Executives and Overtime

Executives are exempt from the Federal overtime requirements if, among other things, they “customarily and regularly direct the work of two or more other employees.” Here, the U.S. Department of Labor explains what this requirement means.

1. An employee will qualify as an “executive” under 541.1 (the section of Federal overtime law that deals with executives) only if he customarily and regularly supervises at least two full-time employees or the equivalent. For example, if the “executive” supervises one full-time and two part-time employees of whom one works during mornings and the other during afternoons, or four part-time employees, two of whom work mornings and two afternoons, this requirement would be met.
2. The employees who are supervised must be employed by the department which the “executive” is managing.
3. A supervisor of as few as two employees usually performs nonexempt work in excess of the general 20-percent tolerance provided in 541.1.
4. In a large machine shop, there may be a machine-shop supervisor and two assistant machine-shop supervisors. Assuming they meet all the other 541.1 qualifications, particularly that they are not working foremen, they should certainly qualify for the exemption. A small department in a plant or in an office is usually supervised by one person. Any attempt to classify one of the other workers in the department as an executive merely by giving him an honorific title such as assistant supervisor will almost inevitably fail, as there won’t be sufficient true supervisory or other managerial work to keep two persons occupied. On the other hand, it’s incorrect to assume that in a large department, such as a large shoe department in a retail store which has separate sections for men’s, women’s and children’s shoes, for example, the supervision cannot be distributed among two or three employees, conceivably among more. In such instances, assuming that the other tests are met, especially the one concerning the performance of nonexempt work, each such employee “customarily and regularly directs the work of two or more other employees therein.”
5. An employee who merely assists the manager or buyer of a particular department and supervises two or more employees only in the actual manager’s or buyer’s absence, does not meet this requirement. For example, where a single unsegregated department, such as a women’s sportswear department or a men’s shirt department in a retail store, is managed by a buyer with the assistance of one or more assistant buyers, only one employee, the buyer, can be considered an executive, even though the assistant buyers at times exercise some managerial and supervisory responsibilities. A shared responsibility for the supervision of the same two or more employees in the same department does not satisfy the requirement that the employee “customarily and regularly directs the work of two or more employees therein.”

Source: The U.S. Department of Labor