On August 14, 2023, the U.S. Court of Appeals for the First Circuit issued a decision—Marcus v. American Contract Bridge League—clarifying and applying the standards for determining whether an employee qualifies for the Fair Labor Standards Act’s (FLSA) administrative exemption, and thus whether the employee is entitled to overtime payments under the FLSA. The court of appeals also addressed the plaintiff’s claim that the defendant had retaliated against him in violation of the act for having filed a wage complaint against it with the U.S. Department of Labor (DOL), and in so doing, shed light on the evidence required to survive summary judgment on an FLSA retaliation claim.

Quick Hits

• The First Circuit partially overturned a district court’s decision in a collective action under the FLSA, holding that certain employees did not qualify for the FLSA’s administrative exemption.

• The court held that many of the employees were exempt because their primary duties directly related to the management of the organization’s business, and they were required to exercise discretion and independent judgment with respect to matters of significance.

• An employer relying on the administrative exemption may want to determine whether an employee’s primary duty can be characterized as providing the very service that the employer is in the business of providing.

The FLSA and the Administrative Exemption

The FLSA requires employers to pay employees at least one and one-half times the regular rate for any hours an employee works in excess of forty hours in a workweek. Employees employed in a “bona-fide … administrative … capacity” are exempt from the overtime requirement (the “administrative exemption”). To establish that an employee is covered by this administrative exemption, an employer must show (1) that the employee’s salary is at least $684 per week, (2) that the employee’s 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) that the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. In determining what an employee’s “primary duty” is, courts consider a number of factors, including the relative importance of the exempt duties as compared with other types of duties, the amount of time spent performing exempt work, and the employee’s relative freedom from direct supervision.

Once it has determined what the employee’s primary duty is, the court next considers whether that duty is “work directly related to the management or general business operations of the employer or the employer’s customers,” i.e., whether the employee performs work that is directly related to assisting with the running or servicing of the business. If the court finds that this prong of the test has been satisfied, it then inquires as to whether the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance to the employer’s business; if it does, then the employee qualifies for the administrative exemption and is not entitled to be paid overtime for hours worked in excess of forty hours in a workweek.

Background Facts and the District Court’s Ruling

The defendant in the lawsuit, American Contract Bridge League (ACBL), is the largest bridge organization in the world. It hosts and operates bridge tournaments at three different levels in each of its twenty-five districts, as well as the North American Bridge Championships (which are held three times per year and involve all twenty-five districts). ACBL employed individuals with the following titles: (1) tournament director, (2) national tournament director, (3) associate national tournament director, (4) field supervisor, (5) area manager, and (6) mentor. At various times, ACBL classified employees in all six positions as exempt from the FLSA’s overtime requirement. The plaintiffs, each of whom had worked for ACBL in one or more of those positions, filed suit against ACBL claiming that they had been misclassified as exempt, and they sought recovery of unpaid overtime wages under the FLSA. In addition, one of the plaintiffs, Peter Marcus, claimed that ACBL had retaliated against him in violation of the FLSA by rejecting his application for a promotion after he filed a wage complaint against the company with the DOL.

The district court granted the plaintiffs’ motion for certification of the unpaid overtime claims as a collective action under the FLSA, and, after discovery, both ACBL and the plaintiffs moved for summary judgment on the class’s overtime claims; ACBL moved for summary judgment on Marcus’s retaliation claim. In ruling on the overtime claims, the district court held that five of the six positions at issue (all but “tournament director”) qualified for the administrative exemption, because the primary duties of those positions—“managing large tournaments and associated staff; training and mentoring other directors in making rulings and tournament scheduling; guiding disputes; and drafting and updating tournament regulations”—involved the performance of office or non-manual work directly related to ACBL’s general business operations and required the employees to exercise discretion and independent judgment with respect to matters of significance. Thus, the district court held that only the tournament directors had been misclassified as exempt and were entitled to unpaid overtime wages. In addition, the court awarded summary judgment to ACBL on Marcus’s retaliation claim, holding that Marcus had failed to provide sufficient evidence of a causal connection between his DOL complaint and the ACBL’s decision not to promote him. Both parties appealed.

The First Circuit’s Analysis

After noting the lack of any dispute that all of the positions at issue satisfied the administrative exemption’s compensation requirement, the First Circuit analyzed whether ACBL had established that the positions satisfied the exemption’s other two requirements. With respect to the tournament director position, the court of appeals agreed with the district court that the primary duty of the position was not directly related to the management or general business operations of ACBL because the primary duty of employees in that position was to supervise bridge contests, and thus they were responsible for providing the very service that ACBL was in the business of providing. The court of appeals also agreed with the district court that ACBL’s field supervisors, area managers, and mentors qualified for the administrative exemption because their duties went beyond simply producing ACBL-sanctioned bridge tournaments and instead required them to supervise and set standards for other employees, and thus were directly related to the management of ACBL’s business. The court also held that these duties required the field supervisors and area managers to exercise discretion and independent judgment on matters of significance because they were responsible for making high-level customer service decisions and for supervising other employees, and required the mentors to do so “because ‘higher-level managers generally deferred to’ their recommendations ‘as to important employment decisions.’”

With respect to the national tournament directors and associate national tournament directors, however, the First Circuit disagreed with the district court and held that ACBL had failed to establish that the positions qualified for the administrative exemption. The court of appeals concluded that although the employees in those positions may have had additional duties related to training and mentoring other employees, those duties all related directly to producing ACBL-sanctioned bridge tournaments—which, as the court had held with respect to tournament directors, was the very service that ACBL was in the business of providing (and thus did not relate directly to the “management” of the business).

Finally, the court of appeals agreed with the district court that Marcus had failed to provide sufficient evidence of a causal connection between his DOL complaint and ACBL’s failure to promote him to support his retaliation claim. In particular, the court held that the nine-month gap between Marcus’s complaint and ACBL’s promotion decision was too long to support an inference of a causal connection between the two events, and the fact that ACBL had not interviewed anyone other than Marcus for the position and ultimately hired a candidate with less bridge experience was insufficient to support his claim. The record showed that after Marcus filed his complaint, ACBL had “promoted him, raised his pay, and [given] him a positive performance evaluation,” and there was undisputed evidence that the person whom ACBL hired for the position had other relevant experience that ACBL valued.

Key Takeaways

The First Circuit’s decision in Marcus serves as a timely reminder that employers that have classified employees as exempt from the overtime requirements of the FLSA in reliance on the administrative exemption may want to perform a careful and thorough analysis of whether those employees actually qualify for the exemption, and in particular, whether their primary duties can be characterized as providing the very service that the employer itself is in the business of providing. If so, as the court of appeals emphasized, the employees do not qualify for the administrative exemption and (unless they qualify for another FLSA exemption) they must be paid at the overtime rate for all hours worked over forty hours in a workweek. In addition, the decision reinforces that plaintiffs asserting FLSA retaliation claims in the First Circuit cannot support those claims with speculation or presumption when months-long gaps between events exist, but they must instead provide evidence of a causal connection between their protected conduct and the employer’s adverse action against them.