How much influence must someone have in the firing process to qualify as exempt from overtime under the executive exemption to the Fair Labor Standards Act rules?
Under the FLSA, employees are paid overtime unless they qualify for one of the exemptions in the Act. One of the most common exemptions is the Executive Exemption. While called an “executive” exemption, it’s not limited only to inhabitants of the C-suites and their VP-level direct reports. Instead, it may be available to a wide range of managerial or supervisory employees and should likely be called the “managerial exemption.”
To qualify for this federal exemption from overtime wages (some state law may differ), all four of the following tests must be met:
1) the employee is paid on a salary basis, at least $455 per week;
2) the employee’s primary duty is managing either the business as a whole, or a recognized department or subdivision of the business;
3) the employee must actually manage other employees—at least two full-time staff or FTEs; and
4) the employee must have hiring and firing authority, or at a minimum, “the employee’s suggestions and recommendations as to hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.”
Requirement (4) can often be particularly problematic—how much firing authority is actually needed?
The Dept. of Labor’s Fact Sheet helps a bit and says that “particular weight” means that—
• It must be part of the manager’s job description to make recommendations regarding firing.
• The manager’s recommendations must be made frequently and generally relied or acted upon.
Thus, merely making “occasional suggestions” about termination does not meet the standard.
There’s very little guidance to clarify just how much authority is required for a mid-level manager to be exempt on this point. However, “managers” who can’t make an actionable firing recommendation probably also fail one or more of the other tests for executive status, so the cases rarely turn on this point alone. Remember, it is a package deal. The employee must satisfy ALL of the tests stated above.
To ensure that their mid-level managers are exempt under this exception, employers should make certain to that all points of the test are met. If it’s business as usual for the manager to recommend a firing and for it to be carried out—and the other requirements are satisfied—then the manager will probably qualify for the Executive exemption from the overtime pay requirements.
