This scenario is based on an actual court case (Patty Lee Smith versus Johnson & Johnson). The issue is whether Phipps’ position is exempt from the FLSA. The court decided the outside sales exemption did not apply to Smith but the administrative exemption did apply. The administrative employee test has three requirements. While the company agreed that Phipps could be defined as an administrative employee under the first requirement: Compensated on a salary or fee basis at a rate of not less than $455 per week. But they disputed his qualification for that exemption under the remaining two requirements: (2) whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or employer’s customers and (3) Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of…show more content… The court found the administrative exemption applies to Phipps. Phipps’ position required him to form a strategic plan designed to maximize sales in the territory. The court felt this requirement satisfied the “directly related to the management or general business operations of the employer” provision of the administrative employee exemption because it involved a high level of planning and foresight, and the strategic plan that Phipps developed guided the execution of the remaining duties. In terms of exercise of discretion and independent judgment with respect to matters of significance, the court found that Phipps executed nearly all of his duties without direct oversight. Phipps could be viewed as the owner of his own business because he could run his territory as he saw fit. Thus, Phipps is subject to the administrative employee exemption and not
