Opinion ID: 4526660
Heading Depth: 2
Heading Rank: 2

Heading: The Highly Compensated Employee exemption

Text: A. Performance of an exempt administrative employee duty – generally To qualify for the HCE exemption, Smith must have performed “any one or more of the exempt duties or responsibilities of an . . . administrative . . . employee.” 29 C.F.R. § 541.601(c). Section 541.601(a)(1), in defining the HCE exemption, sends us to Subpart C to find the exempt duties and responsibilities of administrative employees. §§ 541.200–541.204. Section 541.200 lays out two types of exempt duties. The first type 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 the second type is duties involving “the exercise of discretion and independent judgment with respect to matters of significance.” § 541.200(a)(2)–(3). As to the first type, the regulations define work “directly related to management or general business operations” as a type of work in which the employee “perform[s] work directly related to assisting with the running or servicing of the business.” § 541.201(a). Of the nonexhaustive list of examples of exempt duties directly related to the management or general business operations, the most relevant here are those that Smith allegedly engaged in: “quality control; purchasing; 6 Case: 18-31264 Document: 00515385910 Page: 7 Date Filed: 04/17/2020 No. 18-31264 procurement; . . . legal and regulatory compliance; and similar activities.” § 541.201(b). The breadth of the HCE exemption is shown by the statement that an employee may be exempt even if “the employee does not meet all of the other requirements” for the underlying administrative, executive, or professional exemption. § 541.601(c). The regulation includes an example of an exempt executive HCE, who can be an “employee [who] customarily and regularly directs the work of two or more other employees.” Id. Notably, this hypothetical employee meets only one of the elements in the standalone executive exemption. § 541.100. The standalone executive exemption mirrors the standalone administrative exemption: they both have conjunctive elements laying out an employee’s duties. Compare id., with § 541.200. While the elements are conjunctive in the standalone exemptions, they are disjunctive when paired with a high salary. § 541.601(c). Analogously, then, employees may be exempt as administrative HCEs even if they do not meet all the elements in the standalone administrative exemption. So an employee could be an administrative HCE if the employee customarily and regularly performed “office or non-manual work directly related to the management or general business operations of the employer,” § 541.200(a)(2), even if the employee’s duties did not “include[] the exercise of discretion and independent judgment with respect to matters of significance,” § 541.200(a)(3). We examine the record here to determine if there is any genuine dispute of material fact as to whether Smith performed one exempt duty. We later will analyze whether that performance was customary and regular, then whether it was the proper form of office or non-manual work. The question before us is narrower than the one we often face, which is the primary-duties question for these overtime exemptions. E.g., Dewan v. M- I, L.L.C., 858 F.3d 331, 335 (5th Cir. 2017). Indeed, little caselaw has 7 Case: 18-31264 Document: 00515385910 Page: 8 Date Filed: 04/17/2020 No. 18-31264 addressed exempt duties in the HCE context. Although the two contexts are distinguishable in key respects, we draw from our standalone-exemption precedents where the exemptions overlap. Ochsner argues the facts are undisputed that Smith regularly performed several administrative duties that were “directly related to management or general business operations.” § 541.201(b). For brevity, we refer to these as the “directly related” duties. Duties that are directly related involve “work directly related to the assisting with the running or servicing of the business” as opposed to production-focused work. § 541.201(a). For context, Section 201(b) provides in its entirety: (b) 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. Some of these activities may be performed by employees who also would qualify for another exemption. § 541.201(b) (emphasis added). Here, we begin and end with procurement. Ochsner argues that Smith, as an organ procurement coordinator, engaged in literal procurement for the company. We recognize, though, that job titles are “insufficient to establish the exempt status of an employee.” § 541.2. Smith argues that his involvement with procurement was trivial. He cites testimony indicating that he was “strictly confined to following [certain] exact procedures” for organ procurement. This argument, though, mistakenly assumes that procurement is only an exempt duty if the procurement included the exercise of discretion and independent judgment with respect to matters of significance (i.e., the last part of the standalone exemption, § 541.200(a)(3)). Whether Smith was confined to certain procedures is not material to whether 8 Case: 18-31264 Document: 00515385910 Page: 9 Date Filed: 04/17/2020 No. 18-31264 he performed an exempt, directly-related duty. This fact would cut against finding that Smith exercised discretion and independent judgment, see § 541.202(e), but to define directly-related duties as necessarily including significant discretion would render Section 541.200(a)(3) surplusage. Only a nonprecedential opinion of this court has analyzed whether an employee performed exempt duties in the context of the HCE exemption. See Zannikos v. Oil Inspections (U.S.A.), Inc., 605 F. App’x 349 (5th Cir. 2015). We examine the opinion for its ability to persuade. The Zannikos plaintiffs were marine superintendents who oversaw oil transfers, “monitored the loading and unloading of cargo,” and reported on the transfers’ compliance with company policies and national safety standards. Id. at 351. The plaintiffs also oversaw independent inspectors and the “line blending” process in which oil and gas “are combined and moved onto a ship based on specifications.” Id. We held that the plaintiffs were not administratively exempt because their “primary duties did not include the exercise of discretion and independent judgment with respect to matters of significance.” Id. at 359. Nevertheless, we held that the plaintiffs’ primary duties were directly related to the business’s customers, and therefore, that element of the administrative exemption was established. Id. at 354. Because the plaintiffs primarily performed work directly related to the business’s customers, we concluded the employees also “customarily and regularly perform[ed] any one or more of the exempt duties or responsibilities” of an administrative employee. Id. at 359 (quoting § 541.601(a)). We agree with the Zannikos court’s analysis, but that opinion leaves us with some analytical work to do. In Dewan, we considered only the standalone administrative exemption, reviewing whether summary judgment for the defendants was appropriate. 858 F.3d at 335–40. The plaintiffs, a group of “mud engineers,” argued that they did not perform non-manual work for the business or its customers. Id. 9 Case: 18-31264 Document: 00515385910 Page: 10 Date Filed: 04/17/2020 No. 18-31264 at 336. We recognized the distinction between producing a commodity, whether it be a good or service, and administering business affairs. Id. Applying that principle, we held that material facts were in dispute over whether the mud engineers’ primary duties were directly related to management, business operations, or customers. Id. at 336–37. Unlike the employees in Zannikos, the mud engineers in Dewan did not oversee “work performed by the customers’ employees, contractors, and equipment.” Id. at 338. Additionally, the mud engineers’ jobs did not involve “compliance with health and safety standards,” and the mud engineers did not “engage[] in tasks likely to qualify as the general administrative work applicable to the running of any business.” Id. (quotation marks omitted). It is undisputed that Smith spent substantial time in the donor coordinator role. It is also undisputed that a regular part of his job was receiving calls about potential donations, intaking information, and presenting the information to the surgeon, although the parties dispute how much Smith curated the information he shared with surgeons. This was the first step in the organ procurement process. In another one of Smith’s main roles, he managed the literal procurement of the organs by transporting them. Smith agrees that his “job was to retrieve organs to sell to transplant customers.” Smith testified that based on the organ’s location, a procurement coordinator would decide whether to use ground or air transportation. Smith did not play a role in negotiating the contracts with the transport companies to set prices, but when it was time to transport an organ, it was the coordinator’s role “to make [the transport] happen.” This included calling the transport company to see if a limousine or airplane was available. Relatedly, Smith spent literal procurement time on the ground, taking the team to the airport, going into the operating room, and reporting back to the coordinator and surgeon in Louisiana. 10 Case: 18-31264 Document: 00515385910 Page: 11 Date Filed: 04/17/2020 No. 18-31264 Both the donor coordinator and transportation job duties were directly related to Ochsner’s business operations. By that, we mean the duties were “directly related to assisting with the running or servicing of the business.” § 541.201(a). Smith was not engaged in either manufacturing or sales. See id. He worked in the “functional area[]” of procurement for the business, facilitating the acquisition of organs for Ochsner’s transplant services. See § 541.201(b). We do not attempt to define all the boundaries of procurement, only those relevant in this case. One definition is “the acquisition of goods or services at the best possible price, in appropriate quantity, at the right time and place, etc.” Procurement, OXFORD ENGLISH DICTIONARY (3d ed. 2007). Procurement in the context of obtaining the right organs efficiently would not be described in quite those terms, but Smith was certainly involved in the acquisition of something critical for Ochsner’s services. In crafting the highly compensated employee exemption, the Department of Labor made it easier on both employers and courts. § 541.601(c). We need not conduct a particularly “detailed analysis of the employee’s job duties.” Id. Smith’s level of compensation is the principal consideration. See id. In addition, like in Zannikos and unlike in Dewan, the plaintiff here performed one of the specifically enumerated exempt duties. § 541.201(b); Zannikos, 605 F. App’x at 353. B. Customarily and regularly performs the duties “Customarily and regularly” is defined by regulation and “means a frequency that must be greater than occasional but which, of course, may be less than constant. Tasks or work performed ‘customarily and regularly’ includes work normally and recurrently performed every workweek; it does not include isolated or one-time tasks.” § 541.701. 11 Case: 18-31264 Document: 00515385910 Page: 12 Date Filed: 04/17/2020 No. 18-31264 A review of Smith’s appellate brief reveals that Smith concedes he customarily and regularly took calls about organ donations, relayed the information to surgeons, and planned for the transport of those organs. As discussed, Smith focuses his argument on whether those are exempt duties rather than whether he performed them with sufficient regularity. Smith does argue that he did not customarily and regularly perform other relevant job duties such as interviewing job candidates and ordering supplies. We need not examine other job duties, though, because just one exempt duty suffices. § 541.601(a). Smith does not present any evidence that he did not customarily and regularly engage in procurement. That leaves no dispute that Smith meets this element of the exemption. C. Office or non-manual work To fall under either the standalone or HCE exemption, an employee’s primary duty must include office or non-manual work. § 541.200(a)(2) (standalone); § 541.601(d) (HCE). The district court determined there was no dispute that Smith’s primary duty involved the performance of office or nonmanual work directly related to the management or general business operations. Smith argues on appeal that the facts are in dispute. In particular, Smith cites to parts of the record showing that he had to perform physical, manual tasks. Ochsner argues that Smith waived this argument by not presenting it to the district court. Smith replies that there was no waiver because the burden of proof was on Ochsner to establish this element of the administrative exemptions. Smith declares it would be “absurd” to find that he waived an element of Ochsner’s affirmative defense “where Ochsner itself made no competent argument, and where Ochsner pointed to no undisputed evidence to rebut, regarding a required, essential element of its affirmative defense.” 12 Case: 18-31264 Document: 00515385910 Page: 13 Date Filed: 04/17/2020 No. 18-31264 In examining a waiver argument, we start with the rule that “the scope of appellate review on a summary judgment order is limited to matters presented to the district court.” Keelan v. Majesco Software, Inc., 407 F.3d 332, 339 (5th Cir. 2005). Therefore, “if a party fails to assert a legal reason why summary judgment should not be granted, that ground is waived and cannot be considered or raised on appeal.” 2 Keenan v. Tejeda, 290 F.3d 252, 262 (5th Cir. 2002) (quotation marks and citation omitted). Although Smith is correct that the burden to prove exempt status is on Ochsner, Smith never made the argument before the district court that his work was primarily manual. In fact, he seems to have admitted that much of his work is non-manual in his briefing to the lower court. Arguing that he engaged in non-exempt production work, he stated, “Production work covers much non-manual work.” Smith argued to the district court that his work was not directly related to management or to general business operations. That argument concerned whether Smith met the qualifications in Section 541.601(a). The office or non-manual work element, though, is set out separately in Subsection (d). § 541.601(d). Smith did not make this argument in his district court brief. The argument that he primarily performed manual labor is therefore not properly before us. As a matter of law, Smith was an exempt highly compensated employee. AFFIRMED. 2 Caselaw does not consistently distinguish between “waiver” and “forfeiture,” although the terms are analytically distinct. “Whereas forfeiture is the failure to make the timely assertion of a right, waiver is the intentional relinquishment or abandonment of a known right.” United States v. Olano, 507 U.S. 725, 733 (1993) (quotation marks omitted). We have labeled an issue unintentionally ignored in district court “waived,” Keenan, 290 F.3d at 262, and elsewhere, “forfeited,” McManaway v. KBR, Inc., 852 F.3d 444, 455 (5th Cir. 2017). The parties here say “waiver.” Whatever the term, we will discuss whether to decide an issue not presented to the district court. 13