Performance Appraisal and Compensation Questions HRM Course: Performance Appraisal and Compensation At Olympia Electrical Manufacturing Company (OEM), a u

Performance Appraisal and Compensation Questions HRM Course: Performance Appraisal and Compensation

At Olympia Electrical Manufacturing Company (OEM), a unit of Olympia, you must determine the exemption status and overtime status for Mabel Jones a long time employee.

NOTICE: Be very careful when doing your calculations. You are looking for exact numbers.

ASSIGNMENT INSTRUCTIONS:

1. Read the “Report on Mabel Jones” (Exhibit 1-1) attached below.

Determine what the exemption status is for Mabel Jones.

2. Read the “Olympia Guidechart for Fair Labor Standards Act Qualifications for Exemption from Overtime Pay” (Exhibit 1-2) to understand the factors that separate exempt from nonexempt positions.

Determine whether Olympia is required by law to pay Mabel overtime?

Document the reasons for your answer.

3. Calculate what Mabel Jones salary will be in a week including commission.

Show your calculations. Exhibit 1-1 Mabel Jones
Mrs. Mabel Jones is the most senior employee in the office of Olympia Electrical Manufacturing
Company. Mabel has worked for Olympia for 25 years, and her job title is Office
Manager. There are six other clerks in the office. She has trained all six of them and, when they
have a problem, they usually come to her for advice or assistance. Management recognizes her
as a good and faithful employee.
Mabel’s husband Ed, who works on the other side of town, drops her off at work around 7:25
each morning. Since she is usually the first office person to arrive, her daily routine begins by
making the first pot of coffee for the office staff. While the coffee is brewing, Mabel sorts the
mail and places it in the appropriate employee’s in basket or mail box. (The Production
Manager, who arrives even earlier, picks up the mail at the post office on his way to work each
morning and, on arriving at Olympia, he places it on Mabel’s desk before 7:00 a.m.) After
sorting the mail, Mabel sits down and enjoys her first cup of coffee. While having her coffee,
she reviews her incoming mail, looking especially for checks from customers who have been late
in paying their bills.
In addition to receiving $795 per week, Mabel earns $1,250 in commissions during a quarter (3
months) and is paid that amount at the end of the quarter for late collections that her telephone
calls have helped to bring in. Many years ago, Olympia turned over to a collection agency all
unpaid bills over 90 days in arrears. Mabel had mentioned to her boss that she thought she could
help collect the money because, over the years, she had become familiar with many of their
customers and had a good working relationship with them. They would talk to her about their
problems with Olympia, and she was often able to assist them.
Mabel proved to be very successful in this assignment, so management decided to quit using the
collection agency and instead pay Mabel a commission for all late payments she collected. The
commission she receives amounts to about half of that paid to the collection agency.
During a normal work day, Mabel spends about 40% of her time posting to a number of different
ledgers. She also spends between 5 and 10% of her time in conferences with higher levels of
management. Seldom does a day go by that she isn’t providing guidance or training to one of the
six clerk-secretaries in the office.
The remainder of her time is spent on the telephone responding to client inquiries regarding
shipping dates, quality issues, and other similar problems. Although she quite often cannot give
the customer the desired answer, she is able to transfer the call to the individual who can provide
the necessary information. If a customer isn’t happy with the answers, he or she often checks
back with Mabel who then attempts to obtain a better answer for the customer.
When not talking on customer-originated calls, Mabel performs her collection calls. She keeps a
detailed diary of each past-due customer, noting the date and time of the conversation, what was
said, and to whom she spoke. She quite often makes some of her collection calls while she eats
lunch. All office people know they have an hour for lunch, and four of the ladies usually go off
the premises each day, while tow usually spend their hour in the company cafeteria. Mabel is a
“brown-bagger,” and eats her lunch at her desk. If no one else is in the office, she answers all
incoming calls in addition to making some of her collection calls.
The office closes at 5:00 p.m., and all of the office help is usually gone by 5:02, if not a few
minutes before 5:00. Mabel’s husband, however, does not get off work until 5:30 p.m., and he
doesn’t arrive to pick her up until shortly after 6:00 p.m. During the time from 5:00 to 6:00,
Mabel makes more collection calls, and at that time is frequently able to contact some of those
with late payment problems who she couldn’t contact earlier in the day.
Exhibit 1-2
OLYMPIA GUIDECHART FOR
FAIL LABOR STANDARDS ACT
QUALIFICATIONS FOR EXEMPTION FROM OVERTIME PAY
The four categories of employees that may qualify for exemption from overtime pay are Executive,
Administrative, Professional, and Outside Sales. It is very important to have a clear understanding, in
general, of what differentiates Exempt and Nonexempt positions so that any positions may be properly
categorized and therefore maintained within the framework of the Fair Labor Standards Act. The
following are general definitions:
An Exempt position is one, which, by its non-routine nature and higher required compensation,
demands skills and talents to make those decisions which substantially impact the management,
technology, legality, or financial stature of an organization.
A Nonexempt position is one which, by its more routine nature and lower required compensation,
demands only a level of skill and talent necessary to carry out the more routine and less discretionary
activities essential to supporting those functions which actively impact the management, technology,
legality, or financial stature of an organization.
The following are specific definitions:
EXECUTIVE
To be qualified as an “Exempt Executive” employee, all six of the following tests must be met:
(a) Has a primary duty consisting of the management of Olympia or of a department or
subdivision thereof; and
(b) Customarily and regularly supervises the work of at least two other full-time employees or
the equivalent thereof; and
(c) Has the authority to hire or fire other employees, or recommend hiring and firing or
promotion, or other change of status of other employees; and
(d) Customarily and regularly exercises discretionary powers; and
(e) Does not devote more than 20% (less than 40% if he/she is employed by a retail or service
establishment) of his hours of work to activities not directly and closely related to his
managerial duties; and
(f) Receives payment on a salary basis at a rate of not less than $155/week ($8,060/year)
exclusive of board, lodging, or other facilities.
Streamlined test for high-paid Executive:
Regardless of other considerations, an executive employee paid at least $250/week ($13,000),
exclusive of board, lodging, or other facilities, may be “Exempt” if he meets tests (a) and (b) above.
ADMINISTRATIVE
To be qualified as an “Exempt Administrative” employee, all five of the following tests must be met:
(a) Performs office or non-manual work directly related to management policies or general
business operations of his employer or his employer’s customers; and
(b) Customarily and regularly exercises discretion and independent judgment; and
(c) Regularly and directly assists a proprietor, executive, or administrator, or performs under
only general supervision work along specialized or technical lines requiring special training,
experience, or knowledge, or executes under only general supervision special assignments;
and
(d) Does not devote more than 20% of the hours worked in a work week (40% in a retail or
service establishment) to activities which are not directly and closely related to those in (a),
(b), and (c) above; and
(e) Receives payment on a salary or fee basis at a rate not less than $155/week ($8,060/year),
exclusive of board, lodging, or other facilities.
Streamlined Test for Administrative Employee:
Regardless of other considerations, an administrative employee paid at least $250/week ($13,000),
exclusive of board, lodging, or other facilities may be “Exempt” if he meets tests (A) and (b) above.
PROFESSIONAL
To be qualified as an “Exempt Professional” employee, all five of the following tests must be met:
(a) Primary duty consists of the performance of work requiring knowledge of an advanced type
in the field of science or learning customarily obtained by a prolonged course of specialized
instruction and study, or work that is original and creative in character in a recognized field
of artistic endeavor and the result of which depends primarily on the invention, imagination,
or talent of the employee; and
(b) Work requires the consistent exercise of discretion and judgment; and
(c) Work is predominately intellectual and varied in character and is such that the output
produced or the result accomplished cannot be standardized in relation to a given period of
time; and
(d) No more than 20% of the hours worked in the work week are devoted to activities other
than those described in tests (a), (b), and (c) above; and
(e) Must be compensated at a rate not less than $170/week ($8,840/year), exclusive of board,
lodging, or other facilities.
Streamlined Test for Professional Employee:
Regardless of other considerations, a professional employee paid at least $250/week ($13,000),
exclusive of board, lodging, or other facilities, may be “Exempt” if he meets tests (a) and (b) above.
However, for personal in computer-related occupations, the computer professional exemption allows
computer professionals to be paid on an hourly basis and maintain the exemption. The required hourly
rate for exemption is $27.63/hour.
OUTSIDE SALES
To be qualified as an “Exempt Outside Salesperson,” both of the following tests must be met:
(a) Employed for the purpose of and is customarily and regularly engaged away from his
employer’s place or places of business in making sales or obtaining orders or contracts for
services or for the use of facilities for which a consideration will be paid by the client or
customer. Work performed incidental to and in conjunction with the employee’s own
outside sales or solicitations, including incidental deliveries and collections, shall also be
regarded as Exempt work; and
(b) Hours of work of a nature other than described immediately above does not exceed 20% of
the hours worked in a workweek by Nonexempt employees of the employer.

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