Courts Finds Account Manager for Media Buyer Meets FLSA Administrative Exemption

The administrative exemption from the FLSA overtime requirements presents a challenge for many employers, so much so that some employer don't try to use it.  It is much less clear and therefore more difficult to apply than the professional or executive exemptions (and contrary to the latter's name, the exemption applies to supervisors who have some meaningful input into hiring or firing).  A decision issued today (Verkuilen v. MediaBank) from the federal court of appeals in Chicago helps to better define the rather vague DOL regulation that governs the administrative exemption.

In general terms (from a DOL fact sheet on the subject) the administrative exemption requires that:

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
• 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
• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The court of appeals sitting in Chicago dealt with the "primary duty" questions.  The employer was in the business of selling a software package to advertising firms that would help them place advertising in media outlets.  The software was complex, the court explained, "because it integrates so many functions, and it must be customized to the needs of each client, which vary. The complexity and variance are where the account manager comes in. The manager of a customer’s account has to learn about the customer’s business and help MediaBank’s software engineers determine how its software can be adapted to the customer’s needs."

The account manager's job was "to learn about the customer’s business and help MediaBank’s software engineers determine how its software can be adapted to the customer’s needs."  She is

on the customer’s speed dial during the testing and operation of the customer’s MediaBank software. As the intermediary between employees of advertising agencies struggling to master complex software and the software developers at MediaBank, she has to spend much of her time on customers’ premises training staff in the use of the software, answering questions when she can and when she can’t taking them back to MediaBank’s software developers, and then explaining their answers to the customer and showing the customer how to implement the answers in its MediaBank software. Identifying customers’ needs, translating them into specifications to be implemented by the developers, assisting the customers in implementing the solutions—in the words of MediaBank’s chief operating officer, account managers are expected to “go out, understand [the customers’ requirements], build specifications, understand the competency level of our customers. Then they will build functional and technical specifications and turn it over to . . . developers who will then build the software, . . . checking in with the account manager, making sure what they are building is ultimately what the customer wanted.”

 This, the court held, meant that the account managers "primary duty was directly related to the general business operations both of her employer and (as in a consulting role) of the employer’s customers."  It didn't matter, the court further held, that the account manager did not perform all or even many of the functions listed in the DOL regulation on what makes a job administratively exempt. See 29 C.F.R. § 541.202 (listing numerous "[f]actors to  consider when determining whether an employee exercises discretion and independent judgment with respect to matters of significance.")

DOL Changes its Position FLSA Exemption for Mortgage Loan Officers

Today, the DOL issued its first wage and hour opinion of the current administration.  The DOL has historically issued a number of opinion letters each year and the absence of any new opinion letters has been puzzling.  The DOL has decided to change how it issues official pronouncements.  In an email notice sent out today, the DOL explained:

In order to provide meaningful and comprehensive guidance and outreach to the broadest number of employers and employees, the Wage and Hour Administrator will issue Administrator Interpretations when determined, in the Administrator’s discretion, that further clarity regarding the proper interpretation of a statutory or regulatory issue is appropriate. Administrator Interpretations will set forth a general interpretation of the law and regulations, applicable across-the-board to all those affected by the provision in issue. Guidance in this form will be useful in clarifying the law as it relates to an entire industry, a category of employees, or to all employees. The Wage and Hour Division believes that this will be a much more efficient and productive use of resources than attempting to provide definitive opinion letters in response to fact-specific requests submitted by individuals and organizations, where a slight difference in the assumed facts may result in a different outcome. Requests for opinion letters generally will be responded to by providing references to statutes, regulations, interpretations and cases that are relevant to the specific request but without an analysis of the specific facts presented. In addition, requests for opinion letters will be retained for purposes of the Administrator’s ongoing assessment of what issues might need further interpretive guidance.

(Sorry for the long quote but for some of us, knowing the process is as important as the result.)

The first "Administrator Interpretation" takes the position that the typical duties of a Mortgage Loan Officer does not qualify the employee as being in an administrative exempt position.  In a lengthy, eight page analysis,  the DOL explained that "mortgage loan officers typically have the primary duty of making sales on behalf of their employer; as such, their primary duty is not directly related to the management or general business operations of their employer or their employer’s customers."  

The DOL did not take a position on whether Mortgage Loan Officers might be exempt under a different exemption.  It noted that employers had argued loan officers are exempt as commissioned employees but cautioned that the employer would need to qualify as a "retail or service establishment."

Perhaps what is more interesting about this administrative interpretation is that it "withdraws" (legalese for "rejects") a 2006 DOL ruling which had concluded mortgage loan officers could qualify for the administrative exemption if their primary duties were not "sales."  The difference in positions (between the 2006 and 2010 rulings) seems to be that the 2006 ruling had permitted officers who were making loans to individuals in their personal capacity to qualify as exempt.  The 2010 ruling explained:

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. Individuals acting in a purely personal capacity do not have “management or general business operations” within the meaning of this exemption. However, if the customer 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, the advice regarding such decisions might qualify under the administrative exemption.

Employers who have relied upon the 2006 ruling need to understand that they can no longer rely upon the 2006 ruling to establish that they made a good faith attempt to comply with the FLSA.  That doesn't mean an employer is now liable because they relied in the past on the 2006 ruling.  It simply means that they will have to re-evaluate their position in light of today's ruling.