Can we offer equity stake in lieu of pay and still comply with the FLSA? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Can we offer equity stake in lieu of pay and still comply with the FLSA?

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in Admins,Leaders & Managers,Management Training,Office Management

Q. We are a small start-up company. We have an office manager whom we pay $350 per week. I understand that, in order to be exempt from overtime labor laws, we would need to pay her at least $455 per week. We can’t afford to pay that amount, but are willing to provide her stock in the company. Will that help?

Yes, if she has at least a 20% equity interest in the company, she is exempt under the executive exemption to the Fair Labor Standards Act (FLSA). This is an exception to the salary requirement under the FLSA.

To be FLSA exempt, she would still need to be actively engaged in management of the company. The term “management” generally includes activities such as selecting and training employees; setting and adjusting their pay and hours; maintaining production or sales records; appraising employees; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the types of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures.

As long as the office manager engages in these types of management duties and her ownership interest in the company is genuine, she should be exempt under the FLSA. 

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