Administrative workers may be entitled to minimum wages and overtime compensation unless they meet the Fair Labor Standards Act’s specific exemption requirements. As a general rule, all employees are entitled to be paid minimum wages and overtime pay when they work more than 40 hours in a week. However, the FLSA has several exemptions that allow employers to avoid paying minimum wages and overtime to certain types of employees. For example, someone in a bona fide administrative position is not entitled to minimum wages and overtime, but the administrative worker’s primary job duties must meet very specific requirements.
According to federal regulations, an employee is employed in a bona fide administrative capacity if the following requirements are fully met:
- The administrator must be paid a salary of at least $455 per week;
- The administrator’s primary duty must be to perform office or non-manual office work directly related to management or general business operations of the employer or the employer’s customers;
- The administrator’s primary duty must include the exercise of independent judgment and discretion with respect to matters of significance. See 29 C.F.R. 541.200.
Unless each of those requirements are met, the administrative worker will be entitled to overtime unless they satisfy some other FLSA exemption. In the paragraphs that follow, we will provide you with an overview of the analysis that must go into determining whether these requirements are met. One key point to remember while reading is that it is the employer’s burden to prove that its employee is exempt from the minimum wage and overtime pay provisions of the Act.
First, the employer must show that their manager receives a true salary. As we have discussed in other posts, there are many pitfalls to a salary that can prevent the applicability of the FLSA exemptions. For example, certain deductions may cause an employee who would be otherwise exempt from overtime to be entitled to both minimum wages and overtime pay. If you have had deductions to your pay, you should contact an experienced wage and hour law attorney to make sure that such deductions do not make you eligible for minimum wages and overtime pay. For more information about whether you are being properly paid on a salary, please review this article on the characteristics of a salary.
Second, the employer must prove that your primary duty is to perform office or non-manual work directly related to management or general business operations of the employer or the employer’s customers. An employee will meet this requirement if he or she performs work directly related to running or servicing the business as opposed to performance of work related to the business’ production. For example, a loan officer who collects and analyzes financial information of their customers and helps the customer by determining which financial products meet the customer’s needs could be administratively exempt unless the loan officer’s primary duty is to sell financial products, because the primary duty of sales would be in the production line of the employer’s business rather than within the administrative line of business. The distinction between administrative work and production work is often very difficult to determine and therefore, a detailed analysis of the various circumstances by an experienced attorney is necessary to determine the applicability of the administrative exemption.
Finally, an employee’s primary duty must include the exercise of independent judgment and discretion with respect to matters of significance in order for the administrative exemption to apply. Independent judgment and discretion means the comparison and evaluation of possible courses of conduct and acting or making a decision only after consideration of the possibilities. See 29 C.F.R. 541.202. Although, the discretion need not be absolute, the discretion and judgment of an exempt administrative worker must be free from immediate supervision and review. The judgment and discretion may not include routine decisions that involve the application of well-established techniques, procedures or standards described in employee manuals. For example, an employee of a government assistance program who analyzes a person’s financial circumstances to determine whether they are eligible for benefits is not likely exercising the requisite level of independent judgment and discretion, but rather, is simply applying their employer’s well-established procedures to determine eligibility. Courts will generally review all of the circumstances to determine whether a specific exemption applies; courts will apply the following factors, among others, when determining whether or not an employee’s primary duty includes the exercise of independent judgment and discretion:
- Whether the employee has the 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;
- Whether the employee has the authority to commit the employer in matters that have a significant financial impact;
- Whether the employee has the authority to waive or deviate from established policies and practices without prior approval;
- Whether the employee provides consulting 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.
As you can see, determining whether or not an employee is an exempt administrative worker is not easy. If you are an office worker or otherwise classified as an exempt employee and have questions about how you are being compensated, contact an experienced wage and hour employment lawyer today.