The administrative exemption applies to a wide variety of employees. However, many employees whose jobs involve administrative work do not meet the administrative exemption test and must be classified as nonexempt.
Administrative Exemption Test
To determine if an employee is exempt, consider the duties he/she performs as well as salary. An administrative employee is exempt from overtime pay if the employee meets all of the following requirements:
Staff employees who are functional rather than department heads. This could include employees who act as advisory specialists to management, or to the employer's customers. Typical examples are tax experts, insurance experts, sales research experts, wage rate analysts, foreign exchange consultants, and statisticians. Such experts may or may not be exempt, depending on the extent to which they exercise discretionary powers. Also included in this category would be persons in charge of a functional department, which may even be a one-person department, such as credit managers, purchasing agents, buyers, personnel directors, safety directors, and labor relations directors. Employees who perform special assignments under only general supervision. Often, such employees perform their work away from the employer's place of business. Typical titles of such persons are buyers or field representatives.
“Directly Related” Duties Defined for Administrative Exemption
The California Supreme Court held that work duties qualify as administrative when “directly related” to management policies or general business operations. Work is “directly related” if it meets two components:
There is still some level of uncertainty as to how this portion of the test will be applied, and you should consult legal counsel if you are unsure whether your worker’s job duties are truly administrative in nature. Remember that actual job duties, not the workers’ job title, are key to the analysis.
Examples of Exempt Duties for an Administrator
Executive or Administrative Assistants
Executive or administrative assistants to whom executives or high level administrators delegate part of their discretionary powers may possess enough authority to qualify for the administrative exemption. Generally, these assistants can be found in large establishments where executives or administrators possess duties of this scope and which require so much attention that the work of personal scrutiny, personal attention to correspondence and conducting personnel interviews must be delegated.
Examples of Nonexempt Duties for an Administrator
Examples of nonexempt duties that an administrator might perform include:
California court cases have confirmed how difficult it is for an employee to meet the administrative exemption. Employers who misclassify employees as exempt may owe the employees unpaid overtime, penalties for missed meal and rest breaks, interest and attorneys’ fees.
Because employers do not track exempt employees’ hours, a court will rely on the employee’s evidence as to how many hours of overtime and missed meal and rest breaks are owed. Even if an employee does not recoup a significant amount for overtime and meal and rest break violations, the employee may have incurred large attorneys’ fees. The smaller recovery does not result in reduced attorneys’ fees.
Courts will focus on whether or not the employee in question is actually engaged in running your business or determining the overall course of its policies. Employees whose primary duties are not related to the company’s day-to-day business, who do not participate in policy making or do not have any impact on the company’s operation will not be eligible for the administrative exemption.
“Primarily Engaged In” Defined for Administrative Exemption
For purposes of the administrative exemption, “primarily engaged in” means that more than one-half of the employee’s work time is spent engaged in exempt work. This means an exempt employee spends more than 50 percent of his/her time performing:
“Customarily and Regularly Exercises Discretion and Independent Judgment” Defined for the Administrative Exemption
For the administrative exemption to apply, the employee must “customarily and regularly exercise discretion and independent judgment.” This phrase means the comparison and evaluation of possible courses of conduct and acting or making 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. The decision may be in the form of a recommendation for action, subject to a superior’s final authority, but the employee must possess sufficient authority for the recommendations to affect matters of consequence to the business or its customers. With respect to the administrative exemption, this phrase has been most frequently misunderstood and misapplied by employers and employees alike in cases involving the following: