Administrative / Managerial Exemption from Overtime

Administrative exemption is the most commonly used exemption to classify an employee as a manager exempt from overtime pay. As explained by the California Supreme Court, the administrative exemption applies to employees who: (1) are paid at least twice the minimum wage; (2) perform administrative work, defined as office or non-manual work "directly related to management policies or general business operations of his/her employer or his/her employer's customers;" (3) have primary duties that involve that administrative work; and (4) discharge those primary duties by "customarily and regularly exercising discretion and independent judgment."  - All of the above requirements must be satisfied before an employee can be properly classified as an exempt manager. 

Employers are often tempted to stretch the definition of administrative exemption way too far and classify clearly low ranked workers, who should be paid hourly and be entitled to overtime pay, as exempt. We have seen all kinds of tricks used by employers to accomplish this over the past few years:

• Some employers don't realize or act like they don't realize that simply giving a title of a Manager to an employee or referring to an employee as exempt in his job title doesn't make him exempt.  A receptionist will not be properly classified as exempt just because she has an office manager title. And a security attendant at an office building will not be lawfully exempt just because his job title is desk manager. Being an exempt manager requires showing that most of that employee's duties are in fact "managerial", i.e. related to directing operations and/or directing the work of other employees, and/or making important decisions relating to company operations. 
• Sometimes employers argue in court, when defending a misclassification claim, that s non-managerial employee should be classified as exempt because he exercised "independent judgment". They often try to argue that a secretary or a payroll bookeeper is properly exempt because they exercise independent judgment on the most routine tasks such as how to go about creating documents and where to store them, and which software to use when paying vendors' invoice. These employers conveniently the second part of that requirement, that states that the independent judgment must be exercised with regard to those duties and functions that direct affect the business and its policies / operations. Otherwise, every single employee would be exercising independent judgment and this would lead to absurd results. After all, we all decide how to sit at the desk, when to get up and to the restroom an with which hand to turn on our computer at work.    
• Then, there are also employers who think that an employee can be properly exempt from overtime pay under administrative exemption just because that employee has ocassional managerial responsibilities. Consider a grocery store manager, who spends 75% of his work time covering up for other cashiers when the store is too busy or when one or more of the actual cashiers call in sick. Since most of that manager's work is non-exempt, he should be paid hourly, at least during those weeks or months when the majority of his work is non-exempt.  

When the claim is brought in court or at DLSE for misclassification by an employee who was classified as exempt under administrative exemption, the employer has the burden of proving that the exemption applies to that employee's job duties. This provides a certain advantage to employees-claimant, in grey area type situations where both sides are not sure whether exemption applies. 

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