Administrative Exemption under the Fair Labor Standards Act (FLSA)
To meet the administrative exemption, an employee has the following requirements:
- primary duty is 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;
- primary duty includes the exercise of discretion and independent judgment with respect to matters of significance; and
- is paid at least $455 a week or $23,660 annually free and clear of board, lodging or other non-cash items
Management or General Business Operations - The phrase “management or general business operations” refers to the type of work performed by the employee. To meet this requirement, the employee must perform work directly related to assisting with the running or servicing of the business. This includes but is not limited to, work in such areas as tax, finance, accounting, budgeting, auditing, insurance; quality control, purchasing; advertising, marketing; research, safety and health; human resources; public relations; legal and regulatory compliance; and similar activities.
Discretion and Independent Judgment - Exercising “discretion and independent judgment” generally involves an employee comparing and evaluating possible courses of conducting and acting or making a decision after the various possibilities have been considered. The term implies that the employee has authority to make an independent choice, free from immediate direction or supervision. However decisions and recommendations may be reviewed at a higher level and, upon occasion, revised or reversed. The term “matters of significance” refers to the level of importance or consequence of the work performed.
Discretion and independent judgment factors include but are not limited to whether the employee:
- has authority to formulate, affect, interpret, or implement management policies or operating practices;
- carries out major assignments in conducting the operations of the business;
- performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to the operation of a particular segment of the business;
- has the authority to commit the employer in matters that have significant financial impact;
- has the authority to waive or deviate from established policies and procedures without prior approval;
- has authority to negotiate and bind the company on significant matters;
- provides consultation or expert advice to management;
- is involved in planning long or short term business objectives;
- investigates and resolves matters of significance on behalf of management;
- represents the company in handling complaints, arbitrating disputes or resolving grievances.
Discretion and independent judgment does not include applying well-established techniques, procedures or specific standards described in manuals or other sources; clerical or secretarial work; recording or tabulating data; or performing mechanical, repetitive, recurrent or routine work. Exempt employees may use manuals, guidelines or other established procedures if they contain or relate to highly technical, scientific, legal financial, or other similar complex matters and they can be understood or interpreted by those with advanced or specialized knowledge and skills.
Examples of employees that would meet the administrative exemption criteria:
- an employee who leads a team of other employees assigned to complete major projects;
- an executive assistant or administrative assistant to a business owner or senior executive of a large business who has been delegated authority regarding matters of significance; or
- a management consultant who studies the operations of a business and proposes changes in organization.
Examples of non-exempt positions include ordinary inspection work involving well established techniques and procedures; examiners and graders who perform work involving comparisons of products with established standards; and public sector inspectors or investigators.