The FLSA’s administrative exemption requires the party claiming exemption to establish that the employee was engaged in “administrative” work, as opposed to “production” work (the so-called administrative/production dichotomy). Determining whether an employee meets the administrative exemption can be challenging. This determination is even more difficult in white-collar industries, where unlike in manufacturing, it is not so easy to differentiate between production and administrative work.
In 2009, the Second Circuit reversed a District Court and held an underwriter for Chase J.P. Morgan did not meet the administrative exemption since the employee “produced” the bank’s product, and did not service the business (like an accountant, Information Technology professional or human resources professional). The Supreme Court yesterday declined to review the SecondCircuit’s decision. Davis v. J.P. Morgan Chase & Co., 587 F.3d 529, 536 (2d Cir. 2009) cert denied 559 U.S. ___ (Supreme Court Case No. 09-1160, May 3, 2010). Therefore, in the Second Circuit white-collar employers need to evaluate the position in light of this decision before classifying employees as exempt administrators. This concern is underscored by the fact that the Second Circuit’s decision supports an argument that the exercise of independent discretion and judgment is not relevant to this analysis – if the employee is deemed to perform production work, a Court need not reach the question of the existence or lack of discretion and independent judgment.
This is a disappointing decision for employers hoping that the high court would grant cert and reverse Davis by holding that: 1) the District Court’s determination that the exemption applied in the case at bar was the proper one; and 2) the administrative/production dichotomy is of “limited assistance outside the manufacturing context.” Savage v. Unite Here, 2008 U.S. Dist. LEXIS 32219 (S.D.N.Y. Apr. 17, 2008).