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Your Employee Matters


By May 1, 2008July 2nd, 2021No Comments

A California case, Combs v. SkyRiver Communications, denied a director of network operations his overtime claim. Under both California and Federal law, a person is employed in an administrative capacity when their primary duties are: 1) The performance of office or non-manual work directly related to the management policies with general business operations of the company’s customers; 2) where they customarily and regularly exercise discretionary or independent judgment with respect to matters of significance; and 3) where they perform under only general supervision and do work along specialized or technical lines that require special training, experience, or knowledge.

The phrase “directly related to management policies or general business operations” is interpreted to require that an employee perform work directly related to assisting with the running or servicing of the business, as distinguished from work on a manufacturing product line or selling a product in a retail or service establishment. In a sense, the employee is working “on” the business as opposed to “in” the business. 29 CFR Section 541.201 states that the phrase “directly related to the management or general business operations”:

“Includes, but is not limited to, work in functional areas such as 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; legal and regulatory compliance; and similar activities.”

Interpretive guidance regarding the phrase “exercise of discretion and independent judgment with respect to matters of significance” has been interpreted to mean:

“In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered. The term ‘matters of significance’ refers to the level of importance or consequence of the work performed.”

“The phrase ‘discretion and independent judgment’ must be applied in the light of all the facts involved in the particular employment situation in which the question arises. Factors to consider when determining whether an employee exercises discretion and independent judgment with respect to matters of significance 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 the 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.”

Note that in California the term “primarily engaged in duties” means “more than one-half the employee’s work time.” The Federal standard uses more of a qualitative than a quantitative approach. Read the case here.