Overview: Under the Fair Labor Standards Act (FLSA), most employees must be paid overtime when they work more than 40 hours in a workweek. However, there are exemptions to this general rule. One of the most commonly applied, and also most frequently misapplied, is the exemption for administrative employees.
When the FLSA was first enacted back in 1938, the line between exempt administrative employees and nonexempt workers was relatively clear. Administrative employees assisted with the running or servicing of the business, while nonexempt employees worked on a manufacturing production line or sold a product in a retail or service establishment.
But when the FLSA regulations were amended in 2004, the US Department of Labor (DOL) downplayed this distinction. Although it is still a relevant and useful tool in the modern economy, it is not the final word, the DOL said. Rather, when classifying employees, employers must carefully consider all of the requirements for the administrative exemption.
This can prove quite challenging for HR professionals tasked with employee classification, since many of the key terms used to define the exemption are open to interpretation.
Trends: The US Department of Labor (DOL) has proposed regulations that would, if finalized, increase the minimum salary from $455 per week to $679 per week (or from $23,660 per year to $35,308 per year). The proposed regulations also would allow employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level test, as long as they are paid annually or more frequently. The DOL projects the regulations will take effect January 2020.
Author: Michael Cardman, Legal Editor
Updated to reflect an amendment to the minimum wage and overtime exemptions, effective July 3, 2019.
Updated to reflect an amendment to the minimum wage and overtime exemptions, effective July 1, 2019.
Updated to reflect the repeal of certain minimum wage exemptions, effective July 1, 2019.
Updated to reflect amendments to the salary basis test, effective May 6, 2019.
Updated to reflect the repeal of a minimum wage and overtime exemption, effective June 14, 2019.
Updated to reflect proposed rules that would increase the minimum salary and update the duties tests for most overtime-exempt workers.
The Washington State Department of Labor & Industries issued draft regulations, under which the minimum salary for executive, administrative, professional and outside sales employees would increase from the current level of $23,660 to $49,140 for large employers and to $35,100 for small employers, effective July 1, 2020.
Updated to reflect an amendment to the overtime exemptions, effective May 21, 2019.
Updated to reflect information on a Supreme Judicial Court of Massachusetts ruling concerning the scope of the overtime exemption for employees engaged in agricultural and farm work.
HR guidance on complying with the federal and state requirements for the administrative exemption.