DEFENDING FLORIDA EMPLOYERS: THE ADMINISTRATIVE EXEMPTION APPLIES TO OVERTIME WAGE CLAIMS

It is important for employers to properly classify their employees as exempt or non-exempt under the Fair Labor Standards Act (FLSA). Under the Fair Labor Standards Act, if an employee works more than forty hours in a week, the employee must be paid an overtime rate of at least 1.5 times their regular hourly rate for hours worked in excess of forty hours in the week. 29 U.S.C. § 207. Misclassification of employees as non-exempt, and the failure to pay overtime, can result in an FLSA lawsuit from the misclassified employees. The FLSA sets out a number of exemptions to the overtime pay requirement. Application of these exemptions depends on the employees job duties and wages. The most common exemptions are the executive, administrative, and professional exemptions. 29 U.S.C. § 213. The administrative exemption is one of the most misapplied exemptions. Therefore it is important for employers to understand how to apply the exemption. The Miami business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

To qualify for the administrative exemption, an employee must satisfy all of the following criteria:

• The employee is compensated on a salary or fee basis at a rate not less than the standard salary level set by 29 CFR § 541.600 (currently $684 per week);
• The employee’s 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
• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

29 C.F.R. § 541.200. To satisfy the second element, he employee “must perform work directly related to assisting with the running of servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a produce in a retail or service establishment.” Rock v. Ray Anthony Intern., LLC, 380 Fed. Appx. 875 (11th Cir. 2010). Much litigation over the administrative exemption involves how to determine whether an employee performs work that is directly related to assisting with the running or servicing of the business. The federal regulations define administrative work to include, but not be limited to, work in 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.” 29 C.F.R. § 541.203.

Regarding the third element, “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.” 29 C.F.R. § 541.202.

The employee in Rock v. Ray Anthony Intern., LLC is a good example of an administrative employee. The employee’s primary job duties pertained to running his employer’s crane rental department, therefore the the employee was not entitled to overtime compensation. Specifically, the employee communicated with customers, selected cranes for specific jobs, assigned crane operators to the cranes, oversaw other employees, prepared and reviewed job tickets, and maintained the crane rental schedule.

Determining whether the administrative exemption applies to a particular employee requires a close analysis of that employee’s job duties to determine whether the requisite criteria is satisfied. Employers should perform this analysis prior to designating an employee as exempt under the administrative exemption to avoid unwanted consequences.

The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.