Question:

What does “discretion and independent judgment” mean when applying the duties tests?

Answer:

The Department of Labor defines the use of discretion and independent judgment as more than the use of skill in applying well-established techniques, procedures, or specific standards described in manuals or other sources. The use of discretion and independent judgment implies that one has authority to make an independent choice, free from immediate direction or supervision. However, discretion and independent judgment can be used even if the decision or recommendation is reviewed by higher authority in the organization. Discretion and independent judgment does not require that the decisions being made have to be final or free from review. The fact that one’s decisions may be subject to review and that upon occasion the decisions are revised or reversed after review does not mean that one is not using discretion and independent judgment.

The phrase “discretion and independent judgment” must be applied in the light of all the facts involved in the particular situation in which the question arises. Factors include, but are not limited to:

Whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices;

Whether the employee carries out major assignments in conducting the operations of the business;

Whether the employee performs work that affects business operations to a substantial degree, even if the employee’s assignments are related to operation of a particular segment of the business;

Whether the employee has authority to commit the employer in matters that have significant financial impact;

Whether the employee has authority to waive or deviate from established policies and procedures without prior approval;

Whether the employee has authority to negotiate and bind the company on significant matters;

Whether the employee provides consultation or expert advice to management;

Whether the employee is involved in planning long- or short-term business objectives;

Whether the employee investigates and resolves matters of significance on behalf of management; and

Whether the employee represents the company in handling complaints, arbitrating disputes or resolving grievances.

Discretion and independent judgment does not include:

Applying well-established techniques, procedures, or specific standards described in manuals or other sources;

Clerical or secretarial work;

Recording or tabulating data; or

Performing mechanical, repetitive, recurrent, or routine work.

Question:

If two or more employees work the same job duties that meet the administrative exemption job duties test, but earn different rates of pay, can some of them be classified as exempt and others classified as nonexempt?

Answer:

Yes. The “white collar” exemption requires an employee to be paid on a salary basis that is at least the minimum salary threshold ($913 per week) and meets the job duties test. If the employee meets these requirements, the employee may be classified as exempt. If the employee fails to meet any part of the criteria, the employee would not meet the exemption status and must be classified as nonexempt. The exemption is applied on an employee by employee basis, not by a particular job class or department.

Question:

What are the penalties if an employer misclassifies an employee?

Answer:

There is no fixed dollar amount for penalty for misclassification. However, the financial burden may be costly to employers. Costs will include back pay plus interest (up to three years); liquidated damages equal to the amount of unpaid wages and more in some states; attorney’s fees and court costs; and willful violation penalties — up to $10k in fines and up to six months in prison.

Question:

Can we pay our nonexempt employees a salary?

Answer:

Yes. Nonexempt employees may be paid an hourly wage, salary, commission or fee as...