This month’s expert
contributor is Diana Gregory, senior human resources specialist with
Administaff in
Determining whether your
executive assistants, team leaders, human resources representatives, claims adjusters,
accounting/finance personnel, inspectors, quality control managers, or a myriad
of other administrative jobs qualify for the administrative exemption from
overtime pay requirements can be a challenge. And, if you’re a multistate
employer, this challenge is multiplied, as you need to make this determination for
employees in each state in which you operate.
As most savvy employers
know, improper classification of employees as exempt can lead to back wages, penalties,
court costs, and possibly even a class action lawsuit—so conducting a thorough
exemption analysis is critical. Take the following steps:
1. Make sure job
descriptions are updated, accurate, and detailed. The California Division
of Labor Standards Enforcement (DLSE) and the U.S. Department of Labor (DOL)
use job descriptions as a key document in determining whether a position is
exempt. Yet many organizations don’t update old job descriptions as job duties
and responsibilities change. And, many job descriptions are very broad in scope,
listing areas of responsibility (such as scheduling or customer relations) and
competencies (such as leadership or initiative), but do little to define
primary duties, how much time the employee will spend performing those duties,
and whether the employee can independently make decisions and exercise judgment
in matters that can significantly affect the organization.
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2. Review salary levels.
The
federal Fair Labor Standards Act requires that an exempt employee’s salary be
at least $455 per week, which comes to $23,660 annually. However, in
to qualify for exempt status is larger, $28,080 annually. (Note that this could
change in light of pending legislation to boost the state minimum wage.)
3. Analyze primary
duties. For
the administrative exemption to apply, an employee must be “primarily engaged”—spend
at least 51 percent of his or her time—in office or nonmanual work directly
related to management policies or general business operations of the employer
or the employer’s customers. Examples include: advising management; planning,
negotiating, or representing the company; purchasing materials and supplies of significant financial impact to
the organization; researching business opportunities; or determining company/personnel
policies. Further information and detailed examples of positions and job duties
that do and don’t qualify are available on the DOL’s website at www.dol.gov or
from the DLSE at www.dir.ca.gov/dlse.
4. Determine level of
discretion and independent judgment. The administrative exemption requires that the
employee regularly exercise discretion and independent judgment in matters of
“consequence” or “significance” to the business. To determine this, ask yourself
these key questions:
• Does the employee, as
a regular and recurrent part of the job, compare and evaluate possible courses of
conduct or action and then have the authority and/or a high level of influence
to recommend or make a decision after the various possibilities have been
considered? For example, can the employee: commit the organization to
significant financial costs or impacts, negotiate for and bind the company in matters
of significance, plan business objectives, or waive or deviate from current
policies without approval? A “yes” answer means the employee probably does
qualify for the administrative exemption.
• Does the employee, as
a regular and recurrent part of the job, perform specialized work and/or make decisions
within a scope of recognized or learned standards? And/or does the person make
decisions or recommendations based on information developed in the course of
the inspection or analysis, using experience and skill that may give the person
leeway within the scope of standards to make such recommendations or decisions?
If you answered yes to either question, the administrative exemption probably
doesn’t apply.
Having recently assisted
a small company in an unsuccessful attempt to justify an administrative exemption
before a
deputy labor commissioner, I can attest to the need to take the time to do a very
thorough analysis now, before an agency or an employee questions an exemption.
Unfortunately for the employer in this case, the employee, who had been treated
with all of the privileges of exempt status, including bonus eligibility,
recovered two years of back overtime payments.