Department of Labor Clarifies Scope of FLSA’s Administrative Exemption
The federal Fair Labor Standards Act (“FLSA”) codifies the employment relationship as it relates to the payment of wages. The amount of overtime compensation for salaried employees is subject to certain exemptions, one of which relates to employees who qualify as administrative employees.
The FLSA exempts certain administrative, executive, and professional employees from its minimum wage and overtime payment requirements so long as certain conditions are met, such as the employee must be compensated on a salary or fee basis at no less than the established salary level.
FLSA Administrative Exemption
Despite the name, the “administrative” exemption does not necessarily apply to administrative assistants or certain other employees with “administrative” roles. In fact, it more often applies to the director and executive-level employees.
FLSA (the federal minimum wage/overtime law), employees may be exempt under the administrative exemption if:
They are compensated on a salary or fee basis of at least $455* per week;
Their primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
Their primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
*2016 regulations increased the salary threshold to $913 per week beginning December 1, 2017. However, a federal judge temporarily enjoined the new regulations from taking effect. More recently, the Trump Department of Labor has indicated that it will not seek to maintain the higher thresholds set by the Obama Administration.
New York Administrative Exemption
New York State law, employees can be exempt from minimum wage and overtime requirements if:
Their primary duties consist of the performance of office or non-manual field work directly related to management policies or general operations of the employer;
They customarily and regularly exercise discretion and independent judgment;
They regularly and directly assists the employer or an executive employee, or perform, under only general supervision, work along technical or specialized lines that require special training, experience or knowledge; and
They receive a sufficient weekly salary*.
*The weekly salary threshold now depends on geographic location within New York State. Until December 31, 2017, the threshold is $825 per week for employees of large employers (11+ employees) in New York City, $787.50 per week for employees of smaller employers in New York City, $750 per week for employees in Nassau, Suffolk, and Westchester counties, and $727.50 per week for employees in the rest of the state. The thresholds are scheduled to increase on December 31, 2017 and December 31, 2018 across the state, and on December 31st of subsequent years in some parts of the state.
Some of the areas in which employees eligible for the administrative exemption may work include: finance, accounting, purchasing, marketing, research, human resources, IT, and legal. But not all employees in these areas are eligible for exemption.
The administrative exemptions only apply to certain employees whose actual job situations meet the requirements. Job titles do not automatically determine exemption, nor does the fact that the employee receives a salary.
Employers should periodically review employees’ job duties to determine whether they qualify for the exemption.
In addition, employers must consider whether an employee’s salary remains high enough to qualify for the exemption. Under New York law, the threshold is increasing annually, and at higher rates in some parts of the state. Remember that it is not enough to satisfy the federal salary threshold. When the New York threshold is higher, the employee would need to receive a higher salary level to be fully exempt (unless a different New York state exemption applies).