Federal Court Rules Overtime Exemption Met Despite Over 80% Nonexempt Work Performed

Debbie Tam 

The U.S. Court of Appeals for the Sixth Circuit recently ruled that a district director of operations qualified for the executive overtime exemption under the Fair Labor Standards Act (FLSA) despite spending 80% to 90% of his schedule performing nonexempt work such as running the register, preparing food, and restocking inventory (Manteuffel v. HMS Host Tollroads, Inc., CA6, Dkt. No. 22-3856, 08/17/2023).

Executive, administrative, or professional (EAP) exemption.

Under 29 USC 213 (a)(1) in the Fair Labor Standards Act (FLSA), any employee employed in a bona fide executive, administrative, or professional capacity is exempt from overtime requirements. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis of at least $684 per week.

Job duties test.

Troy Manteuffel was employed by HMS Host Tollroads, Inc., as a district director of operations and made $75,000 annually. There is no dispute that the salary basis test is satisfied. The court examined whether the job duties test is met.

Under 29 CFR 541.100, to satisfy the executive exemption requirements, a three-prong test must be met:

1. The employee’s primary duty must be management of the enterprise in which the employee is employed;
2. The employee customarily and regularly directs the work of two or more other employees; and
3. The employee has the authority to hire or fire other employees or whose recommendations for hiring or firing, including advancement and promotion, are given particular weight.

Time spent on nonexempt duties not necessarily a factor.

The court explains whether an employee’s “primary duty” is management is based on all the factors surrounding the case. Such factors may include the importance of exempt duties compared to nonexempt duties and the amount time spent performing exempt work. The court stressed while the amount of time spent on nonexempt duties may be considered to determine if management is the employee’s primary duty, the time spent alone is not determinative. For example, a manager may perform nonexempt work such as running a register and still qualify as an exempt executive employee regardless of the percentage of time spent on nonexempt work.

While Manteuffel argues he spends 80% to 90% of his time on nonexempt duties, DOL regulations (29 CFR 700(c)) clearly state the time spent is not determinative of whether the individual is an executive.

Importance of management duties vs. nonexempt duties.

Next, the court examined whether Manteuffel’s management duties were of greater importance than his nonexempt work. He admits that his duties include supervising and disciplining employees and the day-to-day operations. The court found that his managerial duties were more important than his non-managerial duties in terms of his employer’s success. The court found this supports that Manteuffel’s primary duty is management.

Pay comparison between exempt vs. nonexempt workers.

The court also did a pay comparison between nonexempt workers performing the same nonexempt work that Manteuffel performed. While he earned $75,000 per year, nonexempt employees earned $10 per hour. Also, Manteuffel could also earn a bonus which the nonexempt workers could not. The court noted that Sixth Circuit set a 30% salary difference between exempt and nonexempt workers as an indicator for management.

Other factors satisfied.

Finally, the court found that Manteuffel was relatively free from supervision, customarily and regularly directed employees, and had the authority to hire or fire other employees. The court therefore affirmed the district court ruling and found in favor of the employer.

For information regarding the EAP exemption, see Payroll Guide ¶18,075.