Seyfarth Synopsis: On January 8, the U.S. DOL’s Wage & Hour Division issued an opinion letter confirming the exempt status of Account Managers at a life sciences manufacturing company under the FLSA’s administrative exemption. The letter offers useful guidance to employers assessing this notoriously murky exemption, as well as potential ammunition for those defending the exempt status of similar roles.
While job title alone does not determine exempt status under the FLSA, certain titles tend to carry preconceived notions with them. Sometimes, these notions are associated with a clear view of exempt status, for instance in the case of a CEO (exempt) or a Janitor (not so much). More often, however, the most ubiquitous titles across industries are associated with less certainty and a greater need for inspection. It’s hard to think of a better example than a title like “Account Manager.”
Account Manager roles are a common focus for employers, their advocates, and the plaintiffs’ attorneys circling the wage and hour waters. A leading reason for this is that the exempt status of these jobs typically turns on the applicability of the FLSA’s administrative exemption. The administrative exemption is the Act’s greyest exemption—it includes phrases like “the exercise of discretion and independent judgment with respect to matters of significance”—and is thus a magnet for litigation. In addition, these roles have been attacked by some who argue that Account Managers perform “inside sales” work, which is generally not regarded as exempt work..
On January 8, 2021, the U.S. Department of Labor’s Wage & Hour Division weighed in on the exempt status of Account Managers at a life sciences manufacturing company, finding the role was properly classified under the administrative exemption despite performing sales-related work. Though fact-intensive and not binding on federal courts, the opinion letter offers useful insight, and potential ammunition, for employers seeking to defend the exempt classification of similar roles.
So what were these Account Managers doing? In short, they performed a consultative function with potential clients, working to understand and assess their needs and identifying product solutions to meet those needs. The Account Managers worked to learn about the needs of potential clients, analyze what products would meet those needs, and communicate with the potential clients about how the company’s products can fulfill those needs. They were neither closely supervised nor scripted in carrying out their work—they had discretion in deciding how to engage with potential clients.
On these facts, WHD concluded that the Account Managers met the duties requirements of the FLSA’s administrative exemption. Those requirements include that the employee’s primary, or most important duty, must: (1) be non-manual or office work generally related to the management or general business operations of the employer or its clients; and (2) include the exercise of discretion and independent judgment with respect to important matters.
With respect to the first requirement, WHD referred to the so-called “administrative-production” dichotomy, finding that Account Managers fell on the management or administrative side of the business, which is suitable for exempt status, rather than the production side, which is not. The Account Managers developed relationships with target customers—typically high-level professionals—in order to facilitate the sales process and weighed in on which products were likely to satisfy their needs. They represented the company with respect to those prospects. Likening the role to those deemed exempt by various federal circuit courts in cases involving pharmaceutical sales representatives and hotel sales managers, WHD concluded that the Account Managers’ work “promoting sales through a sophisticated consultative marketing process … is not ‘production’ work, and is instead related to the management of [the company’s] operations.”
As for the other duties-based requirement—the exercise of discretion and independent judgment with respect to significant matters—WHD observed that the Account Managers were given wide latitude in deciding how to promote products to potential customers, as well as what products to market to which prospects. Though they received training on sales techniques, it was up to them to develop account plans and strategies with minimal supervision and to develop relationships with potential customers. The Account Managers’ independence in carrying out these types of tasks sufficed, according to the Division, to demonstrate the requisite judgment and discretion.
It’s important to note that opinion letters are provided in response to fact-specific circumstances and are generally regarded as persuasive, rather than binding, authority. Moreover, with a new administration en route to Washington, D.C., a withdrawal or revision of various DOL guidance, including WHD opinion letters, is certainly possible.