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Administrative Overtime Exemption Not Determined by Importance of Position

    Client Alerts
  • May 08, 2009

Employers commonly misclassify employees as exempt from the Fair Labor Standards Act’s overtime requirements by claiming that the employees are Administrative exempt.  The actual Administrative exemption is narrow, and is limited to certain support employees who exercise a high degree of discretion and independent judgment.  The limits of the Administrative exemption were reinforced last week by the Fourth Circuit Court of Appeals (which includes North and South Carolina) in Desmond v. PNGI Charles Town Gaming.

The plaintiff was a Racing Official at a horse track who assisted with race day activities.  Most of her work was clerical in nature, such as completing racing entries, confirming weights, and other similar activities.  The district court classified the position as Administrative exempt, accepting the employer’s argument that these functions were indispensable to the employer’s business.

On appeal, the Fourth Circuit reversed this opinion, finding the Race Official position to be non-exempt.  The court made clear that the importance of the position is not directly relevant to the exemption question.  Instead, the Fourth Circuit focused on the actual activities performed.  These duties involved clerical work, or tasks performed according to established guidelines.  The duties were not directly related to business operations as required for the Administrative exemption, because they were more akin to actual production rather than support work.  Although it never reached the issue, the court probably would have found a lack of discretion and independent judgment involved with the job.

Many employers talk themselves into believing that lower level support position do not require overtime payment.  In actuality, only a very small number of highly skilled, highly independent, highly important, and usually highly compensated employees qualify for the Administrative exemption.