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Under the FLSA, in order for an administrative employee to be considered exempt, the following criteria must be met:
- The employee must receive weekly compensation at a rate of $455 per week or more.
- The employee’s job responsibilities must be office or non manual in nature. It must be considered part of the business’s general operations or that of the employer’s customers.
- The employee ‘s primary duty allows for decision making and using their discretion in daily business operations.
“Primary duty” means the most important duty that the employee performs. Determining the employee’s primary duty is done by taking a look at the facts in a particular case with the emphasis being on the type of worker the employee does as a whole.
Directly Related to Management or General Business Operations
In order to meet “directly related to management or general business operations” requirement, the job responsibilities of the exempt must be directly related to assisting with the functioning and or servicing of the business. Unlike an employee who works on an assembly line or employee who sells a product in a store, the exempt employee would be involved in the “general business operations” on a daily basis. General business operations include but are not limited to accounting, budgeting, quality control, purchasing, procurement, managing personnel, marketing, research, advertising, labor relations and other general business activities.
An administrative employee may be exempt from overtime if the employee’s most important job responsibility is work directly related to the management or general business operations of their employer’s customers. A financial consultant or tax expert working on behalf of their employer for a customer would be exempt.
Discretion and Independent Judgment
In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. The term must be applied in the light of all the facts involved in the employee’s particular employment situation, and implies that the employee has authority to make an independent choice, free from immediate direction or supervision. Factors to consider include, but are not limited to: 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; 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, and other factors set forth in the regulation. The fact that an employee’s decisions are revised or reversed after review does not mean that the employee is not exercising discretion and independent judgment. The 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.
Educational Establishments and Administrative Functions
The administrative exemption may also apply to persons involved in academic instruction or training in an educational establishment and whose salary or compensation, on a weekly basis is at least $455 a week.
These administrative employees include a superintendent or other head of an elementary or secondary school system, any administrative worker responsible for administering curriculum, the quality and method of instruction, testing and measuring of achievement of the student body, establishing the grading systems and other aspects of the educational process. Principals, vice-principals, department heads and other educational administrative workers who are paid at least $455 per week in compensation would qualify for the administrative exemption.