The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime pay, recordkeeping, and child labor standards for employees in the private and public sectors. The FLSA also provides exemptions from these standards for certain categories of workers, such as executives, professionals, and administrative employees. For many years, courts narrowly construed these exemptions, making it difficult for employers to classify employees as exempt and potentially exposing them to costly litigation. However, recent changes in the legal landscape have made it easier for employers to classify workers as exempt under the FLSA.
Historically, courts have interpreted the FLSA exemptions narrowly, requiring employers to meet strict criteria in order to classify workers as exempt. For example, in order to qualify for the executive exemption, an employee had to meet all three of the following criteria: (1) the employee’s primary duty must be management of the enterprise or of a customarily recognized department or subdivision; (2) the employee must customarily and regularly direct the work of two or more other employees; and (3) the employee must have the authority to hire or fire other employees or their suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.
Similarly, in order to qualify for the administrative exemption, an employee had to meet all three of the following criteria: (1) the employee’s primary duty must be 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; (2) the employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance; and (3) the employee must be paid on a salary or fee basis at a rate not less than $684 per week.
These strict criteria made it difficult for employers to classify workers as exempt, and many employers faced costly litigation when employees challenged their exempt status. In recent years, however, courts have begun to adopt a more lenient approach to FLSA exemptions, making it easier for employers to classify workers as exempt.
One important development in this area was the Supreme Court’s decision in Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018). In that case, the Court rejected the longstanding principle that FLSA exemptions should be narrowly construed against employers. Instead, the Court held that exemptions should be given a fair reading, consistent with the statute’s text and purpose. This decision opened the door for employers to argue that their employees should be classified as exempt even if they do not meet all of the strict criteria set forth in the FLSA regulations.
Since the Encino Motorcars decision, courts have continued to adopt a more lenient approach to FLSA exemptions. For example, in Schumann v. Collier Anesthesia, P.A., 803 F. App’x 798 (11th Cir. 2020), the Eleventh Circuit held that an anesthesiologist could be classified as an exempt professional employee even though he spent the majority of his time performing clinical work rather than administrative or supervisory tasks. The court held that the anesthesiologist’s work required advanced knowledge in a field of science or learning, and that his work was predominantly intellectual, requiring the consistent exercise of discretion and judgment.
Similarly, in O’Brien v. Town of Agawam, 350 F. Supp. 3d 310 (D. Mass. 2018), the court held that police sergeants could be classified as exempt administrative employees even though they spent a significant amount of time performing routine police work. The court held that the sergeants’ work was directly related to the management or general business operations of the police department, and that their work required the consistent exercise of discretion and judgment.
These decisions illustrate the trend toward a more lenient approach to FLSA exemptions. Employers can no longer assume that they must meet all of the strict criteria set forth in the FLSA regulations in order to classify workers as exempt. Instead, employers should carefully consider the nature of their employees’ work and the requirements of the FLSA exemptions, and make a good faith determination as to whether their employees qualify as exempt.
Of course, employers must still be careful to comply with all other requirements of the FLSA, such as minimum wage and overtime requirements for non-exempt employees. Employers should also be aware that state and local laws may impose additional requirements beyond those set forth in the FLSA. However, the trend toward a more lenient approach to FLSA exemptions is good news for employers who want to classify their employees as exempt and avoid costly litigation.