I am moving an employee into a full time Operation Manager’s position and the employee will no longer do any field work. I will be paying him a salary and he will be supervising three employees and be able to make recommendations on hiring and terminating employees. Does this make him an “exempt” employee now?
It depends upon the salary amount you intend to pay your employee. There are exemptions for certain “White Collar” positions, such as ‘administrative’ or ‘executive’ positions, under the Fair Labor Standards Act (FLSA). Employees must meet specific tests regarding the “job duties” of the position and be paid on a “salary” basis of not less than $455 per week. It’s important to know that job titles do not determine exempt status; it’s actually the duties of the position. Based on the duties you described, it appears your manager’s position may possibly meet the “duties test” criteria to be classified as exempt.
Exempt “white collar” employees must be paid a salary that is a predetermined amount (not less than $455 per week) and that is not varied based on quantity or quality of work. The general rule requires that exempt employees receive their full salary for any week in which work is performed without regard to the number of hours or days worked.
It is important to remember that the exemptions under Federal Law may not be identical to those available under state laws. Each state may provide different exemptions and/or have their own criteria for classifying employees as exempt. For example, all Oregon employers that are subject to the FLSA are required to be paid a minimum weekly salary of $455 a week or $23,660 annually (this salary level was enacted in 2004).
In California your employee would most likely fall under the Executive Exemption, which has a similar duties test to the federal exempt status. The Executive Exemption requirements are met by any employee:
- Who is primarily engaged in duties, which meet the test of the exemption.
- Whose duties and responsibilities involve the management of the enterprise in which he/ she is employed in a customarily recognized department or subdivision thereof; and
- Who customarily and regularly directs the work of two or more other employees
- Who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees will be given particular weight
- Who customarily and regularly exercises discretion and independent judgment
- An executive employee must also earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment (full-time employment means 40 hours per week as defined in Labor Code Section 515(c)). For employers with 25 or fewer employees, that minimum salary is $43,680. For organizations with more than 25 employees, the minimum salary is $45,760.
So, as you can see, both federal and state rules make it tough for employers to establish that an employee is “exempt.”