Court Examines FLSA's Executive and Administrative Exemptions

 

Given the wide-spread practice of misclassification that occurs in the fitness industry, I thought this recent article on the SHRM site worth sharing.

 

By Jonathan E. O’Connell 11/24/2014

The 6th U.S. Circuit Court of Appeals overturned the district court’s dismissal of a plaintiff’s overtime compensation claim brought under the Fair Labor Standards Act (FLSA), holding that there was a factual issue as to whether the plaintiff was indeed an exempt employee in his role as “first assistant manager.”

Under the FLSA, employees who work over 40 hours in a workweek are eligible for overtime compensation–unless they fall within a number of exemptions, including the administrative, professional and executive exemptions. According to Department of Labor (DOL) regulations, in order to meet one of these so-called “white-collar” exemptions, the employee must be paid on a “salary basis,” and the employee must satisfy certain requirements.

For a worker to fall under the executive exemption, the following conditions must be met:

*The employee’s primary duty must involve managing the company, or a department or subdivision of the company.

*The employee must “customarily and regularly” direct the work of two or more employees.

*The employee must have the authority to hire or fire other employees, or his or her suggestions and recommendations to hire, fire, advance or promote others must be given “particular weight.”

For the administrative exemption to apply, these conditions must be satisfied:

*The employee’s primary duty must involve the performance of office or nonmanual work directly related to the management or general business operations of the company or the company’s customers.

*The employee’s primary duty must include the “exercise of discretion and independent judgment with respect to matters of significance.”

Joseph Little worked at several Belle Tire Michigan store locations in the role of first assistant manager. According to the first assistant manager job description, he was required to show proficiency in “professional selling skills,” “inventory control and pricing,” and knowledge of payroll control. Additionally, the job description provided that the first assistant manager should have “managerial skills,” necessary supervisory skills, and full knowledge of the company’s hiring and termination procedures.

Little filed suit against the company under the FLSA, alleging that he did not qualify for any of the exemptions (and thus was owed overtime) because he was essentially a salesman, who performed clerical tasks on behalf of the store manager. As such, Little argued that he did not meet the duties requirements of the executive or administrative exemptions under the act. In defense of Little’s claim, Belle Tire took the position that Little was “influential in hiring” and actively led “employee training and other management tasks,” and thus, he was appropriately classified under either the executive or administrative exemption. The trial court granted summary judgment in favor of Belle Tire, holding that there were no issues of material fact to suggest that Little did not qualify as an exempt employee.

In overturning the trial court’s decision and finding that there was a question of fact as to Little’s exempt or nonexempt status, the court reasoned that “[t]hough it is clear Little played some role in interviewing job candidates, preparing work schedules, and conducting training, questions remain concerning the exact nature of the work Little performed and the level of discretion that [he] exercised.” The court concluded that “[b]ecause Little introduced testimony suggesting his job functions were clerical or otherwise highly circumscribed by his supervisor, we cannot say the record clearly and affirmatively establishes that [he] fell within the executive exemption.”

Similarly, in finding that there was also a question as to whether Little qualified for the administrative exemption, the court noted that although he engaged in certain office, nonmanual and managerial tasks, Little testified that he spent nearly all of his time performing sales-related duties. The court reasoned that while the amount of time spent on tasks is not the only factor in determining whether something is a “primary duty,” the fact that he spent a significant amount of time performing these sales-related duties created a genuine issue of material fact as to “whether his administrative responsibilities were his ‘primary duty.’ ” Notably, the court also questioned whether certain job tasks performed by Little–including the submittal of purchase orders from vendors that were preselected by the company and ordering stock based on levels predetermined by higher management–truly involved the “exercise of discretion and independent judgment with respect to matters of significance.”

Little v. Belle Tire Distributors Inc., 6th Cir., No. 13-2699 (Oct. 23, 2014).