Is a Secretary Exempt from Overtime Pay?

One of the common mistakes made by employers is assuming that office workers are exempt from payment of overtime wages simply because they are “white collar”.  The typical scenario is that a secretary is hired at a specified monthly salary, sits at a desk, wears nice clothes, is given a professional sounding title, and is offended at the suggestion that he or she clock in and out each day.  Thus, the secretary neither claims nor is paid for extra time worked.  Employee and employer alike may prefer that the employee be regarded as salaried, not hourly, because a salary carries more cachet.  However, unless the employee satisfies all of the criteria for an exemption from overtime pay, the employee must be paid for overtime hours worked.

Many secretaries and other office workers fail to meet the criteria for an exemption.  This means that the employer must keep an accurate record of all hours worked by these employees, and then pay the employees 1 ½ times their hourly wage for overtime hours worked.

What are the criteria for exemption?  First, an employee’s title does not answer the question of whether he or she is exempt.  Instead, the employee’s actual duties will resolve that issue.  A good rule of thumb is that, to qualify for one of these exemptions, the employee has to have the ability to exercise some discretion and management skills on the job.

Although federal law recognizes several possible exemptions from overtime eligibility, only two of these exemptions come to mind when office workers are considered: the administrative exemption and the executive exemption.  Both exemptions have an earnings threshold of $455 per week.  The earnings threshold must be met as to all weeks of employment, and cannot be affected by the quantity or quality of work available to the employee.  In other words, to meet this threshold, the employee’s pay cannot be affected by how busy he or she is.  The employee’s paystubs should demonstrate whether an employee meets this threshold.

The other requirements for the administrative and executive employee exemptions have been the subject of substantial litigation.  A detailed factual analysis (which should be performed by an attorney experienced in this area of the law) will be needed to determine whether an employee meets the criteria for either exemption.  Here is a summary.

Administrative Employee Exemption

  1.  Work Directly Related to Management or General Business Operations of the Employer

The employee’s work must be “directly related to assisting with the running or servicing of the business”, which can include work in functional areas and personnel management.  This means that working at a desk in an office, for example as a secretary, doesn’t all by itself qualify an employee for the administrative employee exemption.  Instead, the employee must have some role in managing the business, such as personnel management, accounting, budgeting, purchasing, marketing, or procurement.

         2.   Exercise of Discretion and Independent Judgment With Respect to Matters of Significance

The employee must be required to exercise discretion and independent judgment.  This requirement can be difficult for a typical secretary or administrative assistant to meet.  The employee must be in a position to compare and evaluate possible courses of conduct, and to act or make a decision after the various possibilities have been considered.  This requires more than simply applying by rote rules or formulae that are set forth in an employee manual.  Generally, to satisfy this requirement, the employee must have a role in making decisions that involve managing the operations of at least one part of the business.  The fact that the employee’s decisions can be overruled by his or her boss does not prevent the employee from being exempt where he or she really has a role in making the decision.

By now it should be clear that the typical secretary cannot qualify for the administrative exemption.  The other possible exemption is the executive employee exemption.

Executive Employee Exemption

An easy way to think of the executive exemption is that the employee must be a “boss” – of the business, a division of the business, or a department.  Specifically, the employee must (1) have the primary duty of managing the business or a department; (2) customarily and regularly direct the work of two or more other employees; and (3) have the ability to hire and fire or to influence decisions regarding changes in the status of other employees.    

  1. Employee Must Be Primarily Responsible for Managing the Enterprise or a Department or Recognized Division.

Examples of management duties that may qualify an employee for the executive exemption include interviewing, hiring, training, disciplining, managing work flow, and overseeing a budget.  The key is that the employee’s true primary duty must be regular (as contrasted with occasional) management of the enterprise or a department or a division.  Someone who only occasionally steps in to perform some of the duties described above (perhaps when the actual manager is out of the office) likely will not qualify for the exemption.  As is noted above, the employee’s title alone will not resolve this issue.  Thus, calling a person a department manager without actually assigning the person managerial duties is not satisfactory.  The U.S. Department of Labor has seen that “trick” many times and will not be fooled.

        2. Employee Must Supervise At Least Two Full Time Employees.

The employee must have supervisory responsibility.  This means that the employee must supervise at least two full time employees, at least four part time employees, or some combination.  Thus, an employee who is the manager of a department of two will not qualify for the executive exemption, because he or she doesn’t supervise at least two full time employees.

         3.  Employee Must Have Authority to Hire and Fire.

The employee must have a say in the hiring and firing of personnel under his/her supervision.  This does not mean that the employee must have the final say, but the employee must have input into the process, and the level of input must be more than occasional suggestions.  A department head who has input into the hiring, firing and disciplining of employees under his or her supervision will likely satisfy this requirement even though a higher level member of management must approve (and can overrule) the department head’s recommendations.  But, an employee who may have the right to offer comments on another’s performance, but who has no voice in the actual hiring and firing process, may not qualify for the executive exemption.

When considering all of these criteria, the specific facts surrounding the employee’s duties should be discussed with counsel.  Mistakenly assuming that an employee is exempt when he or she is not can be very costly for the employer.

The analysis set forth in this article is provided for general understanding only and is based only on federal law.  Some states have stricter laws regarding the payment of wages.  In general, as between state and federal law, the stricter law will control within a state.  Thus, the local laws in which the employee works – in addition to the federal law – should also be considered.  Counsel should always be consulted for advice regarding a specific legal dispute.  Please contact The Myer Law Firm if you are in need of legal advice regarding an employment or litigation matter.

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