Monday, February 6, 2023

The problem isn’t “fake” managers, it’s the poorly named “administrative” exemption

"Would you rather be a front-desk clerk or 'Director of First Impressions'? A barber or a 'Grooming Manager'?" CBS News posed this question, and concluded that employers use these fancy, inflated titles to avoid paying employees in full for their overtime work. 

"Title inflation," the article argues, is being used to deny overtime and steal wages from otherwise deserving employees.

The problem isn't how employers title employees' jobs, it's the law itself. Nothing in employment law has a more misleading name than the administrative exemption in the Fair Labor Standards Act. Employers routinely mis-believe that if an employee performs administrative tasks, that employee is exempt from being paid overtime under the FLSA. In fact, the administrative exemption only applies to a narrow group of employees —those 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 which includes the exercise of discretion and independent judgment with respect to matters of significance.

Examples of some professions that the Department of Labor has found could qualify for the administrative exemption include mortgage loan officers, insurance agents, sales managers, marketing analysts, purchasing agents, financial services registered representatives, and loss prevention managers. They key to the exemption, however, isn't the title give to the job but the bona fides of whether the employee has actual and legitimate discretion in the exercise of independent judgment in how they carry out their key job tasks.

Whether an administrative employee is administratively exempt is determined on an employee-by-employee basis, even within the same job category within the same organization. If you haven't audited your wage and hour classifications, what are you waiting for?