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Two former managers' claims for overtime compensation could proceed to trial because the Fair Labor Standards Act's "bona fide executive" exemption might not apply to them, the 1st U.S. Circuit Court of Appeals ruled.
Gassan Marzuq and Lisa Chantre, former managers at Dunkin' Donuts stores in Massachusetts, filed a lawsuit against the owner and operator of their stores, Cadete Enterprises Inc., alleging that they were improperly denied overtime pay in violation of the Fair Labor Standards Act (FLSA). Generally, the FLSA requires employers to pay employees one and one-half times their regular rate of pay for hours worked in excess of 40 per week. The FLSA provides for exceptions to this rule, one of which excludes employees who work in a "bona fide executive" capacity. As managers, Marzuq and Chantre were salaried employees expected to work no fewer than 48 hours over six days each week. However, the two alleged that they were not exempt employees and were entitled to overtime compensation because they spent a substantial portion of their time engaged in nonmanagerial tasks and worked significantly more than the required 48 hours.
At the first level of review, a magistrate judge recommended that Marzuq’s and Chantre's claims proceed to trial, determining that a jury could find that the managers were not employees serving in a "bona fide executive" capacity. The district court, however, concluded that Marzuq and Chantre were capable of managing while performing nonexempt tasks and, therefore, still fell within the FLSA's "bona fide executive" exemption and were not entitled to overtime compensation. Marzuq and Chantre appealed this decision to the 1st Circuit, arguing that the district court failed to perform the required multi-factor analysis to determine their "primary duty" as managers.
In reviewing the appeal, the 1st Circuit evaluated the claims in light of the four criteria used to determine whether an employee is a "bona fide executive" under the FLSA. The FLSA requires that exempted executives: 1) earn more than $455 per week; 2) "customarily and regularly" direct the work of two or more employees; 3) have management as their "primary duty;" and 4) demonstrate authority to hire, fire or otherwise change the status of other employees. Both Marzuq and Chantre satisfied the first two criteria, and the appellate court focused on the last two requirements.
To determine whether management was a "primary duty" of the managers, the appellate court considered the relative importance of exempt duties compared to other types of duties, the amount of time spent performing exempt work, the managers' freedom from direct supervision, and the managers' salaries as compared to nonexempt employees. The court found that a jury could conclude that the managers' duties of performing both managerial and nonmanagerial tasks were equally important to the overall success of the store. In particular, Marzuq often spent time serving customers, cleaning, covering shifts and even landscaping. Marzuq testified that he spent nearly 90 percent of his time working side by side with his subordinates, which affected his ability to supervise the store and resulted in his working seven days and between 70 and 80 hours each week. In addition, Cadete's policies mandated that most decision-making authority rest with district managers rather than with store managers. To that end, the managers had to seek approval before hiring or firing employees and even before issuing gift cards to resolve customer complaints. Finally, the appellate court noted that because the managers worked far in excess of the expected hours, their salaries were comparable to, and in some instances less than, the hourly rates earned by nonexempt crew members.
Considering these factors, the 1st Circuit reversed the district court's decision and ruled that the claims should proceed to trial for a jury to determine whether the managers were "bona fide executives" subject to the FLSA's exemption from overtime pay.
Marzuq v. Cadete Enterprises Inc., 1st Cir., No. 14-1744 (Dec. 9, 2015).
Professional Pointer: Employers should ensure that managers or executives not entitled to overtime pay are provided with both the autonomy and tools to make "managing" their primary duty within the workplace.
Candace D. Embry is an attorney with Marshall Dennehey Warner Coleman & Goggin in Philadelphia.
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