Financial Services Product Manager Covered by FLSA's Administrative Exemption: Seventh Circuit | Practical Law

Financial Services Product Manager Covered by FLSA's Administrative Exemption: Seventh Circuit | Practical Law

In Blanchar v. Standard Insurance Company, the US Court of Appeals for the Seventh Circuit affirmed summary judgment for the employer and held that the plaintiff, who is not a salesperson but who assists and trains the employer's sales team, qualifies for the adminstrative exemption of the Fair Labor Standards Act (FLSA) and is not entitled to overtime compensation.

Financial Services Product Manager Covered by FLSA's Administrative Exemption: Seventh Circuit

by Practical Law Labor & Employment
Published on 03 Dec 2013 • USA (National/Federal)
In Blanchar v. Standard Insurance Company, the US Court of Appeals for the Seventh Circuit affirmed summary judgment for the employer and held that the plaintiff, who is not a salesperson but who assists and trains the employer's sales team, qualifies for the adminstrative exemption of the Fair Labor Standards Act (FLSA) and is not entitled to overtime compensation.
In a November 27, 2013 opinion in Blanchar v. Standard Insurance Company, the US Court of Appeals for the Seventh Circuit affirmed summary judgment for the employer and held that a product manager for a financial services company who assists and trains the employer's sales team but does not engage in sales directly, qualifies for the FLSA's administrative employee exemption and therefore is not entitled to overtime compensation (No. 12-2745, (7th Cir. Nov. 27, 2013)).

Background

In Blanchar v. Standard Insurance Company, the plaintiff, who worked as the Special Markets Director in his company's retirement plans business unit, brought suit against his employer to recover overtime compensation under the FLSA. The employer moved for summary judgment asserting that the plaintiff was not entitled to overtime pay because he qualified for the administrative exemption to the FLSA. The US District Court for the Southern District of Indiana granted summary judgment in favor of the employer. The plaintiff appealed.

Outcome

On appeal, the Seventh Circuit held that the plaintiff satisfied the requirements for the administrative exemption to the FLSA and affirmed the district court's decision.
Although the parties disputed the classification of the plaintiff's duties, they agreed that the plaintiff's duties included:
  • Training salespeople on the company's products.
  • Providing guidance to clients about company products.
  • Traveling with salespeople for sales presentations.
  • Providing guidance to sales consultants, as well as talking points about the company's products and its competitors.
  • Creating materials for webinars and conferences which had to be approved by the company's legal and marketing departments.
  • Conducting webinars, speaking at conferences, answering audience questions and acting as an expert on the company's products.
To qualify for the administrative exemption, employees must satisfy a three-prong test. The employee must:
  • Be compensated on a salary or fee basis of at least $455 per week, not including board, lodging or other facilities.
  • Primarily perform office or non-manual work directly related to the employer's management or general business operations.
  • Exercise discretion and independent judgment on significant matters.
The parties agreed that the plaintiff met the first prong of the test. However, they disputed whether his duties met the requirements for the second and third prongs.
On the second prong, the Seventh Circuit found that the plaintiff's duties were directly related to assisting the running of the business and held that this satisfied the "directly related" prong. In reaching this conclusion, the court relied on:
  • Its decision in Schaefer-LaRose v. Eli Lilly & Co., in which the Seventh Circuit held that the duties of pharmaceutical sales representatives were directly related to the business operations (679 F.3d 560 (7th Cir. 2012)). Even though the representatives were not involved with sales, the court noted that they spent a majority of their time working to promote sales by preparing for and making sales calls to influence physicians' preferences. For further discussion on Schaefer-LaRose, see Legal Update, Pharmaceutical Sales Representatives Covered by FLSA's Administrative Exemption: Seventh Circuit.
  • The US Court of Appeals for the First Circuit's decision in Reich v. John Alden Life Ins. Co. , in which the First Circuit held that the marketing representatives' duties, although not involving sales, promoted customer sales generally and therefore were directly related to the company's general business operations (126 F.3d 1 (1st Cir. 1997)).
The Seventh Circuit related the plaintiff's duties in Blanchar to those in Schaefer-LaRose and John Alden and found that, although he did not directly engage in sales, the plaintiff spent the majority of his time assisting and advising salespeople and generally promoting sales. Therefore, his duties satisfied the "directly related" prong of the administrative exemption test.
As to the third prong, the court held that the plaintiff exercised enough discretion and independent judgment in his position to satisfy it, noting that he:
  • Used his knowledge and experience to answer questions for customers and salespeople.
  • Created talking points for salespeople.
  • Developed presentation materials.
  • Worked alone for the majority of his time.
  • Met with his supervisor only once a year.
  • His supervisor often relied on his expertise about the company's products.
The Seventh Circuit again relied on Schaefer-Rose and John Alden to hold that the plaintiff fell within the administrative exemption of the FLSA. Although the plaintiff lacked the authority to make final decisions free from direction or supervision, this did not prevent him from exercising enough discretion and independent judgment in performing his duties to qualify for the exemption.

Practical Implications

This decision serves as another helpful administrative exemption opinion from the Seventh Circuit, following Schaefer-Rose, involving employees who are not salespeople but who aid in selling the employer's product. With this decision, the Seventh Circuit joins the First Circuit in finding employees in financial services who support sales operations can be exempt administrative employees under the FLSA. The court also clarified that an employee's lack of final decision-making authority is not dispositive on the third prong, and these employees may still exercise the requisite independent judgment and discretion for the administrative exemption.