Having a Title of “Manager” Does Not Mean that You’re Exempt From Overtime Pay

Last week, a class of current and former managers of Steak ‘n Shake, a fast food restaurant, were awarded 2.9 million in lost wages by a Missouri jury who determined that the managers were non-exempt employees under the law and should have been paid overtime.  The case, Clendenen v. Steak N Shake Operations, Inc., is another huge win for misclassified retail managers everywhere.[1]

Far too often, employers in various industries classify employees that have “manager” in their title as exempt from overtime compensation without conducting the requisite evaluation of whether the employee’s duties actually meet the requirements for the executive exemption under the Fair Labor Standards Act (“FLSA”).[2]  Whether it’s laziness, ignorance, or greed, employers routinely mischaracterize employees and wrongfully deprive salaried employees of just compensation for overtime hours in direct contravention of federal law.

For years, employees have been filing lawsuits against retailers on behalf of a class of store managers and assistant store managers who were misclassified as “salaried exempt” employees despite the fact that they were primarily stocking shelves, performing inventory, and/or handling the cash register.  The reality of corporate retail culture and limited store labor budgets often leads managers to step into the role of their subordinates and engage in non-managerial duties that can regularly consume the majority of their time.

As a result of the constant litigation over these issues, defense attorneys began advising their clients of three key takeaways:

  1. Make sure that anyone with the title of “manager” or “assistant manager” or anything similar, really is managing people;
  2. Remember that primary job functions, not title, determines exempt or non-exempt status; and
  3. When in doubt, assume employees are not exempt and pay the overtime

Despite these warnings, retail employers, like Steak ‘N Shake, have continued to misclassify employees and violate the law until challenged in court.

Unfortunately, although these violations are common in retail stores, the problem is not limited to that arena.  Take for instance, the position of “case manager” or “caseworker” in the social work and healthcare fields.  These employees are often paid a salary and considered exempt from overtime compensation.  Like in other industries, these employees are told that their salary will cover all hours worked but are also assured that overtime hours would be infrequent or rarely necessary.  Soon after settling in, these employees find themselves working 50-60 hours a week in order to handle all of their responsibilities and not fall behind.  Of course, no further compensation is provided.   Despite having a position that includes “manager” in the title, these employees are not managing other employees, only cases.   Moreover, case managers are often not even able to exercise their own discretion or judgment when handling their cases, but rather need to follow specific guidelines or protocols from their employer.   This reality also puts case managers outside of the purview of the “administrative exemption” of the FLSA.

The exemption status of case workers in the healthcare field has been the subject of both recent court opinions and administrative actions.  In Talbott v. Lakeview, the Florida federal court found that the case managers did not meet the criteria for either the administrative or executive exemptions.[3]  Accordingly, the Court ruled that the case managers were entitled to lost wages for their overtime hours.  Similarly, in 2016, in a settlement with the Department of Labor, Molina Healthcare agreed to pay over $700,000 to case workers who the Department of Labor had determined did not have job duties that supported any FLSA exemption from overtime compensation.[4]  Later that same year, the 5th Circuit Court of Appeals in Clark v. Cantene Company of Texas affirmed the ruling of the lower court in favor of the plaintiffs.[5]  The 5th Circuit found that case managers lacked the judgment and discretion to make exceptions from the employer’s guidelines, and therefore, did not meet the criteria for the administrative exemption.

Viewed as a whole, employers in various industries – from retail stores to the healthcare field – clearly continue to push the boundaries of federal regulations in an effort to keep their labor costs under control.  By giving certain employees a salary and a managerial title, employers hope to take advantage of the fact that employees are generally afraid to challenge their employer due to the risk of retaliation.  However, no matter the title, if the duties of those employees do not meet strict criteria, then the employees should not be considered “salary exempt” and should be paid 1.5 times their regular (or calculated) hourly rate for all overtime hours.  Unfortunately, the most effective means to incentivize employers to avoid these wage and hour violations remains litigation.  The recent Steak N Shake verdict will provide yet another example for defense attorneys to share with their clients.  Hopefully, more and more employers will take heed of the latest warning.

[1] https://www.law360.com/trials/articles/1134041/steak-n-shake-managers-win-2-9m-jury-verdict-in-ot-row

[2] https://www.dol.gov/whd/overtime/fs17b_executive.pdf

[3] https://www.talbottlawfirm.com/wp-content/uploads/2015/12/Order-and-judgment.pdf

[4] https://www.dol.gov/newsroom/releases/whd/whd20160524-0

[5] http://www.ca5.uscourts.gov/opinions%5Cunpub%5C15/15-50606.0.pdf

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