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Marx v. Friendly Ice Cream Corporation

380 N.J. Super. 302, 882 A.2d 374 (App. Div. 2005)

EMPLOYER-EMPLOYEE; EXECUTIVES—Although a restaurant general manager who genuinely has substantial management control of his or her restaurant may be called upon to cook or clean tables when short-handed, that employee is still classified as an executive employee not entitled to overtime pay.

Three general managers of restaurants claimed that a lower court erred in concluding that they were “ineligible for overtime because they [were] employed in an ‘executive capacity.’” They sued a franchisor of restaurants that conducted three types of business: sale of prepackaged items, take-out services, and restaurant services. According to the Court, “niform quality of products and service and profitability throughout the chain of restaurants [was] important to the franchisor.” The franchisor “sets menus, prices, and specific procedures assigned to ensure courteous and prompt service of quality food and prevent waste through spoilage, oversized-portions and theft. To promote uniformity, [the franchisor] developed manuals and check lists for daily, weekly and monthly tasks in its restaurants.” Every one of its restaurants had “one general manager who [had] overall responsibility for management of the facility, supervision of the staff and implementation of all [the franchisor’s] policies and procedures.”

At relevant times, each general manager had a minimum of eighteen employees on his staff. The franchisor’s policy required a minimum of three employees in attendance during hours of operation. A general manager was expected to work a fifty hour work week. Bonuses were available based on staff performance and profitability of the restaurant. In the absence of a general manager, “either the assistant manager or guest service supervisor assume[d] the role of general manager, but the general manager retain[ed] responsibility for the correct and profitable operation of the restaurant, and the general manager is expected to review the management work done in his or her absence.” General managers hired, trained, supervised, evaluated, and scheduled hours for members of the restaurant staff. They had the authority to hire and had the authority to fire as well, although approval of the district manager was required for termination of an assistant manager or guest services manager. Generally, however, a general manager’s recommendation was followed. In addition, general managers had extensive control over the operation of an individual restaurant. The franchisor considered “its general managers to be ‘executives’ who [were] not entitled to overtime pursuant to” New Jersey law.

On the basis of its examination of the responsibility of a general manager, the lower court concluded that these particular general managers “were employed in an ‘executive capacity’ and ineligible to claim entitlement to overtime compensation.” Although both federal law and state law have requirements regarding overtime obligations, according to the Court, the state has the right to have “minimum wage laws that are more protective of workers than federal law.” Under state law, “the criteria for exempting an employer from the obligation to pay overtime to an employee who serves in a ‘bona fide executive capacity’ is set forth in regulations promulgated by the head of the [New Jersey Department of Labor].” Those regulations establish six standards that, “stated generally, relate to the following: compensation, managerial responsibility, authority to direct staff, authority to exercise discretion, and percentage of work devoted to management.” Applying all of these factors, the Court agreed with the lower court that the individuals in question were “executive employees.” It was clear to the Court that each general manager was “‘in charge’ of the restaurant and operate[d] it without any day-to-day supervision.” District managers appeared only on a discretionary and irregular basis. It was clear that the general managers regularly made discretionary decisions. The fact that they were obligated to “complete forms and follow [the franchisor’s] procedures channel[ed] but [did] eliminate the general manager’s exercise of discretion.” It was clear that the managerial duties of these particular general managers were their “‘chief’ duties in the sense that the managerial duties [had] greater importance to their role in the organization than [did] their performance of ‘fill-in’ tasks when the demand for service [was] high or staff levels [were] low.” The time that the general managers may have spent “cooking, serving food or clearing and wiping tables [did] not preclude simultaneous performance of their supervisory duties. Cooking, serving and clearing tables [was] not necessarily inconsistent with effective supervision.” According to the Court, New Jersey’s wage law were not “intended to require an employer to establish proof in the form of a moment-to-moment analysis of an employee’s work week.” New Jersey’s regulations do not call for maintenance of such records. According to the Court, “[t]he absence of a regulation requiring what would be needed suggest[ed] that there was no intention to demand proof of that sort to establish” that an otherwise “executive” was eligible for overtime compensation. Further, the Court and the lower court held that the franchise’s “staffing levels [were] realistic because they [were] based upon need.” The Court also found the evidence adequate “to meet the employer’s burden to establish that its general managers [were] expected to devote less than forty percent of their work week to non-exempt work and that the expectation [was] reasonable in light of the staffing permitted.”


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