Skip to Main Content

Keeping you informed

Federal Appeals Ruling Shows FLSA Exemption May Be Narrower Than You Think

    Client Alerts
  • January 20, 2023

When determining whether an employee qualifies for a minimum wage and overtime exemption under the Fair Labor Standards Act, employers often quickly rule out most of the available exemptions. For example, the executive exemption requires that the employee supervise two or more people, and the professional exemption usually requires an advanced degree in an area of higher learning. In many situations, the employer is left with the administrative exemption. This exemption applies to workers whose primary duties support the general operations of the business.

On its face, it sounds like most midlevel or higher white collar employees would fit this definition. However, as illustrated by a new decision from the First Circuit Court of Appeals, in practice the administrative exemption is quite limited. In Walsh v. Unitil Service Corp., the federal Department of Labor sued a public utility company, alleging that its dispatchers and controllers were not paid overtime required under the FLSA. In response, the employer argued that these employees meet the definition of administrative workers because they directly assist with the running or servicing of the business.

The district court agreed, dismissing the suit. But on appeal the First Circuit reversed this decision, finding that the workers do not meet the requirements for the administrative exemption. The court pointed to one prong of the exemption that disqualifies workers who actually provide the goods or services offered by the company. In this case, the employees’ primary duties involved daily operational work that provide gas and electricity to customers, and not support functions.

Many employers misclassify employees as administrative exempt when those employees actually do the work for which the company makes its money. Those production workers will not qualify for the exemption regardless of the importance of their jobs to the organization or the degree of discretion and independent judgment used in performing those duties. In practice, the administrative exemption is narrow and should only be claimed for workers with clear support functions.