We have repeatedly addressed the FLSA administrative exemption’s requirement that an employee exercise discretion and independent judgment, a concept which has confounded some courts and at times, led to inconsistent rulings. In a new decision, the Court of Appeals for the First Circuit (encompassing Rhode Island, Massachusetts, New Hampshire and Maine) has ruled that sales managers for an employer providing “high-end wedding receptions and other social functions” at banquet facilities in Boston and in Newport, Rhode Island exercised the requisite discretion and independent judgment to qualify for this exemption. Hines v. State Room, Inc., 2011 U.S. App. LEXIS 23680 (1st Cir. Nov. 28, 2011).
Hines concerned two plaintiffs who served as the “primary client contact on behalf of the event venues.” Their role was to “secure event business” by, among other tasks, speaking on the phone and in person with potential clients, touring the facilities, determining scheduling and analyzing what minimum charges would apply. As is customary in such a role, the purpose of these efforts was to “commit a prospective client to a contract for an event.” Plaintiffs also engaged in “broader sales efforts”, including attending Chamber of Commerce or other organizational meetings as a representative of the defendant. The Court observed that these duties “extended beyond securing the basic sale and event contracts,” and that the plaintiffs “stayed” with clients for the life of their relationship with the employer, working out all the details of their event, preparing internal paperwork relating to these details and attending events to ensure coordination of clients’ wishes. “The picture that emerges from the record,” in the Court’s view was “one in which the primary role of sales managers was to secure a steady stream of business by selling each prospective client on a package of options…and by ensuring that each event so planned was a success.” The Court did note that “within the course of navigating these options and client expectations, the plaintiffs had virtually no authority to make…financial decisions.”
In applying the administrative exemption test to these duties, the Court first acknowledged and endorsed the parties’ agreement that the work performed by the sales managers was administrative, and related to defendant’s ”general business operations.” The Court stated the “sales aspect of the defendants’ businesses, although necessary to their success, is clearly ancillary to the principal function of…providing the banquet services.” Determination of exempt status thus turned on the parties’ dispute as to whether there was sufficient exercise of discretion and independent judgment. The Court rejected plaintiffs’ assertion that they exercised no discretion due to the limitations placed on their involvement in the employer’s “finances and contractual obligations.” Relying on its previous precedents analyzing the administrative exemption, the Hines court determined that the plaintiffs had a “primary duty of engaging potential clients in assisting them and selecting from various options.” Because they did not do so within a prescribed sales technique or pitch, but rather exercised discretion within the general guidance of the employer’s handbook, the Court determined that this required a “significant degree of ‘invention, imagination and talent.’” Finally, the Court determined that the discretion exercised by the sales managers pertained to matters of significance, as they were the “face” of the business to prospective clients, and their worked determined the attractiveness of the venues to the employer’s clients.
This decision bolsters the employer community’s position that those engaged in sales and marketing tasks who perform a mixture of direct sales activities and more generalized marketing duties, and who are not closely supervised or scripted in their sales and marketing work and interaction with customers and potential customers, are exercising discretion and independent judgment and thus qualify for exemption. However, employers must continue to analyze the applicability of this exemption on a case-by-case and jurisdiction-by-jurisdiction basis.