One of the most difficult issues employers face under the
wage and hour laws is properly classifying employees under the "administrative"
exemption. Much of a difficulty comes from the FLSA's use of the word
"administrative." Many employers confuse the exemption with the performance of administrative
The mere performance of administrative tasks, however,
will not qualify an employee for this exemption. Instead, the exemption only
covers salaried employees whose primary duties (1) are the performance of
office or non-manual work directly related to the management or general
business operations of the employer or its customers, and (2) include the
exercise of discretion and independent judgment on matters of significance.
Last week, the 6th Circuit opined on the application of
this exemption to an insurance company's "special investigators" (SIs). In Foster
v. Nationwide Mutual Ins. Co. (6th Cir. 3/21/13) [pdf] [an enhanced version of this opinion is available to lexis.com subscribers],
the court concluded that Nationwide properly classified this group as exempt
Nationwide's SI investigate claims that the company's
adjusters flag as presenting certain indicators of fraud. The SIs are generally
experienced investigators with prior background in law enforcement or insurance
claims. The SIs work with the claims adjusters to develop a plan for the
investigation, which the SIs then conduct free from any supervision. They spend
most of their time investigating suspicious claims, but are not allowed to
adjust claims or make any decisions on whether to pay or deny a claim.
The 6th Circuit concluded that these employees are fall
under the administrative exemption:
The holding of this case is narrow. Unless you are an
insurer or similar company employing similar Special Investigators, Foster
likely will not impact your business.
This case, however, has a broader lesson to teach. FLSA
exemptions are highly fact specific. Before classifying an employee, or group
of employees, as exempt, you must engage in a careful analysis of all of the
facts and circumstances of your business, their jobs, and how the latter
impacts the former. It's also a good idea to run your exemptions past an
employment lawyer knowledgeable on these issues. Because courts give employees
the benefit of any doubt with exemptions, you should not classify an employee
an exempt unless it is a reasonably clear case. You may think you are saving a
few pennies in overtime, but you will spend a whole lot more defending your
decision in court if challenged.
Visit the Ohio Employer's Law Blog for more
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