Employer Must Pay Overtime to Retail Store Manager Who Performed Few Managerial Duties[br]


In Murphy v. Kenneth Cole Productions, Inc. (2005 Daily Journal D.A.R. 14,793, Cal.App. 1 Dist., Dec. 22, 2005), a California Court of Appeal considered issues involving a former retail store manager’s claim to overtime payments. The Court determined the employee was not an executive employee exempt from overtime pay; the employee could not raise claims in the employer’s appeal to the trial court that the employee had not presented to the Labor Commissioner; and the employer could not avoid the “waiting time penalty” because it did not have a good faith defense.


Employee, John Paul Murphy, worked on a salary basis for Employer, Kenneth Cole Productions, Inc., as a manager of a retail clothing store. Employee estimated that he spent approximately 90 percent of his time doing the same tasks as the sales associates, and only 10 percent performing management tasks. Employee filed a complaint with the Labor Commissioner for unpaid overtime, interest, and a “waiting-time penalty.” The Labor Commissioner ruled in favor of Employee and Employer appealed to the trial court. At that point, Employee added claims for meal period, rest period, and pay stub violations. The trial court gave Employee the requested relief, and Employer appealed to the Court of Appeal.

Appellate Court Decision

The Court of Appeal determined that Employee was not an executive employee who was exempt from overtime. First, while Employee acted as a filter for job applicants, he did not have “the requisite level of input [in] hiring and firing decisions” – he had no authority to hire or fire anyone, impose discipline without approval, or participate in compensation decisions. Second, he did not customarily and regularly exercise discretion to compare course of conduct and decide on an action, as most everything was governed by the corporate office and district managers, including sales goals, budgets, pricing, and even merchandise display. Third, Employee was not “primarily engaged” in duties that meet the test of the exemption, because the evidence showed that Employee spent only about 10 percent of his time performing managerial tasks, and 90 percent doing non-exempt tasks that sales associates did.

The Court also held that Employee could not raise the rest break, meal break, and pay stub violations for the first time in the appeal to the trial court. The proceeding at the trial court level is a review proceeding, even though the trial court makes its own decision and can even look at new evidence. The trial court reviews the claims that were presented to the Labor Commissioner, but cannot consider entirely new issues and disputes that were not submitted to the Labor Commissioner.

Lastly, the Court considered the issue of the “waiting time” penalty, which is the thirty-day period of wages that an employer may be forced to pay for failing to pay wages to an employee who leaves employment. An employer can avoid a waiting time penalty by showing that it had a good-faith defense to the Employee’s claim of unpaid wages. Here, Employer did not have a good faith defense because Employee complained to management about the lack of overtime pay, and Employer did not controvert Employee’s testimony that he spent 90 percent of his time on non-managerial tasks.

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