The United States Court of Appeals for the Seventh Circuit held decided that a management consultant who asserted a claim for overtime pay under the Fair Labor Standards Act ("FLSA") was exempt under both the administrative and professional exceptions of the Act. Piscione v. Ernst & Young, L.L.P., 5 Wage & Hour Cas. 2d (BNA) 362 (7th Cir. March 23, 1999).
Piscione was employed by Ernst & Young between 1991 and 1996 as a consultant in its Human Resources Consulting Group. During this time, he received two promotions – from his starting position as staff consultant to senior consultant, and later to that of manager. For his first eight months at Ernst & Young, Piscione received straight overtime pay for work over 40 hours a week. After this period, Ernst & Young reclassified him as an exempt employee and stopped paying him overtime.
Approximately one month after resigning from the firm, Piscione filed suit under the FLSA claiming Ernst & Young violated the Act beginning in his ninth month of employment by classifying him as an exempt employee and not paying him time and a half for overtime. Ernst & Young argued that Piscione fell within either or both the administrative or professional exemptions. The district court agreed with Ernst & Young and granted their motion for summary judgment.
Under the FLSA, employers are required to pay their employees at least one and a half times their regular wages for the number of hours worked exceeding forty in a given week. The Act exempts employees "employed in a bona fide executive, administrative, or professional capacity" from this requirement. The Secretary of Labor set forth certain tests to determine whether an employee falls within either exemption. The employer bears the burden of establishing whether an employee fits within an exemption.
To establish that an employee falls within the administrative exemption, an employer must show that: the employee was paid on a salary basis; the employee’s primary duties involved office or nonmanual work "directly related to management policies or general business operations"; and, the employee’s work required the exercise of discretion and independent judgment. In showing that an employee qualifies for the professional exemption, an employer must show that: the employee was compensated on a salary basis; the employee’s primary duties consisted of performing work requiring advanced knowledge in a field of science or learning; and, the employee’s work required the consistent exercise of discretion and judgment.
In concluding that Piscione’s employment met both tests, the Seventh Circuit looked at a variety of factors. First, the Court noted that Piscione was a salaried employee – meaning the amount of his compensation was not subject to reduction because of variation in the quality or quantity of work he performed. Second, the Court found that Piscione’s duties "clearly demonstrated the need for him to exercise discretion or independent judgment." Piscione was required to summarize problems in clients’ accounts, inform the clients of these problems, and suggest solutions, generally without any supervision.
In conjunction with the above findings, the Seventh Circuit determined that Piscione qualified under the administrative exemption because Piscione’s duties of developing systems and programs integral to Ernst & Young operations and of supervision "directly related to management policies or general business operations." The Court found he qualified under the professional exemption as well -- his primary responsibilities required advanced knowledge of the Internal Revenue Code and his membership in the Society of Actuaries allowed him to have individual responsibility over client documents. Thus, the Seventh Circuit affirmed the district court’s determination that Piscione in his position as a consultant for Ernst & Young was not entitled to overtime pay under the FLSA.
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