Being Highly Compensated Is Not Enough for the Highly Compensated FLSA Exemption
A common refrain among senior management is a belief that employees who make a great deal of money are universally exempt from the overtime requirements of the FLSA. This belief is bolstered, in theory, by the so-called “highly compensated” exemption. 29 C.F.R. § 541.601. In short, the highly compensated exemption renders an employee exempt from overtime when s/he 1) is paid at least $455/week on a salary or fee basis; 2) receives at least $100,000 per year in total compensation; and, 3) “customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.” Id.
It is this third prong, essentially a pared-down version of the “duties” tests necessary to meet one of the white collar exemptions, which is not always easy for an employer to apply or satisfy. A recent decision of the United Stated District Court for the District of Arizona in which a federal judge denied summary judgment to the defendant based on a finding that the plaintiff, a recruiter who made more than $100,000 per year, did not necessarily perform one or more of the duties of an administrative employee, is instructive as to this issue. See Ogden v. CDI Corp., 2010 U.S. Dist. LEXIS 66686 (D. Ariz. June 30, 2010),
In Ogden, while it was undisputed that the Plaintiff earned in excess of $100,000 per year, the Plaintiff testified that his duties consisted solely of screening potential candidates for open positions the Defendant, a staffing company, was trying to fill. He further testified that his supervisor, the Account Manager, would make all decisions regarding which candidates to actually forward to the company’s clients. Based on this testimony, the Court declined to find Plaintiff’s review of candidates for positions and related duties sufficient to demonstrate that Plaintiff customarily and regularly performed an exempt duty. Citing the federal regulations, the Court held that Plaintiff’s characterization of his job was more akin to a non-exempt “personnel clerk who screens applicants” than the exempt duties of a recruiter, and distinguished recent authority which found that another recruiter met both prongs of the administrative exemption as her primary duty consisted of exempt duties (as opposed to the highly compensated exemption’s requirement that an individual “customarily and regularly” perform one exempt duty). Id. at * 13-16 citing Andrade v. Aerotek, Inc., 2010 U.S. Dist. LEXIS 30765 (D. Md. Mar. 30, 2010).
Ogden demonstrates the technical nature of the highly compensated regulation, particularly when the ambiguous administrative exemption test is at issue. Employers need to ensure that the highly compensated segments of their work force are properly classified as overtime claims from such employees create substantial financial exposure. A high level of compensation standing alone is insufficient. And state laws may not even recognize the exemption.
