Wood v. Kinetic Systems, Inc., Case No. 1:09-CV-579-CWD
United States District Court for the District of Idaho
April 19, 2011
Candy W. Dale, United States Magistrate Judge
Whether the “primary duties” test must be satisfied when an employer seeks to exempt a highly compensated employee from overtime pay under the FLSA.
Summary of Ruling:
Plaintiff asserted a Fair Labor Standards Act (“FLSA”) claim against his employer, alleging that it failed to pay him overtime wages. Defendant asserted the affirmative defense that Plaintiff was an exempt employee under the FLSA. In particular, Defendant asserted that Plaintiff fell within the “executive exemption” in 29 C.F.R. § 541.100 and within the “highly compensated employee” exemption in 29 C.F.R. § 541.601. Defendant filed a pre-trial motion with the Court in order to clarify whether the “primary duties” test, which is a component of the “executive exemption,” also applies to the “highly compensated employee” exemption. Defendant argued that the “primary duties” test is inapplicable to the “highly-compensated employee” exemption, while Plaintiff argued that the “primary duties” test applies equally to the “highly compensated employee” exemption.
First, the Court explained the “executive exemption” under 29 C.F.R. § 541.100. The Court explained that the exemption requires the satisfaction of two tests: (1) the salary test (which requires the employee to be salaried at a rate of at least $455 per week); and (2) the duties test. Under the duties test, the employer must establish that the employee’s primary duty is management, that the employee customarily directs the work of others, and that the employee has the authority to employ others. The Court explained that the primary duties analysis is burdensome and extensive, with multiple factors that must be weighed on a case-by-case basis.
Next, the Court examined the “highly compensated employee” exemption under 29 U.S.C. § 541.601. The relevant section of the regulation reads: “An employee with total annual compensation of at least $100,000 is deemed exempt . . . if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee.” Because the regulation only requires the employee to regularly perform “any one or more” of the exempt duties of an executive, administrative, or professional employee – as opposed to all of the duties within one of those categories of employees – the Court reasoned that the primary duties test is “streamlined” for highly compensated employees. Quoting 29 U.S.C. § 541.601(c), the Court gave the following example:
An employee may qualify as a highly compensated executive employee, for example, if the employee customarily and regularly directs the work of two or more other employees, even though the employee does not meet all of the other requirements for the executive exemption under § 541.100.
Thus, the Court concluded: “[W]hile the analysis of a highly compensated executive …employee’s primary duties may be reduced or streamlined, the employer still must establish that the employee ‘customarily and regularly performs any one or more of the exempt duties.’”
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