Authored by Jessica Schauer
On November 28, 2011, the U.S. Court of Appeals for the First Circuit issued a decision in Hines v State Room, Inc. finding that sales managers for a Boston banquet facility were exempt from overtime under the Fair Labor Standards Act’s administrative exemption. The case is certain to become a key precedent for employers in two ways. First, it aids employers in arguing that employees in sales-related job positions meet the “duties test” for the administrative exemption. Second, the case clarifies that the discretion and independent judgment analysis necessary for application of the administrative exemption should not be unnecessarily rigid.
The court determined that the plaintiffs’ job functions – which included working with clients to design customized weddings and other events and securing contracts for those events – were properly considered administrative because they were ancillary to the employer’s principal business function of actually providing banquet services. The court also found that the job involved the exercise of independent judgment and discretion because acting as the face of the company and “engaging potential clients and assisting them in selecting from various options from the employers’ offerings” required “invention, imagination and talent.”
The court rejected the plaintiffs’ argument that, based on language in a recent and controversial Second Circuit decision involving pharmaceutical sales representatives, In re Novartis Wage & Hour Litigation, they could not be administrative exempt because they lacked authority to make financial decisions and did not perform any of the specific examples of job duties involving independent judgment and discretion listed in the Department of Labor’s (“DOL”) administrative exemption regulations. The First Circuit expressed disagreement with the notion that “simple evaluation of the regulation’s exemplary list of factors to be considered among ‘all the facts involved in the particular employment situation in which the question arises’ provides a determinative answer to the ultimate question whether an employee exercises discretion.”
Hines is the most recent in a line of First Circuit administrative exemption cases, starting with the 1997 decision Reich v. John Alden Life Insurance Co., that have held that employees charged with representing the company to outsiders meet the criteria for the administrative exemption, even where sales is also a large portion of the job. This line of cases implicitly rejects a position recently taken by the DOL and some district courts in other contexts that sales jobs are necessarily “production” jobs and thus ineligible for the administrative exemption.