Do you know which of your managers should receive overtime pay? The answer isn’t so easy. Get the answer once and for all in this post.
Two common misconceptions in paying out overtime to employees is that both 1) “white collar” office workers and 2) any salaried employee with a manager title is automatically exempt from receiving overtime. This confusion has led to its fair share of pricey legal fees and penalties, so, we’d like to sort through once and for all: When should you pay your managers overtime?
When managers receive overtime pay
The number one thing that you should remember about determining who should receive overtime pay is that titles don’t matter. Not even a tiny bit.
Why? The Fair Labor Standards Act (FLSA) is the law that sets overtime and minimum wage regulations. Under this law, employees fit one of two classes, exempt (doesn’t receive overtime) and non-exempt (receives overtime), all of which is determined by the work the employee performs.
To return to the manager question, in the exempt set of employees, there are seven exempt job duty categories. One of the seven is called the executive exemption, which includes many (but not all) managers. Employees who fall in this category will fit the following description, and must perform a similar primary duty:
- The executive exemption
Core details from the U.S. Department of Labor
- Primary duty
Managing the company or a recognized important department or subdivision of it, regularly directing the work of at least two or more other full-time employees (or direct 80 employee hours in all each week). Have direct authority or significant influence when it comes to hiring, firing, advancing, and promoting employees.
- Common responsibilities
- Interviewing, selecting, and training employees
- Setting employee pay
- Distributing work
- Determining how work is done
- Controlling the flow of materials and supplies
- Controlling the company budget
- Handling employee complaints
- Minimum wage and structure
Must receive a salary of at least $455/week ($23,660/year) that does not change based on quality or quantity of work performed
As you can see, not all managers neatly fit this category. While they may be exempt based on other criteria, simply supervising others or bearing this title isn’t enough to place them in this category.
Exempt vs. non-exempt managers
Keeping in mind that every case is specific and duties, not titles, matter in granting overtime pay, here are some quick example employees who are likely (but not definitely) exempt:
|Likely exempt||Likely non-exempt|
What’s at stake?
FLSA compliance isn’t something to be regarded lightly. Every year, employers big and small are met with lawsuits around misclassified employees, unpaid overtime, minimum wage violations, and other similar challenges. Even a relatively “small” wage violation can be costly—in one recent case, Cain v. Almeco (2014), the employer was required to pay over $173,000 in attorney’s fees, but only around $6,000 in back wages.
Want to develop compliant minimum wage and overtime policies? Check out our Must-Have Guide to Overtime & FLSA to learn how to pay your employees correctly and avoid steep penalties.