Eleventh Circuit Reminds Employers – Administrative Exemption Requires More than Just Exercising Discretion Over Significant Matters

A recent case decided by the United States Court of Appeals for the Eleventh Circuit (covering Alabama, Georgia, and Florida) analyzed whether property damage investigators were appropriately classified as overtime-exempt administrative employees under the Fair Labor Standards Act (“FLSA”).

As a reminder, the administrative exemption applies when the following criteria are satisfied:

• The employee is compensated on a salary or fee basis of at least $684 per week;
• The employee’s primary is 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

With this set of criteria in mind, employers frequently classify non-manual workers who exercise discretion over significant matters as exempt.  However, the case at issue, Fowler et al. v. OSP Prevention Group, Inc. and Marbry, provides a reminder that this may not be enough to satisfy the administrative exemption.

The appellate court specifically distinguished between “production” and “administrative” work, explaining that “production” employees who perform the “core service” that an employer offers to its clients do not satisfy the administrative exemption. That is because such individuals are not performing work directly related to the management or general business operations of the employer or the employer’s customers. 

In the case at issue, the company, OSP, provides services related to property damage to broadband service providers’ infrastructure. The employees at issue were property inspectors, tasked with investigating the damage to OSP’s client’s broadband infrastructure, determining the source of the damage and who was liable, and calculating the cost of repairs. The employees would then follow OSP’s “prescribed procedures” to write a report based on their independent investigation and submit the report to their managers.

The lower court initially sided with the company, concluding that the employees were properly classified as FLSA-exempt administrative workers, and further holding that the plaintiffs performed work that was “important and significant to the management or general business operations of OSP.” In coming to this conclusion, the initial court likened the plaintiffs’ duties to those performed by insurance claims adjusters, who are generally considered administrative employees.

On appeal, however, the Eleventh Circuit disagreed. Notably, the court determined that the workers’ fact-finding investigations did not include any authority to make higher-level business decisions. Additionally, the court concluded that because they were employed as property damage investigators for a company that specifically provides property damage-related services, the individuals were not performing work directly related to management or general business operations. Instead, they were production employees, carrying out their employer’s core services. The case was thus revived and sent back to the district court for further proceedings.

This decision highlights the importance for employers to critically consider (ideally on a case-by-case basis) all required factors of an FLSA exemption. When determining whether an employee is exempt, it is not sufficient to satisfy some of the duties requirements of the exemption.  Rather, as the production employee example illustrates, exemption status is a nuanced analysis, and multiple factors must be considered in determining whether an employee is properly classified. Employers with specific questions regarding FLSA exemptions should consult with experienced employment counsel.