It is well settled that the Fair Labor Standards Act (“FLSA”) requires employers to pay certain employees overtime pay at one and one-half times the employees’ regular rate. 29 U.S.C.S. §207(a). However, certain employees are exempt from this overtime requirement, specifically employees in a bona fide executive, administrative, or professional capacity. That sounds simple enough, but as most employers are already aware, these classifications can be difficult to navigate in practice.
A recent First Circuit case helped to resolve the murky precedent surrounding the test to determine which employees fit into the “administrative” exemption. Federal regulations have defined those working in an administrative capacity to include employees:
(1) Compensated on a salary or fee basis of $684 or more per week;
(2) Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
(3) Whose primary duty include the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. §541.200.
In Walsh v. Unitil Serv. Corp., 57 F.4th 353 (1st Cir., 2023), the First Circuit discussed the second prong of the above analysis. The court opined that the central question is a “relational” one which “considers the relationship between the job duties of the roles in question and the business purposes of the employer or its customers.” Id. at 358. The relevant questions are twofold: “(1) whether the employee’s role relates to ‘running or servicing the business,’ and if so, (2) what the scope or ‘generality’ of the employee’s role is.” Id. at 359. The “employee’s duties must rise to a level of generality beyond responsibility for day-to-day tasks in order to satisfy” the second prong of the administrative exemption. Id. at 361.
In Walsh, Unitil Service Corporation was engaged in the business of providing electrical and gas services to its customers. Because the employees’ primary duties – “to operate and monitor their respective electrical grids and gas pipelines for the ” – were directly “related to Unitil Service’s business purpose, the second prong of the ‘administrative’ exemption is not satisfied” and the employees were not exempt from overtime pay requirements. Id. at 363. As many employers are already aware, it is critical to understand how to properly determine whether an employee is exempt from FLSA overtime requirements.
For more information on this topic, please contact PLDO Attorney Paige E. Macnie at pmacnie@pldolaw.com.
