The cheap answer is: Case Managers’ exemption under the Fair Labor Standards Act’s (FLSA) overtime requirements must be determined on a case-by-case basis. The tougher analysis is that the Department of Labor (DOL) has apparently continued its earlier position that case managers are typically non-exempt and, thus, entitled to overtime.
With all the celebration surrounding the DOL’s regulations issued in 2004, providers remained frustrated with the DOL’s complete failure to address the exempt or non-exempt status of case managers under the new rules. Under the old regulations, the DOL had routinely concluded that case managers were not exempt administrators under the wage and hour rules and, thus, were entitled to overtime. The Department last year revised the regulations at 29 CFR Part 541 that define exempt executive, administrative or professional employees and published its final rule on April 23, 2004 in the Federal Register (69 FR 22122). Despite voluminous requests asking the DOL to clarify case managers’ classification, the DOL remained mum on the issue in issuing its new rules.
Now the DOL has released a wage and hour opinion letter finding that “regional advocates” were providing non-exempt “ongoing, day-to-day case management services.” On August 29, 2005, the DOL issued opinion letter FLSA2005-30, concluding that the regional advocates were not exempt administrative employees (the DOL did not address the executive exemption because the advocates did not supervise other employees). Per the employer, regional advocate responsibilities included the following:
The Regional Advocate is responsible for advocating for services for people with disabilities. The Regional Advocate represents the wishes and desires of a client and must do so in accordance with national protection and advocacy standards. The Regional Advocate’s duties include keeping informed of changes in federal/state laws, regulations, policies, and court orders affecting persons with disabilities. The Regional Advocate maintains full and accurate documentation of all clients assigned, and prepares and provides regular monthly reports of assigned cases to the Data Report Specialist and other management personnel. The Regional Advocate is also responsible for investigating and acting upon complaints of abuse or neglect, directly advises the Lead Advocate on matters relating to the client’s concerns, and participates in client case reviews. Furthermore, the Regional Advocate is responsible for representing the employer in outside forums, committees, and work groups as assigned by the Program Director. The Regional Advocate does not supervise other employees.
Based on the above duties — even assuming the employees were salaried for at least $455 per week — the DOL concluded that Regional Advocates did not meet the criteria to qualify as exempt administrative employees and were, hence, entitled to overtime for all hours over 40 actually worked in a given workweek. As stated by the agency:
[W]e believe that the activities performed by the Regional Advocate are more related to providing the ongoing, day-to-day case management services, which involve duties required in servicing case loads, such as maintaining full and accurate documentation of all clients assigned; preparing and providing monthly reports of assigned cases to the Data Report Specialist and other management personnel; investigating and acting upon complaints of abuse or neglect; advising the Lead Advocate on matters relating to the client’s concerns; and participating in client case reviews, rather than performing administrative functions directly related to managing the employer’s business or managing the employer’s customer’s business. Thus, the Regional Advocate is not primarily tasked with performing any of the management or general business operational areas described in 29 C.F.R. 541.201(b); nor is the Regional Advocate primarily tasked with providing administrative services to the employer’s customers as contemplated in 29 C.F.R. 541.201(c). Based on this analysis, we conclude that a Regional Advocate’s job function does not satisfy the requirement that the primary duty must be 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.
The “Administrative” Exemption. To be exempt from overtime regulations, “administrative” employees must be paid on a salary or fee basis at a rate of not less than $455 per week and have the primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers including the exercise of discretion and independent judgment with respect to matters of significance
The new rules give as examples of “administrative” work:
Work directly related to management or general business operations includes, but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities. (29 C.F.R. 541.201(b).)
The DOL has construed “directly related to management or general business operations” to mean that an employee 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 business.
The “Production Worker” Problem. This is the persistent “production worker” problem that was not resolved by the new rules. According to rules, exempt administrative work must be distinguished from work that relates to or constitutes the ongoing, day-to-day “production” operations of the employer. By way of different illustration, the Department of Labor has aggressively enforced this distinction in analyzing exemptions for social services positions. On the surface, many social services positions would seem to fall within the administrative exemption: they consist of non-manual work that often involves the exercise of discretion, particularly in analyzing client needs and formulating treatment plans. However, because social worker duties generally go to the heart of the operations of social services agencies, they often are deemed to be “production” work involving day-to-day operations, and not administrative work that supports or services the organization or its clientele.
Plainly, the Department has historically taken a very constrained view of the administrative exemption wherever possible, and the new rules have not eliminated this requirement. The leading case involving this “production” worker problem is Bratt v. County of Los Angeles. In that case, probation officers and child treatment counselors were deemed not to be exempt administrators because they did not perform work related to management policies or general business operations.
In an opinion letter dated March 5, 1999 (the same one that granted a professional exemption to a high-level behavior management specialist), the Department of Labor considered the exempt administrative status of three other social work positions — intake coordinator, program coordinator and supported living coordinator. The Department found that these positions were nonexempt because they involved the “production” work of the business: specifically, assessing eligibility of clients and the availability of appropriate services, assisting applicants in completing intake materials, tracking documents and records, completing intake summaries and social histories, developing programs, coordinating information with other agencies and other tasks of this nature.
The Department reached the same conclusion in an opinion dealing with a child protective investigator for a state’s department of children and family services. In the letter, the Department of Labor opined that “[i]nasmuch as the department of children and family services has the protection of children as a primary function, the activities performed by a child protective investigator II appear to be related more to the ongoing day-to-day ‘production’ operations of the department than to management policies or ‘general business operations.'”
Even if providers can overcome the “production worker” hurdle, the limited discretion actually exercised may defeat eligibility for the administrative exemption. One such situation considered by the DOL involved counselors working with mentally handicapped individuals. The counselors tested and evaluated clients, implemented instructional and behavioral programs designed by the agency in question, acted as liaisons with parents and guardians, planned field trips, transported clients and approved purchases. The counselors worked under the supervision of a supervisor and were found by the DOL not to exercise discretion and independent judgment. The Department reasoned: “The employees in question are primarily using skills applying established standards and procedures.” Furthermore, many of their duties and responsibilities appear to be of the routine variety and “do not involve the level of significance contemplated by the regulations.” The same was found to be true of welfare eligibility workers who evaluated applicants’ eligibility for welfare according to predetermined criteria.
In sum, all job descriptions should be analyzed in light of the DOL’s 2004 rules, and all case manager positions should be carefully reviewed to ensure compliance with the wage and hour classifications.