Two requirements make up the primary tests for overtime exemption: salary and duties. The salary basis is not enough to qualify for the exemption alone; the salaried employee must also pass the "duties” test. At the federal level, the focus of this test is on the primary duties of the individual, which must involve overtime-exempt duties.
“Discretion and independent judgment” (DIJ) is a requirement for the administrative and professional overtime exemptions under the Fair Labor Standards Act, and it is the most commonly misapplied element. But what does “discretion and independent judgment” mean?
It is not completely crystal clear, and can be challenging to determine how to apply this. The employee must have the power to make independent choice based on comparison and evaluation of possible courses of action without immediate direction or supervision on matters of consequence. However, the person's skill or knowledge is not considered to be equivalent to "discretion and independent judgment."
In a BLR webinar titled "Advanced Exemption Audits: Evaluate Your Overtime Classifications Now To Avoid Costly Trouble Later," Mary Topliff, Esq., outlined some tips for evaluating whether or not an employee uses discretion and independent judgment in the course of their job.
One way to look at it is to evaluate how closely supervised the person is. Sometimes you need to drill down further and see the details behind what decisions the employee is responsible for. For example, you can evaluate the importance of the decisions the employee is responsible for. To qualify for the exemption, the decision-making the employee is responsible for should be regard management policies and procedures. The employee:
- can deviate from established policies without approval
- can negotiate and bind company on significant matters
- carries out major assignments
- performs work that substantially affects business operations
- provides consultation or expert advice to management
When doing an audit, it is important to flesh out these examples.
Mary Topliff, Esq. founded the Law Offices of Mary L. Topliff in San Francisco in 1997, after practicing civil and employment litigation for nine years. ( www.joblaw.com) The firm specializes in employment law counseling, training, and compliance, focusing on practical solutions to avoid costly legal issues. She has advised many organizations regarding overtime exemption analyses and strategies for minimizing the risk. Topliff is a published author and frequent speaker on legal issues impacting the workplace.