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The Administrative Exemption: What It Means, and How to Know If You Qualify

July 23rd, 2018 by David Minces

As employment lawyers, we represent many clients because they were illegally underpaid by their employers. This often happens when our clients are improperly classified as being administratively exempt, sometimes unintentionally by their bosses. The administrative exemption excuses employers from having to pay overtime to exempt workers who put in over 40 hours per work week. When non-exempt employees are incorrectly paid as if they were exempt, this deprives them of hours of overtime pay that they are entitled to.

The administrative exemption was introduced in the Fair Labor Standards Act of 1938, often referred to as the FLSA. The Act sought to protect workers from excessively low wages and long hours. Thus, it set the first minimum wage at 25 cents per hour, which would be worth a little more than four dollars today. It also set overtime rules, mandating that employees have to be paid time and a half of their hourly rate for every hour they work exceeding forty per week.

The FLSA’s architects knew that the economic health of the United States, which was in the midst of the Great Depression, depended upon the success of businesses. They also recognized that businesses would be harmed if they had to pay overtime to people whose work, by nature, required them to spend more than forty hours a week. Thus, they included the administrative exemption, allowing employers to bypass the overtime requirement when paying employees whose duties were administrative in nature. This focused the benefits of the FLSA on the working poor, whose duties were generally very routine and fit more in line with a “worker bee” than a policy maker.

Though increased pay and hierarchy in a company seems to correlate with overtime exemption, being administratively exempt does not mean being more important. Many important, highly-trained people are still protected by overtime laws, including police officers, TV news producers, mortgage loan officers, firefighters, and paramedics. Rather, the nature of an employee’s duties is one of the biggest factors in determining whether a company must pay that employee overtime.

Determining whether the nature of an employee’s duties qualifies him for administrative exemption can be tricky, especially since the word “administrative” suggests authority and management. The administrative-production dichotomy is one tool used to legally differentiate administratively exempt and non-exempt employees. This refers to the concept that workers whose primary duty is directly related to the management or general business operations of the employer or the employer’s customers are can be exempt, while workers whose primary duty is producing whatever their company sells, whether goods or services, are not. Production can refer to both goods and services. For example, a card dealer at a casino produces the service his company sells, which is creating entertainment by providing gambling options that offer patrons the chance to have fun and perhaps win money. Without the card dealer, players cannot get cards to play games and be entertained. Thus, though the card dealer certainly possesses authority and management over the cards and the bets, his work falls squarely on the production side of the dichotomy and he is therefore not eligible for administrative exemption.

If you believe that your employer is violating the FLSA when paying you, give us a call. Minces PLLC has decades of combined experience in helping our clients reclaim their owed wages and we would be happy to help you get yours.

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