6th Circuit Addresses Administrative Exemption

Employers often tackle the difficult task of determining whether an employee is exempt from the overtime rules of the Fair Labor Standards Act (FLSA).  Generally, to qualify as exempt, an employee must earn at least $455 per week and fit into one of three defined job categories –  executive, professional or administrative.  Specifically, the administrative exemption requires that the “employee’s primary duty must be 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 “includes the exercise of discretion and independent judgment with respect to matters of significance.”  The Sixth Circuit addressed the administrative exemption in two recent cases:  Henry et. al. v. Quicken Loans and Foster v. Nationwide Mutual Insurance Company.

In Quicken Loans, mortgage loan officers sued their employer bank for failure to pay them overtime wages.  The bank argued that its loan officers use significant independent judgment when collecting information and reviewing each client’s individual situation and thus fit within the administrative exemption.  The loan officers argued that they were merely salesmen.  The case went to the jury at the district court level, which found that the loan officers were in fact exempt.  The Sixth Circuit upheld the jury verdict on appeal, reasoning that the bank presented enough evidence to get to the jury and support its verdict.

In Nationwide, special fraud investigators (SFIs) sued their employer insurance company for failure to pay them overtime wages.   The SFIs primary duty is to investigate insurance claims with high indicators for fraud.  The Sixth Circuit held that the investigators were exempt.  The Court reasoned that, although the investigators do not have the power to make decisions on claims, they use significant discretion in communicating the legitimacy or illegitimacy of such claims.

The cases above are narrow and likely only apply to the specific class of employees at issue.  However, these cases reinforce the notion that employers must review each position carefully and determine whether they can meet the FLSA’s exemption requirements.  Job descriptions must be documented and tailored in advance of litigation.

Dressman Benzinger LaVelle psc.