When High Earners are Eligible for Overtime

Shavitz Law Group

Highly Compensated Managers, Administrators, and Other Employees May Be Entitled to Overtime

While many believe highly compensated managers, administrators, and other employees are not entitled to overtime under the federal law known as the Fair Labor Standards Act (FLSA), that notion is incorrect. In the recent case of Helix Energy Solutions v. Hewitt, the Supreme Court held that if highly compensated employees do not satisfy the “salary basis test” – one of the essential elements for key exemptions to the FLSA – then the employees may be entitled to overtime notwithstanding their high salary. In Hewitt, the plaintiff earned over $200,000 per year. Nonetheless, the high Court held that because he was compensated on a day rate (per diem) basis instead of a salary basis, he was entitled to overtime.

Pursuant to the FLSA, in order for managers and administrators, as well as some other “white-collar” workers to be considered exempt from overtime they must (1) be paid on a salary basis; (2) earn above the minimum salary threshold which is, as of July 1, 2024, $844 per week (or $43,888 per year); and (3) have management or administration as their primary duty.

The issue in Helix Energy related to the first requirement. Specifically, the Court considered whether Hewitt’s day rate passed the salary basis test. The salary basis test requires employees to be paid a predetermined amount of money that is not subject to reduction based upon the quality or quantity of work done. Because Hewitt’s day rate varied depending on the number of days he worked each week, his compensation was not “predetermined” as required and therefore he was entitled to overtime for the hours he worked over 40 in a work week.

Helix Energy makes clear that the amount of money an employee makes is not dispositive of certain FLSA exemptions. Indeed, based upon his compensation and hours worked, Hewitt could be entitled to upwards of $11,500 per week in overtime. Thus, even employees making significant annual compensation can be overtime-eligible if their employer does not guarantee them an unvarying salary. This means that many engineers, banking and finance workers, and other high-income earners and professionals, may be entitled to overtime if they are not paid a salary.

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].

Non-Competes No Longer Valid

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Understanding the FTC’s New Rule on Non-Compete Agreements

The Federal Trade Commission (FTC) has introduced a new rule that significant changes the landscape for non-compete agreements in the workplace. Effective September 4, 2024, most non-compete agreements with employees will no longer be enforceable.

Here’s a breakdown of what the new rule means for both employers and employees:

What is a Non-Compete Agreement?

A non-compete agreement is a contract between an employee and employer that restricts the employee from working for competitors or starting a competing business for a certain period after leaving the company. Non-competes typically are contained in employment contracts or agreements. While non-compete agreements aim to protect the employer’s business interests, but they can also limit employees’ job opportunities and mobility.

What’s Changing?

Pursuant to the new rule, employers can no longer enter into new non-compete agreements with employees. This includes senior executives—employees earning more than $151,164 per year who hold policy-making positions. However, existing non-compete agreements with these senior executives will remain valid. For all other employees, any existing non-compete agreements will become void. So the new rule is retroactive, except for C-suite, upper-level management employees.

Notice Requirements

Employers must inform both current and past employees that their non-compete agreements will not be enforced. This ensures that employees can seek or accept new job opportunities without fear of legal repercussions.

Exceptions

There are a few exceptions to the new rule:

1. Existing non-compete agreements with senior executives remain valid.

2. Non-compete agreements related to the sale of a business are still enforceable.

3. Any legal actions that arise before September 4, 2024, will not be affected by the new rule.

What the New Rule Means for Workers

Workers who previously remained with companies because of a non-compete would deprive them of other employment opportunities will no longer be restricted by the non-compete agreement. This gives employees more employment opportunities and mobility. As a consequence, employees should be in a better position to negotiate more favorable terms from their present employers.

If you or someone you know has been subject to a non-compete and you have questions about the new rule or any other aspect of your employment, please contact Shavitz Law Group at [email protected]

California Employee Expense Reimbursements

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The federal statute known as the Fair Labor Standards Act (FLSA) requires employers to pay overtime and minimum wage for non-exempt employees.  As a federal law, the FLSA applies nationwide. However, some states offer more protection than the FLSA. For example, in California, employers are required to reimburse employees for necessary expenses incurred while performing their jobs.

This requirement comes from Section 2802 of the California Labor Code, which ensures that employees are not forced to pay out-of-pocket for work-related expenses. Section 2802 specifically states: “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties . . .” The protections of § 2802 are broad and apply to all employees.

Here are a few examples of how § 2802 operates:

Personal Vehicles

When employees use their personal vehicles for work purposes, employers must reimburse them for the associated costs. Reimbursement should cover all expenses related to the vehicle’s use, including maintenance, insurance, and wear and tear. The most common method for calculating this reimbursement is by using the IRS standard mileage rate, which provides a per-mile rate that factors in all these costs.

For example, if the IRS mileage rate is 67 cents per mile and an employee drives 100 miles for work, the employer would reimburse $67.

Use of Personal Cell Phones

Similarly, if employees use their personal cell phones for work, employers must cover a fair share of the costs. This includes voice calls, text messages, and data usage necessary to perform their job.

One approach is for employers to reimburse a reasonable percentage of the employee’s phone bill. For example, if it’s determined that 30% of the phone usage is work-related, then 30% of the monthly bill should be reimbursed. If you work in California and believe you have not been properly reimbursed for expenses you incurred as a direct result of your job duties, please contact Shavitz Law Group at [email protected].

Minutes May Add Up to Unpaid Overtime

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The practice of rounding hours is a topic that often raises questions and concerns among employees. Rounding involves adjusting the recorded time worked to the nearest interval, typically in increments of five, ten, or fifteen minutes. While this practice may seem straightforward, it’s important to consider the legal effects of rounding.

The significance of rounding hours worked lies primarily in its adherence to federal, such as the Fair Labor Standards Act (FLSA), and state labor laws. Under these rules, rounding is allowed as long as it does not systematically undercompensate employees over time. Essentially, the rounding method employed must be fair and neutral, treating both overages and shortages of time worked equally.

For example, if rounding consistently results in underpayment or non-compensation for significant periods of time worked it may raise legal issues. For instance, an employee who consistently clocks in at 8:53 AM and clocks out at 5:07 PM, accumulates an additional 30 minutes of work over a two-week period. If the employer consistently rounds down in such instances, the employee could be unfairly deprived of compensation for those extra hours worked, leading to wage theft and violation of labor laws.

Because not all rounding policies violate the law, if you have been consistently “shorted” hours worked based upon an employer’s rounding policy, the best option is to have a lawyer evaluate your situation to determine if you have a claim for unpaid wages.

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].

California Rights for Outside Sales Employees

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When it comes to workers’ rights, California law is often stronger than federal law, meaning that California often grants more generous rights to workers than the federal overtime and minimum wage law known as the Fair Labor Standards Act (“FLSA”). One example of is found in how the Outside Salesperson exemption is treated under California law and the FLSA.

Under the FLSA, an outside sales employee is exempt if they meet the following test:

The employee’s primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

    • The employee must be customarily and regularly engaged away from the employer’s place or places of business
    • California’s requirements for outside salespersons are somewhat different. Under the California Labor Code and  California Wage Orders, an outside salesperson is defined as follows:
      • Any person, 18 years of age or over;
      • Who customarily and regularly works more than half (more than 50 percent) the working time away from the employer’s place of business;
      • Selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities.

Unlike the FLSA’s qualitative standard, California law sets a quantitative standard. The FLSA focuses more on the overall quality of a salesperson’s work. Unlike the FLSA which focuses on an employee’s “primary duty,” California law takes “a quantitative approach, looking to the actual hours spent on sales activity to determine if an employee is primarily a salesperson.” Under this standard, an employee is exempt if more than fifty percent of his job duties involved “sales-related activities.”

If you are employed as an Outside Salesperson (or are involved in sales as an independent contractor) in California and are spending less than 50% of your time outside of the office (including a home office), then you may be entitled to overtime for the hours you work over 40 in a work week.

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].

 

After-Hours Communications

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The Fair Labor Standards Act mandates that employers compensate non-exempt employees for all overtime hours worked. What many employers fail to appreciate is that “work” encompasses not only to traditional tasks performed at a worksite. In this age of technology where communication can occur 24/7, various work-related activities conducted outside regular working hours are considered “work” for which employees are entitled to be paid, including off-site and after-hours communications, such as emails, texts, messages, and phone calls.

For instance, when non-exempt employees respond to work emails/texts/messages during evenings or weekends when they are otherwise off-shift, the time spent engaging in these communications is considered compensable work and should be factored into the calculation of overtime pay. Similarly, if employees are required to participate in work-related phone conferences outside of their standard work hours, the additional time dedicated to these activities qualifies as overtime.

Employers now take it as a given that they can communicate with their employees after hours, via email/text/messaging/phone. While such communication may be considered the “new normal,” employers are required to accurately track and pay for all compensable time, irrespective of the method or medium of communication. If non-exempt employees engage in work-related communications through emails, texts, messages, or phone calls after hours, when they are off the clock, they are entitled to overtime for those additional hours worked.

 

 

 

 

 

Time In Training

Shavitz Law Group

Employers are required to pay employees for study time when they mandate that employees to engage in certain learning activities for the employer’s benefit. Here are several examples of scenarios where studying would likely be considered compensable: 

 

 

1.      Mandatory Training Programs: 

·         If an employer mandates attendance at training programs, workshops, or seminars outside regular working hours, the time spent in these activities is generally considered compensable. 

·         Scenario: A business introduces a new software system for tax preparation. All non-exempt employees are required to attend a weekend training program to learn the ins and outs of the new system. The time spent in this mandatory training program is compensable. 

2.      Online Courses or Webinars: 

·         When an employer requires employees to complete online courses or attend webinars as part of their job responsibilities, the time spent on these activities is likely compensable. 

·         Scenario: A marketing company requires its staff to enroll in online courses on digital marketing trends. The time spent attending these courses during evenings or weekends, as mandated by the employer, is likely compensable. 

3.      Job-Specific Certifications: 

·         Some jobs may require employees to obtain specific certifications or licenses following their hire. Time spent studying for and taking exams related to these certifications, especially if mandated by the employer, may be considered compensable. 

·         Scenario: A healthcare institution mandates that staff obtain a specialized certification for handling new medical equipment. The time spent studying for the certification, including attending preparation courses, is compensable. 

5.      Product or Service Training: 

·         For employees involved in sales or customer service, studying product or service materials to enhance their knowledge and performance may be compensable, especially if the employer requires it. 

·         Scenario: A salesperson at a technology company is required to attend a training session on the features and benefits of a new product. The time spent in this training session, even if it occurs outside regular working hours, is compensable. 

7.      Orientation or Onboarding Programs: 

·         The time spent by new hires in orientation or onboarding programs, including reviewing company policies and procedures, can be compensable if it occurs outside regular working hours. 

·         Scenario: A new employee is required to attend an extensive onboarding program that includes learning about company values, policies, and procedures. The time spent in this onboarding program, whether during or after regular working hours, is compensable. 

 

In all these scenarios, the key factor is that the employer mandates or requires the employee to engage in these activities for the benefit of the company. If it’s a voluntary initiative by the employee for personal development, it may not be considered compensable time. 

 

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].

 

The Two Full-Time Employee Requirement for the Managerial Exemption

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Did you know that managers may be non-exempt and entitled to overtime even if they are salaried and even if they are actually performing managerial duties? One common misconception about the FLSA is that any employee in a managerial role is automatically exempt from receiving overtime pay if they are salaried and performing managerial duties. However, this is not always the case, especially when it comes to supervising a limited number of employees.

When a manager carries out essential managerial duties but only supervises a small team, they may not meet the criteria for exemption from overtime pay. The determination of exempt status hinges on factors beyond job titles including the number of employees supervised.  A manager must supervise two full-time employees or the equivalent  to be exempt. That means two full-time employees each working 40 hours per week. It can also mean four part-time employees each working 20 hours per week. The determining factor is whether the manager is supervising 80 hours of labor per week. Thus, if a store is lightly staffed, then the manager may be misclassified as exempt – again, even if the manager is salaried and performing managerial duties..

For example:

Consider a boutique named “Chic Haven,” specializing in unique and handcrafted fashion accessories. This small store operates with a manager and a single sales associate.

The manager, Alex, is responsible for overseeing the day-to-day operations of the boutique. The duties encompass various managerial tasks such as inventory management, hiring and firing, scheduling , and financial reporting.

The “Chic Haven” manager and sales associate exemplify a scenario where the store operates with a small team, consisting of only one manager and one employee. In this case, while Alex is certainly carrying out managerial duties and exercising decision-making authority, the limited number of employees being supervised—only one—means that Alex is actually a non-exempt employee entitled to overtime.


In conclusion, being called a manager does not automatically equate to being exempt from overtime pay. When a manager’s scope of responsibility involves limited employee supervision such that the manager is not supervising two or more full-time employees or the equivalent (that is, 80 hours of labor) per week, they may be entitled to overtime compensation.

If you have questions regarding overtime, please contact Shavitz Law Group at [email protected].

Under the Fair Labor Standards Act (FLSA), the exemption for managerial positions depends on various factors, including the salary test, duties test, and the requirement that the alleged manager must supervise two or more full-time employees “customarily” and “regularly.” This blog will focus on the importance of meeting the “customarily and regularly” criterion and its implications for employees classified at exempt managers.

The “customarily and regularly” requirement means that the supervisory duties must be a regular and frequent part of the job, not just occasional or temporary. If, for example, an alleged manager only supervises two or more full-time employees on rare occasions or for brief periods, they might not meet this criterion and thus not qualify for the manager exemption. Importantly, in instances where an employee does not meet the “customarily and regularly” requirement, the employee likely is entitled to overtime for the hours worked over 40 in a work week.

What exactly is ”customary and regular”? Courts have held that if an alleged manager supervises two or more full-time employees 67% of the time, or even as high as 76% of the time, then that is not sufficient frequent for it to be “customary and regular” and the exemption may not apply. Rather, the law indicates that the percentage of time the alleged manager is supervising must be much higher.

Let’s compare two examples to better understand the significance of meeting this requirement:

1. Assistant Manager Smith is classified as an exempt manager; however, Smith only supervises two or more full-time employees twice a year, specifically when the Store Manager goes on vacation. Smith likely would be found to be non-exempt and entitled to overtime because two weeks of supervising two or more full-time employees is not “customary and regular.” 

2. Assistant Manager Jones is classified as an exempt manager and supervises two or more full-time employees every week, except when Jones is attending company training out of town. Jones would likely be found exempt (assuming all of the other criteria are met) and not be entitled to overtime because supervising two or more full-time employees all but two weeks out of the year is customary and regular.

The distinction between these examples is critical. Assistant Manager Jones qualifies for the manager exemption because Jones consistently perform supervisory duties regularly (every week), meeting the “customarily and regularly” requirement. On the other hand, Assistant Manager Smith’s supervisory responsibilities are infrequent and limited to a few specific occasions, making Smith likely ineligible for the exemption and therefore entitled to overtime.

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].

Understanding the “Customarily and Regularly” Requirement for the Managerial Exemption under FLSA

Shavitz Law Group

Under the Fair Labor Standards Act (FLSA), the exemption for managerial positions depends on various factors, including the salary test, duties test, and the requirement that the alleged manager must supervise two or more full-time employees “customarily” and “regularly.” This blog will focus on the importance of meeting the “customarily and regularly” criterion and its implications for employees classified at exempt managers.

The “customarily and regularly” requirement means that the supervisory duties must be a regular and frequent part of the job, not just occasional or temporary. If, for example, an alleged manager only supervises two or more full-time employees on rare occasions or for brief periods, they might not meet this criterion and thus not qualify for the manager exemption. Importantly, in instances where an employee does not meet the “customarily and regularly” requirement, the employee likely is entitled to overtime for the hours worked over 40 in a work week.

What exactly is ”customary and regular”? Courts have held that if an alleged manager supervises two or more full-time employees 67% of the time, or even as high as 76% of the time, then that is not sufficient frequent for it to be “customary and regular” and the exemption may not apply. Rather, the law indicates that the percentage of time the alleged manager is supervising must be much higher.

Let’s compare two examples to better understand the significance of meeting this requirement:

1. Assistant Manager Smith is classified as an exempt manager; however, Smith only supervises two or more full-time employees twice a year, specifically when the Store Manager goes on vacation. Smith likely would be found to be non-exempt and entitled to overtime because two weeks of supervising two or more full-time employees is not “customary and regular.” 

2. Assistant Manager Jones is classified as an exempt manager and supervises two or more full-time employees every week, except when Jones is attending company training out of town. Jones would likely be found exempt (assuming all of the other criteria are met) and not be entitled to overtime because supervising two or more full-time employees all but two weeks out of the year is customary and regular.

The distinction between these examples is critical. Assistant Manager Jones qualifies for the manager exemption because Jones consistently perform supervisory duties regularly (every week), meeting the “customarily and regularly” requirement. On the other hand, Assistant Manager Smith’s supervisory responsibilities are infrequent and limited to a few specific occasions, making Smith likely ineligible for the exemption and therefore entitled to overtime.

If you have questions regarding overtime or your employment, please contact Shavitz Law Group at [email protected].

Overtime for Drive Time?

Compensable drive time refers to the hours that an employee is entitled to be paid for when traveling between work-related locations, while non-compensable drive time generally encompasses regular commuting and personal errands. The distinction is important because if the drive time causes an employee to work over 40 hours in a work week, then the employee is entitled to overtime if the drive-time is compensable. Thus, an employee’s entitlement to overtime depends on the compensability of the travel, which in turn depends on many factors.

Some specific situations deal with the compensability of pre-shift travel, including:

  1. Employee drives to work in their personal vehicle, load supplies into the company vehicle, and drives to the company worksite:

The time spent loading the company vehicle and driving to the company worksite is compensable, but the drive to the employer’s business is not.

  1. Employee drives to work in their personal vehicle and drives the company vehicle to the worksite:

The drive to the worksite may or may not be compensable, depending on the employer’s requirements and depends on whether the drive is primarily for the employer’s benefit. The drive to the employer’s business in the personal vehicle is not compensable.

  1. Employee drives to work in their personal vehicle, loads supplies in the company vehicle, and is a passenger in the company vehicle while the supplies are driven to the worksite:

The passenger’s time travelling to the worksite would be compensable only if found to be an indispensable part of the job and/or the travel time primarily was for the employer’s benefit. The drive to the employer’s business in the personal vehicle is not compensable.

More generally, drive time is compensable when the travel is directly related to the employee’s job responsibilities and is during their regular work hours. Examples of compensable drive time include: 

  1. Worksite-to-Worksite Travel: When an employer requires an employee to travel from one worksite to another during their regular work hours, such as a technician visiting multiple client locations in a single workday. 
  1. Client Visits: If an employee needs to travel to a client’s location for a meeting, service, or delivery as part of their job responsibilities. 
  1. Off-Site Meetings and Training Sessions: When employees are required to attend conferences, training sessions, or other work-related events held at a location other than their usual workplace. 
  1. Special Assignments: If an employee who normally works at one location is temporarily assigned to work at a different location for a specific project or task. 

Drive time is generally not compensable where the time employees spend traveling between locations does not directly relate to their job responsibilities. Examples of non-compensable drive time include: 

  1. Regular Commuting Time: The time employees spend traveling between their home and their regular workplace is generally not compensable. This includes their daily commute to and from work. 
  1. Personal Errands During Commute: If an employee chooses to run personal errands during their commute, such as stopping at the grocery store or dropping off their children at school, this time is not compensable. 
  1. Personal Travel Outside of Work Hours: Any travel done by employees for personal reasons outside of their scheduled work hours, even if they are away from their regular workplace, is not considered compensable drive time. 
  1. Commuting Between Home and a Temporary Worksite: If an employee’s regular workplace is temporarily relocated to a different location, the time spent commuting between their home and the temporary worksite is usually not compensable. 

If you have questions regarding the compensability of drive time or any other overtime questions, please contact Shavitz Law Group at [email protected].