Administrative Professionals’ Day is a time to thank staff who are crucial to supporting and running your business.
However, the broad term “administrative professionals,” which encompasses a range of job titles and responsibilities, can create costly confusion for employers attempting to classify employees for compliance with state and federal wage and hour regulations.
Legal disputes over unpaid overtime can last for many years and create significant legal costs. This has been the case in a claim brought by a former administrative assistant whose dispute over unpaid overtime has lasted seven years. Despite recently being dismissed by the U.S. District Court for the Southern District of New York, the former assistant can still correct her complaint and bring suit again.
The Fair Labor Standards Act (“FLSA”), in addition to state laws, sets the standards for minimum wage, overtime pay, recordkeeping and child labor. FLSA has an expansive reach: it applies to all enterprises that engage in interstate commerce or take in $500,000 or more of annual business revenue. As a result, most employers must pay employees at least the FLSA’s minimum hourly wage standard of $7.25 and an overtime rate of no less than one and one-half pay for time worked in excess of 40 hours in any workweek. These standards apply to all employees, unless an employee qualifies for an exemption under FLSA.
FLSA Section 13(a)(1) provides exemption from minimum wage and overtime pay standards for executive, administrative, professional, computer and outside sales employees. Therefore, employers will commonly and mistakenly exempt administrative professionals from overtime pay because of their titles, and salary. But the same employees we celebrate on Administrative Professionals’ Day--secretaries, receptionists, executive assistants and administrative assistants--often do not perform the primary duties necessary to meet the FLSA’s “administrative employee” exemption. While this may seem counterintuitive, below I explain how to determine if an employee qualifies for the administrative employee exemption.
A Three-Pronged Approach to Classifying “Administrative” Employees
For an employer to exempt an employee from the minimum wage and overtime requirements, the employee must meet the FLSA’s definition of an administrative employee. This involves a three-pronged test that examines an employee’s payment, primary duties and exercise of discretion or judgment in completing those duties. To qualify for the administrative exemption an employee must satisfy ALL three of the following tests:
1. The Salary Test
First, for the administrative employee exemption to apply the employee must receive a predetermined, fixed salary that is not subject to reduction based on quality or quantity of work performed. The salary must also reach a certain level of at least $455 per week. This translates to at least $910 biweekly, $1971.66 monthly or $23,660 annually.
2. The Primary Duty Test
The second test examines whether an employee’s primary duty is to perform office or non-manual work that is directly related to the management or general business operations of the employer or customers. For work to involve management or general business operations, it must be “directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.” In addition, the work must also be the employee’s primary duty, meaning the principal, main, major or most important duty that the employee performs. Whether the requisite work constitutes an employee’s primary duty is analyzed by examining the character of the employee’s job as a whole on a case-by-case basis.
3. The Discretion and Independent Judgment Test
Finally, to qualify for the administrative exemption, an employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. To meet this test, the employee’s primary duties, as described above, must satisfy both components: i) discretion and independent judgment; and ii) pertain to matters of significance.
Discretion and independent judgment requires both the comparison and evaluation of possible courses of conduct and making a decision after considering the various possibilities. Although there are numerous factors that may be considered when assessing an employee’s exercise of discretion and independent judgment, the general implication is that the employee has the authority to make a choice free from immediate direction or supervision. While this does not mean the employee’s decision is final and not subject to review, it does mean that certain administrative tasks are not included:
- Applying well-established techniques, procedures or specific standards
- Clerical or secretarial work
- Recording or tabulating data
- Performing mechanical, repetitive, recurrent or routine work
Matters of Significance indicates the requisite level of importance assigned to matters where administrative employees are exercising judgment or discretion. The significance of a decision is not tied to financial loss, but rather whether the work exceeds following established procedures or conducting clerical work.
Because many secretaries, receptionists, executive assistants or administrative assistants’ primary duties do not involve the necessary levels of discretion or independent judgment, they cannot qualify for exemption as an administrative employee under the FLSA. By treating them as exempt employees, you expose your business to claims of non-payment of overtime. FLSA does, however, indicate one possible example where such an employee may qualify for exception: “an executive assistant or administrative assistant to a business owner or senior executive of a large business generally meet the duties requirement for the administrative exemption if such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance.”
Hire a Lawyer
Misclassifying your secretary or executive assistant as an exempt administrative employee will subject you to liability for overtime compensation (in addition to salary already paid) and civil penalties if it is a repeat and willful violation. While attempting to apply the three-pronged test can appear daunting, you don’t have to navigate the classification process yourself.
Hiring an experienced lawyer to analyze and evaluate any exempt administrative, as well as professional, executive, or computer and sales, positions can help protect you from the pitfalls of misclassification. This will limit your exposure to costly claims and lawsuits from employees alleging misclassification and state or federal investigation.
Priori makes it easy to find a trusted, vetted attorney at a below-market, fixed rate. Celebrate Administrative Professionals’ day by finding an employment lawyer and having a free legal consultation here.