The FLSA’s Administrative Exemption

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Employees must be classified as “exempt” or “non-exempt” as governed by the Fair Labor Standards Act or the FLSA. When classified as non-exempt which is most common, employees are eligible for minimum wage and overtime pay. There are many categories of exemptions. Today we are going to focus on one that is often misused, the administrative exemption.

It is important to know that job title does not influence classification. To be eligible for the employee administration exemption, all of the following tests should be met:

  • The employee should be compensated on a salary basis
  • The salary should not be reduced based on the number of hours worked in a particular week, except as specifically allowed under the FLSA
  • Said salary is no less than $455 per week as of 2015. Please note that there is a proposal to increase this level drastically to $970 per week. That change will likely occur mid to late 2016.
  • Primary duties are non-manual and are directly related to the management or general business operations
  • Must include the exercise of discretion and independent judgement with respect to matters of significance

Ultimately this administrative exemption is intended for fairly high-level employees, who’s job focus is to keep the business running. Start by considering whether the employee helps with the underlying business operations or has a more of an operational or production role. If in the latter two categories the employee is likely non-exempt. Routinely ordering office supplies, even selecting which vendor to buy supplies from, is not likely to be considered high-level enough to qualify the employee for the administrative exemption.

Additional considerations:

  • This exemption is more likely if the employee would be considered “in charge” or can interpret policy without authorization
  • Misclassifications are costly and can result in attorneys’ fees, court costs, and double back wages for unpaid overtime
    • Remember: no one will get in trouble for paying minimum wage and overtime
  • Some states have stricter requirements to meet exemption

Properly classifying employees can be a challenge but it is a challenge you cannot afford to avoid.

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