DOL's overtime exemption turns on duties, not titles

Fact Sheet #17C, dated December 2019, answers the question advisory firm owners ask about operations staff more than any other — who can be salaried without overtime — and it opens with a warning that job titles do not determine exemption status. The Fair Labor Standards Act requires most employees to be paid at least the federal minimum wage for all hours worked and overtime at not less than one and a half times the regular rate beyond 40 hours in a workweek, and Section 13(a)(1) exempts employees in bona fide executive, administrative, professional and outside sales roles, with a companion provision covering certain computer-related occupations. What puts an employee inside the exemption is the specific duties performed and the salary paid.

For the administrative exemption, the test turns on "primary duty," which the department defines as the principal, main, major or most important duty an employee performs, and that determination rests on all the facts of a particular case with the emphasis on the character of the job as a whole — a standard that rewards documentation and punishes the assumption that a good title settles the matter.

The fact sheet then lists the functional areas that count as work "directly related to management or general business operations": 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 and database administration, legal and regulatory compliance, and similar activities. Set that list against a typical RIA's back office — billing and reconciliation, the benefits administrator, the compliance analyst, the marketing coordinator, whoever owns the CRM — and most of a firm's non-advisory payroll sits somewhere inside it. The department draws one line: the work must assist with the running or servicing of the business, as distinguished from working a manufacturing production line or selling a product in a retail or service establishment.

The fact sheet spells out a second path, the one advisory firms use least: an employer may claim the administrative exemption where an employee's primary duty is work directly related to the management or general business operations of the employer's customers. For a firm whose business is servicing clients, that is a wider door than the internal-operations reading suggests, and the practical move is to write down which of the two an employee actually walks through rather than assuming either.

The fact sheet declines to state the standard salary level, instead pointing to 29 CFR 541.600 and the department's salary-levels page; that half of the test a firm can fix with a payroll adjustment. The duties half is decided by evidence of what the employee does all day, and the evidence is a document somebody has to write. A one-page description assembled from the department's own functional-areas list is the cheapest compliance work available to an advisory firm. It is also the item most reliably missing from the personnel file.