Michael and Constance Baldwin agreed to manage an RV park for a joint salary of $2,400 a month, plus on-site housing. They were on call 24 hours a day.
After they resigned, the Baldwins sued their employer, Trailer Inns Inc., claiming it owed them 2,151 hours of overtime. The Baldwins said 90 percent of their time was spent doing nonexempt work, such as cleaning.
But a federal appeals court rejected the claim, saying they were exempt from overtime under the Fair Labor Standards Act ().
Reason: The Labor Department's "short test" for the executive exemption under the FLSA includes four parts. The Baldwins were paid on a salary basis, and their salary amounted to $276.92 per week for each, which is above the $250-a-week threshold. The court looked closely at the Baldwins' primary duties and whether those duties included "the customary and regular direction of the work of two or more other employees."
The Baldwins were in charge of day-to-day decisions for the facility, handling emergencies and exercising discretion, and the court said that was their primary value to the employer. Even though assistant managers and the Baldwins performed some of the same tasks, that didn't disqualify the Baldwins for the exemption.
The owner visited the park only once or twice a month, and even extensive checklists of what the Baldwins were to do did not strip the exemption. The Baldwins' limited authority to hire and fire workers also didn't weigh against the exemption because that's a separate requirement only under the long test for FLSA exemptions. (Baldwin v. Trailer Inns Inc., No. 00-35412, 9th Cir., 2001)
Advice: Labor Department rules say the amount of time spent performing managerial duties is "a useful guide" in determining whether a manager is exempt from overtime. But even a worker who spends less than half his time on managerial duties can be exempt. The relevant factors include:
- The importance of managerial duties compared with other types of duties.
- Frequency with which the employee exercises discretion.
- The worker's relative freedom from supervision.
- The relationship between the employee's salary and the wages other employees receive for the kind of nonexempt work performed by the supervisor.
While the employer in this case was victorious, several companies recently have had to pay huge amounts of overtime back pay when they misclassified workers as exempt. So take the time to test your situation against the FLSA criteria.