Two Circuit Courts Expansively Interpret The Administrative Exemption

The applicability of the FLSA’s “administrative” exemption continues to be a primary issue in a significant percentage of the cases comprising the ongoing wave of wage and hour litigation.Recently, two appellate courts, the Courts of Appeals for the Seventh and Third Circuits, issued new opinions endorsing a broader interpretation of this exemption.

In Verkuilen v. MediaBank, LLC, No. 10-3009, 2011 U.S. App. LEXIS 10666 (7th Cir. May 27, 2011), the Seventh Circuit held that a customer account manager who worked at client sites managing custom software contracts is “a picture-perfect example of a worker for whom the act’s overtime provision is not intended.”In reaching its conclusion, the court stated that while the DOL regulations explaining the exemption provide insufficient guidance as to its meaning, overtime requirements should not apply to employees who cannot be supervised and would be tempted to inflate hours, especially when the employee – consistent with the exemption’s requirements – is required to exercise independent judgment regarding management or general business operations. The Court found that the account manager was not merely responsible for fielding random technical calls, but was the “go-to” customer contact, responsible for managing the client’s expectations and ensuring that the software developers were tailoring their software programs appropriately.The Court emphasized that the employer would essentially be unable to determine how many hours the employee would need to perform her required tasks, and concluded that in this modern day, there is a “congeries of specialists” who will be exempted from the FLSA’s overtime provisions.

The Third Circuit’s conclusion in Swartz v. Windstream Communications, Inc., No. 10-3313, 2011 U.S. App. LEXIS 10593 (3d Cir. May 25, 2011), adopted similar reasoning.In Swartz, the Court held that a telecommunications account manager, responsible for developing and tailoring custom telephone platforms for an employer’s major clients, was an exempt administrative employee.The Court concluded that the account manager’s work related to “management and general business operations” and required “independent judgment with respect to matters of significance” since the employee was responsible for custom tailoring complex telephone systems for the company’s most significant clients.

While these decisions are favorable for all companies, even those in unrelated businesses, employers should continue to take appropriate measures to ensure all employees are properly classified as exempt or non-exempt from overtime requirements in order to avoid costly wage and hour claims.