Whether a salaried restaurant manager is entitled to overtime pay depends entirely on meeting strict criteria established by the federal Fair Labor Standards Act (FLSA). A job title alone does not determine eligibility. The determination hinges on a specific set of tests related to the employee’s compensation structure and the actual job duties performed daily. Understanding these federal guidelines is necessary for restaurant owners to ensure compliance and for managers to know their rights regarding hours worked beyond the standard 40-hour workweek.
The Default Rule for Overtime Eligibility
All employees covered by the FLSA are initially considered “non-exempt,” meaning they are entitled to a minimum wage and overtime pay for any hours worked over 40 in a single workweek. The FLSA mandates that this overtime must be compensated at a rate of at least one and one-half times the employee’s regular rate of pay. An employee remains non-exempt unless the employer can prove that the position falls squarely under one of the narrowly defined exemptions. These exemptions are interpreted strictly, placing the burden of proof directly on the business seeking to apply them.
The Three Tests for Managerial Exemption Status
For a restaurant manager to be classified as “exempt” from overtime, the position must satisfy three distinct, mandatory hurdles collectively known as the “white-collar” exemption tests. The first is the Salary Basis Test, requiring the manager to be paid a predetermined, fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed. The second is the Salary Level Test. Under the currently enforceable federal rule, this fixed salary must be at least $684 per week, which equates to $35,568 annually.
The final, and often most complex, requirement is the Duties Test, which analyzes the actual responsibilities and nature of the work the manager performs. For restaurant managers, the “Executive Exemption” is the most relevant classification, focusing on the employee’s role in directing the business. The duties test must be met regardless of the salary level, unless they qualify under the separate Highly Compensated Employee rule.
The Executive Duties Requirement for Restaurant Managers
The Executive Exemption is the primary standard used to determine if a restaurant manager is truly exempt from overtime. To qualify, the manager’s primary duty must be managing the enterprise or managing a customarily recognized department or subdivision of the enterprise. This concept of “management” involves activities such as hiring, firing, training, scheduling, and directing the work of other employees. The duties must constitute the employee’s principal, main, or most important duty.
A central requirement is that the manager must customarily and regularly direct the work of at least two or more other full-time employees, or the equivalent. This supervision must involve more than simply observing; it includes assigning tasks, reviewing work for quality, and providing constructive feedback. Furthermore, the manager must have the authority to hire or fire other employees, or their suggestions and recommendations regarding hiring, firing, advancement, or promotion must be given “particular weight.” The phrase “particular weight” means the employer gives the recommendations serious consideration and acts on them frequently. The proper application of this exemption requires a careful analysis of the manager’s actual authority and the time spent performing these management functions.
How Performing Non-Managerial Tasks Impacts Exemption Status
The nature of the restaurant business often requires managers to perform a variety of tasks, including cooking, serving, or cleaning, which are typically considered non-exempt duties. Federal regulations address this reality with the concept of “concurrent duties.” Performing both exempt managerial work and non-exempt manual work does not automatically disqualify the manager, provided the managerial duties remain the employee’s primary duty. An exempt manager may, for example, fill in for a server during a sudden rush while simultaneously directing the staff and overseeing the entire operation.
The key distinction is whether the non-exempt work is performed concurrently with management or if it becomes the manager’s sole function for an extended period. If a manager is primarily performing manual tasks because the restaurant is understaffed, the exemption may be defeated. While the Department of Labor generally considers the majority of time spent, time alone is not the only factor. An employee who is responsible for the overall success or failure of the restaurant’s operations and who continues to manage the business while performing those tasks is more likely to meet the duties test.
State Laws and Highly Compensated Employees
Employers must always comply with the most protective law, meaning that if a state’s labor laws are stricter than the federal FLSA, the state law must be followed. Several states, such as California and New York, have established higher minimum salary thresholds or more rigorous duties tests for the executive exemption than the federal standard. The existence of these state-specific variations requires employers to analyze both federal and state regulations before classifying a restaurant manager as exempt.
Separately, a small number of high-level restaurant executives may qualify under the Highly Compensated Employee (HCE) exemption. This exemption is designed for employees who perform office or non-manual work and receive a very high level of total annual compensation, currently set at $107,432 or more under the enforceable rule. The HCE exemption is easier to satisfy than the standard executive exemption because the employee only needs to customarily and regularly perform any one of the exempt duties of an executive, administrative, or professional employee. This exemption is generally limited to general managers or corporate executives earning substantially more than the typical restaurant manager.
Risks of Employee Misclassification
Misclassifying a restaurant manager as exempt carries significant financial and legal liabilities for the employer. If a manager was improperly denied overtime pay, the employer is liable for the full amount of back wages owed. Under the FLSA, this liability generally extends back two years, or three years if the violation is found to be willful.
Beyond unpaid overtime, employers may also be liable for an equal amount in liquidated damages, effectively doubling the total amount owed. Federal and state agencies can impose substantial civil monetary penalties for wage and hour violations. The financial consequences can quickly escalate, especially if a class-action lawsuit is filed involving multiple managers, making accurate classification a business necessity.