In today’s hectic and demanding workplace, it’s not unusual for employers to ask employees to multitask on the job. That strategy isn’t without risk, though. In fact, as one California employer has learned the hard way, an employee’s multitasking could forfeit his or her exempt status and leave you on the hook for overtime.

Assistant manager sues for overtime

“Lauren” was the assistant manager at a Safeway grocery store in Oceanside from April 2004 to October 2005. When she started work there, the store was having trouble retaining a bookkeeper (a nonexempt position) and courtesy clerks, who bag groceries, bring in carts, and perform other customer service tasks. The manager asked Lauren to do the store’s bookkeeping.

Each Safeway store is assigned an operating ratio, which is the number of labor hours budgeted to the store based on its sales. Operating ratios are calculated on a weekly basis, and managers are disciplined for missing the ratio in any week by clocking more labor hours than budgeted.

The Oceanside store was not given enough hours to make its operating ratio without both Lauren and the manager doing the work of hourly employees, such as checking and general merchandising. Lauren managed the store while simultaneously working the cash register, and she observed general conditions in the store while stocking shelves.

Lauren typically spent 4 to 6 hours per day on bookkeeping and about 3 hours in the front end of the store. On delivery days, she typically spent 6 to 8 hours breaking down packages and putting items on shelves in the back room, working 14 to 15 hours per day.

As assistant manager, Lauren was responsible for the sales forecasts, the master budget, and all store operations, which included supervising 25 to 35 employees, as well as safety, cash security, and seeing that employees didn’t overorder supplies.

In addition, Lauren:

• Hired and trained staff
• Maintained employee files
• Disciplined employees
• Did salary performance paperwork
• Responded to management e-mail
• Prepared reports
• Scheduled employees
• Performed employee evaluations

After Safeway fired her, Lauren sued to recover overtime pay, contending she had been a nonexempt employee. A jury and the trial court agreed and awarded her more than $26,000 in overtime, plus interest. Safeway appealed.

It’s the activity’s purpose that matters

Under the executive exemption in California’s Industrial Welfare Commission (IWC) Wage Order 7, an employee may be exempt from overtime if he or she is primarily engaged in executive duties. The wage order defines “primarily” as more than half of the employee’s work time.

Safeway argued that the trial court erred in concluding that Lauren spent more than 50 percent of her work time performing nonexempt tasks because the court did not properly credit her multitasking, or concurrent performance, of exempt and nonexempt duties.

Safeway asserted that as long as a manager actively functions in his or her managerial capacity, and addresses his or her attention to managerial tasks like observing how the store is running, all that time should fall on the exempt side of the ledger.

The trial court instructed the jury that when a party claims an employee is engaged in concurrent performance of exempt and nonexempt work, jurors must consider that time to be either exempt or nonexempt—depending on the primary purpose of the employee’s activity at that time.

The nature of the activity, the trial court cautioned, can change. In other words, the activity’s role in the work of the organization is critical to its categorization.

The Court of Appeals found no fault with the jury instructions. It pointed out that the 2001 federal regulations incorporated in Wage Order 7 specifically recognize that managers sometimes engage in tasks that don’t involve the “actual management of the department [or] the supervision of the employees therein.”

And the regulations don’t say that those tasks should be considered exempt as long as the manager continues to supervise while performing them. Instead, the appellate court said, the regulations look to the manager’s reason or purpose for undertaking the task.

According to the regulations, if a task is performed because it is helpful in supervising the employees or contributes to the smooth functioning of the department for which the supervisor is responsible, the work is exempt—even though the identical task performed for a different, nonmanagerial reason would be nonexempt.

The appellate court conceded that the regulations issued by the Department of Labor in 2004 state that concurrent performance of exempt and nonexempt tasks doesn’t disqualify an employee from the executive exemption if the employee is otherwise exempt. But neither the California Legislature nor the IWC has elected to follow these regs, and the court didn’t have the authority to do so.

A different result under the FLSA?

It’s possible that a different result would have been reached under the primary duty test of the federal Fair Labor Standards Act (FLSA), which applies to certain enterprises involved in interstate commerce.

Under federal regulations, management may be the primary duty of an assistant manager in a retail establishment who performs exempt executive work even if more than 50 percent of his or her time is spent performing nonexempt work—unless the assistant manager is closely supervised and earns little more than nonexempt employees.

That’s small comfort if you’re a California employer. To protect yourself from state overtime claims, you should closely review your assistant managers’ exempt classifications and make sure these employees spend more than half of their time on exempt work that’s helpful in supervising the employees or contributes to the department’s smooth functioning. Heyen v. Safeway Inc., Calif. Court of Appeals (Dist. 2) No. B237418, 2013.

‘Realistic expectations’ rule didn’t apply

Under California law, the question of whether an employee was properly classified as exempt depends not only on the work actually performed but also on:

• Whether the employee’s practice diverged from the employer’s realistic expectations;
• Whether there was any concrete expression of employer displeasure with the employee’s substandard performance; and
• Whether these expressions were realistic given the job’s actual overall requirements.

For example, an employee who is expected to engage in sales activities during most of his working hours but falls below the 50 percent mark due to his own substandard performance can’t thereby evade a valid exemption.

Safeway argued that in light of this “realistic expectations” rule, the trial court could have found Lauren was nonexempt only if it determined Safeway expected her to do all the checking, bagging, merchandising, and bookkeeping work she performed.

The Court of Appeals, however, found plenty of evidence that because of Safeway’s unrealistic expectations about stores’ operating ratios, a manager couldn’t keep checkout lines as short as company policy required without stepping in and doing significant nonexempt work.

Several witnesses also testified that Safeway budgeted too few hours for nonexempt bookkeepers to do the stores’ books, so assistant managers had to take over some bookkeeping tasks. Additional testimony indicated that because the Oceanside store had chronic problems keeping a bookkeeper, Lauren was required to act as the sole bookkeeper for significant periods of time.

Therefore, the Court of Appeals concluded, Lauren’s practice of performing significant amounts of nonexempt work didn’t diverge from Safeway’s realistic expectations.

Practice tip: Work that is generally performed by nonexempt employees is usually nonexempt even when performed by the employees’ supervisor.