The Second Circuit Court of Appeals has reversed a lower court and held that a regional director of advertising sales for the Elite Traveler magazine was non-exempt under the Fair Labor Standards Act. The Court rejected the contention that the employee fell within the administrative exemption. The case is entitled Reiseck v. Universal Communications of Miami Inc.
In the 1990s, there was a rash of cases involving inside sales people and whether they fit within the administrative exemption. Courts have held that such employees are “white collar production employees” in that they are really only “producing” the goods of the employer and not engaging in the ancillary, back-office kinds of duties that are deemed administrative under the FLSA. In this case, the Second Circuit continued that line of reasoning.
The Court found that as the primary duty of the employee was selling advertisements to individual customers and not promoting sales generally, the employee was only a producer, not an administrative employee.
The magazine was free and thus advertising sales made up the predominant component of its revenue. There were salespeople who sold advertising space and, significantly, a marketing staff that was charged with the primary function of creating promotional material to increase advertising sales. The Court determined that the employee was not involved with the market creation work, as she was selling specific advertising space and advertising sales were a critical source of revenue, the Court therefore concluded that advertising space was the Company’s “product.”
As the employee’s primary duty was the sale of that product, she was a sales employee, not an administrative employee. This was the Court’s conclusion notwithstanding that there was evidence that Ms. Reiseck developed new clients with the goal of increasing advertising sales generally. Her primary duty remained selling specific advertising space to clients.
I have often commented on the grayness of the administrative exemption. There is a continuing, if you will, eternal, tension between whether an employee is merely producing goods (whatever those good may be) or is performing the more esoteric duties that support and comprise the business. Those duties are administrative, but precise definitions are difficult to come by. Fair warning to the employer----if you choose the administrative exemption, be prepared to defend it (probably in court).