Case In Trucking Industry Explores The Murky Parameters Of The FLSA Administrative Exemption And Gives Warnings For All Employers To Take Heed

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Another administrative exemption case, this time in the trucking industry, tests the contours of that vague, nuanced exemption and to what occupations it applies. In this case, a group of Logistics Coordinators contend they are not within the exemption because their primary duty was making sales and they were not paid on a salaried basis, which is the linchpin for any employer claim of a “white-collar exemption.” The case is entitled Rood v. R&R Express Inc., and was filed in federal court in the Western District of Pennsylvania.

These employees claim they were part of the production process, the stream of production. They claim that their jobs only involved locating entities that needed trucking services and then seeking to sell those services to them. In their summary judgment papers, they claim that the “Third Circuit has long recognized that inside salespeople, like the logistics coordinators, are not covered by the administrative exemption because they do ‘productive work,’ not ‘administrative’ work. Based on the Logistics Coordinators’ primary duties, the Court should rule, as a matter of law, that the logistics coordinators were not covered by the administrative exemption.” Significantly, the exemption argument is the Company’s only defense to the overtime claim.

The Company claimed the workers were administrative, and thus exempt from overtime. The plaintiffs respond by relying on a major Third Circuit decision, Martin v. Cooper Electric Supply Co. that established the premise that inside sales workers were in the stream of production and not administrative workers as defined by Part 541 of the FLSA regulations. They point to the fact that the employees “make cold calls and [send] emails to customers in pursuit of sales and generally engaged in efforts to make sales for R&R Express day in and day out.” They also claim that the workers did not exercise discretion and independent judgment (as required by the exemption) as they were allegedly required to choose from a list of Company sanctioned carriers for other services.

The Company has relied on another Third Circuit case, Smith v. Johnson & Johnson, which found a senior professional sales representative was within the administrative exemption, as his work was concentrating on promoting sales, as opposed to making sales. Most significantly, the plaintiffs charge that the Company did not pay these workers on a salary, which is a fundamental condition precedent for an employer claiming the exemption. The workers state that the Company first paid these employees hourly, then on a flat amount per week (which is a salary) and then by commission only. They allege that neither hourly par nor commission payment satisfy the regulatory requirement.

The Takeaway

The plaintiff brief could have been one sentence simply alleging that no salaries were paid. That, by itself, dooms the exemption argument. On the merits, this case is a cautionary tale. The administrative exemption is more appropriate for “back office” functions and not for any job that contributes to the daily production activity of an employer. Where these cases often go south for employers on the merits is the lack of discretion and independent judgment exercised by the employees. Employers need to give their administrative employees latitude in arriving at decisions and not place them in work roles where their responses are dictated by guidelines and mandated Company protocols.

If borderline, make them non-exempt…

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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