NEWS

By Howard Perlman

“You owe me additional pay of at least half my regular hourly wages for the overtime hours I worked,” said Jim, an office worker.

“Your job is administrative and supports the primary money-making activities of the business, so we can exempt you from overtime pay requirements,” said Avon, a payroll manager of the company.

FACTS: An employee of an electrical services company performed a variety of support work for the company, including customer service, human resources, arranging sales of the employer's services, creating invoices and reviewing them.

Despite performing work for the employer in weeks when she worked for more than 40 hours, the employee did not receive overtime premiums for hours worked in a week beyond the 40th hour. The employer did not pay overtime premiums to the employee because it considered the employee to be exempt from the overtime requirements of the Fair Labor Standards Act under the administrative exemption.

Although the employee had an immediate supervisor, the vice president and chief financial officer of the company said in his deposition hearing that the employee exercised discretion and independent judgment in a variety of leadership contexts and “managed a very vital area of the business that was critical to the financial well-being of the company.”

While the CFO considered himself to have final decision-making authority, with the ability to override the employee's decisions if the need arose, he still considered the employee to have possessed the ability to make independent determinations regarding various aspects of human resources, including new-hire forms collection, insurance processing, reviewing logs of hours worked and determining the regular rates of pay for the company's employees.

The employee claimed that she did not have discretion or independent judgment when performing work for the company, and that because the administrative exemption from the FLSA's overtime requirements can be applied only for employees that exercise discretion or independent judgment when performing work, she could not be exempt from the FLSA's overtime requirements with the administrative exemption. 

Discretion and independent judgment, according to the employee, were not components of her work because her tasks were clerical or secretarial, she could not make vital decisions regarding establishment of policies affecting what benefits employees were able to receive and which insurance was available to them, despite her human resources role, and she could not adjust prices of services or approve invoices.

The employee said that discretion and independent judgment did not apply to her work also because she did not have final authority over her decisions and because there were certain aspects of her work for which she needed to obtain approval from at least one of her supervisors.

The employee sued the employer for back overtime wages, liquidated damages, attorneys' fees and litigation costs. The employer filed a motion for summary judgment, claiming that the employee's case was without merit because evidence proved that the employer was justified in exempting the employee from the FLSA's overtime requirements because of the administrative exemption.

ISSUE: Were overtime premiums owed to the employee?

DECISION: The employee was administrative-exempt from the overtime provisions of the FLSA and no overtime premiums were owed, a federal district court ruled in granting the employer's motion for summary judgment.

An employee does not need to have final decision-making authority to still have some sort of decision-making authority that is characterized by discretion or independent judgment, the court said.

In her own testimony, the employee indicated that she exercised discretion over aspects of the business relevant for the support of its business operations, the court said. Her testimony indicated that her “role in creating invoices was crucial to the business operations” of the employer, the court said, and the court highlighted that in the employee's own words, she performed work that affected business operations to a substantial degree.

The employee also clearly exercised discretion because in her role of arranging sales of the employer's services, she “had the authority to bind the company on significant matters,” the court said.

POINTERS: Employees can be administrative-exempt even if they perform some manual work that does not involve discretion or independent judgment but only if they primarily perform qualifying administrative duties.

The discretion or independent judgment an employee must exercise to be administrative-exempt must involve matters of significance.

The minimum weekly salary that an employee must be paid to be exempt from the minimum wage and overtime requirements of the FLSA with the executive, administrative or professional exemptions is $455.

For more information, see Payroll Administration Guide's “FLSA Exemptions ” chapter.

By Howard Perlman

This analysis illustrates how courts resolve pay-related disputes. The names and dialogue are fictitious.