The Code of Federal Regulations, Title 29, Chapter V, Part 541, Subpart B, defines the rules for exemption of executive, administrative, professional, computer and outside sales employees for the purposes of FLSA. If we focus our attention on administrative employee exemptions, it becomes very clear that an analyst must look carefully at the duties of any employee or position believed to be exempt.
In general, to be considered an “administrative” employee and eligible for exemption the position or employee must meet the following:
Compensated on a salary basis at a rate of not less than $455 per week exclusive of board, lodging or other facilities;
Primary duty is performance of office or non-manual work directly related to the management/general business operations of employer or employer's customers;
And
Primary duty includes the exercise of discretion/independent judgment with respect to matters of significance;
Or;
Primary duty is performing administrative functions directly related to academic instruction/training in an elementary, secondary school system, an institution of higher education or other educational institution establishment or department or subdivision.
``Directly related to the management or general business operations'' refers to work performed by the employee. An employee must perform work directly related to assisting with running or servicing the business.
Work directly related to management or general business operations includes:
Work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations, government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities.
An employee may qualify for administrative exemption if the employee's primary duty is performance of work directly related to management/general business operations of employer's customers.
An employee's primary duty must include:
Exercise of discretion and independent judgment with respect to matters of significance;
Exercise of discretion and independent judgment involves comparison and evaluation of possible courses of conduct;
Acting/making a decision after various possibilities have been considered;
And
``Matters of significance'' refers to the level of importance or consequence of the work performed.
``Discretion and independent judgment'' must be applied in light the facts involved in the particular employment situation. Factors to consider:
Whether an employee exercises discretion and independent judgment with respect to matters of significance 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 operation of a particular segment of the business;
Has authority to commit the employer in matters that have significant financial impact;
Authority to waive or deviate from established policies and procedures without prior approval;
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;
And
Represents the company in handling complaints, arbitrating disputes or resolving grievances.
Exercise of discretion/independent judgment implies the employee has authority to make independent choice, free from immediate direction/supervision.
Employees can exercise discretion/independent judgment even decisions/recommendations are reviewed at a higher level.
The fact that many employees perform identical work does not mean the work of each employee does not involve discretion/independent judgment with respect to matters of significance.
Exercise of discretion/independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources.
Employees do not exercise discretion/independent judgment with respect to matters of significance merely because the employer will experience financial losses if employees fails to perform the job properly.
As with any issues dealing with legal compliance, employers should seek, qualified professional assistance before making changes in their work place practices.
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