There are three major “white-collar” exemptions to the federal overtime rules that are, to some employers, a bit confusing to say the least.  One of them — the “executive” exemption — is mistakenly understood to just include, well, senior executives of a company.

A new case out by the Second Circuit (Ramos v. Baldor Specialty Foods — download here) last week shows that the executive exemption may be a bit broader than is conventionally understood. 

The case turns on whether the employee is managing a “department or subdivision”.  A subdivision must have “permanent status and continuing function, as opposed to a mere collection of employees assigned from time to time to a specific job or series of jobs.” 

In this instance, the court was asked to consider whether 20 or so “warehouse captains” each of whom performs the same job duties as other captains where exectuives.   Their duties include:

overseeing the work of a “team” of three to six “pickers,” the employees who retrieve food products from the warehouse shelves and load them onto trucks to be delivered to Baldor’s customers. Each captain is “in charge of” his team. He is responsible for making sure that his pickers arrive at work on time for each shift, retrieve the correct products from the warehouse shelves, and load the products onto the correct trucks. He is also responsible for improving his team’s performance and efficiency over time. Each captain has the power to assign slow pickers “easier work” so that they do not fall behind or hurt the team’s performance, and the captain can “give certain orders to certain pickers if [he] trust[s]” a particular picker “to get the right product.” It is the captain’s job to ensure pickers “have done their job right.” Supervising his team is the “main part” of a captain’s job.

The plaintiffs in this case disputed that each captain manages “a customarily recognized department or subdivision” of the company. They insisted that the teams of pickers do not constitute customarily recognized departments or subdivisions as defined in the regulations, because each team performs the same tasks as other teams at the same time and in the same warehouse, and that the executive exemption therefore does not apply to captains.

That argument was rejected by the court.  As noted by the Wage & Hour Litigation Blog:

The Second Circuit disagreed, stressing that there was no requirement that a department or subdivision operate in different locations, shifts, or have varied functions. While those characteristics may help define a department, they are not mandatory. The Court also held that “the job of supervising a team of employees becomes no less managerial merely because the team operates alongside other teams performing the same work in the same building.” Accordingly, the Court held that the teams of pickers were valid subdivisions under the FLSA, and thus the warehouse captains who supervised them were properly exempted as executives.

For employers, the case is an important reminder that you ought to be reviewing the way that you classify your employees.  If they are not being paid overtime, ensure that the employees fall within one of the commonly-recognized exemptions. The above example should help you think outside the lines too.

Those individuals who you may not thought of as “executives”, may just fall within that exemption after all.