A restaurant manager was an executive employee as defined by California law and therefore was not entitled to overtime compensation, the California Court of Appeals ruled. Most of the employee’s duties were exempt managerial duties and although the worker spent some time performing non-exempt duties, that time was less than 50% of his work week, the court said.

From December 2008 to December 2012, Geraldo Ramirez managed two restaurants owned by Vipul Mehta and his wife Sushma Mehta. Ramirez worked 50 hours a week, dividing his time between the two restaurants. He received a salary of $ 43,000.

Ramirez’s daily duties included counting cash, entering daily sales information, making daily bank deposits, writing checks, placing food orders, purchasing products, marketing, preparation and delivery. catering orders and cash register management. He was also required to prepare food and serve customers as the restaurants were understaffed.

The Mehtas sold one of the restaurants in December 2012. According to Ramirez, he was fired at that time, but the Mehtas claimed that Ramirez declined an offer of continuous employment for lower pay at the remaining restaurant.

A week after quitting working for the Mehtas, Ramirez took legal action to seek compensation for unpaid overtime. The trial court dismissed Ramirez’s claim, ruling that, in accordance with the executive’s exemption under California law, he was not entitled to overtime payment.

[SHRM members-only HR Q&A: What is the difference between California overtime exemption requirements and federal overtime exemption requirements?]

Ramirez appealed the trial court’s decision.

Six elements of the executive exemption

Section 515 of the California Labor Code authorizes the Industrial Welfare Commission to establish exemptions from overtime pay requirements for managerial, administrative and professional employees. The Wages Ordinance No. 5-2001 governs overtime exemptions for restaurants. The executives’ exemption has six elements:

  • The duties and responsibilities of the employee involve the management of the business.
  • The employee directs the work of two or more other employees.
  • The employee has the power to hire or fire other employees.
  • The employee exercises discretion and independent judgment.
  • The employee earns a monthly salary of at least twice the state minimum wage.
  • The employee mainly performs managerial functions.

The trial court ruled that Ramirez primarily performed duties falling under the exemption, noting that he supervised the work of others, was authorized to hire and fire, exercised independent judgment habitually and regularly, and regularly and directly assisted the owners. Ramirez was paid more than double the minimum wage.

Although Ramirez performed some non-exempt duties, such as serving clients, the time spent on these activities was less than half of his working time, and therefore he was mainly engaged in managerial duties, the court found. first case.

The first and sixth elements of the executive exemption were at issue on appeal, the appeals court noted.

Ramirez argued that bank deposits, entering sales data, paying invoices, calculating employee hours for payroll purposes, managing inventory, ordering supplies, and marketing were not management functions. The appeals court disagreed, however, concluding that all these tasks were directly linked to the management of restaurants and contributed to the proper functioning of businesses. In addition, the tasks were all assigned to the manager and not performed by non-exempt employees.

The appeals court also noted that evidence showed Ramirez was spending around 20.25 hours per week in his 50-hour workweek performing non-exempt work. This was less than “more than half” required to change Ramirez’s status to a non-exempt.

The court upheld the trial court’s ruling that Ramirez was not entitled to overtime payment.

Ramirez v. ISB Mehta Corp., Calif. Ct. App., No.H042072 (February 27, 2017).

Professional pointer: Assigning non-managerial tasks to managers, especially if a company is understaffed, can seem like a good way to manage limited resources. However, if managers perform these tasks regularly and devote a lot of time to them, they can no longer be considered exempt executives and may be paid overtime if they work more than 40 hours per week.

Joanne Deschenaux, JD, is a freelance writer in Annapolis, Maryland.

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