Episode 6: Professional Exemption

Hear how a decades-old landmark law guides today’s employers on some of the most pressing issues facing companies. Bill Martucci, who leads Shook, Hardy & Bacon’s national Employment Litigation and Policy Practice, shares insight in these bite-sized podcasts focusing on the Fair Labor Standards Act. Whether you’re a seasoned general counsel or just finding your way through the myriad of state and federal wage and hour laws, listening to Bill’s soothing discourse is time well spent.

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You’re listening to “A Window into Wage and Hour,” a podcast series that shines the light on time and money laws impacting your business today.

Welcome to our podcast, A Window into Wage and Hour. This is Bill Martucci, the practice group leader for the Shook Hardy National Employment Litigation & Policy practice. And today, as we continue our wage and hour podcast series, we will look at the third major exemption under the white-collar exemptions. Of course, we’re looking at the Fair Labor Standards Act, and we are looking at the Professional Exemption.

As we know, there must be a salary basis to qualify for the white-collar exemptions, such as the executive exemption, the administrative exemption, and—our focus today—the professional exemption. As we look at the professional exemption today, we are going to find a few categories that are very well spelled out in the Department of Labor regulations.

It may be helpful to begin by noting that the word “professional,” as we use it in common parlance today, refers to people who are doing their job well, who go about it with some sense of commitment, and a standard of excellence. But with respect to the Fair Labor Standards Act, as it was enacted in 1938, the word “professional” is used much more in a traditional, limited sense and is not nearly as broadly based as we would use it today.  So when we think about professional as an exemption under the Fair Labor Standards Act, we will consider the Learned Professional Exemption, the Creative Professional Exemption, and certain special categories recognized as professions such as the teaching profession.

Under the Learned Professional Exemption, to be exempt in that category, one must be paid on a salary basis, as we’ve noted is required in the other categories of the so-called “white collar exemptions.” And under the Learned Professional Exemption, one must have as her or his primary the performance of work requiring advanced knowledge such as to be predominately intellectual in character and which would include the consistent exercise of discretion and judgment. In addition, there must be advanced knowledge in a field of science or learning and the advanced knowledge must be customarily acquired by that prolonged course of specialized intellectual instruction.

With respect to these aspects, there again must be this dimension of primary duty. We know primary duty is essential to the analysis with respect to the exemptions, and here, what that means is that the primary duty of the employee must be such that the work requires advanced knowledge, and, as we have stated, a field of science or learning customarily acquired by a prolonged course of specialization, intellectual instruction, consistent with the exercise of discretion and judgment.

Lawyers and doctors are commonly considered exempt under the Learned Professional Exemption. But what about other fields, such as accounting? And what about newer accountants? Well, one case that’s fascinating from the Second Circuit in New York involved KPMG. In that case, the court undertook a very careful analysis and noted that certified public accountants under the Department of Labor regulations generally meet the exercise of discretion and judgment that is required for the Learned Professional Exemption. The case is fascinating in that the case involved a deep dive, if you will, into the actual work of younger, newer, less experienced accountants. At the heart of the argument for asserting, perhaps, the lack of the exemption in this context, was the position advanced that that the audit associates, for example, did not, according to plaintiffs’ theory, exercise discretion; that, really, the work they did, arguably, as the plaintiffs’ lawyers pursued the case, was characterized as routine; that  there was pervasive supervision; and that the work, if you will, in that context, was thought to be not such as to require the exercise of independent judgment and discretion within the Learned Professional Exemption qualifications. 

The Second Circuit Court of Appeals reviewed the arguments carefully and found that the Professional Exemption did apply in this context and that there was, in fact, the exercise of a great deal of independence and discretion within certain general guidelines. 

The case is so instructive in that it demonstrates how the facts are significant and there will be deep dives, in certain situations, to determine whether discretion and independent judgment truly is exercised.

Other aspects of the Professional Exemption include the Creative Professional Exemption. Under the Creative Professional Exemption, the look, with respect to primary duty, is to be related to invention, imagination, originality in a recognized field of artistic or creative endeavor. And, for example, in the analysis of originality or talent and imagination, journalists are commonly considered exempt, if their primary duty involves the use of their imagination, originality and talent, which, of course, we realize to be a fine journalist those qualities are critical.

So, as we step back, we note that the Professional Exemption is meaningful, but it is fairly narrowly circumscribed—if you will, it’s “cabined in” to the extent that it is, first and foremost, the Learned Profession Exemption, and for those that are truly in the creative professional fields that involve invention, imagination, originality, or talent, then the Creative Professional Exemption applies. Again, the exemption is not nearly as broad as we use it in language today, but it’s still a very meaningful part of the primary white-collar exemptions.

Thanks so much for today’s effort. We will talk again soon.