The Fair Labor Standards Act (FLSA) exempts certain highly-compensated employees (HCEs) from the requirement that they receive overtime pay for hours worked over 40 in a workweek. To be considered highly compensated, the employee must receive both (1) at least $684 per week paid on a salary or fee basis; and (2) at least $107,432 in total annual compensation. To satisfy the HCE exemption, the employee must also (1) customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee; and (2) perform office or non-manual work as part of his or her primary duties.
In a recent opinion, the Fifth Circuit examined the job duties required to satisfy the HCE exemption. Smith v. Ochsner Health Sys., No. 18-31264, — F.3d –, 2020 WL 1897186 (5th Cir. Apr. 17, 2020). Smith, a former organ procurement coordinator for Ochsner, sued for overtime pay under the FLSA. In response, Ochsner asserted the HCE exemption, arguing that Smith performed one or more administrative duties and received the required level of compensation. Smith did not contest that he met the compensation requirements, but argued that he did not perform the duties required to satisfy the HCE exemption because he was required to follow exact procedures in performing his organ procurement work and, thus, did not exercise discretion and independent judgment as required to establish the administrative exemption.
The Fifth Circuit agreed with Ochsner, finding that Smith’s job duty of procuring organs for Ochsner was an exempt administrative duty directly related to Ochsner’s management or general business operations and, thus, Smith met the duties portion of the HCE exemption. The Fifth Circuit emphasized the “breadth of the HCE exemption,” explaining that an employee may be exempt even if he or she does not meet all of the other requirements for the underlying administrative, executive, or professional exemptions. Thus, the Fifth Circuit explained that an HCE who customarily and regularly performs at least one administrative job duty may meet the HCE exemption even if the employee’s duties did not include the exercise of discretion and independent judgment with respect to matters of significance (as would typically be required to establish the administrative exemption). The Fifth Circuit further highlighted that, in determining whether the HCE exemption applies, the employee’s “level of compensation is the principal consideration,” and that courts “need not conduct a particularly detailed analysis of the employee’s job duties” (internal quotation marks omitted).
Although the Fifth Circuit’s decision in Smith v. Ochsner recognizes the breadth of the HCE exemption, employers should still carefully examine their employees who make at least $107,432 annually to ensure that these employees satisfy both the compensation and job duties requirements of the HCE exemption. Because these employees, by definition, receive a high level of compensation, the potential overtime pay liability if HCEs are determined to be misclassified can be substantial.