HR Support on the Administrative Exemption

Editor's Note: Administrative employees who help a business to run smoothly can sometimes be exempt from overtime.

Michael CardmanOverview: Under the Fair Labor Standards Act (FLSA) and many state wage and hour laws, 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: Effective January 1, 2020, a final overtime rule from the US Department of Labor (DOL) increased the minimum salary for administrative employees from $455 per week (or $23,660 per year) to $684 per week (or $35,568 per year). The rule also allows 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.

Author: Michael Cardman, Legal Editor

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