Can an employee do exempt and nonexempt work at the same time?

"Not in California" was the answer that Safeway recently received from the Second District Court of Appeal in Los Angeles. Heyen v. Safeway Inc., Case No. B237418 (May 23, 2013).

Linda Heyen was responsible for all store operations at Safeway's Oceanside store, but, she also had to do bookkeeping and other nonexempt work. She was able to manage the store while doing lower level work. For example, when she was stocking shelves, she was also observing general conditions in the store. Safeway classified her as an exempt employee, but she sued for overtime, claiming that she was really a nonexempt employee.

The California wage orders establish an "executive" exemption for those who manage a customarily recognized unit of the employer and are "primarily engaged" in executive duties. (Wage Order No. 7-2001 applied to Safeway.) "Primarily" means "more than one-half the employee’s work time."

Safeway argued that Heyen spent more than half her time on executive duties, because whenever she was performing nonexempt work she was also keeping an eye on general operations. The Court of Appeal disagreed. The test requires the fact finder to determine the employee's purpose for each task. If the purpose is to supervise employees or contribute to the smooth functioning of the unit, the task exempt work. Otherwise, it is nonexempt work.

The result might have been different under the federal Fair Labor Standards Act. The FLSA regulations use a "primary duty" rather than a "primarily engaged" test. Under that test, "assistant managers in a retail establishment who perform exempt executive work such as supervising and directing the work of other employees, ordering merchandise, managing the budget and authorizing payment of bills may have management as their primary duty even if the assistant managers spend more than 50 percent of the time performing nonexempt work such as running the cash register. However, if such assistant managers are closely supervised and earn little more than the nonexempt employees, the assistant managers generally would not satisfy the primary duty requirement." 29 CFR 541.700(c).

Exemptions from Wage and Hour Requirements: Executive

Both California and federal law recognize an exemption for employees in executive positions. The elements of the exemption are substantially the same. Both standards require that the employee be paid on a salary basis, as discussed in an earlier post.

The federal definition appears in the Department of Labor's regulations at 29 CFR section 541.100. Under that definition, an executive employee is one (1) who is paid a salary of at least $455 per week, (2) whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof, (3) who customarily and regularly directs the work of two or more other employees, and (4) who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

Under the state definition (which appears in section 1(A)(1) of each wage order), an executive employee is one (1) whose duties and responsibilities involve the management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof, (2) who customarily and regularly directs the work of two or more other employees, (3) who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees will be given particular weight, (4) who customarily and regularly exercises discretion and independent judgment, (5) who is primarily engaged in duties which meet the test of the exemption, and (6) who earns a monthly salary equivalent to no less than two times the minimum wage which equates to $640 per week.

The principal difference (other than the minimum salary required) is the use of the "primary duty" standard under federal law, and the use of the "primarily engaged" standard under state law. The state wage orders define "primarily" in section 2(N) as "more than one-half the employee's work time." The "primary duty" standard is more flexible. Section 541.106(b) of the regulations gives the following example: "For example, an assistant manager in a retail establishment may perform work such as serving customers, cooking food, stocking shelves and cleaning the establishment, but performance of such nonexempt work does not preclude the exemption if the assistant manager's primary duty is management. An assistant manager can supervise employees and serve customers at the same time without losing the exemption." Under the state standard, the assistant manager would not be exempt unless he or she spent more than half his or her time on exempt duties.