The Administrative Exemption
UPDATED: June 19, 2018
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The administrative exemption is a qualification under both state and federal law which exempts certain employees from receiving overtime wages. In order to qualify for administrative exemption, the employee must be paid on a salary basis, and meet minimum annual salary requirements. When an employee meets these first two requirements, whether he falls within the administrative exemption will depend on the duties at work. To determine whether an employee falls within the administrative exemption, courts consider general concepts about the nature of the employee’s job, such as the type of work performed; the impact the employee's work has on the overall company; and the level of discretion given to the employee.
In disputes about whether the employee falls within the administrative exemption, and therefore is not entitled to overtime pay, the burden is on the employer to show qualification for exemption. An employee that has been misclassified under the administrative exemption and has worked over 40 hours in any week is entitled to recover any unpaid overtime from his or her employer.
Type of Work
To qualify under the administrative exemption, the employee must perform office, or non-manual labor duties that relate to the management policies or general business operations of the employer. An administrative employee will usually be responsible for the support of manual-labor, or lower level employees. This does not always mean that the employee should oversee the duties of another, but the job must involve a managerial level of work above the production level of a business. The job will generally involve duties that benefit the overall operation of the company.
For example, an employee doing direct sales for a company by calling potential customers directly would likely not qualify under the administrative exemption. On the other hand, an individual in charge of marketing or advertising, i.e. designing a concept for the direct sales employees to follow, is more likely to qualify under the administrative exemption.
Employee Level of Discretion
The office work of an administrative employee must be of high significance, or considerable importance, in the context of the company for the employee to qualify under administrative exemption. A job of considerable importance means that the employee must be able to use their independent judgment and discretion to make important decisions that affect the company as a whole.
In other words, a secretary in charge of answering phones, organizing files, and ordering supplies in a large company would likely not meet the level of responsibility needed to meet the administrative exemption. However, an employee in charge of the company finances, human resources, legal department, bookkeeping and taxes, public relations, or database/records maintenance is more likely to use the level of discretion needed to fall within the administrative exemption.
Actual Duties Performed
It is important to remember that it is the nature of the duties rather than the label the employer gives the employee's employment position that qualifies an employee as exempt from overtime under the administrative exemption. This means that giving a clerical worker the minimum salary requirements and the job title of administrative assistant, when he is only in charge of answering phones, will not exempt the employee from overtime.
This also means that if there is a discrepancy between an employee’s written job description, and what the employee actually does, this may mean a misclassification. For example, suppose an employee is hired as a manager for a boot-making company, and the written job description entails hiring, firing, and scheduling duties, as well as general on-the-job oversight. However, if the company fails to hire enough machine workers and the manager is forced to spend 75% of her 60 working hours per week on the machines making boots, the manager is no longer working within her job duties and will likely no longer qualify under the administrative exemption. If she is no longer qualified under her actual work duties, she is entitled to overtime pay.
However, employees cannot purposefully misclassify themselves to qualify for overtime. For instance, suppose instead of the company failing to hire enough workers, the manager failed to schedule enough workers, leading to her working on the machines 75% of her 60 working hours per week. Since the employee is at fault for having to perform non-managerial duties, this does not disqualify her from the administrative exemption.