Are Part-Time Executive Trainers Exempt Learned Professionals? DOL says - Yes, but No

Being the mid-century-modern guy that I am, my vintage idea of training is spending 30 minutes in the break room watching the company cartoon about how to properly shape a hamburger with only three touches.

Times have changed. There now are many, many companies whose sole business is training the employees of other companies on all manner of subjects. This brings me to a recent Wage and Hour Opinion letter issued in response to a request for an opinion letter submitted by a company that provides management training to corporate executives. The request posed several questions that, taken together, essentially boiled down to whether the company’s part-time trainers could be classified as learned-professionals who would be exempt from the requirements of the Fair Labor Standards Act (“FLSA”). DOL’s answer? Maybe yes, but not here. See Opinion Letter Fair Labor Standards Act (FLSA), FLSA2020-13, 2020 WL 5367070 (Aug. 31, 2020) (posted on the DOL website here) (“Opinion”).

The trainers who are the subject of the opinion primarily deliver training to the executives of client companies, part of which also involves evaluating the executives’ performance in the training. For this, the trainers are paid a flat daily rate of $1,500 for each day they deliver training. They also might perform development work in which the trainers create new content for the programs put on for the trainees. For this, they are paid $50 per hour. To be eligible to work as an executive trainer for this particular company, the employee must possess advanced knowledge in business finance and adult education and are required to hold an advanced degree, ideally a Ph.D. but at least a master’s degree in “finance, accounting, adult learning, or “business discipline.’” See Opinion at 1-2.

The FLSA entitles covered employees to be paid a minimum wage for each hour they work and further are entitled to be paid time-and-a-half of their regular rate of pay for all hours worked in excess of 40 hours in a workweek. See Opinion at 2. However, certain employees are exempt from FLSA coverage if they are “employed in a bona fide executive, administrative or professional capacity. . . .” Opinion at 2 (quoting 29 U.S.C. § 213(a)(1)). DOL regulations provide that an employee who is paid on a salary or fee basis of at least $684 per week may be an exempt professional if his or her work requires either “knowledge of an advance type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.” Opinion at 2-3 (citing, among other provisions, 29 C.F.R. § 541.300(a)(2)). Where employees are highly compensated (i.e., they receive total annual compensation of $107,432), the 3-part exemption test need not be met and the employees will be deemed exempt if they regularly perform at least one exempt executive, administrative or professional duty and they are paid on a salary or fee basis an amount that is great than $684 per week. Opinion at 3.

The Opinion Letter addressed four issues: (1) whether the trainers perform learned professional duties; (2) whether the trainers are paid on a salary basis for delivering training; (3) whether the hourly pay for developing new content would affect the trainers’ exempt status; and (4) whether the total compensation requirement of the highly compensated test could be reduced on a proportional basis for employees who work part-time. Opinion at 2.

The Administrator easily concluded that the trainers’ work fulfilled the professional duties test. See Opinion at 3-4. The employees are required to hold advanced degrees in recognized fields of study (e.g., finance, teaching and accounting) and the learning afforded them by these courses of study is directly relevant to the very matters about which they instruct the executives. Their work requires advanced knowledge (i.e., work that is primarily intellectual and requires the exercise of discretion and judgment) insofar as they teach and evaluate the executives in the subjects of advanced finance and business related material. Accordingly, DOL concluded the trainers perform duties that require advanced knowledge in a field of science and learning acquired through prolonged specialized instruction.

Given that the duties test would be met, the trainers’ exempt status next depends on whether they are paid on a salary basis. Opinion at 5. As noted above, an employee will be paid on a salary basis if he or she receives a predetermined amount that is all or part of their compensation on a weekly or less frequent schedule regardless of the quantity or quality of their work. Here, the trainers are paid a predetermined daily rate and, in the absence of a minimum weekly guarantee, their pay for a given week could fluctuate depending on the number of days they worked in a given week. So, this issue also was not hard for DOL - the trainers are not paid on a salary basis and, therefore, cannot be exempt under the compensation scheme used by the training company.

The company that requested the opinion letter raised the question of whether the hourly payment for the trainers’ work on the development of new content if they were “otherwise” exempt. DOL took this question to ask whether an hourly payment made in addition to a predetermined weekly payment would defeat a finding that an employee was paid on a salary basis. Opinion at 6. DOL responded that it would not so long as the employees are paid a predetermined amount on a weekly or less frequent basis regardless of the quantity or quality of their work. In other words, if an employer pays a worker on a salary basis, it may pay additional compensation to its employees on “a commission, flat, bonus, straight-time or other basis.” Opinion at 6 (citing 29 C.F.R. § 541.604(a)). Of course, this question was largely irrelevant in the context of this scenario because the trainers are not, in fact, paid on a salary basis.

The final question raised by the requester was whether the total compensation requirement of the highly compensated test could be met “if the employee’s pay for the number of weeks worked is proportional to the minimum annual amount required” by the test. Opinion at 2 (describing requester’s questions). DOL’s response first recounted the fact that, in addition to the annual compensation requirement (presently $107,432), exempt status under the highly compensated test first requires that their compensation must satisfy the salary basis and salary level requirements. Opinion at 6. If these requirements are met, DOL stated that there is no exception that would permit a reduction in the annual compensation amount for part-time workers who either work fewer than 40 hours per week or some weeks but not others. DOL stated that the only recognized basis for reducing the annual compensation amount is if the employee “begins work after the year starts or leaves work before the year ends.” Opinion at 6. It should be noted that this question also was irrelevant under the requester’s scenario because its compensation scheme did not satisfy the salary basis test thereby making the highly compensated test unavailable regardless of the total compensation paid.

All told, the DOL did not break any new ground in this opinion letter. However, it provides a useful reminder that employers must take an element-by-element approach to consider whether an employee will be exempt under the FLSA. There are many nuances that complicate the analysis of any given position; however, the analysis always requires the consideration of duties, method of payment, and the amount of pay. Hence, as here, the answer to whether a particular employee might be exempt often may be yes—but no.