When Contractors Performing Administrative Work Can Be Exempt From Overtime

If you are well versed in the Fair Labor Standards Act (FLSA) or have read our blog recently, you are already well aware that most employees must be paid at a rate of 1.5 times their regular pay rate for any hours worked over 40 in a work week, with a few exceptions. We have already discussed how certain Professional, Computer-Related, and Executive positions are exempt from that overtime requirement. Now it is time to take a look at when a contractor can be exempt from overtime under the Administrative Exemption. As with the other exemptions, there are plenty of positions that may be considered by many to be “administrative,” but the position must pass a two-part test to qualify.Part One: DutiesFor a contractor you place to be considered an Administrative employee, his/her “primary duty” must be directly related to the management of the business or general business operations. Specific areas the Department of Labor (DOL) places under this category are tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research;, safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network; Internet; and database administration; and legal and regulatory compliance.But just because someone works in one of the areas above does not automatically mean they qualify. The contractor must “exercise discretion and independent judgement.” What does that mean? Well, the Department of Labor (DOL)’s Fact Sheet on the Administrative Exemption provides a rather lengthy definition, but the main thing is that the contractor “has the authority to make an independent choice, free from immediate discretion or supervision.”Part Two: CompensationAs with the other exemptions, duties alone are not enough to exempt an employee from the overtime requirements. The contractor must also pass the compensation test. Like most of the other exemptions, the compensation requirement is that they are paid on a salary rather than hourly basis at a rate of at least $455 per week.We again urge you to make use of the DOL’s Fact Sheets regarding the exemptions from the overtime regulations when determining if a contractor should be paid overtime and consult an employment attorney if you encounter a particularly tricky situation.This article is for informational purposes only and should not be considered legal advice.