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The Administrative Exemption to Overtime Under the FLSA

The administrative exemption of the Fair Labor Standards Act (“FLSA”) is one of the most litigated areas of overtime law. Because the administrative exemption regulations can be confusing, it provides a prime opportunity for employers to violate the law. One of the elements of proving the administrative exemption is evidence that the employee exercised discretion and independent judgment with respect to matter of significance.

In order to establish the narrowly construed affirmative defense of the administrative exemption, employers must also show, with clear and convincing evidence, that the employee’s primary duty involved the performance of exempt work involving “the exercise of discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200. Such work is defined as involv[ing] the comparison and evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.” 29 C.F.R. § 541.202(b). Additionally, the following factors should be considered when determining whether an employee exercises the requisite discretion and independent judgment:

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 the 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).

Many of these activities pertain to whether the employee exercised discretion as to matters affecting the management or operation of the business, or was involved in planning business objectives. Other factors relate to whether an employee had the authority to bind the company or negotiate on behalf of the company. Furthermore, “[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).

In order to determine if you are misclassified as a non-exempt administrative employee, contact us for an immediate, free consultation.