QUESTION: I own several small restaurants in the metro area. The restaurants are run by a manager, who is in charge of hiring and firing, scheduling shifts, ordering food, and generally overseeing the entire operation within guidelines I set. I also have several assistant managers, who help out in the restaurant if the manager is absent. Their job is to make sure that food is prepared, that wait staff are doing their jobs, and to make sure everyone is on time. I pay both the managers and assistant managers a salary – no overtime. One of the assistant managers has been complaining to her manager that she should be classified as an hourly worker, and paid for overtime, and that my business is in violation of labor laws and could be in trouble. Managers at my stores average about 60 hours per week; the assistant managers usually work about 50. I pay my assistant managers a decent wage for the industry — $30,000. Isn’t that enough?

ANSWER: Paying an employee at least $455 per week ($23,600 per year) on a salary basis is only one factor the Department of Labor looks at when determining whether the worker is exempt from federal rules requiring all employers to pay time-and-half for each hour over 40 worked in a week. To be classified as “exempt” under the “executive exemption” which applies to most managers and supervisors, employees must be more than managers (or assistant managers) in name only: They must have managerial authority.

Under the Fair Labor Standards Act, which governs overtime requirements, an employee must satisfy three additional tests to be classified as exempt:

  1. Are the employee’s primary duties managing the business or a department or division of the business?
  2. Does the employee “customarily and regularly” direct the work of at least two or more other full-time employees (or four part-time employees)?
  3. Does the employee have authority to hire or fire other employees, or are the employee’s suggestions on hiring, firing, promotion “or any other change of status” given particular weight?

Managing a business or department involves more than overseeing waitstaff, it also involves the authority to handle such items as complaints and grievances, set the schedule, control the budget, decide which supplies are needed and purchase them, and provide for the safety of the employees. Management of the business must also be the primary duty of the worker, the most important duty that the worker performs.

As for directing the workers, that involves more than telling them to do their jobs – it also involves having a real role in determining what those job responsibilities are, assessing job performance, establishing a schedule, etc.

From what you describe, your manager passes all three tests, but your assistant manager does not, and should perhaps be paid on an hourly basis – with overtime.

The United States Department of Labor takes violations of the wages and hour laws seriously. Recently, a Macomb County business had to pay almost $200,000 in back pay and damages for shorting workers who held the title of manager, their overtime pay. Employers who violate the law may be responsible for back pay, fines, and damages. If the violation is “willful,” the employer can be prosecuted for a crime and, on conviction, serve time in jail or prison in addition to paying fines!

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By: Daniel A. Gwinn, Esq.

Daniel A. Gwinn
901 Wilshire Drive, Suite 550
Troy, MI  48084
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