To qualify for the administrative exemption from FLSA Overtime Requirements, an employee must meet the salary basis and two primary duty requirements for the exemption. This is a conjunctive test, meaning that an employee must satisfy all four requirements to qualify as an exempt administrator.
To qualify for the administrative exemption, employees must be paid on a salary basis. This means receiving a consistent, predetermined amount each pay period, regardless of work quantity or quality. As of January 1, 2025, the minimum salary threshold for to qualify as an exempt administrator is $1,128 per week or $58,656 per year.
The FLSA requires the use of a two-part primary duty test to analyze whether workers are employed as exempt administrators. First, the employee’s primary duty must involve “work directly related to management or the general business operations” of the employer or the employer’s customers. Second, the employee’s job duties must exercise independent judgment and discretion; and such discretion must be exercised with respect to matters of significance.
An employee’s primary duty must be the “”directly related to the management or general business operations of the employe or the employer’s customers” 29 C.F.R. § 541.201(a). An employee’s duties are “directly related” to general business operations if she the functions involve “assisting with the running or servicing of the business.” 29 C.F.R. § 541.201(a). “Servicing” the business, “includes for example, advising the management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control.” Calderon v. GEICO Gen. Ins. Co., 809 F.3d 111, 123 (4th Cir. 2015). An employee only qualifies as an exempt administrator where she “engages in may be exempt from overtime pay because she “engages in ‘running the business itself or determining its overall course or policies,’ not just in the day-to-day carrying out of the business’ affairs.” Talbott, 2008 WL 4525012, at *4 (N.D. Fla. Sept. 30, 2008).
29 C.F.R. § 541.201(b) provides that “directly related work” includes, but is not limited to “work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations, government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities.” 29 C.F.R. § 541.201(b)
Work directly related to the management or general business operations of the employer’s customers may also qualify a worker for the exemption. 29 C.F.R. § 541.201(c). “Courts interpreting this subsection have explained that “while the regulations provide that ‘servicing’ a business may be administrative, § 541.205(b), ‘advising the management’ as used in [subsection (c)] is directed at advice on matters that involve policy determinations, i.e., how a business should be run or run more efficiently, not merely providing information in the course of the customer’s daily business operation.” Greene v. Tyler Techs., Inc., 526 F. Supp. 3d 1325, 1341 (N.D. Ga. 2021); Dewan v. M-I, LLC, 858 F.3d 331 (5th Cir. 2017) (explaining that whether an advisor or consultant’s duties falls within the administrative exemption turns on whether the employee’s duties are “directly related to management or general business operations” of the customer; and that “the focus is not on a general concept of advice or consultancy but rather on ‘policy determinations [for] how a business should be run or run more efficiently.’”).
The regulations instruct that “[i]n general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered,” and that “the term ‘matters of significance’ refers to the level of importance or consequence of the work performed.” § 541.202(a).
29 C.F.R. § 541.202(b), contains the following ten factors that must be assessed to determine if an employee exercises judgment to decide significant matters in the performance of his primary job duty: “whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices; whether the employee carries out major assignments in conducting the operations of the business; whether the employee performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to operation of a particular segment of the business; whether the employee has authority to commit the employer in matters that have significant financial impact; whether the employee has authority to waive or deviate from established policies and procedures without prior approval; whether the employee has authority to negotiate and bind the company on significant matters; whether the employee provides consultation or expert advice to management; whether the employee is involved in planning long- or short-term business objectives; whether the employee investigates and resolves matters of significance on behalf of management; and whether the employee represents the company in handling complaints, arbitrating disputes or resolving grievances.”
Courts regularly find employees to be non-exempt in light of the above factors, which often show that Plaintiffs’ job duties do not involve discretionary calls on significant matters. Talbot, 2008 WL 4525012, at *1, 6 (finding that factors cited in § 541.202(b) weighed “heavily in favor” of family service counselors, whose job duties included “resolving case related emergencies, case planning…, assessing risks to children and developing safety plans,” not being exempt, because a “review of the factors demonstrates that the administrative exemption is plainly intended to for employees who have a hand in running the business and make major, strategic decisions on its behalf. Plaintiffs simply do not fit this categorization.”);Harper v. Gov’t Employees Ins. Co., 586 Fed. Appx. 772, 774 n.* (2d Cir. 2014).
29 C.F.R. § 541.203(a)–(f) provide examples of workers who “generally meet the duties requirements for the administrative exemption” (listing categories of workers and some duties they perform). Workers identified as generally meeting the administrative exemption include: insurance claims adjusters, as long as they have settlement authority); financial services employees, as long as they conduct analysis and are not limited to selling financial products; team leaders assigned to complete major projects; executive assistants who work without “specific instructions or prescribed procedures” and have delegated authority on significant matters; human resource managers who do more than gather information to “screen” job applicants against minimum requirements; and purchasing agents who have the authority to bind a company on significant purchases.
29 C.F.R. § 541.203(g)-(j) provides examples of workers who generally do not meet the administrative exemption. The regulation provides that this includes employees who perform “ordinary inspection work” using well-established techniques and procedures from manuals; “examiners or graders” who apply established standards to compare products; comparison shoppers (unless they evaluate the reports they compile on competitors’ prices); and public sector “inspectors or investigators” whose work primarily involves using technical skills to gather information and apply known standards or prescribed procedures.
