Are Your Account Managers Properly Classified as Exempt Under the FLSA?

By Courtney Amelung - Shawe Rosenthal LLP

February 3, 2021

In its first opinion letter of 2021, the United States Department of Labor (“DOL”) addressed a hot topic that seems to frequently trip up employers: exemption from the minimum wage and overtime pay requirements under the Fair Labor Standards Act (“FLSA”).  The DOL’s opinion letters are official, written opinions by the Department’s Wage and Hour Division that respond to fact-specific scenarios.  In this letter, the DOL considered whether account managers employed by a life science products manufacturer are exempt under the FLSA’s administrative employee exemption.  Although the DOL’s conclusion is limited to the particular set of facts presented, this letter serves as helpful guidance for any employer that employs individuals in an account manager role.

As a refresher, the FLSA exempts certain types of employees from its minimum wage and overtime pay requirements, including those who are “employed in a bona fide executive, administrative, or professional capacity.”  An employee qualifies for the administrative exemption if: (1) the employee is compensated on a salary or fee basis at a rate of not less than $684 per week; (2) the employee’s primary duty is office or non-manual work directly related to the management or general business operations of the employer or the employer’s customer; and (3) the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.  Based upon the specific facts presented in this letter, the DOL concluded that the manufacturer’s account managers meet all three requirements for the administrative employee exemption.

First, the account managers are paid a base salary ranging from $60,000 to $90,000 per year and, when combined with commissions, typically make in excess of $107,432 per year.  Therefore, the account managers meet the first requirement for the administrative exemption because they are paid at least $684 per week on a guaranteed basis.

Second, the account managers’ primary duty is the performance of office or non-manual work related to the management or general business operations of the manufacturer’s clients, because they have the following duties and responsibilities:

•    They develop relationships with target customers (i.e., scientists and academics) in order to facilitate a sales process;
•    They learn potential customers’ business needs;
•    They determine the services or products that the customer is most likely to purchase; and
•    They serve as the point of contact between potential customers and the manufacturer.

Ultimately, the DOL concluded that the account managers meet the second requirement for the administrative exemption because they promote sales through a sophisticated consultative marketing process, through which they engage with highly educated professionals to assess their needs and recommend products for purchase.  Thus, as distinguished from working on a manufacturing production line or selling a product in a retail establishment, these account managers perform work directly related to assisting with running the customer’s business.

Finally, the DOL found that the account managers meet the third requirement for the administrative exemption because they exercise discretion and independent judgment with respect to matters of significance to potential clients.  In particular, the account managers:

•    Are given wide latitude in promoting products, designing portfolios and solutions for potential clients, advising potential clients, and performing other consultative activities;
•    Are expected to independently develop account strategies and build relationships with customers under minimal supervision;
•    Have substantial knowledge of life sciences in order to engage meaningfully with customers;
•    Determine product solutions based upon their technical knowledge and previous customer interactions; and
•    Have responsibility for building and maintaining relationships with other professionals through which the employer indirectly increases its market share.

This opinion letter serves as a useful guidepost for all employers that utilize account managers, not only those in the life sciences industry.  Employers would be wise to evaluate the duties performed by and independence afforded to such employees, to determine whether they qualify for the FLSA’s administrative exemption consistent with this new guidance promulgated by the DOL.