Wage and Hour Division (WHD)
Opinion Letters - Fair Labor Standards Act
December 19, 2008
This is in response to your request for an opinion regarding whether store managers lose their exempt status under section 13(a)(1) of the Fair Labor Standards Act (FLSA)* by participating in a seven-week training program to become eligible for promotion to the area sales manager position. It is our opinion that bona fide exempt store managers would not lose their exempt status by participating in the training program you describe in your inquiry.
Each year a number of high performing store managers are selected to participate in a training program to become eligible for promotion to the position of area sales manager. Area sales managers supervise eight to ten store managers. During the training period, each of the store managers accompanies an area sales manager on visits to area stores, reviews store paperwork, addresses issues with the managers of the stores visited, investigates inventory shortages and violations of company policy, and attends sales meetings. At the beginning of the training period, the trainee simply “shadows” the area sales manager, but as the training progresses, the area sales manager delegates more and more duties to the trainee. By the end of the training period, it is the area sales manager who “shadows” the trainee. According to your letter, during the first week of the training period, the trainee spends little time performing exempt work, and during the first several weeks of training, it is unlikely that the trainee spends more than half of the time performing exempt work.
During the training period, trainees analyze sales figures, product returns, and inventory data to determine store performance; review data with the store manager and suggest improvements; review the hours worked by employees; approve payroll; determine whether the store manager allocates labor hours effectively and, if not, suggest improvements; audit lottery ticket sales; and work with the store manager to control losses.
Trainees who fail to complete the training program are allowed to continue working in their position as store manager, an exempt position. After successful completion of the training program, a trainee resumes the regular exempt duties as store manager until an area sales manager position becomes available and he or she is selected for promotion to the vacancy. You state that the store manager’s salary is maintained, or increased, during the training period. For purposes of this opinion, you asked that we assume the store manager and area sales manager positions qualify for the executive exemption under section 13(a)(1) of the FLSA. You ask whether the store manager loses his or her exempt status during the training period.
You note that 29 C.F.R. § 541.705 states, “exemptions do not apply to employees training for employment in an executive . . . capacity who are not actually performing the duties of an executive . . . employee.” You also note that exemptions normally apply on a workweek by workweek basis. You point out, however, that in this case, the store managers have been working for years as bona fide exempt managers. You cite Wage and Hour Opinion Letter June 14, 1968, which declined to offer an opinion regarding the exempt status of employees “during the portion of the training program that is between the periods in which they are clearly exempt under the regulations” pending clarification of the courts. You also cite to a federal district court case in which the plaintiff was found to be exempt during a period of training that was between two periods in which he qualified as an exempt systems engineer. See Booth v. EDS Corp., 799 F. Supp. 1086, 1093 (D. Kan. 1992). (“[The plaintiff] has pointed to no evidence in the record that indicates that he or EDS considered phase two of the [training] program to be a separate employment position.”).
The fact that, during at least some of the weeks of training, the store managers do not perform significant amounts of exempt work, in and of itself, does not cause the store managers to lose their exempt status because the primary duty test for executives need not be met each and every workweek in all cases. In its 2004 revisions to 29 C.F.R. Part 541, the Department included this discussion in the preamble to the final regulations: