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Making Sense of the FLSA’s Administrative Exemption

| May 10, 2013 | overtime time violation, Practice Areas, Retaliation |

As the attorneys at The Spitz Law Firm know, many employers commonly misclassify employees as “exempt” from the overtime provisions of the Fair Labor Standards Act (FLSA). “Exempt” means that the overtime provisions of the FLSA do not apply to you. One of the most common (and confusing!) exemptions under the FLSA is the administrative exemption. Many employers wrongly confuse this exemption with the performance of administrative duties.

Let’s take a look at what the administrative exemption really means. According to the U.S. Department of Labor’s website, to qualify for the administrative employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
  • The employee’s primary duty must be 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
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

What this means generally is that the administrative exemption only covers salaried employees whose primary duties (1) are the performance of office or non-manual work directly related to the management or general business operations of the employer or its customers; and (2) include the exercise of discretion and independent judgment on matters of significance.

A recent case out of the U.S. Court of Appeals for the Sixth Circuit provides an excellent example of how the administrative exemption works. In Foster v. Nationwide Mutual Ins. Co., the Sixth Circuit applied the administrative exemption to an insurance company’s position of “special investigator.” The court held that the insurance company properly classified the special investigators as exempt from the FLSA’s overtime provisions under the administrative exemption.

The insurance company’s special investigators investigate claims for certain indicators of fraud. They work with the claims adjusters to develop a plan for the investigation, which they then conduct free from any supervision. While the special investigators spend most of their time investigating suspicious claims, the special investigators are not allowed to adjust claims or make any decisions on whether to pay or deny a claim.

Given these facts, the Sixth Circuit held that the special investigators fall clearly within the administrative exemption of the FLSA: “the SIs’ investigative work that drives the claims adjusting decisions with respect to suspicious claims is also directly related to assisting with the servicing of Nationwide’s business.”  Moreover, “the SIs’ primary duty to conduct investigations with the goal of with the goal of resolving the indicators of fraud includes the exercise of discretion and independent judgment with respect to matters of significance.”

As this case demonstrates, the exemptions under the FMLA are highly fact-specific. Additionally, employers bear the burden of proving that an employee is exempt under the FMLA. Indeed, courts generally give employees the benefit of the doubt when it comes to these exemptions.

If you believe that your employer may have misclassified you as “exempt” from the FMLA’s overtime provisions, call the attorneys at The Spitz Law Firm today for a free and confidential consultation.

If you even think that your employment rights have been violated or that you might need an employment lawyer, then call the right attorney to schedule a free and confidential consultation at 866-797-6040. The Spitz Law Firm is dedicated to protecting employees’ rights and solving employment disputes.

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