Recent Case Reveals the Burden Employers Face to Prove an FLSA Exemption Applies
A recent Court of Appeals opinion involving Northern States Power Company in Minnesota demonstrates just how difficult it can be for employers to prove that the administrative exemption under the Fair Labor Standards Act (FLSA) applies to any given job. In this case, the employer will have to convince a jury that the plaintiff was not entitled to overtime pay.
In order to meet the administrative exception to overtime under the FLSA, an employer has to prove that the employee's primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer. In general, if an employee of a company that produces widgets helps run the business (like serving as an HR Manager or an accountant) instead of actually working on the production line, then the employee might qualify for the administrative exemption. In the case against Northern States Power Company, a big issue was whether the office work performed by the plaintiff was related to the company's management or business operations, or whether it was primarily related to the direct, hands-on production of energy – the company's main "product" – that it offered to the public.
Even if an employer can prove that an employee acts more as an administrator than an employee who produces the product the company offers to the public, the employer still must prove that the employee has discretion and independent judgment in matters of significance. Paper pushers and file clerks never qualify – this element involves "the evaluation of possible courses of conduct and making a decision after the alternatives have been considered," according to the Court. This generally requires "independent choice by the employee, free from immediate direction or supervision."
Inaccurate job titles and outdated job descriptions also serve as a detriment to the employer – courts want to know what the employee actually does on a day-to-day basis and how much discretion the employee has. As in a lot of examples, the two sides in this Eighth Circuit case had very different views of what the plaintiff's job duties were and the time spent doing those job duties. As the court ultimately explained, "the amount of time devoted to administrative duties, and the significance of those duties, present factual questions." In this case, because there are disputed facts about what the employee did and the significance of those job duties, a jury will get to decide whether the administrative exemption applies.
What are the lessons to be learned from this case? First, know that it's always the employer's burden to prove that the exemption to overtime applies. Second, make sure your job descriptions are up-to-date and that you have a record of your employees reviewing and signing off on their respective job duties.