The Two Full-Time Employee Requirement for the Managerial Exemption

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].

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