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May 11, 2010
How to Assess Whether an Employee Qualifies for the Administrative Exemption

In a BLR webinar titled "Reducing Overtime Costs: What You Legally Can—and Can't—Do to Keep Workers at Their Straight-Time Rates," Laura P. Worsinger, Esq., discussed some key issues to consider when determining whether an employee qualifies for the administrative exemption under the Fair Labor Standards Act (FLSA):

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  • Whether the employee exercises sufficient discretion and independent judgment to qualify as an exempt administrative employee
  • Whether or not the employee is actually performing in an administrative "role"
  • Whether he or she performs services that the company is "in the business to provide" (Note: The employee might be considered non-exempt even if the employee is highly compensated and exercises a high degree of independent judgment and discretion.)

Financial Services and the Administrative Exemption

In an attempt to provide greater clarity to the exemption, the FLSA regulations enacted in 2004 provide explicit examples of what type of work fits within this definition. In the financial services industry, the regulations provide that employees are generally exempt if their duties include:

  • Collecting and analyzing information regarding customer's income, assets, investments or debts;
  • Determining which financial products best meet the customer's needs and financial circumstances; and
  • Advising the customer regarding the advantages and disadvantages of different financial products and marketing, servicing or promoting the employer's financial products.

Selling Financial Products

However, FLSA regulations specify that an employee whose primary duty is selling financial products does not qualify for the administrative exemption.

A DOL Administrator's Interpretation states that employees who perform the typical duties of a home mortgage loan officer are not exempt when primary duty is routine sales. Thus, they are entitled to receive minimum wage (at least) and overtime under the FLSA.

Laura P. Worsinger, Esq. is Of Counsel with the Los Angeles office of Dykema Gossett PLLC. She has broad counseling and litigation experience and specializes in the defense of employers in individual and class actions involving wage and hour violations, misclassification, discrimination, wrongful termination, and other employment-related proceedings. She can be contacted at lworsinger@dykema.com.

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