Earlier this year, the Fair Labor Standards Act celebrated its 85th anniversary. Later this year, the executive and administrative exemptions will also turn 85 years old. The FLSA helps ensure workers receive fair compensation, while the exemptions provide important aid to employers. Whether you are an employer or an employee, it’s important to understand what the FLSA and its exemptions do (and don’t) require. If you have questions, get in touch with a skilled Atlanta wage-and-hour lawyer to get the knowledgeable answers you need.
When the federal government created the first salary threshold for the executive and administrative exemptions in 1938, that number was $1,560 annually. By 1949, the figure was $5,200.
Currently, the minimum salary an employer can pay and also claim the executive or administrative exemption is $684 per week, or just over $35,500. If a proposed rule from the U.S. Department of Labor takes effect as written, that figure will — for the first time — climb above $50,000 annually, at $1,059 per week, or just slightly above $55,000 annually.
The Executive Exemption
Of course, the salary threshold is not the sole criterion for determining whether or not the administrative or executive exemption applies. For the executive exemption, the worker must also have as his/her primary duty “managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise.”
Managing, in this context, refers to things like interviewing job candidates, choosing new employees, training workers, setting and altering workers’ rates of pay, directing and supervising subordinates’ work, disciplining workers, recommending promotions or other job status changes, and more.
Courts have made it clear that there is no bright-line percentage when it comes to determining whether or not a duty is or is not a worker’s primary one. Rather, the analysis comes down to “all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.”
Additionally, the worker in question must supervise and direct the work of at least two full-time employees and must have the ability to hire and fire workers (or at least have the authority to make hiring and firing recommendations that carry “particular weight.”)
The Administrative Exemption
For the administrative exemption to apply, the worker must (in addition to meeting the salary threshold) work primarily doing “office or non-manual work” that is tied to the general business operations or management of the employer’s customers. Additionally, the employee’s primary work must involve “the exercise of discretion and independent judgment” for the exemption to apply.
The Labor Department has clarified that the “directly related to management or general business operations” requirement distinguishes two very different sets of workers. Manufacturing production workers and sales staff, for example, generally do not qualify for the exemption. On the other hand, employees who work in areas such as finance and accounting, auditing, quality control, purchasing, procurement, research, human resources, employee benefits, public relations, IT, and legal/regulatory/tax compliance can qualify under this exemption.
The comment period for the Labor Department’s proposed change is currently open and will remain so until early November.
This significant proposed change is a reminder that wage-and-hour law is constantly moving and evolving. To ensure that your business is in compliance, you need to be up-to-date on all the new changes in the laws and regulations. The skilled Atlanta wage and hour attorneys at the law firm of Parks, Chesin & Walbert can help, collaborating with our clients to develop and modify employment policies that will protect their business interests while also ensuring complete legal and regulatory compliance. Contact us through this website or at 404-873-8048 to schedule a consultation today.