Highly Paid Worker Needed to Regularly Perform Only One FLSA-Exempt Duty

By Caroline Secola July 29, 2020
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Organ transplantation on ambulance

A highly compensated employee needs to customarily and regularly perform only one exempt duty to be exempt from overtime pay under the Fair Labor Standards Act (FLSA), even if that duty does not involve the exercise of discretion and independent judgment, according to the 5th U.S. Circuit Court of Appeals.

Under the FLSA's executive, administrative and professional exemptions from overtime pay, employees must perform certain duties and earn at least a specified salary. But under a special rule, highly compensated employees are eligible for exempt status if they meet a reduced duties test as follows:

  • The employee's primary duty must be office or nonmanual work.
  • The employee must "customarily and regularly" perform at least one of the bona fide exempt duties of an executive, administrative or professional employee.

The FLSA defines "customarily and regularly" as "a frequency that must be greater than occasional, but which of course may be less than constant." This definition does not include isolated or one-time tasks, but rather tasks that are typical for the employee and performed recurrently each workweek.

The plaintiff in this case was employed as an organ procurement coordinator at Ochsner Health System in Louisiana. His duties included responding to calls at any time of the day or night regarding organs being offered to the hospital for transplants, evaluating donors' medical charts and history, verifying the donors' consent, communicating pertinent information about the donors to the surgeons and obtaining the surgeons' acceptance of the organs, preserving and arranging for the organs' transportation, and completing reports.

The plaintiff was paid a salary of more than $120,000 from 2014 until he resigned in 2017. During that time, the FLSA's highly compensated exemption applied to employees who earned a salary of at least $100,000 (though the threshold was raised to $107,432 on Jan. 1, 2020).

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In 2017, the plaintiff demanded all of his owed wages and overtime premiums, but Ochsner claimed he was statutorily exempt as a highly compensated administrative employee. The plaintiff claimed he did not customarily and regularly perform exempt duties and that his work was not directly related to Ochsner's general business operations.

The plaintiff filed a lawsuit claiming FLSA violations, and the district court sided with Ochsner. On appeal, the 5th Circuit affirmed that decision. The exemption for highly compensated employees is broad, the court noted, and federal regulations provide less stringent duties requirements for exempt employees when their annual compensation exceeds $100,000.

In particular, to be exempt, the highly compensated employee has to customarily and regularly perform one or more exempt duties, rather than primarily perform exempt duties. The plaintiff's job in organ procurement met the necessary level of frequency, according to the court.

The court also held that procurement was an exempt duty in its own right without the employer's proof that the employee exercised discretion and independent judgment. The plaintiff managed the organ procurement process from start to finish, which was directly related to Ochsner's business operations, the court said.

The plaintiff claimed that he didn't exercise independent judgment or discretion or negotiate contracts to set prices for organ transport; rather, he claimed to follow established procedures. The court found, however, that his procurement responsibilities, paired with his salary, were enough to exempt him from overtime compensation under the highly compensated employee exemption.

Smith v. Ochsner Health System, 5th Cir., No. 18-31264 (April 17, 2020).

Professional Pointer: The exemption for highly compensated employees may provide employers with some flexibility as they develop compensation structures for important roles that do not squarely align with the categories of work contemplated in the federal regulations. Before classifying a position as exempt, however, the employer should also review local requirements, which may impose stricter requirements.

Caroline Secola is an attorney with Collazo & Keil LLP, the Worklaw® Network member firm in New York City.

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