TO BE OR NOT TO BE: FOURTH CIRCUIT CLAIRFIES THE SCOPE OF THE FLSA’S EXECUTIVE EXEMPTION

Issuing a favorable decision for employers, the Fourth Circuit Court of Appeals – which covers West Virginia – recently clarified its position on the executive exemption contained in the Fair Labor Standards Act (“FLSA”).  The case, titled Grace v. Family Dollar Stores, Inc., involved a former Family Dollar Stores manager who sued the retail business claiming she wasn’t paid proper overtime compensation for working more than 40 hours a week.

The manager who brought the case had responsibility for one of the retail chain’s many stores.  She worked 50 to 65 hours per week, was paid a fixed salary plus a bonus and, like many managers of retail stores like Family Dollar, handled a lot of the day-to-day grunt work at the store.  She also provided managerial oversight of the store as it related to performance and profitability.

Although the manager claimed that 99 percent of her time was devoted to non-executive duties such as running a cash register, putting out freight, and doing janitorial work, the court determined that, even while she was doing those jobs, she continued to be the person primarily responsible for the operation of her store.  Finding that there was no one else to run the store on a daily basis and noting that no one else was directly supervising her work, the court observed that it could not rationally be assumed that the store went without management 99 percent of the time.

The Fourth Circuit recognized that “[t]he successful management of her store . . . depended totally on her own decision-making and judgment, even as she was also required to do non-managerial work a majority of the time.”  In concluding that the manager was properly treated as falling within the FLSA’s executive exemption, the court placed considerable emphasis on the fact that, while performing non-managerial tasks around the store, the plaintiff concurrently performed the managerial duties of running the store.

The Fourth Circuit’s decision in Grace is important for employers that deal with the FLSA’s executive exemption – particularly those businesses with small retail operations who expect certain managers to have a range of responsibilities in supervising a facility.  The decision clarifies that a manager’s considerable involvement with non-managerial tasks necessary to the operation of his or her establishment is not necessarily sufficient to remove that employee from the reach of the FLSA’s executive exemption, provided that the manager, with relative autonomy, is concurrently performing the managerial tasks necessary to run the store.

However, in addition to the positive points to be taken from the Grace decision, employers that deal with the FLSA’s executive exemption should heed the Fourth Circuit’s somewhat veiled warning that a slightly different set of facts could lead to a different conclusion, even for managers who work within the same company, hold the same job title, and are governed by the same policies.  This warning emphasizes the importance of making a person-by-person determination regarding the FLSA’s executive exemption, focusing on a number of factors, including the individual responsibilities of the manager, whether the manager performs exempt and non-exempt duties concurrently, and the degree of supervision exercised over his or her job.

The decision in Grace provides valuable insight to West Virginia employers with regard to the scope of the FLSA – a law that is always tricky for employers, particularly when it comes to the overtime requirements of the Act and the way the executive exemption is construed.

Matt Hansberry focuses his practice in the areas of employment litigation and ski-industry defense. Mr. Hansberry has defended companies and management in both federal court and state court cases. He has also defended employers before the West Virginia Human Rights Commission.
 
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