Q&A: Evaluate administrative exemption from overtime carefully
Q&AEmployee ClassificationsWage and Hour
Question: We have a dispatcher who we’ve always considered to be exempt from overtime. A newly hired member of our HR team is now questioning this classification. How can we determine who’s right? And if it turns out the dispatcher is probably nonexempt but we decide not to make any changes, what’s the risk to our company?
Answer: You’ll need to analyze the dispatcher’s job duties and salary under both the federal Fair Labor Standards Act (FLSA) and state law. Unless the employee is a supervisor, the most promising “white collar” exemption from overtime that could apply to a dispatcher position is the general administrative exemption. A worker may qualify for this exemption under the FLSA if: (1) their “primary duty” is to perform office or nonmanual work directly related to management or general business operations; (2) their primary duty involves the exercise of discretion and independent judgment on matters of significance to the company; and (3) they’re paid on a salary basis at a high-enough level (currently $684 per week under federal law). State law may impose additional requirements as well as a higher salary. Your Vigilant Law Group employment attorney can help with this analysis, if you provide a detailed description of your employee’s actual job duties.
In a recent decision from the U.S. First Circuit Court of Appeals, dispatchers and controllers for a public utility services company were found to be nonexempt and therefore eligible for overtime under the FLSA. The employer had unsuccessfully argued that they qualified for the administrative exemption. The dispatchers monitored and controlled the electricity grid, while the controllers performed similar duties for the natural gas transmission system. The employer failed to demonstrate that this work was directly related to management or general business operations of the company or its customers. The court said that analyzing this relationship required determining whether the employees’ work was related to running or servicing the business (which is the type of behind-the-scenes work that can qualify for the administrative exemption) or related to the core products or services provided by the business (which is nonexempt work). The court found that the workers performed routine operational duties, didn’t analyze or plan systems, and didn’t determine how they could be improved. The court therefore concluded that the dispatchers and controllers didn’t qualify for the administrative exemption and were entitled to overtime (Walsh v. Unitil Service Corporation, 1st Cir, Jan. 2023).
For further guidance, see our Legal Guides, When Is an Employee Exempt Under Federal Law?, State Laws on the White Collar Exemptions from Overtime, and Salary Basis Test for Overtime Exemptions. If you classify an employee as exempt when they’re actually nonexempt, you put your company at risk for expensive overtime claims, going back in time for at least two years and possibly three years if a judge determines your conduct was willful. Contact your Vigilant Law Group employment attorney with any questions on whether you’ve properly classified employees as exempt from overtime.