If you are properly classified as an “administrative employee” then you are an exempt employee and your boss does not have to pay you overtime. Not surprisingly, employers often call workers “administrative employees” to avoid paying them overtime, even when the law does not permit them to do so. Are you properly classified as an administrative employee? How do you find out?
Administrative Exemption Basics
In order to be exempt from overtime pay under the administrative exemption, you must:
- Be paid a salary of at least $800/week for employers with 25 or less employees and $840/week for employers with 26 or more employees (for full-time employment), and
- Have primary work duties that are directly related to management policies or general business operations of the employer or its customers (as distinguished from ‘production employees’ whose primary duty is producing the goods or services that the employer produces), and
- Exercise independent business judgment over matters of substantial importance.
The distinction between production work and administrative work is key. Production work is easy to understand in the case of companies like Ford. Ford produces cars on massive assembly lines. If you work on that assembly line putting together trucks, you are a production worker and must be paid overtime. On the other hand, administrative work is anything that relates to supporting the business itself, such as accounting, human resources, tax, and legal. Using my Ford example, if you’re a operations specialist who designs the assembly line, you’re probably an administrative employee and exempt from overtime.
Regularly Exercise Discretionary Power
As with the other exemptions, the employee must customarily and regularly exercise discretionary power and independent judgment. An employee who merely applies her skills in following prescribed policies and procedures is not exercising discretion and judgment necessary to qualify for this exemption.
The phrase “customarily and regularly exercises discretion and independent judgment” means the employee compares and evalutates possible courses of conduct and acts or makes a decision after the various possibilities have been considered. The employee must have the authority or power to make an independent choice, free from immediate direction or supervision and with respect to matters of significance. This is critical.
This phrase is frequently misunderstood and misapplied by employers in cases involving the following:
- Misapplication of the phrase to employees making decisions relating to matters of little consequence.
- Misapplication of the exemption to employees engaged in production aspects of the employer’s business as opposed to administrative functions.
- Confusion between the exercise of discretion and independent judgment, and the use of skill in applying techniques, procedures, or specific standards.
An administrative employee must also earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. Full-time employment means 40 hours per week.
As with any of the exemptions, having a fancy job title does not reflect actual job duties and therefore, is of no assistance in determining exempt or nonexempt status. The actual determination of exempt or nonexempt status must be based on the nature of the actual work performed by the employee.
Again, there are many exceptions. If you have any questions as to whether you are misclassified as an administrative employee, contact our employment law firm for more information.