The Administrative Exemption and the Public Sector

Public Sector.BlogThe U.S. Department of Labor looks at the public sector with a specialized lens, for a variety of reasons. One area worth discussing is the administrative exemption to minimum wage and overtime. As we all know, to meet the administrative exemption, an employee must satisfy two criteria: perform work directly related to management or general business operations, and use independent judgment and discretion with respect to matters of significance.

Whether work is directly related to management or general business operations is a question that deserves some thought. In the public sector, it includes work in functional areas such as: tax; finance; accounting; purchasing; procurement; advertising; marketing; safety and health; human resources; employee benefits; labor relations; public relations, government relations; internet and database administration; regulatory compliance; and other, similar activities.

These are tasks of many cities, counties, and agencies, and are not the reason the organizations exist. Instead, public-sector organizations exist to serve the citizens of their districts, and any activity to help those citizens is not on the administrative side of the business, and cannot be included under the exemption.

Public-sector inspectors or investigators of various types, such as fire prevention or safety, building or construction, health or sanitation, environmental or soils specialists and similar employees generally do not meet the duties requirements for the administrative exemption because their work typically does not involve work directly related to the management or general business operations of the employer.

A project manager may meet the exemption if he or she leads a team to complete major projects for the employer such as purchasing, selling, or closing all or part of the business, negotiating a real estate transaction or a collective bargaining agreement, or designing and implementing productivity improvements, even when the employee does not have direct supervisory responsibility over the other employees on the team. The more difficult issue is when a project manager is performing work on the operations side of the business. Because it is not on the administrative side of the business, the administrative exemption may likely not apply. Whether other exemptions apply is a question the employer must explore. Of course, MSEC can help with this analysis.