Employment-Seventh Circuit Rules That A Financial Consultant Is Exempt From Overtime Pay Requirements

In Blanchar v. Standard Insurance Company, No. 12-2745 (7th Cir. 2013), the plaintiff, Thomas Blanchar (“Blanchar”), brought suit against the defendant, Standard Insurance Company (“The Standard”), to recover overtime pay pursuant to the Fair Labor Standards Act (“FLSA”). The Standard moved for summary judgment, arguing that Blanchar qualified as a bona fide administrative employee, and so was exempt from the FLSA’s overtime requirement. The district court granted summary judgment in The Standard’s favor, and Blanchar appeals.

In analyzing the case, the Seventh Circuit Court of Appeals (the “Court”) noted that, to qualify under the bona fide administrative employee exemption, the employee must meet the following conditions: (1) he or she must be compensated on a salary or fee basis at a rate of not less than $455 per week … exclusive of board, lodging, or other facilities; (2) his or her primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers; and (3) his or her primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The parties agree that condition (1) is met. To meet condition (2), the Court said 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 establishment.” 29 C.F.R. § 541.201(a). “[E]mployees acting as advisers or consultants to their employer’s clients or customers (as tax experts of financial consultants, for example) may be exempt.” § 541.201(c). “Employees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include … 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.” § 541.203(b).

As to the instant case, the Court said that Blanchar’s primary duty was to work with salespeople to promote the sales of The Standard financial products. He fielded calls from salespeople, recommended marketing materials and plans for certain customers, and educated The Standard’s salespeople on the different types of plans. He did not directly engage in the sales of any 403(b) or 457 plans; he merely assisted salespeople with those sales. He frequently provided talking points and advice to pension salespeople, spoke at industry conferences and seminars, and educated firms about 403(b) plans. Since Blanchar was involved in advising salespeople and promoting the sales of 403(b) and 457 plans generally, the Court found that his duties and responsibilities satisfy condition (2).

As to condition (3), the Court said that “Factors to consider when determining whether an employee exercises discretion and independent judgment with respect to matters of significance include, but are not limited to … whether the employee provides consultation or expert advice to management; [and] whether the employee is involved in planning long- or short-term business objectives.” 29 C.F.R. § 541.202(b). The phrase “work involving discretion and independent judgment” implies that an employee “has authority to make an independent choice, free from immediate direction or supervision.” § 541.202(c). “The term `discretion and independent judgment’ does not require that the decisions made by an employee have a finality that goes with unlimited authority and a complete absence of review. … The fact that an employee’s decision may be subject to review … does not mean that the employee is not exercising discretion and independent judgment.” Id.

As to the instant case, the Court said that Blanchar’s duties –promoting sales, advising sales staff, and fielding questions–required the exercise of discretion and independent judgment. He scripted talking points for consultants to further the sales of 403(b) and 457 plans. He used his knowledge and experience to develop presentation materials and to answer questions from pension consultants. When presenting or speaking at conferences, Blanchar used materials he himself had prepared, which were later approved by The Standard’s legal and marketing departments. He worked largely alone and met with his supervisor only once a year. Though Blanchar lacked final decision-making authority, his work involved a great deal of discretion and independent judgment. The Court concluded that Blanchar meets condition (3). Meeting all the conditions, the Court further concluded that Blanchar is an exempt bona fide administrative employee, and it affirmed the district court’s summary judgment.