The First Circuit Court of Appeals has issued a ruling narrowing the overtime exemption for administrative employees, providing greater overtime rights for administrative workers.”

United States Court of Appeals, For the First Circuit

SUMMARY: (court decision – opens in PDF)

“Compliance with the Fair Labor Standards Act’s (‘FLSA’) overtime pay requirements is critical to ensuring worker protections. Before us, Appellant, the Department of Labor (‘DOL’), seeks overtime compensation under the FLSA for hours worked in excess of forty hours per week for two categories of employees — Dispatchers and Controllers — employed by Appellee, Unitil Service Corporation (‘Unitil Service’). Unitil Service argues that these workers are exempt ‘administrative’ employees under federal law and as such are not entitled to overtime payments. The district court found that the employees’ ‘primary duty’ was ‘directly related’ to the general business operations of Unitil Service’s customers and concluded that the employees were ‘administrative,’ exempt from the FLSA, and thus not entitled to overtime pay. Summary judgment was granted in favor of Unitil Service. The DOL filed a timely appeal. For the following reasons, we vacate the grant of summary judgment and remand to the district court for further proceedings consistent with this opinion. …

“On appeal, the DOL argues that Dispatchers and Controllers do not satisfy the FLSA’s administrative exemption and thus are entitled to overtime pay. More specifically, the DOL argues that the district court did not properly evaluate the job duties of both categories of workers under the second prong of the administrative exemption of the FLSA’s regulations, discussed infra. Rather than relying on and analogizing to the relevant regulation’s list of functional areas that can be (but are not necessarily) administrative, as the district court did, the DOL posits that the district court should have instead engaged in a ‘relational’ analysis that considers the relationship between the job duties of the roles in question and the business purposes of the employer or its customers. We agree, acknowledge that our circuit’s precedent on this issue is limited, commend the district court for attempting to parse out our limited jurisprudence, clarify the application of the ‘relational’ analysis test, vacate the grant of summary judgment for Unitil Service, and remand to the district court to apply the test we now outline. …

“Whether both classes of employees are administrative employees — and thus exempt from overtime payment — turns on whether their ‘primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers.’ …

“While our jurisprudence on the second prong is limited, we clarify here that the analysis is indeed — as described by the DOL — a ‘relational’ one. Although often framed as one question, it entails two: (1) whether the employee’s role relates to ‘running or servicing the business,’ and if so, (2) what the scope or ‘generality’ of the employee’s role is. …

“Turning to the facts before us, we thus ask whether Unitil Service has conclusively shown that the Dispatchers’ and Controllers’ primary duties are ‘directly related to the management or general business operations of’ either Unitil Service (the employer) or the [Distribution Operating Companies (DOCs)] (the employer’s customers). … If the Dispatchers’ and Controllers’ primary duties relate to Unitil Service’s business purpose, in that they produce the product or provide the service that the company is in business to provide, the second prong is not satisfied. …

“The district court was correct in finding that the primary duties of the Dispatchers and Controllers are to provide the very services that Unitil Service is in the business of providing. Unitil Service’s business purpose is to provide operational and administrative services to its subsidiaries. The primary duties of the Dispatchers and Controllers are to provide these various services — to operate and monitor their respective electrical grids and gas pipelines for the DOCs — and thus are the very services that Unitil Service is in business to provide. Because the Dispatchers’ and Controllers’ primary duties relate to Unitil Service’s business purpose, the second prong of the ‘administrative’ exemption is not satisfied. Consequently, the only way Unitil Service — which bears the burden of establishing that an employee falls under the FLSA’s ‘administrative’ exemption — can satisfy the second prong is to show that the Dispatchers’ and Controllers’ primary duties are directly related to the general business operations of the DOCs (the employer’s customers).

“To determine whether Unitil Service can satisfy the second prong in this regard, we turn to (1) whether the Dispatchers’ and Controllers’ primary duties relate to the ‘running or servicing’ of the DOCs, and if so, (2) what the scope or ‘generality’ of their role is. …

“As previously mentioned, the district court did not apply this ‘relational’ analysis. …

“Accordingly, because the district court did not apply a ‘relational’ analysis comparing the business purpose of Unitil Service and/or its customers to the primary duty of the Dispatchers and Controllers, it was improvident to grant summary judgment to Unitil Service. Unitil Service has not demonstrated that the Dispatchers’ and Controllers’ primary duty consists of work ‘directly related to the management or general business operations’ of its customers such that the employees fall under the second prong of 29 C.F.R. §541.200. We leave it to the trier of fact to apply the ‘relational’ analysis required by the second prong of the test. At this stage, genuine issues of material fact remain unresolved. Accordingly, we vacate the decision of the district court granting summary judgment to Unitil Service and remand for further proceedings consistent with this opinion. No costs are awarded.”