Administrative Exemption

Dolley Law, LLC represent clients with claims or questions about the administrative exemption from the pay requirements of the Fair Labor Standards Act (“FLSA”). This exemption applies to workers “employed in a bona fide…administrative…capacity.” 29 U.S.C. § 213(a)(1). Our attorneys know the relevant regulations and considerations that impact a determination of whether an individual meets the requirements for the administrative exemption. With this knowledge, we can help advise you regarding your legal rights and obligations.

Who is “employed in a bona fide administrative capacity?”

To qualify as an exempt administrative employee, an individual must:

1. be compensated on a salary or fee basis at a rate not less than $684 per week;
2. have the primary job duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
3. have the primary job duty of exercising discretion and independent judgment with respect to matters of significance.

29 C.F.R. § 541.200. “The phrase ‘directly related to the 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). It includes “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; [and] legal and regulatory compliance.” 29 C.F.R. § 541.201(b).

“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.” 29 C.F.R. § 541.202(b). Factors to consider include:

• 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).

Nonetheless, “[t]he exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources.” 29 C.F.R. § 541.202(e). “The exercise of discretion and independent judgment also does not include clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work.” Id. Finally, “[a]n employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly.” 29 C.F.R. § 541.202(f) (noting “an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance because improper performance of the employee’s duties may cause serious financial loss to the employer”).

Regulations promulgated by the United States Department of Labor further elaborate on the meaning and scope of the administrative exemption by providing a series of examples. See, e.g., 29 C.F.R. § 541.203. Insurance claims adjusters, financial services analysts, human resource managers, and executive assistants to business owners or executives of a large business will likely meet the duties requirements for the administrative exemption. 29 C.F.R. §§ 541.203(a), (b), (d).

On the other hand, an individual performing “ordinary inspection work generally does not meet the duties requirements for the administrative exemption.” 29 C.F.R. § 541.203(g). This is because “[i]nspectors normally perform specialized work along standardized lines involving well-established techniques and procedures which may have been catalogued and described in manuals or other sources” and “[s]uch inspectors rely on techniques and skills acquired by special training or experienced.” Id. And this is true even though “[t]hey have some leeway in the performance of their work but only within closely prescribed limits.” Id.

And similar inspectors, investigators, and specialists—whose work “involves the use of skills and technical abilities in gathering factual information, applying known standards or prescribed procedures, determining which to procedure to follow, or determining whether prescribed standards or criteria are met”—“generally do not meet the duties requirements for the administrative exemption because their work typically does not involve work directly related to the management or general business operations of the employer.”See 29 C.F.R. § 541.203(j).

Ultimately, questions regarding employee duties for purposes of determining the applicability of the administrative employee exemption will necessitate fact-intensive inquiries regarding, among other things, the business in question, its structure, its employees, and its services.

Contact Us

If you would like to discuss the potential applicability of the administrative employee exemption in further detail, contact Dolley Law, LLC by phone at (314) 645-4100 or by e-mail at kevin@dolleylaw.com.