Hunton Employment & Labor Perspectives

In a recent decision in Perez v. Express Scripts, Inc., the U.S. District Court for the District of New Jersey determined that plaintiff and a conditionally certified class of 200 members in a misclassification class action were exempt given that they were highly compensated.

Previously, the court had denied defendants’ motion for summary judgment in which defendants argued that plaintiff was a highly compensated employee under C.F.R. § 541.601 and exempt from coverage under the FLSA because plaintiff’s annual compensation exceeded $100,000; she primarily performed office or non-manual work; and customarily and regularly performed the duties of an exempt administrative employee. In denying the motion for summary judgment, the Court had scrutinized plaintiff’s job duties and determined that there was a genuine issue of material fact as to whether she exercised sufficient discretion and independent judgment regarding matters of significance. The court also granted plaintiff’s motion for conditional class certification. Defendants filed a motion for reconsideration.

On reconsideration, the court determined that it did not properly analyze whether plaintiff was overtime-exempt under the highly compensated exemption given the Supreme Court’s ruling in Encino Motorcars LLC v. Navarro and the guidance set forth in 29 C.F.R. § 541.601(c), both of which provide that the analysis of the employee’s job duties is more relaxed when the employee is highly compensated. Since there was no dispute that plaintiff made over $100,000 per year during the relevant period,[1] there was no need for a more rigorous analysis of her job duties. Instead, she simply needed to perform one or more exempt duties “more than occasionally,” which is less stringent than the “primary duty” test that applies under the administrative exemption. The court’s ruling is a positive outcome for employers who can possibly claim an exemption for certain of their workforce based on the exemption applicable to highly compensated employees. However, employers should still be careful to ensure that these employees still perform one or more exempt duties, even in light of this more relaxed standard. For employees who perform exempt duties and have salaries that are close to the threshold for highly compensated employees, employers should consider whether an increase in pay is worthwhile given the lower scrutiny that will apply when a court evaluates whether those employees’ job duties fall within the exemption.

[1] Currently, to qualify for the exemption, an employee needs to make at least $107,432 annually.