employees who receive pay on a yearly fixed salary basis (not hourly), exempt from certain rules....
Below is part of the Fair Labor Standards Act regarding exempt employees. These are the actual specifics for exempt employees (this example is for administrative exempt employees). Exempt employees are by nature "salaried", which means they are paid on a fixed yearly salary basis, not hourly.
Fair Labor Standards Act (FLSA) Exemptions
To qualify for the administrative employee exemption, all of the following tests must be met:
• The employee must be compensated at a rate not less then $455 per week;
• The employee must be compensated on a salary basis;
1. Experience no reduction in salary for variance in the quality and/or quantity of work.
2. Experience no deductions for absences of less than one day for reason of sickness or disability. Deductions can be made for absences of one full day or more if the absence if for a personal reason other than personal sickness or disability. Deductions can be made for one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide benefit plan providing compensation for salary loss due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more days imposed in good faith for workplace conduct rule infractions.
• 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;
• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
• The employee must spend no more than 20% of his/her work time in activities not directly related to the performance of exempt administrative activities.
1. Work that is “directly and closely related” to the performance of exempt work that would appear to be routine or fairly low level but has a direct and close relationship to the performance of the more important duties. This work includes routine work which necessarily arises out of administrative duties and the routine work without which the employee’s most important work cannot be performed properly. For example, a Human Resources Generalist may take extensive notes during a personnel investigation, type the notes first in draft form, and then type the draft in final form. Although the work up to this point has been manual and clerical in nature, the work was essential to the more important work which was to determine a resolution to a problem.
“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
To meet the “directly related to management or general business operations” requirement, an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing 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 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 network, Internet and database administration; legal and regulatory compliance; and similar activities.
An employee may qualify for the administrative exemption if the employee’s primary duty is the performance of work directly related to the management or general business operations of the employer’s customers. Thus, employees acting as advisors or consultants to their employer’s clients or customers – as tax experts or financial consultants, for example – may be exempt.
Discretion and Independent Judgment
In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses 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 and independent choice, free from immediate direction or supervision. Factors to consider, but are not limited to: whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices; whether the employee carries out major assignments in conducting the operations of the business; whether the employee performs work that affects business operations to a substantial degree; whether the employee has authority to commit the employer in matters that have significant financial impact; whether the employee has the authority to waive or deviate from established policies and procedures without prior approval, and other factors set forth in the regulation. The fact that an employee’s decisions are revised or reversed after review does not mean that the employee is not exercising discretion and independent judgment. The exercise of discretion and independent judgment must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources. An employee who merely applies his/her knowledge in following prescribed procedures or determining which procedure to follow, or who determines whether specified standards are met or whether an object falls into one or another of another of a number of definite grades, classes, or other categories, with or without the use of testing or measuring devices, is not exercising discretion and independent judgment.
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 who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer.
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