Exempt or Non-exempt - TEST BANK 360



Exempt or Non-exempt?

Jane Swift is becoming frustrated with her job as a Shift Leader at Jones Department Store. She’s worked there for six months and the full-time job has turned into more than full-time. Several Associates have left the store and as a result, the past several weeks she has worked 45-50 hours each week. She doesn’t mind working the extra hours; she is just frustrated because she is not getting paid overtime pay.

She asked the Store Manager, Amy Kostner, about the overtime pay she was due. Amy informed Jane that Shift Leaders are part of the management team and they are classified as Exempt under the Fair Labor Standards Act. The store is not required to pay Exempt workers overtime pay.

Jane agrees that she is part of the management team. As a Shift Leader, Jane runs the floor when she is on duty. One of the Assistant Managers sets the daily schedule of Associates each week, but Jane and other Shift Leaders assign the Associates to various work areas as needed. Depending on store traffic, Associates need to be moved from stocking shelves and cleaning to cashiering or assisting customers. When not working on such management responsibilities, the Shift Leaders generally assume the duties of Associates by assisting customers and cashiering. Jane reports that she typically spends only a little more than half of her time performing Associate duties.

Shift leaders are also involved in managerial decisions. For example, they often sit in on employment interviews, and typically are aware of employee terminations before the employee is fired. They also give feedback about the Associates to the Assistant Managers who write the annual performance appraisals.

Just like a manager, Jane makes a lot of decisions during the course of her shift each day. If there is a dispute on a sale price, Jane searches the weekly sales flyer to determine the correct price. If a customer has a return, Jane reviews the transaction and initials it before the cashier can give a refund. However, she does not have complete autonomy in making decisions. For example, if a return is greater than $50.00, an Assistant Manager or the Store Manager needs to approve the refund.

But even though she agrees that she is part of the management team, Jane isn’t satisfied with Amy’s answer on her question about pay. If she isn’t eligible for overtime pay, she thinks that she should be paid more. While she is paid at a higher rate than most of the Associates, she is not paid nearly as much as the Assistant Managers. A pay increase or overtime pay would at least make it worthwhile for her to put in the extra hours.

1. Why did Amy classify the Shift Leaders are Exempt? Are there any advantages to Jones Department Store to having the Shift Leaders classified as Exempt?

2. Do you think that the Shift Leaders are properly classified as Exempt? Why or why not?

3. What are some factors that Amy should consider when determining if Shift Leaders are Exempt or Non-exempt?

Instructor Notes

The Fair Labor Standards Act (FLSA) addresses the issues of minimum wage, overtime pay and child labor. The FLSA requires employers to properly classify employees as Non-exempt (covered by the Act) or Exempt (not covered by the Act). Many companies want to classify workers as Exempt to avoid the requirement to pay overtime. While the company has the responsibility to properly classify employees, the decision needs to be made based on the responsibilities of the job. The Department of Labor (DOL) has interpreted Exemptions from the Fair Labor Standards Act (FLSA) narrowly. Students can find more details on the exemptions on the DOL’s website at . Many companies wrongly assume that all supervisors or managers in an organization are Exempt from the FLSA. Aaron v. City of Wichita provides some guidance on classifying supervisors:

• Relative importance of management as opposed to other duties

• Frequency with which they exercised discretionary powers

• Relative freedom from supervision

• Relationship between their salaries and wages paid to other employees offer similar nonexempt workers.

In examining all of these factors, it is clear that Jane Swift and the other Shift Leaders should be classified as Non-exempt.

Student Responses

1. Why did Amy classify the Shift Leaders are Exempt? Are there any advantages to Jones Department Store to having the Shift Leaders classified as Exempt?

Amy most likely assumed that the Shift Leaders met the Executive exemption under the FLSA. Classifying the Shift Leaders as Exempt was advantageous to the store management, as they did not have to pay the Shift Leaders overtime pay. Further, management saved some extra administrative work because they did not need to track the hours of the Shift Leaders.

2. Do you think that the Shift Leaders are properly classified as Exempt? Why or why not?

Most likely the Shift Leaders should be Non-exempt. Under the guidance set forth by Aaron v. City of Wichita, the Shift Managers do not meet the criteria to be classified as Exempt.

3. What are some factors that Amy should consider when determining if Shift Leaders are Exempt or Non-exempt?

Amy should consider the fact that the Shift leaders spend a majority of their time working as Associates and their pay rate is closer to the Associates than the Assistant Managers. While they are involved in employment related decisions, their decision-making ability is limited.

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