Of the three so-called white collar exemptions, the administrative is the grayest and the most difficult for an employer to prove. This is because such a worker does not usually supervise anyone, which eliminates the executive exemption. They are also, typically, not professional employees, e.g. lawyer, doctor, etc. What is left is an exemption that requires the use of “discretion and independent judgment” and work that is not directly tied to “production” or the Company’s main business. In short, this exemption refers to what may be called back-office functions, or those that support the main business purpose of a particular company.
On this note, I have handled many audits and cases involving dispatchers. These employees supervise no one, as a rule, but yet their function is vitally important to the trucking/bus company they work for. There have been many cases litigating the exempt status of such employees and in a new decision, the First Circuit has indicated that the administrative exemption is not as encompassing as the others. The case is entitled In Walsh v. Unitil Service Corp. and issued from the First Circuit Court of Appeals.
The Company argued that these workers were involved with running the business, servicing the business, so they fit within the exemption. The lower court accepted this argument and dismissed the case. The First Circuit disagreed and reversed. The Court examined the prongs of the exemption and noted that those employees who assisted or participated in the production of the goods or services offered by the Company were non-exempt. Then, the Court applied that principle to this case and concluded that these employees were within the stream of production. In other words, the employees worked in jobs that were operational and were not the back office, support type functions that are required for the exemption.
As the Court noted, when an employee is charged with performing day-to-day functions which add or help generate the Company’s main business, whether sale of products or services, that is not work affecting general business operations, because FLSA administrative work is that which affects the business at a higher level. Here, the Court did not find that but rather that the work was related to the main business. In other words, although the Court did not use this term, this was “white collar production work” which is not exempt work under the FLSA.
The Takeaway
Employers sometimes misclassify employees as administrative when they do not fit into the two other white collar cubbyholes. This case, however, is another example of office-type workers who do perform important functions for a company but those functions are not concerned with the higher level processes of running the business at its core, as opposed to facilitating the Company’s efforts to sell product and make money. Significantly, the Court did not even need to reach the “discretion and independent judgment” prong of the test which is, as I have seen dozens of times in my practice, where these cases usually fail for the employer.
If you have a doubt, pay them hourly…
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