In the final weeks of the Trump administration, the Department of Labor has been busy putting out guidance on wage and hour matters. Let’s put aside last week’s Final Rule on independent contractors, issued January 6, 2021. That rule is expected to face substantial challenge in court, so while it is an interesting change in approach by the DOL, all should recognize the uncertainty of its lasting effect.
Please turn instead to two Wage & Hour Opinion letters issued on January 8, 2021. The first, FLSA2021-1, addresses whether account managers at a life science products manufacturer qualify for the administrative employee exemption under the FLSA. The second, FLSA2021-2, addresses whether the ministerial exception allows a private religious daycare and preschool to pay its teachers on a salary basis that would not otherwise conform with the requirements of the FLSA.
The issue of whether an employee qualifies for the administrative exemption under the FLSA is fact intensive. In addition to meeting the salary basis of earning at least $684 per week, the employee’s primary duty must be related directly to the management or general business operations of the employer and include “the exercise of discretion and independent judgment with respect to matters of significance.”
Here, the inquiry was whether account managers qualified for the exemption. Among other things, they were required to have at least a bachelor’s degree in the life sciences, or in business with an additional minimum of five years of experience in the life science industry. The account managers engage with highly trained scientists in a consultative relationship. They are not closely supervised and are not required to follow a strictly laid out script or sales process. They are expected to independently develop account plans and strategies and then make independent decisions in answering questions and explaining how a product will benefit the prospective client. They are also given the flexibility to decide how best to develop and engage with potential clients and have the responsibility to analyze information gleaned from the sales process to create a product solution.
Based on these representations, the DOL concluded that the account managers qualified for the administrative exemption.
Here, the inquiry was whether the ministerial exemption could be used to pay the teachers of a religious not-for-profit day care and preschool a salary below the required salary basis for exemption, and yet not violate the FLSA because the teachers qualified as ministers and the First Amendment’s requirement of separation of church and state applies.
The inquirer did not ask DOL to determine whether the teachers were actually ministers, but assuming they did qualify as such, the school could avoid FLSA liability. The DOL noted: “[w]e assume for purposes of this letter that the church and school are covered employers; that, potential application of the ministerial exception aside, the teachers are covered employees; and that the school does not furnish programs of the sort that would qualify the teachers for the teaching professional exemption.”
The DOL also noted that whether employees actually qualify as ministers depends on their duties as employees, not upon the employer’s designation. There is no checklist one can use to determine whether the ministerial exception applies. Instead, quoting from the Supreme Court’s 2020 decision in Our Lady of Guadalupe School v. Morrissey-Berrua the DOL stressed that a “variety of factors may be important” based on their “relationship to [an employee’s] ‘role in conveying the Church’s message and carrying out its mission.’” The question must be answered on a case-by-case basis and requires considering “all relevant circumstances” surrounding each employee “to determine whether each particular position implicate[s] the fundamental purpose of the exception.” Ultimately, ministerial status depends on the employee’s role in carrying out the employer’s mission and conveying the employer’s message.
With this understanding, the DOL concluded that the school may pay these employees on a salary basis that would not otherwise comport with the FLSA.
IMPORTANT CAVEAT: DOL Opinion Letters are general legal guidance but do not bind courts. An employer who relies on DOL guidance, however, will have a good faith defense to claims that it violated the FLSA. It is possible that the DOL in the new administration will reject interpretations from the prior administration.