In welcome news for employers who treat “team leaders” as exempt pursuant to the executive exemption, the Second Circuit Court of Appeals, in Ramos v. Baldor Specialty Foods, Inc., held that a “team” of workers can qualify as a “customarily recognized subdivision or department” for purposes of determining whether their supervisor can qualify for the executive exemption.

The plaintiffs worked as night shift “captains” in the company’s warehouse department. Captains oversaw teams of pickers. Captains made sure the pickers arrived to work on time and performed their duties as expected. Captains could assign work depending on the captain’s trust of the picker, or the picker’s speed and productivity. Captains prepared the team’s distinct work area for the shift. At the end of the shift, captains, who report to the night warehouse manager, prepared a productivity report for each picker. The reports impact whether the night warehouse manager will award the picker a productivity bonus. Captains have the ability to request pickers transfer to a different team. The night warehouse manager typically grants these requests. Captains recommend pay raises, issue warnings, and have the authority to fire pickers. For their work, captains earn $700 per week.

The district court found that the plaintiffs qualified as exempt executives under the FLSA, and granted the employer’s motion for summary judgment. On appeal, the plaintiffs argued that each team of pickers could not constitute a customarily recognized subdivision of the company because each team of pickers was essentially the same. The Court of Appeals rejected the plaintiffs’ argument, finding that physical, functional, or shift separation is not necessary for a team of employees to be deemed a customarily recognized subdivision or department of the company.

Instead, the focus of the analysis is on the actual team of employees and their duties. Here, each team of pickers had a defined membership and was led by the same captain on each shift. Pickers did not change teams without being transferred by the night warehouse manager, each team of pickers met in an assigned work area, and the captains are in charge of supervising their team. For these reasons, the court concluded that each team of pickers was a customarily recognized subdivision or department of the company and that each team of pickers had a permanent status and continuing function. Therefore, the captains who supervised the teams of pickers and who met all other requirements of the executive exemption qualified as exempt executive employees under the FLSA.

Following Baldor, employers that utilize the executive exemption for those who supervise “teams” of employees should strive for consistency in form and function with respect to those teams. For example, establishing “permanent” teams of the same employees, led by the same supervisor, and reporting to the same work area, will strengthen the employer’s argument that the team qualifies as a “department or subdivision.” Of course, it is not enough that team leaders supervise a “subdivision or department” – team leaders must also meet the other elements of the exemption, including: (a) they must be compensated on a salary basis at a rate not less than $455 per week, and (b) they must have the authority to hire or fire other employees, or to make suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees that are given particular weight.

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