Change in Duties did not Warrant Non-exempt Reclassification

May 4, 2006 ( - The 1st US Circuit Court of Appeals has determined that a change in a salesman's job duties that caused him to spend more time in the office and handling customer service problems did not qualify him for overtime pay.

At issue was whether the employer, Verizon Communications, “substantially controlled” James Palmieri’s hours and places of work, according to the court opinion.   The court noted that, while the change in job responsibilities had an effect on Palmieri’s hours and places of work, he still had substantial freedom in when and where he did business.

According to the opinion, Palmieri’s time spent on service-related issues was evidence of his own desire to maintain and expand his customer accounts and not any control exerted by Verizon.

In addition, the court said, a finding for Palmieri could lead to situations where temporary assignments of new tasks could move employees in and out of exempt status for brief periods of time. The opinion stated that “…claims could be made at any time that a special, temporary work assignment made it inconvenient or impossible for an employee to maintain the level of his usual commission-based workload and effectively, though not explicitly, required “attendance” during given days and hours.”

For this reason the court confined the term “substantially controlled” to situations in which the employer actually dictates specific hours and locations for work.

Palmieri had reached one of the highest sales positions at Verizon and maintained a specific set of clients for which he made repeat sales.   Verizon had a group that handled customer complaints, allowing salespersons to dedicate their time to making sales.   According to the court opinion, Palmieri stated that he managed his job as if it were his own business and controlled his own hours and worked outside of the office most of the time. A considerable portion of Palmieri’s pay was in the form of commissions.

When Verizon merged with Bell Atlantic, Palmieri was given additional clients and also the responsibility of handling customer service problems.   He told the court that this changed his schedule to the point where he spent 70% of his time in the office handling customer service issues.   In addition, his sales quota was increased and he felt that the quota could not be met considering his additional service duties.

He took a leave of absence in May 2002 and was fired in August 2002.   Two years later he sued the company for overtime pay under the Fair Labor Standards Act and under Maine law, claiming the company should have reclassified him as non-exempt when his job duties changed.

A district court granted summary judgment in favor of Verizon and Palmieri appealed.   The appellate court affirmed.

The opinion in Palmieri v. Nynex Long Distance Co. can be found here .