On April 1, 2022, the Eleventh Circuit Court Appeals issued a decision regarding the application of the administrative exemption under the Fair Labor Standards Act (“FLSA”). In Brown v. Nexus Business Solutions, LLC, 2022 WL 9828660 (April 1, 2022), the Court held that business development managers, who sourced and sold General Motors vehicles to corporate customers, fell within the FLSA’s administrative exemption from overtime pay requirement.
The decision provided some clarification on the requirements of the administrative exemption, which are often litigated.
Nature of the Lawsuit
The plaintiffs in this case were employed as business development managers for an automotive services provider. Their job was to persuade corporate customers to purchase General Motors vehicles for their fleets. The business development managers often worked in excess of 40 hours per week and claimed they were entitled to overtime compensation.
The district court ruled against the business development managers and granted summary judgment to the employer. The managers appealed the decision to the Eleventh Circuit Court of Appeals. The Appellate Court held that because the business development managers exercise discretion in the performance of business development tasks, they fell within the administrative exemption of the FLSA and they were thus not entitled to overtime compensation.
The Business Development Managers Exercised Discretion and Independent Judgment
To qualify for the administrative employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at
a rate not less than $684* 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 business development managers did not dispute that the first two requirements were met. They claimed, however, that the administrative exemption did not apply because they did not exercise discretion and independent judgment with respect to matters of significance. The Eleventh Circuit disagreed.
The Court found that the primary role of the business development managers is to “develop business leads and opportunities for the dealerships.” Each business development manager acts as a “‘facilitator and liaison’ between the customer and the dealerships,” and the focus of the job is “developing those new relationships and bringing them to the dealer.” In short, business development managers are tasked with building relationships and developing leads which requires creative thinking and tailoring to each individual customer.
First, the Court recognized that a worker is not required to have “limitless discretion” or a total lack of supervision to qualify as an administrative employee. Whether an employee exercises the required level of discretion is ultimately a holistic determination.
Employees may satisfy the discretion prong of the test if they have the “authority to make an independent choice, free from immediate direction or supervision,” even though their choices may still be subject to review, revision, or reversal. The FLSA regulations further provide that the work must involve “more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources”; it cannot be “mechanical, repetitive, recurrent or routine.”
The Court applied these factors and concluded that there was ample evidence that the business development managers exercised independent discretion as they:
- had a hand in choosing which leads to develop;
- performed customized research before meeting with selected leads; and
- delivered presentations that necessarily required some amount of customization.
In short, the Court found that business development managers were tasked with building relationships and developing leads, which the Court held required creative thinking and tailoring to each individual customer.
The Discretion Involved Matters of Significance
The Court also rejected the business development managers’ claim that, even if they do have some level of discretion, it is limited and does not apply to “matters of significance.” The Department of Labor regulations provide that the term “matters of significance” refers to the level of importance or consequence of the work performed.
The Court did not use many words to explain that the business development managers discretion over how to secure new customers for General Motors is a “matter of significance”. The employers’ entire business model is supplying employees for General Motors’ Operation Conquest program. In the Court’s words, the discretion exercised by business development managers “goes straight to the heart of GM customer recruitment efforts.”
Thus, the Court held that the third prong of the test does apply to the business development managers and they are exempt from the overtime pay requirement.
Conclusion
The Administrative Exemption is perhaps the most confusing and misunderstood exemption. Although the decision does not establish new law, it provides a helpful explanation of the administrative exemption and its requirements.
As always, please let me know if I can help.
Kenneth Winkler, a shareholder at Berman Fink Van Horn, helps employers navigate the employment laws and regulations that govern the workplace.
