Payday loans

February 15, 2012

FLSA and “Matters of Significance”

Q.  The FLSA administrative exemption really confuses me.  I understand the first part of the exemption – that an employee’s primary duty must consist of the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers.  But then it goes on to say the primary duty must also include the exercise of discretion and independent judgment with respect to “matters of significance.”  How am I supposed to know what matters of significance means?

A.  Out of all the exemption tests, the administrative exemption is considered to be the most ambiguous in terms of interpretation.   According to the Department of Labor (DOL), the term “matters of significance” refers to the level of importance or consequence of the work performed. An employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer.

So what do matters of significance mean?  To start with you can ask yourself if the employee in the position:

  • have authority to formulate, affect, interpret, or implement management policies or operating practices?
  • contribute to long-term or short-term business objectives?
  • represent the company in handling complaints, arbitrating disputes, or resolving grievances?
  • have authority to waive or deviate from established policies and procedures without prior approval?

The answers to these questions will assist in determining if matters of significance are part of the employee’s position.  As always, it is recommended to review exempt status with your employment law attorney before making a final determination.  The DOL also has a fact sheet regarding the Administrative Exemption which you can access by clicking here.

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