Discretion and Independent Judgment

The Fair Labor Standards Act (FLSA) requires most employees in the United States to receive wages which are at or above the federal minimum wage. Section 13(a)(1) of the FLSA, however, allows an exemption from both minimum wage and overtime pay for specific employees, including those who are considered administrative, professional, or executive.

To qualify for the exemption, however, the employees must meet certain requirements. For instance, they must be paid a salary, and they must have discretion and independent judgment. Unfortunately, discretion and independent judgment is one of the most confusing aspects of the Fair Labor Standards Act's (FLSA) administrative exemption.

What is discretion and independent judgment?

Discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct by an employee. For instance, if the employee has discretion and independent judgment they have the ability to evaluate several possible actions and make the appropriate decision. Discretion and independent judgment is not simply applying well-established techniques, procedures, or specific standards which have been documented in a company manual or training material, but rather the ability to make decisive actions independently.

Discretion and independent judgment also does not mean the employee's decision will not be reviewed by someone who has more authority in the company. In fact, an employee may have discretion and independent judgment but not be considered free from review.

Common examples of discretion and independent judgment include the ability to formulate, affect, interpret, or implement management policies or operating practices; to carry out assignments as part of the business operations; to perform work which substantially affects the business operations; make decisions which can financially impact the company; deviate from established policies and procedures; negotiate significant matters for the company; provide consultation or expert advice to management; and be involved in planning long- or short-term business objectives.