Administrative Exemption under FLSA Excludes Revenue-Generating Positions

Parker Poe Adams & Bernstein LLP

Parker Poe Adams & Bernstein LLP

When we review an employer’s overtime exemption classifications for various jobs, we frequently raise questions over whether employees qualify as exempt administrative workers under the Fair Labor Standards Act. Many companies view the administrative exemption as a catch-all for jobs that do not meet the specific requirements for the executive or professional exemptions. These employers are often surprised to learn that well-compensated, important positions do not qualify for the administrative exemption because they make money directly for the organization.

Among other tests, the FLSA rules for the administrative exemption require that the position’s primary duties involve "performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers." This language has been interpreted to mean that the administrative employee must work in a support function, and not a role that involves providing the products or services in which the business engages.

Last month, the First Circuit Court of Appeals determined that a bridge league’s employees who supervise tournaments did not meet the test for the administrative exemption because the organization is in the business of running such tournaments. In other words, the employees’ primary duties involved producing the very services for which it charges participants.

In practice, the administrative exemption is limited to a narrow range of support workers (i.e. human resources, accounting, marketing, etc.) who exercise significant discretion and independent judgment in assisting management with tasks of importance to the organization. In most cases, if the employee in question is a revenue generator rather than a cost center, then that position will not qualify for the administrative exemption.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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