All You Need to Know About Overtime Exemptions You Can Learn From TV

It comes as a big surprise to many employers when they learn that they are not entirely free to decide which of their employees should be paid set salaries and which should receive wages and overtime. Those decisions are governed by complicated laws that hinge on the details of each individual employee.

    The best way to explain the rules is by pointing to specific employees and then describing exactly what about their jobs requires them to be paid salary or overtime. The problem is common frames of reference: Where can you find employees who will be known and recognized beyond their own provincial workplaces?

    The answer, of course, is television. Homer Simpson, MacGyver, Dwight Schrute (the weird guy from NBC’s The Office) and other TV characters are better teachers of overtime exemption rules than most wage-and-hour attorneys.

Exempt versus nonexempt: the basics
    Under the federal Fair Labor Standards Act and some state laws, employees are presumed to be entitled to premium pay for overtime hours they work. These laws exist primarily to prevent unscrupulous employers from working employees excessively for nominal pay.

    However, the FLSA and applicable state laws all contain exemptions by which certain kinds of employees are not required to be paid overtime and can instead be paid set salaries regardless how much time they work. These employees are referred to as “exempt” (as in exempt from overtime requirements), whereas employees who must be paid overtime are “nonexempt.”

    There are dozens of different exemptions, many of which are of limited use to most employers. For example, employees who process maple syrup have their own special exemption, as do lumberjacks, fishermen and sheepherders. The exemptions that are most commonly used are for white-collar employees.

    Employers generally try to extend exemptions to as many employees as possible in order to fix labor costs and reduce administrative burdens, such as tracking employee work time. Many employees, however, like to remain nonexempt in order to collect overtime. And others view salaried jobs as more prestigious than wage positions.

    Exemption rules are based on theoretical employee archetypes that sometimes do not fit with modern workplaces. Employers try to match their employees as closely as possible to one or more of the archetypes (employees can be subject to multiple different exemptions).

    But when the fits are not perfect, which is almost always, employers are forced to make judgment calls about whether employees who are “on the bubble” should be characterized as exempt or nonexempt.

    Making the wrong decision can be costly. If an employee is improperly characterized as exempt and then works long hours, the employee can later sue the employer for the overtime she should have been paid, plus fees and various penalties. If numerous employees have been misclassified, they can bring class actions that can easily result in multiple thousands (if not millions) of dollars in liability.

    It is critical to understand the employee archetypes upon which the white-collar exemption rules are based. And since archetypes can only be understood so much in the abstract, it is often helpful (and certainly a lot of fun) way to explain them using identifiable characters from TV, movies and other media to illustrate which kinds of employees are exempt, which are not exempt and which are on the bubble–and why.

Specific exemptions
    There are three white-collar exemptions: the executive, the administrative and the professional. To qualify for any of the white-collar exemptions in California, employees must receive a minimum amount of compensation (at least double the minimum wage for a 40-hour workweek); they must also spend more than 50 percent of their work time performing “exempt” job duties. Whether an employee’s job duties qualify as exempt depends on the specific exemptions to which the employee is subject.

The executive exemption–general rules and pitfalls
    The executive exemption is intended for mid- to high-level managers and supervisors. Duties that qualify for the executive exemption include:

• Actively managing a recognized department or subdivision consisting of at least two direct reports (or the equivalent thereof).

  
  

• Having authority to hire and fire employees, or having enough authority to make recommendations about hiring and firing that are given particular weight.

  
  

• Customarily and regularly exercising independent judgment and discretion in the execution of job duties.

  
  

    Problems occur with the executive exemption when employees are managers in name only and lack any real authority over personnel or departments, and when executives wear multiple hats and do not spend a sufficient amount of time actually managing other employees.

Executive characters: exempt
    Gruff newsman Lou Grant of The Mary Tyler Moore Show is arguably the best example of an exempt manager because that is all you ever saw him doing: managing the plucky reporters of WJM-TV in Minneapolis. He was the quintessential boss, his authority absolute and unquestioned. He also never got his hands dirty doing day-to-day chores that he had employees to take care of, meaning that he was never in danger of spending less than half his time managing.

    Honorable mention: Lt. Anita Van Buren (Law & Order), Michael Scott (The Office) and Charles Townsend (Charlie from Charlie’s Angels).

Executive characters: not exempt
    Two words can summarize why Dwight Schrute, the workplace suck-up on the U.S. version of The Office, would not be an exempt executive: “to the,” as in he is the assistant to the regional manager, instead of the assistant regional manager (as he likes to tell his co-workers). Schrute has no direct reports and no authority to hire, fire or discipline other employees, as he was pointedly told when he requested “emergency power” to fire a co-worker when he was left in charge of the office for an afternoon. He also spends the vast majority of his work time selling Dunder Mifflin paper products, rather than managing.

    Honorable mention: Gareth Keenan (Schrute’s counterpart on the U.K. version of The Office); Michael Brown, former director of the Federal Emergency Management Agency (Not a fictional character, but he listed a former position with Edmond, Oklahoma, as “assistant city manager,” rather than assistant to the city manager, which was reportedly more accurate).

Executive characters: on the bubble
    Assuming that employees on the U.S.S. Enterprise would be governed by California’s wage-and-hour law, rather than interplanetary rules, Capt. James T. Kirk might not have qualified for the executive exemption because of the excessive amount of time he spent beaming down to planet surfaces.

    While having sexy and exciting adventures on unknown worlds may make for great TV, it probably would not qualify as exempt supervision work, which means that Kirk may have been in danger of spending less than 50 percent of his work time actually managing his subordinates.

    Honorable mention: Archie Bunker, of Archie Bunker’s Place, because of the time he spent tending bar rather than managing his employees. (This article assumes that all the characters mentioned were employees of their respective businesses, rather than owners. Federal rules have provisions that exempt equity owners under certain circumstances. As a practical matter, most owners also would not challenge their exemption status.)

Administrative exemption–general rules and pitfalls
    The administrative exemption is both the most confusing of the white-collar exemptions, and the most utilized. When other, more specific exemptions cannot apply (e.g., no executive exemption because an employee has no direct reports), employers often turn to the administrative exemption as a last resort.

    The administrative exemption is intended for mid- to high-level support employees such as buyers, marketing employees, human resources professionals, assistants to high-ranking executives, and anyone else who provides the multiple ancillary services needed to make a business run. As with all the white-collar exemptions, administrative employees must receive a minimum salary and they must spend more than 50 percent of their time performing exempt job duties. Duties that qualify for the administrative exemption include:

    Performing office or non-manual work directly related to management policies or general business operation of either the employer or the employer’s clients/customers.

• Customarily and regularly exercising discretion and independent judgment with respect to matters of significance.

  
  

• Regularly and directly assisting an exempt executive or administrative employee.

  
  

• Performing work along specialized or technical lines requiring special training, experience or knowledge.

  
  

• Performing special assignments and tasks under only general supervision.

  
  

    The administrative exemption is unique among the white-collar exemptions in that it is subject to the so-called “production exception,” a carve-out that is more ambiguous and confusing than the exception itself.

    According to the production exception, employees who are directly involved with the creation or provision of the employer’s final product or service cannot qualify as administrative employees. For example, if an employer’s end product is technical troubleshooting, no one directly involved with the provision of that service can qualify as administratively exempt, even if they meet all of the other criteria listed above.

    The production exception is perhaps the biggest pitfall of the administrative exemption. Other problems occur when employees perform manual work as part of their jobs, or when low- to mid-level employees are not given sufficient discretion and authority over matters of significant importance.

Whether and to what extent employees have “discretion and authority” generally depends on the diversity of the problems they encounter (expansive or cookie cutter?), the diversity of the options they must consider to solve the problems, and whether they have enough autonomy to decide on a course of action themselves.

Administrative characters: exempt
    George Costanza of Seinfeld: As assistant to the traveling secretary of the New York Yankees, George Costanza likely qualified for the administrative exemption—not that there’s anything wrong with that. He performed non-manual desk duty, he regularly and directly assisted an exempt executive employee (the traveling secretary himself, Mr. Wilhelm), and he had nothing to do with the Yankees’ end product, playing baseball. Hence he was not in danger of falling into the production exception.

    It is debatable whether he had discretion and authority over matters of significant importance, since the most important thing he ever seemed to do was decide what hotels the Yankees would stay in when they were on the road. However, he was able to unilaterally decide that the Yankees should switch to all-cotton uniforms (which ultimately shrank in the rain), so he likely had sufficient authority to qualify.

    Honorable mentions: Winston Wolf, Pulp Fiction (a “problem solver” who helps dispose of dead bodies, Harvey Keitel’s Wolf is a perfect example of someone who performs special assignments under only general supervision).

    Waylon Smithers, The Simpsons (in his tireless service to his beloved Mr. Burns, Smithers illustrates a maxim about assistants: the more high-ranking the executives they assist and the more duties those executives delegate to them, the more likely they will be deemed exempt). Julie McCoy, Love Boat (the Pacific Princess’ cruise director likely had sufficient discretion and authority over ancillary matters of significant importance, but may have come close to falling into the production exception).

Administrative characters: not exempt
    Kelly, Sabrina and Jill of Charlie’s Angels are a good example of how the production exception can wreak havoc with administrative employees. They had all the qualifications that normally would qualify employees for the administrative exemption: They functioned independently, with little to no direct supervision (except occasionally from Bosley), and they handled life-and-death matters of undeniable importance.

    Other than the occasional karate fights they got into, their detective work also probably qualified as sufficiently non-manual for the exemption. The problem, however, is that they were directly involved in the end product of Charlie’s business, i.e., crime-stopping. Thus they fell squarely into the production exemption and were therefore not exempt.

    Honorable mentions: Homer Simpson, The Simpsons (federal regulations state that Homer’s job, safety inspector, should generally not qualify for the administrative exemption because it often requires knowledge and skills, not discretion and authority).

    Duane Schneider, One Day at a Time (the loveable handyman performs way too much manual work to qualify as administratively exempt, despite the fact that he appeared to have complete discretion and authority over how he did his job).

    Billy Campbell, Melrose Place (as an assistant to conniving Amanda Woodward at D&D Advertising, Billy was likely too low-level to have the requisite discretion and authority needed to be exempt).

Administrative characters on the bubble
    As the spy whose mind was the ultimate weapon, Angus MacGyver of MacGyver was the very embodiment of discretion and authority. Should he turn bubble gum into a grappling hook to escape a vat of acid? Or make a tube of Chapstick into a surface-to-air missile to bring down an escaping villain?

    As he proved time and again, MacGyver had almost limitless ways to deal with the equally diverse range of problems he encountered, and it was up to him alone to decide what to do. Although such creativity and autonomy normally would almost guarantee an exemption, MacGyver may have had the same problem as Charlie’s Angels. He may have been too close to providing his employer’s core service to qualify as administratively exempt.

    Honorable mention: Tattoo, Fantasy Island (definitely appeared to be the right-hand man to the Island’s apparent owner/manager, Mr. Rourke. However, it was never clear what he did besides announcing the arrival of “da plane, da plane”).

    Thomas Magnum, Magnum, P.I. (the only way Magnum would not have been subsumed by the production exception is if he worked for Robin Masters’ overall enterprise, rather than for a discrete private investigations company).

Professional exemptions
    There are three different professional exemptions: The learned professional, the creative professional and the computer professional.

Learned professionals: general rules and pitfalls
    The learned professional exemption is intended for employees who do work that requires advanced knowledge in science or learning that is generally acquired through a specialized degree.

    Employees who acquire comparable knowledge through other means, such as training and experience, can sometimes qualify for the exemption, but only in rare circumstances.

    In California, employees must work in one of eight specified fields to qualify for the learned professional exception: law, medicine, dentistry, optometry, architecture, engineering, teaching or accounting. They also must actually use their advanced knowledge to do their jobs; it is not sufficient simply to have a professional degree unrelated to the employee’s job duties.

    Problems occur with the learned professional exemption when employees do jobs that do not actually require their advanced degrees, such as a lawyer doing marketing work), or when jobs do not actually require advanced knowledge. As a general rule, the more employees in a job who do not have a specialized degree, the more likely it is that the job does not require advanced knowledge.

Learned professional characters: exempt
    There is a long list of characters who likely would qualify as exempt learned professionals: Cliff and Clair Huxtable, The Cosby Show (he as a doctor, she as an attorney); Doogie Howser, Doogie Howser, M.D. (there is no age requirement for the learned professional exemption); Elise Keaton, Family Ties (Meredith Baxter Birney’s character was an architect); and Ralph Hinkley, The Greatest American Hero (he was a teacher).

Learned professional characters: not exempt
   Conversely, there were several other characters who just as clearly appeared to not qualify for the exemption, including Elvin Tibideaux, the son-in-law on The Cosby Show who, upon graduating from medical school, decided to open up a wilderness store (he was not using his advanced medical knowledge to run his business); and Dr. Mark Sloan, Dick Van Dyke’s character from Diagnosis: Murder (trained as a doctor, but he worked on the show as a detective).

Learned professional characters: on the bubble
    Vivien Thomas, the real-life doctor who was the subject of the HBO movie Something the Lord Made, aptly illustrates how employees can be on the bubble with the learned professional exemption.

    Dr. Thomas spent the majority of his early career as a lab technician with no formal education or degrees in medicine. Through an extraordinary combination of innate ability and on-the-job training, Thomas acquired sufficient knowledge to eventually become a recognized pioneer in heart surgery. He was a doctor for all intents and purposes, but because he acquired his knowledge through means other than formalized education and degrees, his status under the learned professional exemption is uncertain.

    It is generally difficult to extend the exemption to people who have acquired their advanced knowledge through means other than education resulting in a formal degree (e.g., apprenticeships, vocational training, on-the-job training, etc.). However, it can be done in rare circumstances involving exceptional, truly one-in-a-million individuals such as Dr. Thomas.

Creative professionals: general rules and pitfalls
    The creative professional exemption is intended for employees whose jobs truly depend on creativity, imagination and talent, such as artists and writers. The work must be original and creative in character, meaning that exempt employees must have significant discretion and authority over the eventual expression of the work, rather than simply filling in the lines of, or parroting, work that was created by others.

    Problems arise under the creative professional exemption when employees have jobs that focus more on their non-creative attributes (e.g., diligence, accuracy, etc.), and when employees do not have sufficient creative control over their work. This can occur either when employees are using templates or existing work to copy or fill in, or when they are given such stringent guidelines that their work amounts to simple assemble of the elements of the guidelines, rather than true creation.

Creative professional characters: exempt
   There have been a healthy number of characters that probably would have qualified for the creative professional exemption: Henry Russo, Too Close for Comfort (Ted Knight’s character on the show was the classic creative professional because he drew “Cosmic Cow” cartoons for a living); Mary Jo Shivley, Designing Women (Annie Potts’ character was an interior designer); and Tom Bradford, Eight Is Enough (Dick Van Patten’s patriarch character was a newspaper columnist, a position which generally can qualify for the exemption because it involves creativity).

Creative professional characters: not exempt
   Likewise, there have been a good number of characters who likely would not have qualified: Clark Kent, Superman (Superman’s alter ego was a newspaper reporter, rather than a columnist; breaking news stories generally are not deemed to be sufficiently creative to qualify writers for the exemption); and Banky Edwards, Chasing Amy (in the hilarious opening scene of the movie, Jason Lee’s comic illustrator character shamefully admits to being a “tracer” of pictures drawn by Ben Affleck).

Creative professional characters: on the bubble
   Bubble cases typically involve low-level employees who may not have sufficient creative control to qualify. For example, Henry Desmond, Peter Scolari’s character from Bosom Buddies, was a junior copywriter. Whether he qualifies for the exemption depends on whether he was truly creating his own work, or just parroting work that someone else dictated to him.

Computer professionals: general rules and pitfalls
    The computer professional exemption is generally intended for employees who create sophisticated code, programs and other applications. In California, the exemption is also subject to a special compensation requirement mandating that employees must be paid at least $44.63 per hour to qualify. The high compensation requirement is the single most common pitfall to the computer professional exemption in California.

Computer professional characters: a short list in media
    There is a surprising dearth of computer nerd characters who would qualify for the exemption. Ryan Phillippe’s character from the 2001 movie Antitrust would probably qualify because he is a highly sought-after tech star (thus suggesting he was highly paid) who appeared to do nothing but write source code.

    Most of the techie characters who appear on TV and in movies, however, likely would not qualify because they are generally depicted as low- to mid-level drones—as in the movie Office Space—who probably make far less than $45 per hour. The tech support guy Jimmy Fallon played on Saturday Night Live also would not qualify because his job appeared to be technical troubleshooting, rather than actually writing code.