On March 10, 2025, the U.S. Supreme Court denied a request by F.W. Webb (“Webb”), a nationwide wholesale plumbing and HVAC supply company, to review a First Circuit decision upholding a ruling that Webb’s Inside Sales Representatives (“ISRs”) were not exempt “administrative” employees under the Fair Labor Standards Act (“FLSA”), and thus were entitled to overtime compensation.
Under the administrative exemption, employees are exempt from FLSA overtime requirements if: (1) they are compensated on a salary basis; (2) their 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) their primary duty includes “the exercise of discretion and independent judgment with respect to matters of significance.” Only the second element—whether the ISRs’ primary duty was “directly related to the management or general business operations” of Webb—was at issue in the case of the ISRs.
In its decision, the First Circuit affirmed the lower court’s reliance on a “relational analysis,” which the First Circuit first adopted in 2023 and which focuses on an employer’s business purpose, rather than the nature of the employees’ jobs, to determine if the employees are exempt. Put differently, as stated in Webb’s petition, the relational analysis “examines whether an employee’s primary duties are focused on carrying out the business’s principal production activity or on other ancillary matters related to the business’s overall operations and management.” If it is the former, then the employee is less likely to be exempt.
Relying solely upon the relational analysis, the First Circuit determined that Webb’s ISRs’ primary duty is “to help sell Webb’s products” and that this duty is “directly related to Webb’s business purpose of making wholesale sales of its products.” Consequently, the First Circuit held that the ISRs were not exempt under the FLSA’s administrative exemption.
Webb challenged the First Circuit’s decision on grounds that it improperly made “the business purpose of the employer . . . dispositive to the second element of the FLSA’s administrative exemption.” In other words, according to Webb, the First Circuit erred in using the relational analysis to make its determination because the relational analysis focused only on Webb’s business purpose (i.e., to sell products) and excluded consideration of the ISRs’ other job duties, which extend beyond making sales.
According to Webb’s petition for review, ISRs, in addition to making routine sales, provide consultation to customers regarding which plumbing and HVAC systems would best enable Webb’s customers to meet their own customer needs. ISRs also advise Webb’s managers and sales teams “on technical questions” and help “keep tabs on” and “develop strategies to beat” Webb’s competitors. Additionally, ISRs provide “concierge” services to help Webb’s customers after the sale “by tracking inventory, monitoring shipping, interacting with third-party manufacturers, and addressing customer concerns and complaints.”
Webb also argued that the First Circuit’s reliance on the relational analysis ran afoul of the FLSA and its regulations because, according to Webb, no statutory or regulatory basis exists for relying solely on an examination of the employer’s business purpose, rather than the inherent nature of the employee’s duties, to determine whether an employee satisfies the administrative exemption.
In its Petition, Webb noted that the First Circuit’s use of the relational analysis as determinative of the second element of the administrative exemption conflicted with decisions from the Ninth and Fourth Circuits. Webb also noted that the Second and Seventh Circuits take a similar approach to the First Circuit’s approach, thus creating a significant split among the federal Courts of Appeals.
The Supreme Court declined to hear the case, but it did not explain why.
The First Circuit’s decision in Webb, and the Supreme Court’s denial of review, mean that employers who operate in the First Circuit (and potentially the Second and Seventh Circuits, which use the same approach) should be mindful of employees they currently classify as exempt administrative employees. In these Circuits, if the employees’ primary duty “directly relates to the business purpose of the employer,” such as making sales for a wholesaler, courts may not look beyond this to other duties the employee may have that relate to the running or servicing of the business to determine whether the employee is exempt. Employers thus may want to review their administrative exempt employees’ job duties to determine whether those duties relate to the employer’s business purpose, as opposed to managing or servicing the business. Such a review is necessarily fact-intensive and employers should consult outside counsel to determine the potential applicability of any exemption under the FLSA.