The administrative exemption is one of the most common bases on which employers claim that their workers are exempt from the minimum wage and overtime protections guaranteed by the federal Fair Labor Standards Act (FLSA).
The administrative employee exemption applies to administrative workers who meet certain qualifications, or tests, concerning their job duties and compensation. There are three tests under the FLSA for exempt status, and an employee must meet the requirements of each test to qualify as exempt.
The three tests are:
- The salary level test
An exempt administrative employee must earn at least $23,660 per year, or $455 per week.
- The salary basis test
An exempt administrative employee’s base salary may not change depending on hours worked or quality of work.
- The job duties test
An exempt administrative employee’s primary role must involve the exercise of independent judgment in the completion of office or non-manual work.
- The salary level test
Administrative employees may work in a variety of disciplines including tax, budgeting, auditing, insurance, human resources, advising, consulting, quality assurance, compliance, advertising, marketing, public relations, technology services, database administration, and more.
Improperly classifying administrative employees as exempt is a violation of both federal and state labor law. Administrative employees who have been improperly classified may be entitled to back wages, overtime pay, and other damages dating back up to several years of employment.
Are You Classified Correctly?
If you believe you’ve been intentionally or inadvertently improperly classified under the administrative exemption, you may be eligible to file a wage claim to recover your damages.
Understand your rights as a worker. Call toll-free (800) 254-9493 or fill out the form to speak with an employment attorney about your potential wage claims. All consultations are free and confidential.
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|Acosta||$9.9 million for unpaid overtime and business expenses|
|Spansion||$8.5 million for employees laid off without proper notice|
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|Cosmo||$1 million for merchandisers who were not compensated for off-the-clock work|
|First Franklin||Backpay for workers who were not paid overtime|
Administrative Exemption Under the FLSA
The FLSA clearly states that job titles cannot determine exempt status for administrative professionals.
For an employee to qualify for the administrative exemption, each of the following job tests on the FLSA administrative exemption checklist must be met:
- The employee must be compensated on a salary basis at a rate not less than $455 per week
When calculating base salary, only include portions of salary that are not dependent on the quality or quantity of the employee’s work. For example, do not include performance-incentive pay.
- The employee’s primary duty must be the performance of office or other non-manual work directly related to management or general business operations
“Primary duty” means the employee’s principal or most important duty. The work can be related to management or general business operations of the employer or one of the employer’s customers (such as in the case where the employer is a consulting company, which provides management support or business operations consulting).
- The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance
An employee exercises discretion or independent judgement if the employee has the authority to consider various courses of action and make independent decisions of consequence without direct supervision.
Highly Compensated Employees
The FLSA contains a special exemption for highly compensated employees, or the HCE exemption.
The HCE exemption may apply to administrative, executive, or professional employees who:
- Earn at least $100,000 a year, including a minimum of $455 in weekly salary
- Primarily perform office or non-manual work
- Regularly perform at least one of the exempt duties of an executive described in the job tests above
California Administrative Exemption
The California administrative exemption checklist differs from the federal one, with additional and more specific job tests. Because it contains additional requirements, California’s administrative exemption is narrower than the federal exemption. When federal and state exemption law differs, employees are protected by the law which is most favorable to them.
In California, a worker employed in an administrative capacity is one whose duties involve either:
- The performance of office or non-manual work directly related to management policies or general business operations of the employer or the employer’s customers; or
- The performance of functions in the administration of a school system, or educational establishment or institution, or of a department or subdivision thereof, in work directly related to the academic instruction or training carried on therein
In order to qualify for the executive exemption, California employees also must:
- Customarily and regularly exercise discretion and independent judgment
- Regularly and directly assist a proprietor, or an employee employed in a bona fide executive or administrative capacity
- Perform, under only general supervision, work along specialized technical lines requiring special training, experience, or knowledge
- Execute, under only general supervision, special assignments and tasks
- Are primarily engaged in duties which meet the test for the exemption
Under California Labor Law, an employee is “primarily engaged in” exempt duties when more than one-half of their work time is spent on exempt work.
- Earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment (40 hours per week)
Common Misapplications of the Administrative Exemption
The administrative exemption is one of the most commonly misapplied exemptions and has spurred significant class action litigation in recent years. Federal Courts and the Department of Labor have issued conflicting rulings and guidance concerning the interpretation of employees’ duties. Cautious employers will apply the job tests to qualify for the administrative exemption narrowly, and there are pitfalls to avoid that may be specific to individual industries and businesses.
Common misapplications of the administrative exemption involve:
Some employers wrongly assume that all salaried workers are exempt from minimum wage and overtime protections. However, to qualify for the administrative exemption, an employee must meet both the salary and the job duties requirements.
Because federal and state law define an employee’s “primary duty” differently, the amount of time an employee spends on exempt work may be sufficient under federal but insufficient under state law to warrant exempt status.
Administrative or Production Work
The administrative exemption distinguishes between workers supporting the operations of a business and workers producing the goods that a business sells. Workers who support general business operations may qualify for the administrative exemption; production workers may not.
Employees commonly misclassified under the administrative exemption include:
- Pharmaceutical sales representatives
- Mortgage loan officers
- Insurance claims adjusters
- Store merchandisers
- Retail store managers
Our Employment Experience
Our employment attorneys have been representing classes of employees in state and federal litigation against their employers for over 20 years.
We have successfully litigated employment cases concerning unpaid overtime, meal breaks, and business expenses; employee misclassification; and mass layoffs without proper notice, recovering millions of dollars on behalf of our clients against some of the world’s largest corporations.
Girard Gibbs has been recognized a Tier-1 law firm by U.S. News – Best Lawyers consecutively since 2013, and founders Daniel Girard and Eric Gibbs have been named among the Best Lawyers in America consecutively since 2012.
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