Seventh Circuit Court of Appeals Tosses Employee’s Wage Overtime Case

December 23, 2013

The federal Fair Labor Standards Act (“FLSA”) requires employers to pay employees overtime compensation at time and a half the employee’s regular rate of pay for hours worked over 40 in a work week unless one of the exceptions to the overtime requirement applies. The Seventh Circuit recently in Blanchar v. Standard Insurance Company considered the administrative employee exemption. Blanchar was hired as Standard Insurance Company’s Director of Institutional Sales/Product Manager for its 403(b) and 457 retirement products. Blanchar’s main duty was to promote the sales of the special market retirement plans. Blanchar trained sales people regarding these plans, traveled to make presentations with sales people, provided guidance to sales consultants about the plans and provided talking points to Standard’s sales consultants as to why Standard’s products were better than those of its competitors. Blanchar was not involved in direct sales of 403(b) and 457 plans.

To be exempt as an employee employed in a bona fide administrative capacity under the FLSA, the employee must meet three criteria:

  1. Receive compensation on a salary or fee basis at a rate of not less than $455.00 per week;
  2. Whose primary duty 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 customer; and
  3. Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The court found Blanchar met all of these criteria. His salary was $102,000.00 annually. He met the primary duty test under applicable regulations relating to employees in the financial services industry. He acted as an advisor or consultant to his employer’s customers. He determined which financial products would best meet the customer’s needs. He advised customers regarding the advantages and disadvantages of different financial products. The court noted an employee whose primary duty is selling financial products does not qualify for the administrative exemption. Although Blanchar’s job duties involved sales-related tasks, the court concluded these particular duties were aimed at promoting customer sales generally. Blanchar’s primary duty was to work with sales people to promote the sale of Standard’s financial products.

The Court also concluded Blanchar’s duties involved discretion and independent judgment with respect to matters of significance. Blanchar provided consultation and expert advice to management and was involved in planning long- and short-term business objectives. An employee can exercise independent judgment and discretion without being the final decision-maker or having unlimited authority to decide a matter.

The Blanchar decision is the second time in as many years that the Seventh Circuit Court of Appeals has found an employer need not pay overtime under the administrative exemption. Last year the Seventh Circuit found pharmaceutical sales representatives also satisfy the administrative employee exemption to the FLSA’s overtime requirement. The administrative exemption is one of a number of exemptions to the overtime requirement available to employers.

Axley’s Labor and Employment Team assists employers and employees in all areas of wage and hour law including classification under the various overtime exceptions.

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