Managers and assistant managers at retail locations have been the focus of many wage and hour class or collective action lawsuits.  In these cases, the employer often asserts that the employee is exempt under the executive exemption and the employee contends that there was not enough discretion or exempt work to warrant application of the exemption.  As discussed previously in this blog, the issue in such cases generally comes down to whether the managers’ “primary duties” are exempt or non-exempt. 

For employers in California, courts employ a quantitative test, asking whether more that 50 percent of the employees’ duties are exempt.  In the vast majority of states, and under federal law, the test is qualitative, taking into account factors such as the importance of the exempt duties to the job, the amount of time spent on them, the employee’s freedom from direct supervision, and differences between the employee’s pay and that of hourly workers.  29 C.F.R. section 541.700.  As a result, employers with smaller individual retail outlets, such as convenience stores, tend to have more difficulty establishing the exempt status of their managers in California than elsewhere because, by virtue of the stores’ smaller size, it is more likely that managers will work along side the employees they supervise and hence more likely that they will spend more time on nonexempt work.

Outside of California, the application of the qualitative test will mean that the employer will often prevail, as demonstrated by a recent case from the United States District Court for the Northern District of New York.  In Guinup v Petr-All Petroleum Corporation.pdf. (case 5:07-CV-1120, 8/23/2010) the plaintiff was the manager of a combination convenience store and gas station.  She asserted both federal claims under the FLSA and class action claims under the New York wage and hour law, claiming that the company misclassified all of its retail outlet managers.  She made many arguments in support of this contention, including, for example, that she was required to perform numerous nonexempt duties such as counting cigarettes, verifying gas readings, monitoring security tapes, comparing prices as nearby gas stations, and working alone at times.

Interestingly, the plaintiff withdrew her class allegations early in the case as part of a compromise regarding a motion to dismiss filed by the defendant.  The court thus technically ruled on her individual claims on the defendant’s motion for summary judgment, although its reasoning theoretically would have applied to the class of store managers as a whole.  The court accepted the plaintiff’s description of the nonexempt duties she performed, and even her argument that she performed such duties 80 percent of the time, but noted that she also performed numerous exempt duties such as evaluating employees, scheduling, and supervising other employees.  It noted that while her performance of nonexempt duties was helpful to the store’s operations, and quite possibly filled the bulk of her time, her managerial functions were more important.  As the court reasoned, the store largely could not function well, if at all, were she not there to perform the exempt managerial duties.  It further found that despite the existence of regional supervision, she spent most of her day free from direct supervision because the regional manager generally was not in the store.  Therefore, the court found, the managerial duties were  the “primary” duties as a matter of law, and entered judgment for the defendant.

The Bottom Line:  Even in small individual retail operations, and even when the amount of time spent strictly managing the store is relatively small, managerial duties or often still the primary duties and will support the executive exemption.