How Much Nonexempt Work Can an Exempt Employee Do?

From Fair Labor Standards Handbook, © Thompson Publishing Group

Most employers know that to qualify for one of the white-collar exemptions from the Fair Labor Standards Act (FLSA), an employee must perform certain "exempt" duties. But it's a reality of the work world that even high-level employees perform some routine or "nonexempt" work on occasion. That fact leads to an important question for employers: just how much nonexempt work can an exempt employee do and still retain his or her exempt status?

In this article, we look at how various courts have addressed this issue. In many cases, where an employee performs significant nonexempt work, the question of whether the worker is still exempt may depend on other factors, such as the importance of the employee's exempt duties to the employer's operations.

Under the FLSA, employers generally must pay their employees time and one-half overtime pay for all hours worked over 40 in a week. However, this requirement does not apply to bona fide executives, administrators or professionals (EAP). Employees can qualify for an EAP exemption under either a "short test" or "long test" for the exemption in question; these tests are set forth in FLSA implementing regulations, issued by the U.S. Department of Labor (DOL).

Overview of the Long and Short Tests
Both the short test and long test for each of the EAP exemptions contain a requirement that the employee be paid on a salary basis, meaning he or she must regularly receive a predetermined amount each pay period that is not subject to reduction based on the quality or quantity of work performed (29 C.F.R. §541.118).

Also, both the short test and long test for each of the three exemptions contain a minimum salary amount. While the short test requires that an employee earn at least $250 per week, the long test has lower salary thresholds of $155 per week (for the executive and administrative exemptions) and $170 (for the professional exemption).

Although the short test's salary requirement is more stringent than that of the long test, the short test's duty provisions are less stringent. Therefore, for an employer seeking to claim a white-collar exemption for a particular employee, it is in the employer's best interest to examine the worker's duties under the short test, provided that the employee earns more than $250 per week. In this healthy U.S. economy, most higher-level employees are likely to meet the $250-per-week salary requirement, rendering the long test practically obsolete. The long and short test salary thresholds were last changed in 1975, although DOL has in recent years stated its intention to adjust them.

EAP Duties Requirements
In addition to a salary component, the short and long tests for each of the three EAP exemptions contain specific duties requirements:

• The Executive Exemption. Both the long and short tests for the executive exemption provide, among other things, that an employee's primary duty must involve managing the employing entity or a department thereof, and must include directing the work of two or more full-time employees. Under the long test only, a worker must spend no more than 20 percent of working time in nonexempt work—that is, in "activities which are not directly and closely related to the performance" of managerial work (29 C.F.R. §§541.1, 541.119). DOL regulations provide that the limitation on nonexempt work is 40 percent for employees working in retail or service establishments (29 C.F.R. §541.1(e)).
  
• The Administrative Exemption. The long and short tests for the administrative exemption provide, in part, that an employee's primary duty must entail performing office or nonmanual work directly related to the employer's "management policies or general business operations," and must require the consistent use of discretion and independent judgment. The long test also requires that no more than 20 percent of working time be spent in work not directly and closely related to administrative duties (29 C.F.R. §§541.2, 541.214).
  
• The Professional Exemption. The long and short tests for the professional exemption state, among other things, that an employee's primary duty must require advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, and must demand use of consistent discretion and judgment. The long test adds that an employee must spend no more than 20 percent of working hours in activities "which are not an essential part of and necessarily incident to" his or her professional duties (29 C.F.R. §§541.3, 541.315).

In sum, each of the EAP long tests contains an explicit 20 percent limitation on nonexempt work. The short tests, on the other hand, omit this limitation, stating only that a worker must perform exempt work as his or her "primary duty." It is worth noting that sometimes this distinction between the long and short tests has eluded some courts and even DOL.

Nonexempt Work Under the Long Tests
In recent years, the need for courts to apply the EAP long tests seems to have dwindled, with fewer candidates for exemption earning less than $250 per week. Nonetheless, courts have, in years past, ruled on applying the long test and its limitation on nonexempt work.

For example, in 1990, a federal court applied the long test in considering whether supervisory housing inspectors working for the District of Columbia were exempt as executives (Harris v. District of Columbia, 741 F. Supp. 254 (D.D.C. 1990)). The court found that the supervisors spent over 20 percent of their time doing the same type of nonexempt work as non-supervisory housing inspectors—that is, performing housing inspections. "This alone removes them from the executive category, even if the rest of their duties are of an executive character," the court said.

In another case, a court applied the administrative exemption's long test to a worker who earned a salary of $240 per week and thus could not qualify under the short test (The Osler Institute Inc. v. Inglert, 558 N.E.2d 901 (Ct. App. Ind. 1990)). The employee in Osler worked for a company that produced medical education seminars; her duties included making and answering telephone calls, opening mail and assisting at seminars. The employer argued that the plaintiff exercised independent judgment through her participation in developing a health plan for the company. The court found, however, that this task "was not a large part of her duties" and that she spent more than 20 percent of her time performing nonexempt work.

As these cases indicate, for employers that have a need to apply the long test, an important fact is clear: FLSA rules do not leave open to interpretation the amount of nonexempt work an employee can perform and still qualify for an EAP exemption under the long tests. Employees who earn less than $250 per week and who spend more than 20 percent of working time in nonexempt duties will not meet the long test. As noted, however, the 20 percent limitation "is applicable only to the long test," and not to the short test (Hinsdale v. Liberal Housing Authority, Civil Action No. 93-1201-FGT (D. Kan. Sept. 24, 1997)).

In another, more recent case involving the long test, the 8th U.S. Circuit Court of Appeals addressed the exempt status of motel managers who, along with their managerial duties, were found to perform significant nonexempt work, such as checking in guests and doing laundry (Reich v. Avoca Motel Corp., 82 F.3d 238 (8th Cir. 1996)). This nonexempt work would have pushed them over the applicable 40 percent limitation on nonexempt work (for service employees—see 29 C.F.R. §541.1(e)), had it not been for their "waiting time," the court found. Significantly, the managers had to live on motel premises so that they could respond promptly to guests' concerns. Because the court deemed this waiting time to be managerial, it concluded that the managers spent over 60 percent of their time in exempt duties and thus qualified as exempt administrators.

Nonexempt Work Under the Short Tests
Under the EAP exemptions' short tests, employees must perform exempt work as their "primary duty." But how much of a particular kind of exempt work must an employee do for that work to qualify as his or her primary duty? And if the 20 percent limitation does not apply, what does?

DOL rules state that "as a good rule of thumb," the primary duty is "the major part, or over 50 percent, of the employee's time" (29 C.F.R. §541.103). Thus, for example, an executive who spends over 50 percent of his or her time in management would have management as his or her primary duty. However, DOL rules stress that time is not the "sole test," and that an employee who does not spend more than 50 percent of his or her time in applicable exempt duties may still be exempt if "other pertinent factors support such a conclusion." According to 29 C.F.R. §541.103, these factors include:

1. the "relative importance" of the worker's applicable exempt duties as compared with other kinds of duties;
   
2. the frequency with which the employee uses "discretionary powers;"
   
3. the employee's "relative freedom from supervision;" and
   
4. the relationship between the employee's salary and the wages paid to other employees for nonexempt work that is similar to that performed by the employee in question.

In the words of the 10th U.S. Circuit Court of Appeals in Reich v. Wyoming, 993 F.2d 739 (1993), an employee's primary duty "is that which is of principal importance to the employer, rather than collateral tasks which may take up more than 50 percent of his or her time." FLSA rules also note that a determination on primary duty "must be based on all the facts in a particular case" (29 C.F.R. §541.103).

Court Findings on ‘Primary Duty'
In practice, several courts have found that employees who allegedly spent more than 50 percent of their working time in nonexempt duties nonetheless were exempt under the short test, because other "pertinent factors"—such as those listed at 29 C.F.R. §541.103—indicated the employees were exempt. In some of these cases, the amount of nonexempt work allegedly performed by the workers was significantly more than half the total working time.

In Hinsdale, for instance, a Kansas federal court considered whether an executive director of a city's housing authority qualified for the executive exemption from the FLSA. While the director acknowledged that she performed some exempt managerial duties, she asserted that this work comprised less than 50 percent of her time. In fact, she claimed she spent between 80 and 90 percent of her work time performing nonexempt work. But the Hinsdale court noted that the other "pertinent factors" listed in DOL regulations must be considered where employees perform exempt work for less than 50 percent of their work time.

Applying the first factor, the Hinsdale court found that the plaintiff's managerial duties "were far more important to the operation of the [housing authority] than the nonexempt duties she performed." Among other things, she helped formulate the budget; had discretion to make certain purchases; and hired, fired, trained and disciplined workers. Her primary duty was to handle "the day-to-day management" of the housing authority. The court found that her other duties were "collateral" and less important than her managerial work.

With regard to the other factors listed in 29 C.F.R. §541.103, the Hinsdale court noted that the plaintiff regularly exercised discretion (although within constraints) and was "completely free from day-to-day supervision." Also, she earned a salary that was "a great deal higher" than the wages paid to the nonexempt workers she supervised, the court found, concluding that she qualified as exempt.

Similarly, a Michigan court, in Vezina v. Jewish Community Center of Metropolitan Detroit, No. 93-CV-74163 (E.D. Mich. Sept. 23, 1994), considered the case of a community center's aquatics director. The director claimed she failed to qualify under the executive exemption because she spent 80 percent of her time in non-managerial duties.

Weighing the evidence, the court found that even if this estimate was true, it did not settle the question of whether she was exempt. Examining the other pertinent factors, the court found that the employer's aquatics department "could not operate successfully unless plaintiff's managerial functions were performed." Using language similar to the court in Hinsdale, the Vezina court found that the plaintiff was in charge of the department's "day-to-day operation." Among other things, the court also found that the aquatics director exercised "discretionary powers," had "relative freedom from supervision" and was paid more than nonexempt employees in the aquatics department.

In yet another case, a court found a store manager exempt as an administrator even though no evidence was presented as to how much time the manager spent in exempt work (Stricker v. Eastern Off-Road Equipment Inc., 935 F. Supp. 650 (D. Md. 1996)). The court acknowledged that the 50 percent rule is a "useful guide," but added that if "a worker's most important duties are administrative, if the worker exercises discretion and judgment frequently and if the worker is relatively free from direct supervision, quantifying the time spent performing administrative duties is not required."

Examining the circumstances of the plaintiff's employment, the Stricker court found that the manager "was the highest ranking employee located at his store" and was "responsible for the ‘day-to-day operations' of the store," including making sure that the store opened and closed on time, that sales goals were met and that customers were satisfied. The court found that administering the store had "special significance" as compared to the plaintiff's other duties and therefore that he was exempt. "Even if the plaintiff spent more than half of his workday performing nonexempt work, his primary duty was to manage the store," the court found.

In another case, however, a court found a maintenance director nonexempt—not strictly because he performed too much nonexempt work, but because that fact combined with other pertinent factors indicated his primary duty was not exempt. In Sack v. Miami Helicopter Service Inc., 986 F. Supp. 1456 (S.D. Fla. 1997), the court noted that evidence showed the plaintiff spent less than 50 percent of his time on exempt work, and so considered other pertinent factors related to his employment.

Weighing the other factors, the court examined the relative importance of his exempt duties as compared to his nonexempt duties. A key finding on this issue related to the plaintiff's work inspecting aircraft repairs made by other mechanics. The court found that his inspection work—which was "certainly central to his position"—was, in large part, non-managerial. His managerial duties were not more important than his non-managerial duties, the court found, and he did not exercise discretionary power on a regular basis. Also, he had limited power to hire and fire workers. On the other hand, he was relatively free from supervision and was paid more than nonexempt employees for similar nonexempt work. Considering all the facts, the court noted that "exemptions from the FLSA are to be narrowly construed," and thus ruled that the employee did not qualify as an exempt executive.

Another case where an employee's primary duty was deemed nonexempt involved an accounting manager/clerk working for a customs broker (Friou v. L.E. Coppersmith Inc., Civil Action No. 14-97-1181 (S.D. Tex. July 24, 1998)). The plaintiff's employer claimed she was exempt as an administrator because her primary duty involved collecting outstanding debts from customers. Also, the employer argued, she was given the authority and discretion to extend credit to customers and to establish payment plans.

But the court found that "[a]ny discretion [the plaintiff] may have exercised in deciding whether to set up a payment plan with a customer constituted only a small part of her overall duties and was not such an important or significant part of her job so as to require her to be classified as an administrative employee." The court found that the plaintiff's primary duty involved making routine collection telephone calls to customers and other nonexempt clerical work.

A DOL Finding
The issue of nonexempt work performed by exempt employees also has been considered by DOL in its interpretive rulings. In fact, a tricky situation on the nonexempt work topic arose in a DOL opinion letter dated Dec. 26, 1985.

The letter involved a "police liaison officer" who technically was a police department employee but was assigned to work full-time at a school district. The liaison officer taught two classes a day on law enforcement issues and counseled students and parents, and also attended school functions and parent-teacher meetings. However, the officer also responded to criminal complaints and investigated crimes committed on or near the school grounds.

Under the FLSA, DOL noted, employees whose primary duty involves teaching generally are exempt as professionals. Normal police work, however, is not professional work. Considering whether the officer was exempt, DOL found he could qualify for exemption in weeks during which he worked at the school, provided he did not "spend substantially more than 50 percent" of his time in law enforcement. DOL cautioned, however, that "[e]xamining the primary duties of a police liaison officer over a much longer period than a workweek could lead to a conclusion that the police officer is a law enforcement official rather than a teacher."

Conclusion
In sum, exactly how much time an employee must spend on a particular task before that task becomes his or her primary duty can depend on the employee's overall work situation. However, courts generally agree that the primary duty need not occupy more than half of the employee's work time, if the employee's exempt work is of sufficient importance to the employer and if other pertinent factors apply.

Of course, sometimes the courts and even DOL seem to confuse various short and long test requirements. In addition, if the employer assigns nonexempt duties that go beyond the 50 percent threshold for the short test, then there is an ever-present risk that the primary duty may be deemed nonexempt, particularly if the exempt duties are less important, involve fewer discretionary powers and are not relatively free from supervision. Employers who want to steer the safest course possible in claiming a white-collar exemption thus may want to assign as many exempt duties as possible to meet or exceed the 50 percent number—just in case the "pertinent factors" weigh in favor of classifying the employee as nonexempt. As always, employers should seek legal advice when uncertain about how to classify their employees.

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