The Third Circuit Court of Appeals recently held in Smith v. Johnson and Johnson that a senior professional sales representative for a subsidiary of Johnson & Johnson was properly classified as an exempt employee under the Fair Labor Standards Act (FLSA), and was, therefore, not entitled to overtime payments pursuant to the Act.
Patty Smith sued Johnson & Johnson, alleging that she was entitled to overtime pay under the FLSA. Johnson & Johnson argued that Smith was properly classified as an exempt administrative employee, and therefore was not entitled to overtime. The trial court agreed, granting the company’s motion for summary judgment. Smith appealed. Smith argued that her job did not meet the requirements for the administrative exemption, which applies only to employees whose primary duty is “performing non-manual work directly related to the management or general business operations of the employer,” and who exercise “discretion and independent judgment with respect to matters of significance.” The Court of Appeals found that Smith’s position qualified as exempt, pointing specifically to the fact that she was required to formulate a strategic sales plan for her assigned territory as evidence of her management responsibilities.
This case illustrates how seemingly small details of an employee’s job—such as the requirement that Smith prepare a strategic plan for her sales territory—can become important factors in litigation over an employee’s exempt status. Conversely, the absence of such responsibilities from the job description of an employee classified as an exempt “administrator” may persuade a court that the employee is in fact entitled to overtime pay.
As the U.S. Department of Labor gears up for an intense enforcement effort focusing on employee misclassification issues and plaintiffs’ attorneys continue to aggressively pursue wage and hour class actions, employers are strongly advised to pay particular attention to worker classification issues such as this in the coming year.