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(Download free Hours of Work model policy
including HR best practices and supporting legal background.) A:
Under Fair Labor Standards Act (FLSA) regulations, workers are employed in an administrative capacity and exempt from the FLSA minimum wage and overtime requirements if they are compensated on either a salary or fee basis at a rate of at least $455 per week (exclusive of board, lodging, or other facilities), and their work meets both
of the following requirements:
1. Their primary duty consists of the performance of office or nonmanual work directly related to the management or general business operations of their employer or of their employer’s customers. To meet the “work directly related to the management or general business operations” standard, an employee must perform work directly related to assisting with the running or servicing of the business.
Examples include work in functional areas such as human resources; finance; accounting; auditing; insurance; quality control; purchasing; marketing; research; safety and health; employee benefits; labor relations; public relations; computer network, internet, and database administration; legal and regulatory compliance; and similar activities. The regulations also note that some of these activities may be performed by employees who also would qualify for another exemption.
2. Their primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. This standard requires the comparison and evaluation of possible courses of conduct, and acting or making a decision, after the various possibilities have been considered. “Matters of significance” refer to the level of importance or consequence of the work performed. The regulations list ten factors to consider:
a) whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices;
b) whether the employee carries out major assignments in conducting the operations of the business;
c) 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;
d) whether the employee has authority to commit the employer in matters that have significant financial impact;
e) whether the employee has authority to waive or deviate from established policies and procedures without prior approval;
f) whether the employee has authority to negotiate and bind the company on significant matters;
g) whether the employee provides consultation or expert advice to management;
h) whether the employee is involved in planning long- or short-term business objectives;
i) whether the employee investigates and resolves matters of significance on behalf of management; and
j) whether the employee represents the employer in handling complaints, arbitrating disputes, or resolving grievances.
Note that the regulations state that employees can be considered to be exercising the necessary discretion and independent judgment even if their decisions or recommendations are reviewed at a higher level. Thus, decisions may consist of making recommendations for action rather than the actual taking of action. However, the employee must be doing more than simply applying well-established techniques, procedures, or specific standards described in manuals or other sources.
(Download free Hours of Work model policy
including HR best practices and supporting legal background.)
The FLSA regulations contain several examples of jobs that may meet this exemption depending on their specific job duties, including executive or administrative assistants to business owners or senior executives, if substantial authority has been delegated to them. So, the key likely for this employee is how much discretion and independent judgment she actually exercises in her job duties.
If she is really just a glorified secretary and does not have any decision-making authority, she likely will not meet the administrative exemption. It may be most useful to compare her day-to-day activities with the list of ten factors provided by the FLSA regulations. In addition, it is always wise to have your attorneys review any borderline compliance fact situations.
Robin Thomas, J.D.
Personnel Policy Service, Inc.
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