FLSA2005-45 — Staffing manager and section 13(a)(1)

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

October 25, 2005 FLSA2005-45

Dear
Name*,

This is in response to your letter requesting an opinion concerning whether Staffing Managers
employed by your client, Company X, qualify for the executive or administrative exemption under
section 13(a)(1) of the Fair Labor Standards Act (FLSA). You seek this opinion in light of the final
rules at 29 C.F.R. Part 541 implementing minimum wage and overtime pay exemption that went into
effect on August 23, 2004.

Section 13(a)(1) of the FLSA provides a complete minimum wage and overtime pay exemption for
any employee employed in a bona fide executive, administrative, or professional capacity, as those
terms are defined in 29 C.F.R. Part 541. An employee may qualify for exemption if all of the pertinent
tests relating to duty, salary level and salary basis, as discussed in the appropriate section of the
regulations, are met. Please note that revisions to 29 C.F.R. Part 541 were published as a final rule
in the Federal Register on April 23, 2004 (69 Fed. Reg. 22122) and became effective on August 23,
2004 (copy enclosed).

You state that Company X is a temporary staffing agency. It provides temporary labor in various
clerical, accounting, human resource, computer and similar white collar functions to clients who have
a need for such personnel. The primary duty of a Staffing Manager is to manage this function. In
doing so, a Staffing Manager confers with the client to evaluate what kind of skills are needed: for
example, will a certified public accountant be necessary, or will someone with basic accounting and
bookkeeping skills fulfill the services required. Once a job description is decided, the Staffing
Manager negotiates the terms for the placement and the fee for Company X. Thereafter, the Staffing
Manager recruits, interviews and hires the employee to provide the services. In recruiting and
selecting employees to fill assignments, Staffing Managers do not simply check off a few minimal
requirements, but must evaluate the potential worker’s education, skills acquired in prior
employment, personality fit and ability to work within a particular organization. Staffing Managers
then make recommendations to the client companies for placement of employees at particular
assignments. The Staffing Managers’ recommendations are typically followed. Staffing Managers
also negotiate the wage to be paid by Company X to the employee. Once the employee is placed,
the Staffing Manager continues to supervise the services of the employee with the client. The
Staffing Manager stays in contact with the client and the employee to evaluate the employee’s
performance. As the situation calls for, the Staffing Manager decides whether counseling or
disciplining an employee is necessary. If the employee fails to respond to counseling or discipline,
the Staffing Manager may decide to transfer the employee to another placement, or if necessary,
terminate his or her employment with Company X. Staffing Managers typically supervise about thirty
employees. Staffing Managers have full authority to discipline, fire, promote and assign to various
tasks the employees they supervise. Although the employees of Company X report to a supervisor at
the client location for the details of their work, they report to the Staffing Manager for matters relating
to length of assignment; position held; performance issues; complaint and grievance issues;
counseling; discipline; pay adjustments and termination of employment. In carrying these duties,
Staffing Managers work under very little supervision; they make decisions and accomplish their tasks
without prior approval and with broad range of discretion.

In addition, Staffing Managers decide if advertising for the position is needed to find certain
candidates. They determine where to place the advertisement and negotiate the costs of such
placement. Staffing Managers are paid at least $455 per week on a salary basis.

As discussed in 29 C.F.R. § 541.200(a), the term “employee employed in a bona fide administrative
capacity” in section 13(a)(1) of the FLSA means “any employee”:

1) Compensated on a salary or fee basis of at least $455 per week ... ;
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U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

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 the employer’s customers;
and
3) Whose primary duty includes the exercise of discretion and independent judgment with respect
to matters of significance.

Id. “The phrase ‘directly related to management or general business operations’ refers to the type of
work performed by the employee. To meet this requirement, an employee must perform work directly
related to assisting with the running or servicing of the business, as distinguished, for example, from
working on a manufacturing production line or selling a product in a retail or service establishment.”
29 C.F.R. § 541.201(a).

“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.” 29 C.F.R. § 541.201(b).

“An employee may qualify for the administrative exemption if the employee’s primary duty is the
performance of work directly related to the management or general business operations of the
employer’s customers. Thus, for example, employees acting as advisers or consultants to their
employer’s clients or customers (as tax experts or financial consultants, for example) may be
exempt.” 29 C.F.R. § 541.201(c).

“To qualify for the administrative exemption, an employee’s primary duty must include the exercise of
discretion and independent judgment with respect to matters of significance. In general, the exercise
of discretion and independent judgment involves the comparison and the evaluation of possible
courses of conduct, and acting or making a decision after the various possibilities have been
considered. The term ‘matters of significance’ refers to the level of importance or consequence of the
work performed.” 29 C.F.R. § 541.202(a).

“The phrase ‘discretion and independent judgment’ must be applied in the light of all the facts
involved in the particular employment situation in which the question arises. Factors to consider
when determining whether an employee exercises discretion and independent judgment with respect
to matters of significance include, but are not limited to: whether the employee has authority to
formulate, affect, interpret, or implement management policies or operating practices; whether the
employee carries out major assignments in conducting the operations of the business; whether the
employee performs work that affects business operations to a substantial degree, even if the
employee’s assignments are related to operation of a particular segment of the business; whether
the employee has authority to commit the employer in matters that have significant financial impact;
whether the employee has authority to waive or deviate from established policies and procedures
without prior approval; whether the employee has authority to negotiate and bind the company on
significant matters; whether the employee provides consultation or expert advice to management;
whether the employee is involved in planning long or short-term business objectives; whether the
employee investigates and resolves matters of significance on behalf of management; and whether
the employee represents the company in handling complaints, arbitrating disputes or resolving
grievances.” 29 C.F.R. § 541.202(b).

As the preamble to the final rule explained, 69 Fed. Reg. 22122, 22143 (April 23, 2004) (copy
enclosed), federal courts generally find that employees who meet at least two or three of these
factors mentioned above are exercising discretion and independent judgment, although a case-by-
case analysis is required.

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U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

In performing the Staffing Managers’ primary duty of recruiting, hiring and managing the temporary
labor pool of Company X’s clients, the Staffing Managers perform work in the functional areas of
personnel management, human resources and labor relations. See 29 C.F.R. § 541.201(b). Thus, it
appears that the Staffing Managers’ primary duty meets the requirement that such office or non-
manual work be directly related to the management or general business operations of the employer’s
clients.

Whether a Staffing Manager exercises discretion and independent judgment within the meaning of
the regulations would depend, to a great extent, on the amount of selectivity exercised in matching
persons seeking employment with the requirements of the job opening and in deciding which
employee to send to any particular employer for consideration, as opposed to referring to the
employer several prospects who generally meet the qualifications for the job. See WH Opinion
Letters dated August 11, 1970 and October 14, 1983 (copies enclosed). It appears that Staffing
Managers who recruit; interview; hire and recommend placement of employees to particular
assignments; manage the client’s temporary labor pool; provide advice on personnel issues; handle
complaints; resolve grievances; and terminate employees on behalf of the client’s management,
exercise the requisite discretion and independent judgment with respect to matters of significance.
See 29 C.F.R. § 541.202(b). The final rule identifies human resources managers, who perform
similar duties interpreting and implementing employment policies, as exempt and it distinguishes as
nonexempt those personnel clerks who simply screen applicants to obtain data regarding
qualifications and to identify those who do not meet the minimum required standards. See 29 C.F.R.
§ 541.203(e).

Based on analysis of the information provided, it is our opinion that Staffing Managers employed by
Company X qualify for the administrative exemption under the final rule at 29 C.F.R. § 541.200. We
are unable to make a determination regarding the applicability of the executive exemption to Staffing
Managers in this case, because there is insufficient information as to whether the Staffing Managers’
primary duty is management of a customarily recognized department or subdivision with a
permanent status and a continuing function, or a mere collection of employees assigned from time to
time to a specific job or series of jobs. See 29 C.F.R. § 541.103(a).

This opinion is based exclusively on the facts and circumstances described in your request and is
given based on your representation, express or implied, that you have provided a full and fair
description of all the facts and circumstances that would be pertinent to our consideration of the
question presented. Existence of any other factual or historical background not contained in your
letter might require a conclusion different from the one expressed herein. You have represented that
this opinion is not sought by a party to pending private litigation concerning the issue addressed
herein. You have also represented that this opinion is not sought in connection with an investigation
or litigation between a client or firm and the Wage and Hour Division or the Department of Labor.
This opinion is issued as an official ruling of the Wage and Hour Division for purposes of the Portal-
to-Portal Act, 29 U.S.C. § 259. See 29 C.F.R. §§ 790.17(d), 790.19; Hultgren v. County of Lancaster,
913 F.2d 498, 507 (8th Cir. 1990).

We trust that this letter is responsive to your inquiry.

Sincerely,

Alfred B. Robinson, Jr.
Deputy Administrator

Enclosures: 29 C.F.R. Part 541
69 Fed. Reg. 22143
WH Opinion Letters dated August 11, 1970 and October 14, 1983

* Note: The actual name(s) was removed to preserve privacy in accordance with 5 U.S.C. 552 (b)(7).
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