Tag Archives: White Collar Exemptions

Recent Exemption Cases of Interest

The last few weeks have brought their share of interesting misclassification/exemption cases. In one case, a law school graduate performing non-lawyer duties was held to be non-exempt. In another, a court within the Fifth Circuit held that a tax lien negotiation business- clearly within the CFR’s definitions of a business lacking a retail concept- was in fact a retail business subject to 7(i)’s so-called retail sales exemption. Lastly, despite his managerial duties at times, a court held that a police sergeant might not be exempt under the executive exemption and denied the police department-employer’s motion for summary judgment. Each of these decisions is discussed in greater detail below.

Law School Graduate Employed as a Graphic Consultant Non-Exempt

Kadden v. VisuaLex, LLC

In the first case, the defendant- a litigation support company- employed plaintiff- a college and law school graduate as a graphics consultant. At issue was whether the defendant had properly deemed plaintiff to be exempt from the FLSA’s overtime requirements. The defendant (“VisuaLex”) contended that the plaintiff was exempt under either the creative professional exemption, the administrative exemption, or the so-called combination exemption whereby an employer can utilize elements of multiple white-collar exemptions to render an employee exempt. While acknowledging that the case presented a close call, the court held that the plaintiff lacked the requisite primary duties to meet the elements of any of the exemptions asserted. Thus, the court held that the plaintiff had been misclassified and should have been paid proper overtime. In so doing, the court reiterated that the fundamental tenet of exemption cases is an examination of the employees primary duties and not simply a job description or a list of duties performed. The court also reminded us that the learned professional examination is only applicable where the advanced degree of learning or science is actually required for and by the position performed by the employee- holding such a degree alone is not sufficient to meet the stringent exemption requirements.

Click Kadden v. VisuaLex, LLC to read the entire Opinion and Order.

Tax Consultants Subject to 7(i) Retail Exemption Notwithstanding CFR Regs Defining “Tax Services” Establishments as “Lacking a Retail Concept”

Wells v. TaxMasters, Inc.

The second case was before the court on the parties’ competing motions for summary judgment. Deciding the case in favor of the defendants, the court held that the plaintiffs were subject to the so-called retail exemption codified in 7(i) of the FLSA. It was uncontested that the plaintiffs regularly worked in excess of 40 hours. Similarly, the duties they performed were not at issue nor was the methodology by which they were paid (qualifying for the pay element of the retail sales exemption). Rather the sole issue appears to have been whether or not defendants- an enterprise engaged in rendering “tax resolution services”- was in a retail establishment within the meaning of 7(i) such that plaintiffs could properly be deemed to be exempt from overtime under the so-called retail exemption.

Holding that the defendants were a retail establishment, notwithstanding the Department of Labor’s regulations stating otherwise, the court reasoned:

Whether Defendants were exempt under Section 207(i) thus turns on whether they were “an establishment 75 percentum of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.” 29 U.S.C. § 213(a)(2). According to Department of Labor regulations, a retail or service establishment must have a “retail concept.” 29 C.F.R. § 779.316 (2005). Section 318 of the regulations describes the “characteristics and examples” of retail or service establishments:

Typically a retail or service establishment is one which sells goods or services to the general public. It serves the everyday needs of the community in which it is located. The retail or service establishment performs a function in the business organization of the Nation which is at the very end of the stream of distribution, disposing in small quantities of the products and skills of such organization and does not take part in the manufacturing process.

Such an establishment sells to the general public its food and drink. It sells to such public its clothing and its furniture, its automobiles, its radios and refrigerators, its coal and its lumber, and other goods, and performs incidental services on such goods when necessary. It provides the general public its repair services and other services for the comfort and convenience of such public in the course of its daily living. 29 C.F.R. § 779.318. Section 317 of the regulations provide a “partial list of establishments lacking ‘retail concept’ ” which includes, among over one hundred other examples, “tax services.” 29 C.F.R. § 779.317.

Plaintiffs do not dispute that Defendants sold more than 75 per cent of their products directly to the consumer. Instead, Plaintiffs insist that the Department of Labor regulations, which expressly define “tax services” companies as lacking a retail component, are determinative. See Doc. 60, 61, 63. Defendants contend both that they were not a “tax services” establishment and that Section 779.317 therefore does not apply and that Fifth Circuit precedent holds that the Department of Labor’s list of non-retail establishments is not determinative. Doc. 64.

The Defendants are correct that the Fifth Circuit has declined to follow strictly the Department of Labor’s list. See Rachal v. Allen, 376 F.2d 999 (5th Cir.1967) (rejecting Secretary of Labor’s position that a fixed base aeronautics operator’s business has no retail concept merely because it is part of an industry, namely, the air transportation industry, that Section 779.317 lists as lacking a retail concept). “There is no magic in placing a business in a category and then asserting that since it is in that category, it is like all businesses with which it has been placed.” Id. at 1003. In Rachal, the Fifth Circuit rejected the Secretary of Labor’s argument that because a fixed-base operator engaged in servicing and selling aircraft at airports was in the air transportation industry, and because the Secretary had made a determination in Section 779.317 that the air transportation industry lacked a retail concept, a fixed base operator necessarily lacked a retail concept:

[T]he Secretary’s argument … assumes the result of the issue we are asked to determine…. The issue is whether, under the statute, there may be, as a matter of law, and if so whether there is as a matter of fact, a retail concept in the defendants’ business, notwithstanding the Secretary’s determination. It is, of course, the function of the Court, as well as of the Secretary, to interpret the statute. Id. (citing Walling v. La Belle S.S. Co., 148 F.2d 198 (6th Cir.1945)). The question for this Court, then, is whether Defendants provided services that meet the Secretary’s four criteria for establishments with a retail concept. 29 C.F.R. § 770.319 (listing criteria).

Certainly Defendants sold their services to the general public. In fact, the Plaintiffs in this action worked as salespeople in a call center and sold Defendants’ services directly to consumers. Plaintiffs contend, however, that Defendants’ “services do not serve the every day needs of the public” because “these services provide a specialized function that is not necessary for the community’s daily routine.” Doc. 68 at 22. It is not the case that an establishment must provide a product or service used by each member of the community on daily basis for it to serve the everyday needs of the community. Addressing just such an argument, the District Court for the Middle District of Florida reasoned that:

[t]he list provided in the regulations of businesses which are recognized as retail reflects that such narrow interpretation would be incorrect. This list includes billiard parlors, bowling alleys, cemeteries, coal yards, crematories, dance halls, embalming establishments, funeral homes, fur repair and storage shops, hotels, masseur establishments, recreational camps, taxidermists, theatres, and undertakers, none of which would be used daily by everyone in the community. Reich v. Cruises Only, Inc., 1997 WL 1507504, *4 (M.D.Fla.1997).

This Court agrees. The summary judgment evidence before the Court indicates that Defendants provided not only tax preparation services that each member of the community may well utilize, but also tax dispute services to address issues that may, in some instances, arise in the course of filing taxes. Doc. 64–1 at 7–8. Each member of “the community” does not require tax services on a daily basis any more than they require frequent visits to the undertaker. Yet these services derive inevitably from the only two certainties in life. Such certain, but periodic, services are no less retail in nature than the sale of “automobiles, … radios and refrigerators,” or the “incidental services on such goods when necessary.” 29 C.F.R. § 779.318. Defendants’ tax resolution services clearly were “services for the comfort and convenience of such public in the course of its daily living.” Id.

It is not clear if the case would have been decided differently outside the Fifth Circuit. Of interest, in footnote 5 of its opinion, the court declined to follow a Sixth Circuit opinion on point that reached the opposite conclusion, Hodgson v. N.G. Kallas Co., 480 F.2d 994 (6th Cir.1973).

Click Wells v. TaxMasters, Inc. to read the entire Opinion and Order.

Notwithstanding Management Duties, Police Lieutenant Might be Non-Exempt; Defendant’s Motion for Summary Judgment re: Executive Exemption Denied

Jones v. Williams

In the third exemption case of interest, the case was before the court on the defendant’s motion for summary judgment regarding all of plaintiff’s asserted claims (Title VII, retaliation, unpaid overtime, etc.). As discussed here, the court denied the defendant’s motion with regard to plaintiff’s unpaid overtime claim, citing issues of fact precluding a finding- as a matter of law- that plaintiff was subject to the executive exemption.

The court’s brief description of the plaintiff’s duties was as follows:

Steven Jones currently works as a police supervisor with the rank of lieutenant at BCCC. (Defs.’ Mot. Summ. J., ECF No. 44, at 2, Ex. 1; Deposition of Steven Jones, ECF No. 51, at 7–8.) Jones’s duties include making shift assignments, reviewing paperwork, responding to calls in the event he is needed, and “mak[ing] sure everybody is on their post, looking clean and doing their jobs.”

After noting that the defendant’s cited an outdated regulation as the basis for their exemption defense, the court ultimately held that the defendant failed to show that the plaintiff’s primary duties were the performance of exempt work:

Here, the defendants’ exemption claim fails summary judgment on two fronts. First, the defendants have failed to adduce any evidence that Jones has any responsibility with respect to hiring or firing or that his opinions are given “particular weight” with regard to these matters. See
29 C.F.R. § 541.105. Without such evidence, the defendants cannot sustain an exemption claim under § 541.100.

Second, taking the available facts regarding his job responsibilities in the light most favorable to Jones, the defendants have not convincingly demonstrated that, even though he supervises other officers, Jones’s primary duty is not law enforcement. See 29 C.F.R. § 541.3(b). As evidence that Jones primarily performs exempt work, the defendants point to Jones’s statement that his duties include “making shift assignments … review[ing] all paperwork and … respond[ing] to calls in the event an officer has an issue or my sergeant is unable to deal with an issue … mak[ing] sure everybody is on their post, looking clean and doing their jobs.” (Jones Dep. at 9.) However, in interpreting a similar job description (“a lieutenant’s ‘primary responsibility … is to make sure that their people in the field can handle any situation that happens at any time’ “), the Tenth Circuit noted that this description could merely encompass “the kind of front-line supervision” that the regulations deem “non-managerial.” Maestas, 664 F.3d at 830. Elsewhere in the record, Jones has indicated that his duties also include being “on-call” (Jones Dep. at 59), maintaining emergency generators when needed, ensuring campus safety, and setting up traffic barrels. Jones was, apparently, essential to front line security during the snow storms that caused him to work substantial overtime. Jones may perform enough non-exempt duties like these to fall outside the scope of the exemption. The defendants have certainly not demonstrated his job position falls squarely within an exemption. Accordingly, the defendants’ motion for summary judge with respect to Jones’s FLSA claim will be denied.

Click Jones v. Williams to read the entire Memorandum opinion.

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Courts Support DOL Positions re: Tip-Credit Regs and Classification of Mortgage Loan Officers

More so than any recent Department of Labor in memory, the DOL’s positions have come under attack by several major industries largely under the battle cry that they amount to unfair or “over” regulation. Although the Supreme Court recently handed the pharmaceutical industry a major victory in its industry-wide litigation regarding the outside sales exemption’s application to its so-called pharmaceutical reps or PSRs, the DOL and workers come out on the winning end in 2 district-level cases, both challenging recent DOL pronouncements of its policies. In the first, the DOL’s recent amendment to the rules governing when an employer may take the tip-credit with respect to tipped employees came under fire. In the second, the Mortgage Bankers Association challenged the DOL’s recent Administrative Interpretation 2010–1 in which the DOL took the position that Mortgage Loan Officers (MLOs) performing typical MLO duties were non-exempt.

National Restaurant Ass’n v. Solis

In the first case, the National Restaurant Association, Counsel of State Restaurant Associations, Inc., and National Federation of Independent Businesses sued the Secretary of Labor, Hilda L. Solis, in her official capacity as Secretary of the U.S. Department of Labor; Nancy Leppink, in her official capacity as Acting Administrator of the U.S. Department of Labor; and the U.S. Department of Labor (“the Department” or “DOL”).

The rule at issue, 29 C.F.R. § 531.59(b), which went into effect on May 5, 2011, provided:

Pursuant to section 3(m), an employer is not eligible to take the tip credit unless it has informed its tipped employees in advance of the employer’s use of the tip credit of the provisions of section 3(m) of the Act, i.e.: The amount of the cash wage that is to be paid to the tipped employee by the employer; the additional amount by which the wages of the tipped employee are increased on account of the tip credit claimed by the employer, which amount may not exceed the value of the tips actually received by the employee; that all tips received by the tipped employee must be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and that the tip credit shall not apply to any employee who has not been informed of these requirements in this section.

In its challenge to the regulation, the restaurant tradegroup-Plaintiffs alleged that the DOL violated the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 611, 702 (2006), when DOL promulgated a new regulation, 29 C.F.R. § 531.59(b) (2011), concerning an employer’s obligation to inform tipped employees of the “tip credit” requirements of the Federal Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. §§ 201219 (2006). The parties filed cross-motions seeking judgment in their respective favor. The court held that because the agency complied with the APA notice requirements when it conducted this rulemaking exercise, and the public was fully and specifically informed of the subject matter under consideration, the DOL was within its rulemaking powers when it promulgated the new tip-credit notice rules.

Click National Restaurant Ass’n v. Solis to read the entire Memorandum Opinion.

Mortgage Bankers Ass’n v. Solis

In the second case, the Mortgage Bankers Association, a trade group for mortgage bankers challenged the DOL’s issuance, in 2010, of Administrative Interpretation, the 2010 AI, which expressly withdrew a DOL’s 2006 Opinion Letter, regarding the exempt status of typical Mortgage Loan Officers (“MLOs”). Whereas, previously the DOL had taken the position that MLOs, performing typical duties of MLO positions met the requirements for application of the administrative exemption, the 2010 Administrative Interpretation took the opposite view- that typical MLOs are non-exempt.

Discussing the AI, the court explained:

The 2010 AI relies on a District of Minnesota decision, Casas v. Conseco Finance Corp., No. Civ.00–1512, 2002 WL 507059 (D.Minn. March 31, 2002) in addition to several other cases, as support for its position that mortgage loan officers are non-exempt employees. Id. at 105. In Casas, loan originators asserted they were entitled to overtime compensation from the defendants under the FLSA, requiring the court to decide whether the plaintiffs were exempt from FLSA overtime pay provisions. The court found that because “Conseco’s primary business purpose [was] to design, create and sell home lending products,” the mortgage loan officers’ primary duty was to sell those lending products on a day-to-day basis, not ” ‘the running of [the] business [itself]‘ or determining its overall course or policies.” Casas, 2002 WL 507059, at *9 (citation omitted) (alterations in original). Relying on the ruling in Casas, the 2010 AI reasons that “because Conseco’s loan officers’ duties were ‘selling loans directly to individual customers, one loan at a time,’ ” the administrative exemption did not apply to them. A.R. at 105 (Administrator’s Interpretation No.2010–01) (internal citation omitted). The 2010 AI further notes that the 2004 amended regulations examined the difference between mortgage loan officers who spend the majority of their time selling mortgage products to consumers, like the Casas plaintiffs, as compared to those who “promot[e] the employer’s financial products generally, decid[e] on an advertising budget and techniques, run[ ] an office, hir[e] staff and set[ ] their pay, service [ ] existing customers …, and advis[e] customers.” Id. at 105 (citing 69 Fed.Reg. at 22145–46). The 2010 AI concluded that in order for mortgage loan officers to be properly classified as exempt employees, their primary duties must be administrative in nature. Id. at 105.

Relying on the facts that a significant portion of mortgage loan officers’ compensation is composed of commissions from sales, that their job performance is evaluated based on their sales volume, and that much of the non-sales work performed by the officers is completed in furtherance of their sales duties, the 2010 AI concluded “that a mortgage loan officer’s primary duty is making sales.” Id. at 106–07. And because their primary duty is making sales, the 2010 AI further concludes that “mortgage loan officers perform the production[, not the administrative,] work of their employers.” Id. at 107.

After concluding that the work of mortgage loan officers is not related to the general business operation of their employers, the 2010 AI considered another factor that could provide the basis for finding that mortgage loan officers are subject to the administrative exemption. Id. at 108. The AI states that “[t]he administrative exemption can also apply if the employee’s primary duty is directly related to the management or general business operations of the employer’s customers.Id. In making this assessment, the 2010 AI notes that “it is necessary to focus on the identity of the customer.” Id. The 2010 AI finds that “work for an employer’s customers does not qualify for the administrative exemption where the customers are individuals seeking advice for their personal needs, such as people seeking mortgages for their homes.” Id. However, it recognizes that a mortgage loan officer “might qualify under the administrative exemption” if the customer that the officer is working with “is a business seeking advice about, for example, a mortgage to purchase land for a new manufacturing plant, to buy a building for office space, or to acquire a warehouse for storage of finished goods.” Id. Nevertheless, the 2010 AI concludes that the typical mortgage loan officers’ “primary duty is making sales for the employer [to homeowners], and because homeowners do not have management or general business operations, a typical mortgage loan officer’s primary duty is not related to the management or general business operations of the employer’s customers.” Id. at 109.

Finally, the 2010 AI took exception with the 2006 Opinion Letter’s apparent assumption “that the example provided in 29 C.F.R. § 541.203(b) creates an alternative standard for the administrative exemption for employees in the financial services industry.” Id. Rather, the 2010 AI states that 29 C.F.R. § 541.203(b) merely illustrates an example of an employee who might otherwise qualify for the exemption based on “the requirements set forth in 29 C.F.R. § 541.200.” Id. Thus, the 2010 AI clarifies that “the administrative exemption is only applicable to employees that meet the requirements set forth in 29 C.F.R. § 541.200.” Id. In providing this clarification, the 2010 AI states, “[t]he fact example at 29 C.F.R. § 541.203(b) is not an alternative test, and its guidance cannot result in it ‘swallowing’ the requirements of 29 C.F.R. § 541.200.” FN4
Id.

In summation, the DOL through the issuance of the 2010 AI explicitly withdrew the 2006 Opinion Letter “[b]ecause of its misleading assumption and selective and narrow analysis[.]” Id. Before taking this action, the DOL did not utilize the APA’s notice and comment process. Compl. ¶¶ 32–33.

The Mortgage Bankers Association relied on two different theories in seeking that the court strike down the AI at issue. First, relying on Paralyzed Veterans, 117 F.3d at 586, the plaintiff argues that once an agency issues an authoritative interpretation of its own regulation, it must utilize the notice and comment process if it desires to modify that interpretation. Second, the Mortgage Bankers Association argued that the 2010 AI does not comport with the 2004 regulations and is therefore “arbitrary, capricious, an abused of discretion, and otherwise not in accordance with law.”

With regard to the first argument, the rejected it, noting that ” seven courts of appeals have held that the notice and comment provisions found in section 553 of the APA do not apply to interpretative rules.” Further, the court held that the case did not fit within the limited recognized exceptions to that general rule. Similarly, the court held that the DOL’s interpretation of its own 2004 white collar regulations was not inconsistent and therefore not arbitrary and capricious. Thus, the court granted the DOL summary judgment, in part, and denied the Mortgage Bankers Association’s similar motion, and upheld the AI.

Click Mortgage Bankers Ass’n v. Solis to read the entire Memorandum Opinion.

 

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E.D.Pa.: Hourly-Paid Physician Assistant (PA) Not Professional Exempt; Not A Practitioner “Licensed and Practicing In The Field Of Medical Science”

Cuttic v. Crozer-Chester Medical Center

This case was before the court on the parties’ cross-motions for summary judgment regarding whether plaintiff was exempt from the FLSA’s overtime provisions under the professional exemption.  Because it was undisputed that Plaintiff was paid on an hourly rather than salary basis, the sole issue before the court was whether plaintiff, a physician assistant (PA), qualified as a “professional” within the meaning of § 541.304, the regulation that exempts certain “other practitioners licenced and practicing in the field of medical science” from the typical salary requirements for the professional exemption.  Holding that PA’s do not fall within this definition, the court granted plaintiff’s motion and denied defendant’s motion.

The court reasoned:

“The issue in dispute is whether PAs are intended to be included within § 541.304 and, thus, exempt from the salary requirement in § 541.300(a)(1). In particular, the parties contest whether the language “other practitioners licenced and practicing in the field of medical science” includes PAs. See 29 C.F.R. § 541.304(b).

Defendant argues that PAs are explicitly included among those who qualify for the salary-basis exemption enunciated in § 541.304 because the regulation makes an exception to the salary-basis requirement for employees holding valid licenses or certifications permitting the practice of medicine and actually engaging in the practice thereof. 29 C.F.R. § 541.304(d). Defendant states that because Plaintiff admitted he possesses a valid licence to practice as a PA in Pennsylvania and that he “practice[s] medicine under the direct supervision of [his] attending physicians,” Plaintiff is a “practitioner licensed and practicing in a field of medical science” and qualifies under the salary-basis exemption. (Def.’s Mot. for Summ. J. at 9-12.)

Plaintiff, on the other hand, argues that the salary-basis exemption is narrow in scope and does not include PAs. To support this argument, Plaintiff compares the examples given in § 541.600(e) and § 541.304(b). Section 541.600(e) states that “[i]n the case of medical occupations, the exception from the salary or fee requirement does not apply to pharmacists, nurses, therapists, technologists, sanitarians, dieticians, social workers, psychologists, psychometrists, or other professions which service the medical profession.” 29 C.F.R. § 541.600(e) (emphasis added). Section 541.304(b) states that “the exemption applies to physicians and other practitioners…. The term ‘physicians’ includes doctors including general practitioners and specialists, osteopathic physicians …, podiatrists, dentists …, and optometrists ….” 29 C.F.R. § 541.304(b).

Plaintiff argues that a PA is more akin to one of the named professions which “service the medical profession” as opposed to a doctor, osteopathic physician, podiatrist, dentist, or optometrist. Plaintiff points out that any work he does as a PA must be performed under the direct supervision of a physician, and his main function “is to serve and provide support to the medical profession .” (Pl.’s Mot. for Summ. J. at 8.)

B. Examination of § 541.304

In interpreting the language and meaning of § 541.304, the Court must first determine whether the terms used in § 541.304 are ambiguous as to PAs. Defendant argues that PAs unambiguously practice medicine or a branch of medicine within the meaning of § 541.304, and Plaintiff maintains that the regulation does not speak to this issue. “A regulation is ambiguous when it is not free from doubt … and where no particular interpretation of the regulation is compelled by the regulation’s plain language or by other indications of the [agency's] intent at the time of promulgation of the regulation.” Sec’y of Labor v. Beverly Healthcare-Hillview, 541 F.3d 193, 198 (3d Cir.2008) (internal marks omitted) (holding the term “cost” in Bloodborne Pathogens Standard regulation was ambiguous based on preamble language and fact that neither party “pointed to any indication contemporaneous with promulgation unequivocally stating the agency’s intent to interpret the provision in a particular way”).

Here, the regulations do not define the terms used in § 541.304. In particular, the term “other practitioners licensed and practicing in the field of medical science” is broad and undefined. See Belt v. Emcare, Inc., 444 F.3d 403, 409-12 (5th Cir.2006) (finding § 541.304‘s language is ambiguous and resorting to DOL for interpretative guidance); Clark v. United Emergency Animal Clinic, Inc., 390 F.3d 1124, 1127 (9th Cir.2004) (considering the applicability of § 541.304 to veterinarians); Parker v. Halpern-Ruder, M.D., No. 07-401S, 2008 WL 4365429, at *1 (D.R.I. Sept.16, 2008) (considering the applicability of § 541.304 to registered nurse practitioners and holding nurse practitioners do not fall within § 541.304). Consequently, the Court must construe the language of § 541.304 by giving controlling weight to the agency’s interpretations unless they are “arbitrary, capricious, or manifestly contrary to the statute.” Chevron U.S.A., Inc. v. Natural Res. Defense Council, Inc., 467 U.S. 837, 842-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). An agency’s interpretation is controlling “unless plainly erroneous or inconsistent with the regulation.” Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) (internal marks omitted).

There is limited law on the question of whether PAs are exempt from the overtime requirements of the FLSA pursuant to § 541.304. The Fifth Circuit, the only circuit to consider the matter, gave deference to the DOL’s informal interpretative statements because that court held that there was limited law on the matter. Belt, 444 F.3d at 405 (using DOL interpretative statements to determine that PAs are not exempt from the salary-basis test); see also Parker, No. 07-401S, 2008 WL 4365429, at *4 (denying Defendant’s motion to dismiss because Defendant did not establish that nurse practitioners are subject to salary-basis exemption in § 541.304). This Court will do the same.

The DOL has consistently interpreted the regulations set forth in § 541 to require a PA to satisfy both the duties test and the salary-basis test, as set forth in § 541.300(a)(1)-(2), in order to qualify for an exemption from the FLSA’s overtime requirements. The DOL has refused to extend § 541.304‘s exception to the salary-basis requirement beyond actual physicians and has consistently taken the position that the salary-basis exception does not apply to PAs. The DOL issued an interpretative regulation in 1949, which was revised in 1973, regarding the meaning of § 541.304(a)‘s phrase “or any of its branches”. See Belt, 444 F.3d at 413 (examining DOL’s interpretative regulations to interpret 29 C.F.R. § 541.3(e) which is a predecessor to 29 C.F.R. § 541.304). This interpretative regulation stated:

Exception for physicians, lawyers, and teachers.

(a) … The exception applies only to the traditional professions of law, medicine, and teaching and not to employees in related professions which merely serve these professions.

(b) In the case of medicine:

(1) … The term physicians means medical doctors including general practitioners and specialists, and osteopathic physicians…. Other practitioners in the field of medical science and healing may include podiatrists …, dentists …, optometrists….

(2) [omitted]

(3) In the case of medical occupations, the exception from the salary or fee requirement does not apply to pharmacists, nurses, therapists, technologists, sanitarians, dieticians, social workers, psychologists, psychometrists, or other professions which service the medical profession.

Id. (quoting 29 C.F.R. § 541.314(a), (b)(1)-(3) (1973)) (emphasis added). This language indicates that the DOL intended for the salary-basis exemption, set forth in § 541.304, to only apply to the “traditional professions of law, medicine, and teaching….” Defendant does not assert any arguments as to why PA’s should be considered members of the “traditional professions of law, medicine, and teaching.” The PA occupation did not develop until 1960; as such, it could not have been within the traditional practice of medicine when the exception was first enacted in 1940.

The 2004 amendments to the regulations continue to use a salary-basis test to determine whether an employee qualifies for the “bona fide professional” exemption pursuant to § 541.300. Additionally, the 2004 amendments specifically reference PA’s. Section 541.301(e)(4) states that PAs who meet certain educational and certification requirements “generally meet the duties requirements for the learned professional exemption.” 29 C.F.R. § 541.301(e)(4). The learned professional exemption that is referenced is found in § 541.300, and this exemption requires an employee to meet the duties and salary requirements. Other occupations explicitly recognized in § 541.301 include registered or certified medical technologists and nurses. See § 541.301(e) (1)-(2). These recognized professions are explicitly excluded from § 541.304‘s salary-basis exemption in § 541.600(e). Further support for the Plaintiff’s position is found directly in the DOL’s statements. In Belt, the DOL, as amicus curiae, “unambiguously adopt[ed] the position that [nurse practitioners] and PA’s do not qualify for the professional exemption.” 444 F.3d at 415; see also Auer, 519 U.S. at 462 (finding that Secretary’s amicus brief sufficed to show how the DOL interpreted its own ambiguous regulation).

Under these circumstances, the Court will give deference to the DOL’s position which is consistent with the 1973 interpretative regulations and 2004 amendments. In deferring to the DOL’s interpretive statements, the Court holds that PAs are not included in the salary-basis exemption found in § 541.304.”

Click Cuttic v. Crozer-Chester Medical Center to read the entire opinion.

If you are an hourly-paid Physician Assistant, call us at 1-888-OVERTIME to discuss your rights.

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E.D.Ark.: “Payroll Manager” Demonstrated Lack Of Discretion And Independent Judgment; Defendant’s SJ Motion On Administrative Exemption Denied

Reedy v. Rock-Tenn Co. of Arkansas

Plaintiff was, at points relevant to this case, Defendant’s “payroll manager.” The case was before the Court on Defendant’s Motion for summary judgment, based on Defendant’s assertion that Plaintiff was exempt from the FLSA’s overtime provisions under the administrative exemption. Finding issues of fact as to whether Plaintiff had the requisite discretion and independent judgment, the Court denied Defendant’s Motion.

The Court recited the following relevant facts, “Dolores Reedy worked at Rock-Tenn’s folding carton plant in Conway, Arkansas, from June 1986 until March 15, 2007, when she voluntarily resigned. Reedy, who has no college degree or formal accounting training, began as a temporary employee and later worked full-time as a payroll clerk. Rock-Tenn originally treated her as an hourly employee and paid her overtime. At some point, Reedy acquired the title of “Payroll Manager,” was paid on a salary basis, and stopped receiving overtime compensation.

Reedy was responsible for Rock-Tenn’s payroll. Rock-Tenn hired several assistants to work with Reedy in the payroll department, including Linda Suggs, Carolyn Hansen, and Denise Bent. Sometimes assistants worked only as temporary employees. Reedy’s responsibilities in the payroll department included maintaining employee files; wage garnishments; referring Family and Medical Leave Act (“FMLA”) matters to her immediate supervisor, Ken Hogan, or the Benefit Services Center; completing some Employment Eligibility Verification forms based on the documents in employees’ files; and responding to requests for information from the Arkansas Employment Security Department. At some point, Reedy composed a policy reference book for the payroll department.

Reedy says that after she stopped receiving overtime pay, she continued to log her hourly time and report her time to Hogan. She says she spoke with someone in Rock-Tenn’s corporate office about whether she should be exempt from overtime compensation under FLSA. Reedy also says that she and Hogan attended a class in which the instructors conducted an exercise to determine which persons were exempt under the FLSA, and Reedy says that at the end of the exercise she was in the group of persons who were not exempt. Reedy says that she discussed the exercise with Hogan, but Rock-Tenn made no changes to her exempt status.”

After a recitation of the relevant law, the Court applied same stating, “Reedy’s job title of “payroll manager,” standing alone, is of little use in determining whether she was exempt, and the Court must examine evidence relating to the nature of Reedy’s duties. See Lentz v. Hospitality Staffing Solutions, LLC, 2008 WL 269607, at *4 (N.D.Ga. Jan. 28, 2008). A reasonable jury could conclude that Reedy did not exercise discretion and independent judgment in her job as payroll manager. Therefore, the nature of Reedy’s duties and her position relative to the payroll assistants is a disputed issue of fact.

Regarding Reedy’s investigatory duties, Rock-Tenn asserts that she investigated alleged pay discrepancies and notified management if there were any problems requiring remedial action. Rock-Tenn argues that her investigatory duties were similar to those of the postal workers in Dymond, wherein the Eighth Circuit held that postal workers exercised discretion and independent judgment inasmuch as they determined when a situation required immediate action and whether an alleged violation was minor or required reporting to the United States Attorney for prosecution. Dymond, 670 F.2d at 95. Reedy responds that her investigatory responsibilities were distinguishable from the postal workers in Dymond.Reedy says that employees came to her about payroll discrepancies because she was the one who computed payroll, that she had no authority to issue a corrective check, and that she had to receive permission from management before taking any remedial action.

Reedy’s deposition testimony does not demonstrate that her payroll duties required independent judgment or discretion. She reviewed the payroll records in response to complaints; but she was not authorized to proceed with remedial action unless approved by management. Her responsibilities were more clerical than investigatory, unlike those of the postal inspectors in Dymond.Rock-Tenn has failed to show that, as a matter of law, her authority to investigate and remedy payroll discrepancies required the exercise of discretion and independent judgment.

As to the completion of I-9s, Reedy responds that she received no special training qualifying her to recognize a fake employment form, that her job was merely to check the documents in the employee’s personnel file, and that she then signed the I-9s to indicate that Rock-Tenn did in fact have the proper documentation on a particular employee. Rock-Tenn replies that the fact that Reedy signed the I-9s under penalty of perjury-swearing that she had examined the employee’s documents-means that she had to compare and evaluate possible courses of conduct and use her common sense. Rock-Tenn cites to Haywood v. North Am. Van Lines, 121 F.3d 1066, 1073 (7th Cir.1997), for the proposition that an employee who uses common sense satisfies the discretion and independent judgment prong of the administrative employee exception. In that case, however, the Seventh Circuit mentioned “common sense” in a footnote, referencing the employer’s guidelines which informed its employees, whose job it was to negotiate with customers, that they had considerable latitude to negotiate and were to “just use [their] common sense.” Haywood, 121 F.3d at 1073 n. 8. The Seventh Circuit did not hold that every employee who exercises common sense in the performance of a job duty is exercising discretion and independent judgment, and Rock-Tenn has cited no cases holding that completing I-9s amounts to exercising discretion and independent judgment. Furthermore, other than the I-9s and Hogan’s affidavit, there is no other evidence relating to Reedy’s completion of the I-9s, and Reedy was not questioned about the I-9s in her deposition testimony.

As to Reedy’s communications with the Arkansas Employment Security Department, Reedy seemingly characterizes those communications as routine clerical work. Rock-Tenn, relying on Hogan’s affidavit, asserts that Reedy’s responses to the Department’s requests for information often triggered Rock-Tenn’s responsibility to pay unemployment benefits. However, Rock-Tenn offers no authority for the proposition that acting as a liaison between the employer and a governmental agency in and of itself rises to the level of exercising discretion and independent judgment. It is a disputed issue of fact whether Reedy’s work in this area was routine clerical work, providing information to a state department when requested, or actually involved discretion and independent judgment.

Regarding Reedy’s understanding and application of the FMLA, Reedy responds that she was merely instructed to look for certain “red flags” that could indicate that an employee might be asking for FMLA-qualifying leave. Reedy points to Hogan’s deposition, in which he stated that Reedy would bring a potential FMLA-related request to him, and he would make the final decision. Reedy also states that FMLA issues were ultimately referred to a separate entity, the Benefit Services Center. Therefore, Reedy argues, she had no authority to exercise discretion or make decisions regarding FMLA matters. Rock-Tenn replies that Reedy exercised discretion because she stated in deposition testimony that she “felt like [she] was understanding when to ask [Hogan] if [she] should offer an employee FMLA.”Because Reedy stated that she felt like she understood FMLA well enough to notify Hogan of a potential FMLA-related request, Rock-Tenn argues that she was exercising discretion and independent judgment. Reedy characterizes her testimony as showing that she merely looked for “red flags,” whereas Rock-Tenn characterizes her testimony as Reedy touting her ability to interpret and apply the FMLA. After reviewing Reedy’s deposition testimony, it is unclear that either party’s characterization is completely accurate. Thus, the degree to which Reedy actually exercised discretion and independent judgment in reviewing leave requests for FMLA issues and the nature of Reedy’s review of those requests are issues of fact best left to a jury to resolve.

As to Reedy’s job questionnaire responses indicating that she engaged in policy clarification and research, Reedy responds that Rock-Tenn has cited no authority for the proposition that doing research requires the use of discretion or independent judgment with respect to matters of significance. Reedy also states that she eventually had to suspend her research due to other obligations, and Rock-Tenn offers no evidence showing that Reedy actually engaged in research and policy clarification during the period of time relevant to her lawsuit. Furthermore, the record is inadequate to show that whatever research and policy clarification Reedy performed involved the exercise of discretion and independent judgment.

Finally, regarding Reedy’s involvement in garnishing wages, Reedy responds that her duties consisted of merely following the court orders and company procedure, and that Rock-Tenn offers no authority for the proposition that performing wage garnishments amounts to exercising discretion or independent judgment. Rock-Tenn argues that Reedy admitted in deposition testimony that she followed the applicable garnishment laws, and that following those laws required the use of discretion and independent judgment insofar as she was required to “interpret, construe, and explain the laws, policies, and regulations applicable to her work.”In her deposition testimony, however, Reedy stated only that she followed the court orders and the applicable laws regarding precedence when there were multiple garnishments. Reedy did not talk about interpreting, construing, and explaining the laws, policies, and regulations applicable to her work, as Rock-Tenn contends. Rather, it appears from her deposition testimony that, in her position as payroll manager, Reedy simply followed the court orders she received regarding garnishments and then followed the proper procedures where there were multiple garnishments. The nature of Reedy’s work with garnishments and the extent to which her garnishment work involved discretion or independent judgment are disputed issues of fact for a jury to decide.

In summary, issues of fact remain regarding the nature of Reedy’s duties and the extent to which they involved the exercise of discretion or independent judgment.”

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