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On October 24, 2025, a Milwaukee County jury returned a verdict in favor of restaurant employees who were misclassified as managers and awarded more than $500,000 in damages for unpaid overtime. This verdict serves both as a warning and guide for Wisconsin employers in the restaurant industry to ensure they properly classify their employees under applicable wage and hour laws.
The Executive Exemption Under Wisconsin and Federal Law
Wisconsin and federal law generally provide that nonexempt employees are entitled to overtime pay at a rate of at least 1.5 times their regular rate of pay for work performed in excess of 40 hours in a workweek. However, there are exceptions to this rule, including for employees working in "executive" capacities.
To qualify for the executive exemption under Wisconsin law, employees must, among other things, primarily perform management duties and customarily and regularly direct the work of two or more other employees. In the context of a "retail or service establishment" such as a restaurant, an employee may be considered an exempt executive even if the employee spends as much as 39 percent of his or her weekly hours performing nonexempt (i.e., non-management) work. However, if 40 percent or more of an employee's weekly hours are spent performing nonexempt work, the employee would not qualify for the executive exemption unless he or she is in "sole charge" of an independent establishment. If an employee cannot satisfy this (or any other) exemption, he or she must be paid overtime for all hours worked over 40 hours in a workweek.
The test for determining whether an employee qualified for the executive exemption under federal law is less stringent; among other things, managing the enterprise or a customarily recognized department or subdivision must simply be the employee's "primary duty." Unlike Wisconsin law, federal law does not require that a specific percentage of an employee's duties are dedicated to exempt management responsibilities. This means an employee may qualify for the executive exemption under federal law, but not under Wisconsin law, which creates potential liability risk for unwary employers.
Facts of the Case
The Milwaukee County case referenced above was as a class-action lawsuit filed on behalf of more than 60 current and former managers of several KFC restaurants operated by a Texas-based franchisee. According to the complaint, these managers were regularly required to work more than 40 hours per week but were never paid overtime.
The plaintiffs alleged that they were managers in name only and thus did not qualify for the executive exemption under Wisconsin law. Specifically, the plaintiffs argued that the managers performed the same work as other crew members for more than 40 percent of their working time and were not in "sole charge" of the restaurants, as they did not set wages or perform many operational functions. The Milwaukee County jury agreed with both arguments and awarded the misclassified managers more than $500,000.
Take-Aways for Wisconsin Employers
This case shows the importance of properly classifying employees (particularly in the restaurant industry) and underscores a key difference between Wisconsin and federal wage and hour laws. If a Wisconsin employer classifies certain employees as exempt executives, it should review the relevant job description and actual duties performed by those employees to ensure they perform exempt duties for more than 60 percent of their working hours. In the case of franchise locations with a common parent company, leadership should monitor each location to ensure that managerial and non-managerial duties are properly allocated among the correct employees. Taking these steps can help protect employers from liability for unpaid overtime wages.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
