Fair
Labor Standards Act: What Does an Administrative Employee
Do?
Employees
qualify as Administrative Employees exempt from the overtime
pay and minimum wage requirements of the Fair Labor Standards
Act if they are salaried and perform certain duties.
Regulations issued by the United States Department of
Labor establish the "long" and "short" tests that are
used to determine whether personnel perform such duties.
Today, the long test is outmoded because it applies only
to employees who earn less than $250 per week.
The
short test exempts personnel whose primary duty consists
of office or non-manual work directly related to the
management policies or general business operations of
the employer or the employer's customers. Those duties
must require the exercise of discretion and independent
judgment.
Employers
sometimes incorrectly construe those criteria to exempt
all employees who perform office work that most people
would call "administrative." That work typically involves
tasks such as processing payroll, providing clerical
services, handling accounts receivable and payable, purchasing
supplies and inventory, compiling business statistics,
and maintaining personnel files. The fact that employees
perform such administration duties does not mean that
they are exempt Administrative Employees.
An
employee qualifies for exemption only where their administrative
activities are of substantial importance to management
or to the business operations of the employer or its
customers. Accordingly, the DOL regulations explain that
the following types of personnel are generally exempt
Administrative Employees:
- Employees
who participate in the formulation of management
policies or the operation of the business as a whole.
-
Employees
whose work affects, involves carrying out, or is
directly related to management policies.
-
Employee
whose work substantially affects business operations,
even though their assignments relate only to a particular
segment of the business.
Regrettably,
those descriptions are very vague and imprecise. In addition,
neither the DOL's regulations nor judicial decisions
interpreting the FLSA specify the precise point where
work becomes of "substantial importance" to the management
or operation of a business.
In
many situations, of course, an employer can easily determine
that an employee's duties satisfy that criterion. For
instance, it would be the rare case where a human resources
director or controller would not perform services that
are substantially important to an employer.
Employers,
however, must also deal with situations where the proper
classification of personnel is not so obvious. For example,
an employer may lawfully exempt as Administrative Employees
personnel who:
- Serve
as an assistant to an exempt Executive Employee or
Administrative Employee.
-
Handle
staff functions such as advising management on taxes,
insurance, sales research, wage rates, statistics,
investments, and similar topics or being responsible
for purchasing, credit management, safety, claims,
or human resources.
-
Act
as an outside consultant in any of those areas for
the employer's customers.
-
Perform
special assignments, such as serving as an account
executive at an advertising firm or a customer broker
at a stock exchange firm.
Before
exempting employees who work in any of those capacities,
employers must ensure that they exercise sufficient "discretion
and independent judgment." That means the employees must
regularly and customarily evaluate possible courses of
action, make decisions after considering various possibilities,
and exercise the authority to make independent choices
regarding significant matters free from immediate direction.
As
a consequence, an employee who assists an Administrative
Employee by performing routine clerical functions would
not qualify for exemption. The same is true of other
employees who merely apply their skills and knowledge
in following prescribed procedures, determining whether
specified standards have been met, or deciding what procedures
to follow. Quality control inspectors, personnel department
clerks, and bookkeepers usually fall into that category.
On
the other hand, an assistant who, without specific instructions,
customarily decides how to respond to correspondence,
arranges meetings, conducts interviews, and handles callers
on an Administrative Employee's behalf may exercise the
discretion and judgment required for exemption. Thus,
an "administrative assistant" to a human resources director
could conceivably qualify for exemption.
Employers
must deal with many gray areas when classifying employees
as exempt Administrative Employees. In addition, those
decisions must be made with the understanding that a
judge and jury might someday have a chance to second
guess the employer.
Employers
can reduce their exposure to potential liability for
unpaid overtime by systematically and realistically analyzing
employees' duties, regardless of their job titles. Employers
should also continue monitoring the content of jobs to
ensure that exemption determinations made years ago remain
valid as circumstances and personnel assignments change.
Employers should also keep in mind that Administrative
Employees must be salaried-a requirement which our newsletter
has previously explained is replete with its own subtleties
and complexities.
|
