The US Court of Appeals for the Fourth Circuit recently held that the executive assistant to the CEO of a large real estate investment firm was exempt from the overtime compensation requirements under the Fair Labor Standards Act ( FLSA) and the Maryland Wage and Hour Law (MWHL). Altemus v. Federal Realty Investment Trust, 2012 WL 3090915 (4th Cir. July 31, 2012)
According to the court’s decision, Federal Realty Investment Trust (FRIT) is an equity real estate investment trust specializing in the ownership, management, development, and redevelopment of high quality retail assets. From September 2003 until March 2010, FRIT employed Dorothy Altemus as the sole executive assistant to Donald Wood, CEO and President of FRIT. Although FRIT employed between 10 and 14 executive assistants during this period, Altemus was the only executive assistant classified as exempt.
Altemus' base salary was $84,000 in 2007, with a $12,146 annual bonus; in 2008, 2009, and 2010, her base salary was $86,520, with an annual bonus of $6,489 in 2008 and $12,978 in 2009. Comparatively, the base salary for each of the other executive assistants was less than $60,000 during this time period.
At the time she was hired in 2003, the job description for the Executive Assistant to the CEO stated that Altemus was to “(p)rovide high, executive-level support to the CEO.” The position required 5 to 10 years of previous experience and listed the following responsibilities:
Manage the day-to-day business activities of (the) CEO; demonstrate the ability to handle confidential information with discretion; prioritize and handle internal and external correspondence; screen incoming calls in the most professional manner; schedule meetings and maintain daily and long-term calendar; coordinate Trustees meetings and materials preparation; make all necessary travel arrangements; create and maintain comprehensive filing system; handle all incoming and outgoing mail; maintain coordination of all external board participation activities.
During Altemus' employment with FRIT, Wood spent approximately 30 percent of his time on business travel. Altemus coordinated Wood's travel arrangements and monitored his email and communications as necessary while he was away from the office. In addition, Altemus assisted Wood in his work with a number of professional organizations, including his roles as an active member of the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT) and the US Capital Chapter of the Young Presidents’ Organization (YPO). Altemus also assisted Wood with his role as Chairman of the Metro DC Chapter of the Cystic Fibrosis Foundation (CFF), a charitable organization in which Wood participated for both personal and business reasons.
Altemus alleged that her administrative tasks as the sole executive assistant to Wood typically took no more than 20 to 25 percent of her time, while her responsibilities for performing personal work for Wood and his family required 75 to 80 percent of her time. With respect to personal tasks performed for Wood and his family, Altemus indicated that she planned his annual personal holiday party, scheduled medical appointments, managed his personal travel, purchased tickets to sporting and theatre events, occasionally picked up his children from school, and assisted Wood with his role as Little League coach for his son's baseball team for two seasons, among other tasks. In addition, Altemus stated that she spent a significant amount of her time working on projects related to the CFF, work that she claimed was unrelated to the management of FRIT. Altemus further alleged that her work as Wood's executive administrative assistant “involved only minimal exercise of discretion or independent judgment,” as “Wood often micro-managed tasks and took control of even the most basic decision making of those tasks.”
During Altemus' tenure with FRIT, Wood completed performance reviews in 2005, 2007, and 2009 addressing Altemus' strengths and weaknesses. Altemus reviewed each performance review before signing it, and never objected to the content or substance of the reviews. In her 2005 performance review, Wood stated that Altemus “truly has become my right arm when it comes to organizing and administering all aspects of business at Federal,” describing Altemus as “critical to the continued success of the overall office environment and my ability to be organized and prioritize.” In Altemus' 2007 performance review, Wood praised Altemus' “superior interpersonal skills and intelligence,” stating:
I can honestly say that, in the four years that she has been with (FRIT), every decision that I have ever seen her make has been made with her strong internal belief that it is in the best interest of the company and of the CEO's office. As a result, I give Dorothy more leeway to make decisions than I have ever given to an assistant before.
In addition, Wood stated: “I have never had a more complete partner in my 25 year professional career. Dorothy's scope of responsibilities are broad, as she truly assists me in all of the professional areas of my career that are important to my overall success as the CEO of the Trust.”
In her complaint, Altemus alleged that she worked in excess of 40 hours per week during her tenure with FRIT, but was not provided overtime compensation, in violation of the FLSA and the MWHL. The district court granted FRIT’s motion for summary judgment, finding that Altemus fell within the executive administrative assistant exemption from the FLSA's overtime requirement. Altemus appealed to the Fourth Circuit.
The Fourth Circuit’s Analysis
The FLSA's regulations define an “employee employed in a bona fide administrative capacity” as any employee (1) compensated on a salary or fee basis at a rate of not less than $455 per week; (2) whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and (3) whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. The claim that an employee is exempt from overtime is an affirmative defense that must be proven by the employer by clear and convincing evidence.
On appeal, Altemus maintained that the district court erred in finding that she met the last two requirements. With respect to her “primary duty” as Wood's sole executive assistant, Altemus asserted that personal and family work she performed as Wood's administrative assistant occupied between 75 and 80 percent of her work time. The Fourth Circuit concluded that the district court did not err in finding that Altemus' “primary duty” related to the management of FRIT, rather than Wood's personal tasks. Although Altemus urged the court to adhere to the “50 Percent Rule” in assessing whether her primary duty involved the performance of administrative duties related to the management of FRIT, the court held as follows:
Nothing in the FLSA compels any particular time frame for determining an employee's primary duty. To the extent the regulations refer to time at all, it is only to provide that ‘a good rule of thumb (is) that primary duty means the major part, or over 50 percent, of the employee's time.’.... (I)n fact, the regulations explicitly state ‘time alone, however, is not the sole test,’ and that any assessment of primary duty should ‘be based on all the facts in a particular case.’ It is clear from this language that the primary duty is meant to be assessed by the totality of the circumstances.
Under the regulations, “the term ‘primary duty’ means the principal, main, major or most important duty that the employee performs.” According to the Fourth Circuit, “as the sole administrative assistant to the CEO of FRIT, Altemus managed Wood's calendar, made all necessary travel arrangements, screened incoming phone calls, coordinated Trustees meetings, prepared slides and handouts for meetings, and assisted Wood with his participation in external boards, tasks necessary to ensure the smooth administration of the CEO's office.” Although Altemus claimed that she spent 75 to 80 percent of her time performing personal tasks for Wood, the court noted “she does not allege that her personal work for Wood supplanted her administrative tasks or that she diverted administrative tasks to other assistants.” Furthermore, the court reasoned that although Altemus claimed that personal tasks for Wood required a majority of her time, “she nonetheless maintained a responsibility to complete her administrative tasks at all times.”
With respect to the level of discretion she exercised, Altemus maintained that “in virtually every area of her work, Wood controlled decision making, often to a minute detail.” According to Altemus, “Wood told her on a daily basis which tasks to complete and the order in which to complete them.” Altemus further maintained that her duties were “largely clerical, involving the sending out of mailings drafted by Wood, sending out emails, recording dates in a calendar and making lists.”
The Fourth Circuit concluded that the district court did not err in finding that Altemus exercised independent discretion as the sole executive assistant to Wood. The court reasoned that the record as a whole established Altemus' significant responsibilities as the sole executive assistant to the CEO of a large company with over 400 employees. The performance reviews prepared by Wood reflected the high level of independence and discretion Altemus enjoyed. In addition, the fact that Altemus, the only executive assistant supporting the office of the CEO, completed her administrative tasks while Wood was away from the office on business travel approximately 30 percent of the time served as further evidence of Altemus' exercise of independent judgment and discretion.
The court also noted that Altemus was paid a salary commensurate with her level of responsibility. Her salary was nearly twice that of other nonexempt assistants, taking into account her annual bonus. To determine whether an employee's “primary duty” involves the performance of exempt work, the regulations list a number of factors to consider, including “the relationship between the employee's salary and the wages paid to other employees for the kind of nonexempt work performed by the employee.” Thus, “the fact that Altemus' salary was significantly higher than all other nonexempt administrative assistants further supports a finding of exempt status.”
Finally, the Fourth Circuit noted that Altemus' high salary itself created doubt as to whether she fell within the scope of the intended protected class in light of the legislative goals of the FLSA. “(A)lthough salary alone is not dispositive under the FLSA, ... the FLSA was meant to protect low paid rank and file employees.” Indeed, the FLSA's regulations state that “(a) high level of compensation is a strong indicator of an employee's exempt status.”
The Altemus case is good news for employers — at least those in the Fourth Circuit — which covers the states of Maryland, North Carolina, South Carolina, Virginia, and West Virginia. Although federal courts in other states may follow Altemus, some may have reached a different decision based on the facts of this case.
The case demonstrates that an employer can enhance the chances that an executive assistant will be considered exempt as an administrative employee under the FLSA (and perhaps similar state laws) by carefully drafting job descriptions, reinforcing the importance of the position in performance reviews, and making significant distinctions in pay between exempt and nonexempt employees.