overtime.
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