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New Guidelines Regarding the Fair Labor Standards Act (FLSA)
effective August 23, 2004
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ADMINISTRATIVE EXEMPTION
To qualify for the Administrative employee exemption, all of the following tests must be met.
- The employee must be compensated on a salary basis 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.
TERMS DEFINED:
Salary Basis- Being paid on a “salary” basis means an employee regularly
receives a predetermined amount of compensation each pay period on a weekly, or
less frequent, basis. The predetermined amount cannot be reduced because of
variations in the quality or quantity of the employee’s work. Subject to
exceptions listed below, an exempt employee must receive the full salary for any
week in which the employee performs any work, regardless of the number of days or
hours worked.
Primary Duty- “Primary duty” means the principal, main, major or most important
duty that the employee performs. Determination of an employee’s primary duty
must be based on all the facts in a particular case, with the major emphasis on
the character of the employee’s job as a whole.
Directly Related to Management or General Business Operations- Refers to the
typed of work performed by the employee who must perform work directly related
to assisting with the running or servicing of the business, as distinguished,
for example, from working on a production line or selling a product in a retail
or service establishment. Work “directly related to management or general
business operations” includes, but is not limited to, work in functional areas
such as:
| Finance- Accounting, Budgeting, Auditing |
Purchasing- Procurement |
Public & Government Relations |
| Quality Control |
Research |
Marketing & Advertising |
| Computer Network, Internet & Database Administration |
Safety and Health |
Legal & Regulatory Compliance |
Employer’s Customers- Means those employees who are acting as advisors or
consultants to their employer’s clients or customers. For example, financial or
educational consultants may be exempt.
Discretion and Independent Judgment- In general, the exercise of discretion and
judgment involves the comparison and the evaluation of possible course of
conduct and acting or making a decision after the various possibilities have
been considered. The term must be applied in the light of all the facts involved
in the employee’s particular employment situation, and implies that the employee
has authority to make an independent choice, free from immediate direction or
supervision. See Factors to Consider.
Matters of Significance- The term “matters of significance” refers to the level
of importance or consequence of the work performed. An employee does not
exercise discretion and independent judgment with respect to matters of
significance merely because the employer will experience financial losses if the
employee fails to perform the job properly. Similarly, an employee who operates
very expensive equipment does not exercise discretion and independent judgment
with respect to matters of significance merely because improper performance of
the employer’s equipment many cause serious financial loss to the employer.
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