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Administrative staff: Who’s exempt, who’s not?

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in Leaders & Managers,Management Training

Claims representatives at Farmers Insurance Exchange typically worked beyond 40 hours a week. But the company didn't cough up overtime pay because it said those workers were administrative employees exempt from overtime.

The claims reps disagreed and sued. Although the case was based on California law, the court looked to interpretations of the federal Fair Labor Standards Act (FLSA), the source of some of the key terms in the state law. Result: Claims reps in more than 70 branch offices won overtime and back pay. (Bell v. Farmers Insurance Exchange, No. A091134, Calif. CA, 2001)

Advice: To determine if workers are exempt administrative workers under the FLSA, you have to consider two points:

  • The actual work being done, not just the employee's title. 
  • The amount of discretion and authority the workers have. (The more they have, the more likely they'll be considered exempt.) 

To qualify for the administrative exemption, an employee must, among other things, perform nonmanual work

that's "directly related to management policies or general business operations of his employer or his employer's customers."

In contrast, workers who produce the goods or services that the company markets are not considered ad-ministrative workers. While few employees today may consider themselves in "production," that's what many of them are. Examples of workers who didn't qualify for the ad-ministrative exemption because of this: news producers, probation officers and child treatment counselors.

Note: Claims reps aren't automatically barred from the overtime exemption. In this case, the jobs didn't rise to exempt status because their authority was limited.Solve exempt/nonexempt puzzle

To help you properly classify your employees, we've created a free, two-page checklist, Exempt vs. Nonexempt: Where to Draw the Line. To have it faxed to you, call us at (800) 543-2055. To have it e-mailed to you, send an e-mail request to customer@nibm.net and put "Exempt vs. Nonexempt" in the subject line.

For a full description of the FLSA's categories of overtime exemptions, visit the U.S. Labor Department's Web site at www.elaws.dol.gov/flsa.

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