The “Personnel Authority” Requirement Under The Executive Exemption To Overtime Coverage

As I’ve discussed before, under federal overtime law employees are either “exempt” or “nonexempt.”  Exempt employees are never entitled to overtime regardless of how many hours they work.  Nonexempt employees are entitled to overtime if they work more than forty hours in a given week.

One of the federal exemptions is for “executive” employees.  Several requirements have to be met under federal law for an employee to be covered under the executive exemption:  The employee must be paid a salary, the employee must regularly supervise two or more full-time employees or their equivalent, the employee must have management as the primary jo duty of the position, and the employee must have the authority to hire or fire other employees or give suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees that are given particular weight.  All components of the test must be met or the employee is not exempt and is entitled to overtime for every hour worked over forty in a given week.

That final part of the test, which I call the “personnel prong,” is where I believe many employers are failing the exemption test.  Too many “management” employees do not have the level of personnel authority or input that federal law requires for true exempt executive employees.  In many cases the employee does not have unilateral authority to make significant personnel decisions, such as hiring, firing, demotions, or promotions.  The employee can make recommendations or give input in that regard, but the ultimate personnel authority is held by the supposed manager’s superiors.

Given that common scenario, the argument frequently concerns whether the employer gives the employee’s suggestions, recommendations, and input “particular weight.”  Federal regulations instruct that to determine whether an employee’s suggestions and recommendations are given “particular weight,” factors to be considered include, but are not limited to, whether it is part of the employee’s job duties to make such suggestions and recommendations; the frequency with which such suggestions and recommendations are made or requested; and the frequency with which the employee’s suggestions and recommendations are relied upon. Generally, an executive’s suggestions and recommendations must pertain to employees whom the executive customarily and regularly directs. It does not include an occasional suggestion with regard to the change in status of a co-worker. An employee’s suggestions and recommendations may still be deemed to have “particular weight” even if a higher level manager’s recommendation has more importance and even if the employee does not have authority to make the ultimate decision as to the employee’s change in status.

This is an area that I believe should be given more attention in overtime cases.  Not enough employees consider whether their personnel authority is sufficient to satisfy the executive exemption test when deciding whether to pursue an overtime claim.  Overtime cases require legal analysis of federal statutes, U.S. Department of Labor regulations, and court decisions.  I can help you with any employment law or labor law questions that you might have.  Please feel free to contact me for a free initial consultation about employment law or labor law.

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