The Administrative Exemption
What is the administrative exemption and does it apply to you as an employee in Massachusetts, or should you be paid overtime for hours worked over 40 in a workweek?
The general rule regarding overtime is that all employees are to be paid overtime for all hours worked over forty in a workweek unless they fall into one or more statutory exemptions. This is the case under the Massachusetts Wage Act and the Fair Labor Standards Act.
As we’ve written about here, the most common exemptions from the requirement to pay overtime are known as the white-collar exemptions. These include the executive exemption, the administrative exemption, the learned professional exemption, and the creative professional exemption. The administrative exemption is probably the most litigated of all the white-collar exemptions. Ironically, it’s also the most difficult to analyze in terms of whether it’s properly being used.
What is the Administrative Exemption?
The administrative exemption covers any employee “(1) who receives a salary of at least $455 per week; (2) whose 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 (3) whose primary duty includes the exercise of discretion and independent judgment with respects to matters of significance." Cruz v. Boston Litig. Sol, 2016 U.S. Dist. Lexis 187470 (D. Mass. 2016). Employers must satisfy all requirements in order to avail themselves of the exemption. Marzuq v. Cadete Enterprises, Inc., 807 F.3d 431, 435 (1st Cir. 2015).
What Type of Work Do Administrative Exempt Employees Do?
The Fair Labor Standards Act and the Massachusetts Wage Act identify the type of work that typically satisfies the administrative exemption. That list includes employees working in the following fields: 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 networking, internet and database administration, legal and regulatory compliance, and similar activities.
What Does Exercising Discretion and Independent Judgment Mean?
In order to be properly classified as an administrative exempt employee, the employee must exercise discretion and independent judgment. That’s the case under the Fair Labor Standards Act and the Massachusetts Wage Act. According to governing regulations, courts should consider the following factors when determining if any employee exercises the type of discretion and independent judgment sufficient to satisfy the administrative exemption: (1) whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices; (2) whether the employee carries out major assignments in conducting the operation of the business; (3) 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; (4) whether the employee has authority to commit the employer in matters that have significant financial impact; (5) whether the employee has authority to waive or deviate from established policies and procedures without prior approval; (6) whether the employee has authority to negotiate and bind the company on significant matters; (7) whether the employee provides consultation or expert advice to management; (8) whether the employee is involved in planning long-or short-term business objectives; (9) whether the employee investigates and resolves matters of significance on behalf of management; and (10) whether the employee represents the company in handling complaints, arbitrating disputes or resolving grievances.
Courts have grappled with the administrative exemption for decades. In doing so, they typically find that the question as to whether someone is or is not an administrative exempt employee is best left to a jury. On occasion, courts have taken that issue off the table all together and found that the evidence before it sufficiently eliminates any doubt as to whether an employee falls under the administrative exemption. To date, courts have analyzed the following job titles regarding application of the administrative exemption:
Production Lead / Production Manager employee from Roslindale, Massachusetts (Suffolk County) working for an employer based in Boston; federal court in Boston reserved administrative exemption question to jury.
Computer Technician / Systems Administrator employee from Fitchburg, Massachusetts (Worcester County) working for an employer based in Marlborough, Massachusetts (Middlesex County); federal court in Boston reserved administrative exemption question to jury.
Customer Relations Manager employee from Boston, Massachusetts working for an employer based in Boston, Massachusetts; federal court in Boston held that the employee was properly classified as an administratively exempt employee.
Sales Manager employee from Boston, Massachusetts working for an employer based in Boston, Massachusetts; federal court in Boston held that the employee was properly classified as an administratively exempt employee.
Technical Writer employee from Billerica, Massachusetts (Middlesex County) working for an employee based in Billerica, Massachusetts (Middlesex County); federal court in Boston held that the employee was properly classified as an administratively exempt employee.
Are you a resident of Springfield, Pittsfield, Worcester, Lawrence, Fall River, New Bedford or Hyannis? Are you working overtime and not getting paid? Contact Steffans Legal to schedule a free consultation.