Do Your Employees Qualify for the FLSA’s Administrative Exemption?

by Mammoth Team on June 30, 2016

Administrative Exemption

If you’re having trouble staying on top of all the exemptions under the Fair Labor Standards Act (FLSA), you’re not alone.  They can be confusing for organizations of any size.

In part one of this three-part series, we’ll look at one of the most common White Collar exemptions: the Administrative exemption. Employees who qualify are exempt from the minimum wage and overtime provisions of the FLSA.

Administrative Exemption

To qualify for this White Collar exemption, an administrative employee needs to pass three tests:

  1. They must perform certain duties on a regular basis
  2. They must be paid on a salary basis, meaning they make the same EVERY week no matter how many hours they work or the quantity or quality of their work
  3. They must be paid at least the minimum exempt employee salary as determined by the Department of Labor.

The duties test is the trickiest for this exemption.

It’s important to note that job title does not influence the classification. In fact, someone with the word “administrative” in their title very likely doesn’t qualify for this exemption.

To be eligible for the exemption, the employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and must include the exercise of discretion and independent judgment with respect to matters of significance.

Ultimately, this administrative exemption is intended for fairly high-level employees whose job focus is to "keep the business running." An example of an employee who would NOT qualify is an administration assistant who gets to decide between shipping via USPS or FedEx. Although this is non-manual work, has a bit to do with business operations, and there is some discretion in choosing between the post office and FedEx, the position doesn’t have to do with the management of the company, and the fact that the employee’s choices have some impact on the bottom line doesn’t mean they rise to being matters of significance.

It’s important to be aware that improperly classifying  employees carries significant financial risk. The risks include potential attorneys’ fees, government fines, and double back wages for unpaid overtime during the period when an employee was incorrectly categorized as exempt.

Some states also have stricter requirements for which duties may qualify for the administrative exemption.

Accurately classifying employees can be a challenge, but it’s one you can’t afford to ignore.

If you have questions or need help with employee classification, sign up for a free, 7 day trial! You’ll have full access to our team of on-demand HR pros and the HR Support Center, where you can get help with everything from FLSA compliance, to everyday employee issues, to handbooks.

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Topics: Compliance, Wage & Hour

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