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March 2, 2009
Dear Name*:
Enclosed is the response to
your request for an opinion letter signed by the then Acting Wage and Hour Administrator
Alexander J. Passantino on January 16, 2009 and designated as Wage and Hour
Opinion Letter FLSA2009-26. It does not appear that this response was placed
in the mail for delivery to you after it was signed. In any event, we have
decided to withdraw it for further consideration by the Wage and Hour
Division. We will provide a further response in the near future.
The enclosed opinion letter,
and this withdrawal, are issued as official rulings of the Wage and Hour
Division for purposes of the Portal-to-Portal Act, 29 U.S.C. § 259. See
29
C.F.R. §§ 790.17(d), 790.19;
Hultgren v. County of Lancaster, Nebraska, 913 F.2d 498, 507 (8th Cir.
1990). Wage and Hour Opinion Letter FLSA2009-26 is withdrawn and may not be
relied upon as a statement of agency policy.
Sincerely,
John L. McKeon
Deputy Administrator for Enforcement
FLSA2009-26
This Opinion Letter is withdrawn. January 16, 2009
Dear Name*:
This is in response to your request for an opinion regarding
whether client service managers (CSMs) at an insurance company qualify for the
administrative exemption under section 13(a)(1) of the Fair Labor Standards Act
(FLSA).
It is our opinion that the CSMs are exempt administrative employees.
Your agency sells a wide range of insurance products, from
personal and business insurance to professional liability insurance, and
employs CSMs who are professional, licensed insurance agents. The CSMs’
primary duty is generally to serve as insurance advisers and consultants to the
agency’s clients. The agency separately employs individuals whose duties it is
to sell insurance products. CSMs have the authority to execute insurance and
finance contracts that legally bind your agency and its clients. CSMs help the
clients recognize the need for insurance coverage to guard against unforeseen
risk and loss. They work with the clients to develop an insurance program that
will adequately respond to the client’s total risk management needs. To that
end, CSMs consult with the client to identify risk and exposure, advise on the
proper values for the client’s assets, and then recommend solutions to manage
the client’s risk and exposure. After selecting the proper insurance package
for each client, they act as a liaison between the client and the insurance
company and gather and pass underwriting information about the client to the
insurance company. Additionally, CSMs audit the client’s selected insurance
program to ensure it meets all regulatory compliance matters. You indicate
that CSMs use their own discretion and independent judgment when advising
clients and are generally not required to seek prior approval for the advice
and counsel they provide. They are free from immediate supervision or
direction. Finally, CSMs are compensated in excess of $455 per week.
Section 13(a)(1) of the FLSA exempts from its minimum wage
and overtime pay provisions “any employee employed in a bona fide executive,
administrative, or professional capacity.” 29 U.S.C. § 213(a)(1).
The exemption is determined not by occupational title or job classification,
but rather by the duties and salary of the individual employee involved. See
29 C.F.R.
§ 541.2.
As discussed in 29
C.F.R. § 541.200, the term “employee employed in a bona fide
administrative capacity” means “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.
An employee whose primary duty is
directly related to the management or general business operations of the
employer “must perform work directly related to assisting with the running or
servicing of the business, as distinguished, for example, from working on a
manufacturing production line or selling a product in a retail or service
establishment.” 29
C.F.R. § 541.201(a). This “includes, but is not limited to, work in
functional areas such as tax; finance; accounting; budgeting; auditing;
insurance; . . . employee benefits; . . . legal and regulatory
compliance; and similar activities.” 29 C.F.R. § 541.201(b). Additionally,
as stated in section 541.200(a)(2), the exemption may apply to an employee
whose primary duty includes “work directly related to the management or general
business operations of the . . .
employer’s customers.” “Thus, for example, employees acting as advisers or
consultants to their employer’s clients or customers (as tax experts or
financial consultants, for example) may be exempt.” 29 C.F.R. § 541.201(c).
We assume for purposes of this
response that the CSMs receive at least $455 a week on a salary basis. See 29
C.F.R. § 541.600. Further, because the CSMs serve as insurance
advisers and consultants to your clients, they perform office or non-manual
work directly related to the management or general business operations of the
employer’s customers. 29 C.F.R. §§ 541.201(b); 541.201(c). Therefore, we
will focus on whether their primary duty includes the exercise of discretion
and independent judgment with respect to matters of significance.
To qualify for the administrative
exemption, an employee’s primary duty must also include the exercise of
discretion and independent judgment with respect to matters of significance. See
29 C.F.R. § 541.200(a)(3). This “involves the comparison and the
evaluation of possible courses of conduct, and acting or making a decision
after the various possibilities have been considered.” 29
C.F.R. § 541.202(a). Some factors to consider when making this
determination are:
whether the employee performs work that affects business
operations to a substantial degree, even if the employee’s assignments are
related to operation of a particular segment of the business; whether the
employee has authority to commit the employer in matters that have significant
financial impact; whether the employee has authority to waive or deviate from
established policies and procedures without prior approval; whether the
employee has authority to negotiate and bind the company on significant
matters; whether the employee provides consultation or expert advice to
management; whether the employee is involved in planning long- or short-term
business objectives.
29 C.F.R. § 541.202(b). Federal
courts generally find that employees who meet at least two or three of these factors
mentioned above are exercising discretion and independent judgment, although a
case-by-case analysis is required. See 69 Fed. Reg. 21,122, 22,143
(Apr. 23, 2004).
Based on the information provided,
it appears the CSM’s primary duty includes the exercise of discretion and
independent judgment with respect to matters of significance. Serving as an
insurance adviser and consultant to your agency’s clients and helping each
client select the proper insurance package involves comparing and evaluating possible
courses of conduct and acting or making a decision after the various
possibilities have been considered. See 29 C.F.R. § 541.202(a).
When doing this task, the CSM analyzes the client’s insurance needs and
compares these needs to the insurance packages available, taking into account
the level of risk and the price of the coverage. This service is a significant
matter to the agency’s clients. Furthermore, since the CSMs have the
authority to execute insurance and finance contracts and legally bind the
agency and its clients, the CSMs have the authority to commit their employer in
matters that have significant financial impact and to negotiate and bind the
company on significant matters. 29 C.F.R. § 541.202(b). Finally, CSMs
use their own discretion and independent judgment and are free from immediate
supervision when advising clients. Thus, it appears the CSMs primary duty
includes the exercise of discretion and independent judgment with respect to
matters of significance.
Additionally,29
C.F.R. § 541.203 includes specific examples of occupations that would
generally meet the administrative duties test, including in paragraph (b)
“[e]mployees in the financial services industry,” who perform duties similar to
the CSMs’ duties. Such employees are ordinarily considered to meet the
duties requirements for the administrative exemption if their duties include:
work
such as collecting and analyzing information regarding the customer’s income,
assets, investments or debts; determining which financial products best meet
the customer’s needs and financial circumstances; advising the customer
regarding the advantages and disadvantages of different financial products; and
marketing, servicing or promoting the employer’s financial products.
However, an employee whose primary duty is selling financial products does not
qualify for the administrative exemption.
29 C.F.R. §
541.203(b); see also Wage and Hour Opinion Letter FLSA2006-43
(Nov. 27, 2006); Defining and Delimiting the Exception for Executive,
Administrative, Professional, Outside Sales and Computer Employees, 69 Fed.
Reg. 21,122,146 (Apr. 23, 2004). In advising each client on which insurance
package best suits that client’s individual needs, concerns, risk, and
exposure, the CSM analyzes information such as the client’s income, assets,
investments, or debts; takes into account all the data and then determines and
recommends the best insurance package for the client; and advises the client on
the advantages and disadvantages of the available insurance packages. As
previously stated, some of the CSM’s specific day-to-day duties include consulting
with the client to identify risk and exposure, advising on determining proper
values for the client’s assets, and then recommending solutions to manage the
client’s risk and exposure. Finally, the CSM’s primary duty is to serve as an
insurance adviser and consultant to the agency’s clients, not selling an
insurance product.
Therefore, it is our opinion that
CSMs meet all three requirements of the administrative exemption and are
accordingly exempt from the minimum wage and overtime requirements of the FLSA.
This opinion is based exclusively on the facts and
circumstances described in your request and is given based on your
representation, express or implied, that you have provided a full and fair
description of all the facts and circumstances that would be pertinent to our
consideration of the question presented. Existence of any other factual or
historical background not contained in your letter might require a conclusion
different from the one expressed herein. You have represented that this opinion
is not sought by a party to pending private litigation concerning the issues
addressed herein. You have also represented that this opinion is not sought in
connection with an investigation or litigation between a client or firm and the
Wage and Hour Division or the Department of Labor.
We trust that this letter is responsive to your inquiry.
Sincerely,
Alexander J. Passantino
Acting Administrator
*
Note: The actual name(s) was removed to preserve privacy in accordance with 5 U.S.C. § 552(b)(7).
*
Unless otherwise noted, any statutes, regulations, opinion letters, or other
interpretive material cited in this letter can be found at
www.wagehour.dol.gov.
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