Certain Specialists Are Administratively Exempt

Three specialist job classifications of a Medicare insurance provider are administratively exempt under the Fair Labor Standards Act (FLSA), according to the 8th U.S. Circuit Court of Appeals.

Four former contracting specialists, one operations specialist and one pharmacy Part D specialist brought a collective action against their employer, New Orleans Regional Physician Hospital Organization LLC ("Peoples Health"), claiming People's Health intentionally misclassified them as salaried and exempt from the FLSA's overtime requirements.

People's Health maintained that the plaintiffs were administratively exempt from the FLSA's overtime requirements. Notably, People's Health reviewed and certified each employee's job description annually to ensure accuracy and compliance with the FLSA. After conditional class certification, the district court granted People's Health's motion for summary judgment, finding that the plaintiffs were administratively exempt.

On appeal, the 8th Circuit applied the three factors found in the FLSA regulations in order to qualify for the FLSA's administrative exemption. First, the employee must be compensated on a salary basis at a rate that exceeds the regulatory minimum. Second, the employee must perform office or nonmanual work directly related to the management or business operations of the employer. Finally, the employee's primary job duties must include the exercise of discretion and independent judgment with respect to matters of significance to the employer.

As for the first factor of the exemption, the plaintiffs claimed that People's Health treated them as hourly, not salaried, employees. Although People's Health paid them well in excess of the regulatory minimum, the plaintiffs claimed that People's Health violated the no-docking rule of the FLSA regulations by docking their pay in half-day increments rather than full-day increments. The plaintiffs also claimed that they were required to use time off for each week they worked under 40 hours in a workweek. The court held that these practices were expressly permitted under the relevant regulations and the circumstances of this case.

As for the second factor, the plaintiffs asserted that their primary duties did not relate to the management or business operations of People's Health. The court held that the four contracting specialists maintained and enlarged the company's provider network. The operations specialist coordinated projects, brainstormed improvements and dispensed advice to managers. The Medicare Part D specialist performed all tasks within Centers for Medicare & Medicaid Services (CMS) guidelines, company policies, and state and federal regulatory requirements. These duties were essential to the general business operations of People's Health.

As for the third factor, the plaintiffs argued that their primary duties did not allow the exercise of discretion and independent judgment regarding matters of significance. The court held that contracting specialists met the requirements, even though they did not have the final authority to negotiate and execute a binding contract. The operations specialist performed equivalent duties to a management consultant—a position used in the regulations to illustrate job duties that involve discretion and independent judgment. The Pharmacy Part D specialist acted independently when reviewing CMS rejections and resolving prescription drug events.

The court affirmed summary judgment for People's Health.

Jones v. New Orleans Regional Physician Hospital Org. Inc., 5th Cir., No. 19-31027 (Dec. 3, 2020).

Professional Pointer: This decision demonstrates how important it is for employers to regularly review job descriptions for accuracy and compliance. Also of note is that the decision provides three additional job descriptions that may satisfy the administrative exemption to the FLSA, at least as classified by this employer. Furthermore, the decision affirms that workers do not need to have the final say on an issue in order to be considered exempt administrative employees.

Sean S. Kelly is an attorney with Ross, Brittain & Schonberg Co. LPA, the Worklaw^® Network member firm in Cleveland.