Strategy Considerations For Properly Applying White-Collar Exemptions For Overtime To Administrative Employees
By Lonnie Giamela Partner, Fisher & Phillips, LLP | June 24, 2012
Applicable state and federal laws, such as the Fair Labor Standards Act ("FLSA"), outline minimum wage and overtime pay obligations that hotels have to their employees. Minimum wages vary from state to state, with four states having less than the federal minimum wage of $7.25 up to Washington having a minimum wage of $9.04. Four western states (California, Nevada, Alaska and Colorado) as well as Puerto Rico and the Virgin Islands have daily overtime laws in addition to the 40-hour per week threshold established for overtime under the FLSA. Complicating matters even further for hotels are local and county ordinances that may impose additional minimum wage and overtime burdens for businesses that, for example, have contracts with a municipality and/or operate near an airport.
With respect to overtime laws, the FLSA exempts certain categories of white-collar employees from the minimum wage and overtime pay provisions, including those employed in a "bona fide executive, administrative, or professional capacity," as defined by regulations promulgated by the Secretary of Labor. States that have their own overtime laws generally defer, incorporate or favor the tests established under the FLSA's regulations.
In 2004, the United States Department of Labor ("DOL") promulgated new regulations governing the "white collar" exemptions. Qualifying for the white-collar exemptions requires an employee to perform certain defined job duties, have certain defined responsibilities and be compensated at certain salary levels. Although the regulations, found in 29 CFR Part 541 are fairly comprehensive, they by no means encompass the extremely diverse functions and wide variety of positions within the executive, administrative and professional ranks which exist in today's workplace.
Two points need be emphasized at the outset. First, exempt status is determined by the employee's actual duties and responsibilities. Given the fact that neither job title nor job description is determinative of status, employers should not make determinations based on generalizations as to exempt status. Second, the exemptions are narrowly construed against the employer and their application is limited to those plainly and unmistakably within their terms. Since the employer carries the burden of proving the applicability of the exemptions to a particular employee and must show that all of the enumerated qualifications exist, determinations of exempt status require a thorough analysis of the applicable standards and the nature of the employee's job duties and responsibilities.
Those in the hotel industry frequently struggle with the executive exemption from overtime, but even more so with the administrative exemption from overtime. Departmental and shift managers, human resource assistants, accounting employees, sales and catering representatives not paid on a commission basis and marketing staff are prime examples of employees frequently misclassified as exempt from overtime. The crux of the struggle involves whether these employees, who have no supervisory responsibilities, have the requisite autonomous duties and responsibilities that may qualify them for the administrative exemption from overtime. As to the executive exemption, there is regularly a constant dispute whether the employee classified as exempt devotes the minimum amount of time to supervisory duties.
Two recent cases in the hotel industry demonstrate the frequency of wage-hour litigation over the misclassification of exempt employees and the case-by-case analysis that must be utilized. A hotel management company was recently hit with a putative class action in federal court by a former Chief Engineer who claims that his duties of upkeep of the hotel and its grounds, building and property maintenance and supervision of no more than one other employee failed to qualify him for either exemption. A second case, involving a hotel franchisee operating numerous hotels in the western United States, was subjected to class action litigation for whether front desk shift managers were exempt from overtime.
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