Overtime for Administrative Employees?

While most employees are entitled to overtime under the Fair Labor Standards Act (FLSA’s), there are exceptions, known as “exemptions”.  One such exemption is the administrative exemption.  An employee who satisfies the requirements for this exemption need not receive overtime for hours worked over 40 in a work week.

To be covered by the administrative exemption, an employee has to satisfy three (3) requirements:

(a)    the employee must be compensated with a salary not less than $455 per week;

(b)   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

(c)    the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Notably, an employee must satisfy all three requirements to be exempt from overtime.

The first requirement is self-explanatory.  However, President Obama recently announced that he intends to raise the $455 per week threshold.  This would mean that employees making more than $455 per week would not fall within the exemption and therefore be entitled to overtime.  The new threshold has not been announced, but will have the effect of more employees being eligible for overtime.

An employee’s primary duty is the main or most important duty he or she performs.  There is no set amount of time an employee has to spend on certain duties for them to be considered his primary duties.  Instead, in addition to considering the amount of time spent on specific duties, courts also look at the relative importance of the exempt duties as compared to other types of duties performed by the employee.

Generally, 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. Other considerations regarding whether an employee exercises independent judgment are whether: (a) the employee is free from direct supervision; (b) has trouble shooting or problem solving responsibilities for the company; (c) sets budgets; or (d) has contact with the public or is considered the “face” of the company.  The fact that an employee’s decisions may be revised or reversed after review does not mean that the employee is not exercising discretion and independent judgment.

These requirements are very fact-specific and need to be evaluated on a case-by-case basis.  In addition, with the Obama administration’s new regulations, percentages will be set so that an employee who does clerical work the majority of the time, but sometimes performs administrative functions involving discretion and independent judgment, will still be eligible for overtime.  Again, this will increase the number of employees eligible for overtime.

The administrative exemption is one of the more vague exemptions under the FLSA.  Consequently, employers frequently misapply it.  Shavitz Law Group, P.A. has handled numerous claims relating to this exemption.  If you desire to discuss whether you may be misclassified as exempt from overtime, and therefore entitled to overtime wages, please contact us at 800-616-4000 or by email at [email protected]

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