This exemption applies to people who assist or administrate in the business affairs of the employer or the customer. An administrative employee must work directly with an exempt employee or under only general supervision, and administrative work cannot involve making the products or performing services which the employer sells or markets.
Description of The Administrative Exemption:
For an employee to be exempt under California's administrative exemption, the employer must prove all of the following about the employee:
The employee's duties and responsibilities require office or non-manual work directly related to management policies or general business operations of the employer or employer's customers; and
The employee does one of the following:
- regularly and directly assists the business' proprietor or another exempt employee,
- who performs, under only general supervision, work along specialized or technical lines requiring special training or knowledge, or
- who executes special assignments and tasks under only general supervision; and
The employee spends over half of his or her weekly work time engaged in exempt administrative duties. What constitutes "exempt" and "non-exempt" administrative work is discussed in the "What You Should Know" section below; and
The employee regularly exercises "discretion and independent judgment." What constitutes "discretion and independent judgment" is discussed more fully in the "What You Should Know" section below; and
The employee must be full-time and salaried. The monthly salary must be twice California's minimum wage for full-time employment, or $1,993.33 a month. Being paid a "salary" has a special legal meaning and is discussed more fully in the "What You Should Know" section below.
If the employer cannot prove all of the above elements, the employee is "non-exempt" under the administrative exemption under California Law.
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What You Should Know About The Executive And Administrative Exemptions:
What is "Executive" Work For the Purpose of the Executive Exemption? The executive exemption applies only to employees that spend over half their time on management work. Job titles are not determinative; rather the law looks to what employees actually do on the job. Examples of exempt, management work include:
Interviewing and training employees;
Adjusting pay rates and work hours;
Directing the work of subordinates;
Disciplining employees;
Planning or distributing work, determining techniques to be used in work;
Determining materials, supplies, machinery and tools to be used or merchandise to be bought or stocked;
On the other hand, examples of non-exempt work include:
Performing the same kind of work as subordinates;
Making sales, replenishing stock, returning stock to shelves;
Routine clerical duties, such as bookkeeping, cashiering, billing or filing;
Making routine inspections;
Performing production or service work.
According to California's Division of Labor Standards Enforcement, managers of restaurants, retail stores, service stations and motels are frequently mischaracterized as exempt in where they spend most of their work time cooking, selling on the floor, cashiering, pumping gas, repairing equipment, and acting as a desk clerk.
Assistant managers - employees who assist the manager of a department - often are considered to be non-exempt because they do not regularly direct the work of other employees. Trainees are not usually considered exempt.
What is "Administrative" Work For the Purpose of the Administrative Exemption?
Administrative work means "servicing" a business; for example, advising the management, planning, negotiating, representing the company, purchasing, and business research and control. Additionally, administrative work must affect the business operations to a substantial degree. This includes the formulation of management policies or the responsibility to execute it. Making sales, producing goods, or performing the services that the employer sells or markets is not administrative work.
A recent case, Bell v. Farmers Insurance Exchange, illustrates these points. In Bell, the court found that Farmer's claims representatives were not administrative employees because they spent their time adjusting claims - the main function of the claims offices where they worked. Secondly, the larger and more important claims were handled by supervisors of the claims representatives. The court concluded that their work was limited to "routine" matters which made them more like production workers than administrative personnel. On this basis, the court found them to be non-exempt and entitled to overtime.
Examples of employees who have been found to be entitled to be non-exempt and overtime pay are:
Escrow workers working for a title company;
Indoor wholesale salespeople working for an electrical supplier;
Police detectives and border patrol agents;
Convention planners employed by a tourist bureau;
Electronics technicians repairing satellite equipment;
Insurance claims investigators and adjusters;
Computer specialists performing simple programming;
Television news producers and sports broadcasters for television stations;
Probation officers;
According to the Department of Labor, run-of-the-mill work performed by bookkeepers, secretaries, and clerks are not performing work directly related to management policies or general business administrative work. Moreover, trainees are non-exempt.
Employers Cannot Rely on Untrue or Unrealistic Job Descriptions to Classify Employees as Exempt.
In examining an employee's work to determine whether he or she is exempt, the law focuses on what the employee should be doing given the realistic requirements of the job. This prevents employers from using an untrue job description to classify employees as exempt, and it prevents employees from becoming non-exempt by doing a bad job. The courts look at what employees are supposed to be doing. This applies to all exemption laws.
The courts will first consider how the employee actually spends his or her time on the job. Then court will compare the employee's work to the employer's realistic expectations, considering particularly whether the employer had any displeasure over the employee's work, and whether this displeasure was itself realistic given the job.
This makes how employees are evaluated, both formally or informally, very important. For example, does your employer compare your sales (which are non-exempt) to the sales of subordinate employees? This makes it more likely that you are non-exempt. What do the employer's formal evaluations say? The list of important things includes practically every aspect of the employee's job. Because of this, an experienced attorney is required for these cases.
Confusion about the exemption often arises over employees who perform some exempt work but also perform "production" or service work. In California, no matter how many exempt responsibilities an employee has, the employee should be considered non-exempt and entitled to overtime if the job requires that the employee work over half the time in non-exempt work.
The federal law is the opposite from California: generally, it considers the employee's duties over how much time they spend doing any individual task. For example, under the federal law, a court found that Burger King restaurant managers performed exempt management work even while flipping hamburgers, because those employees were thinking about management (an exempt executive task) at the same time. California law leads to the opposite result: burger flipping would be non-exempt work time no matter what are the employee's duties or what the employee is thinking about. (In California, if employees are non-exempt under California law, but are exempt under the federal standards, they are non-exempt and entitled to overtime pay!)
What Constitutes "Discretion and Independent Judgment" for the Purposes of the Exemptions
Most exemptions require that, for an employee to be exempt, he or she must regularly exercise "discretion and independent judgment" in their work. This means that the employee has to evaluate possible alternatives and choose or recommend (and the recommendation is given weight) a course of action. The choice has to be made free from immediate supervision and in regard to important matters of a business. The shipping clerk may decide how to pack a shipment, the bookkeeper decides which ledger to post first, but those relatively minor choices do not count.
Discretion and independent judgment are distinguished from skills and procedures. Employees who merely use knowledge or follow procedures do not use discretion and independent judgment. For example, in California, a sportscaster was found not to use discretion and independent judgment; his talent for putting together an entertaining sports newscast came from his skillful application of station guidelines and various techniques which were standard in the industry.
Being Salaried Means No Deductions In Pay
Under state and federal law, if employees are not salaried, they are non-exempt and must receive overtime pay. A salary means that the employee gets paid the same amount each pay period despite lack of work or poor work, attendance or disciplinary problems. The employer generally cannot tinker with an employee's pay. If an employer deducts from an employee's "salary" for the quality or quantity of work performed, the employee is not salaried and not exempt. If there is no work to be done, the salaried employee must still be paid the full salary.
An employer generally cannot dock a salaried employee's pay for disciplinary reasons and keep them "salaried" for overtime purposes. An employer's deduction of less than one day for disciplinary reasons is not allowed. Further, employers cannot dock an employee for partial days missed or poor work and must choose other methods to address the problem. The only exception is for important safety reasons.
Further, a "salaried" worker's pay cannot be subject to deductions for a portion of a workweek for jury duty, attending court proceedings as a witness, or temporary military leave.
Deductions may be made for sick time or absences, but they must be made for periods of one day or longer and according to a bona fide plan or practice of providing extra compensation for such sick time, i.e., sick days.
Employees who are paid hourly wages, on commission, or piece rates, cannot be exempt from payment of overtime under the administrative, executive or professional exemptions.
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