Overview of the FLSA Law and Exempt Status
Determining the Importance of the Work
Defining the Degree of Independent Discretion
Comparison Between Exempt and Non-Exempt Work
A Quick Status Test 
To verify that a position qualifies for an FLSA exemption, use the FLSA
Exemption Status Test Form.
Overview of the FLSA Law and Exempt
Status
Q1. What is the FLSA?
The Fair Labor Standards Act (FLSA), also called the Wage
and Hour Law, is enforced by the U.S. Department of Labor. Its primary
objective is to eliminate detrimental working conditions. FLSA established
protections for employee regarding minimum wage, child labor and overtime
pay provisions. In addition, the regulations identify and exclude certain
workers (exempt) from FLSA coverage.
Q2. What does it mean for a position to be exempt or non-exempt?
Simply put, employees holding nonexempt positions are
those that must be paid in accordance with the overtime provisions of
FLSA. Exempt positions, on the other hand, are excluded (exempted)
from coverage and do not need to be paid overtime. It is important that
the employees assigned to exempt classifications perform work that meet
the standards for exemption. The law's objective is to protect the
employee, so FLSA assumes all positions are nonexempt and subject to
the law. It is the employer's responsibility to prove that a job is
exempt.
Q3. What are the consequences if FLSA is violated?
The Fair Labor Standards Act can be enforced by employee
lawsuits or by actions taken by the US or S.C. Department of Labor (DOL).
Damages may include back pay (statute of limitations is
2 years for unintentional violations and 2 years for willful violations),
penalties, attorney fees, and court costs. In a lawsuit, (as opposed
to an administrative audit by the DOL), employees generally collect
not only back pay but also liquidated damages in the amount of back
pay (double damages).
Q4. How does an employer decide if a position's duties
and responsibilities are exempt according to the FLSA regulations?
There are three types of exemptions under FLSA: Executive,
Administrative and Professional. The exempt test criteria differ by
type.
The FLSA regulations provide guidelines and examples to assist the
employer in making exempt-non-exempt determinations. Essentially,
the law guides the employer in the evaluation of two key criteria:
1. The importance of the work as defined by the FLSA regulations,
and
2. Within the context of the work's importance, the extent and magnitude
of the positions independent discretion.
Determining the Importance of
the Work
To be exempt, work must be of substantial importance to the management
and operations of a department, etc. For example, a position whose primary
function is to participate in the development of business operations
or management policies would typically be exempt. In contract, a position
whose main responsibility is to ensure that management policies are
being followed would not be considered exempt.
Exempt employees make analyses and draw conclusions, which are important
to the determination of management policies or general business operations.
Importance can be measured by the degree and impact of:
-
Advising
- Planning
- Negotiating
- Representing the University
- Purchasing
- Marketing
- Fundraising
- Researching
- Controlling
Types of positions that typically perform this kind of work are:
- Advisory specialist to management
- Executives, managers and supervisors
- Professional such as lawyers, doctors, pharmacists, engineers
- Employees who work on special assignments or in public relations type
positions
Defining the Degree of Independent Discretion
Independent discretion means comparing and evaluation possible courses
of conduct and recommendations or making decisions after the various possibilities
have been considered. (Recommendations need to have strong influence
and are usually adopted with minimal review from higher levels of authority).
Independent discretion must be free from immediate directions or supervision
and involve matters of significance.
Independent discretion must be different from the use of skill or knowledge
in applying techniques or procedures according to specific standards.
Independent discretion must not deal with matters of little consequence
to the overall business operations.
Decisions in significant matters refer "to the kinds of decisions normally
made by persons who formulate or participate in the formulation of policy,
or who exercise authority within a wide range to commit their employer
in substantial respects financially or otherwise."
An exempt employee must exercise this kind of discretion and independent
judgment customarily and regularly (day to day).
Comparison Between Exempt and Nonexempt Work
| ACTIVITY |
NON-EXEMPT |
EXEMPT |
| Research |
Collects and compiles information. Reviews for completeness,
identifies missing documentation. Process documents against an established
standard by following prescribes audit lists. |
Identifies root cause
of problems. Investigates applicable laws, policies and procedures.
Ascertains intent of transactions/issue. Creates "historic" record
of events and repercussions. |
| Analysis |
Identifies problems or issue and selects or determines
appropriate action within prescribes guidelines. Analyses based
on reviewing the documentation against established standards. |
Compare and evaluates possible courses
of conduct; acts after considering various possibilities. Considers
the cause and effect of historic activities and the impact and potential
repercussions of possible actions. |
| Decision-Making |
Applies skills and knowledge in following
prescribed procedures and determines whether specified standard
are being met. Uses knowledge in determining which procedures to
follow. |
Has the power to make an independent choice
free from immediate supervision. The decisions may be in the form
of a recommendation usually following with minimal, if any, review
from higher levels of authority. |
| Judgment |
Determines if documentation meets standards. |
Determines how best to resolve the situation. |
| Independent Discretion |
Discretion applied to the production processes
as opposed to the company's policies or operations. Consequences may
lead to loss through the choice or wrong techniques, improper applications
of skills, neglect or failure to follow instructions. |
Makes decision of consequences of real and
substantial significance regarding the policies or general operations
of the business. Ability to deviate from standard policies and procedures. |
For more information about wage and hour laws visit
the Department of Labor's web site http://www.dol.gov
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