29CFR541.202 - Discretion and independent
judgment.
Section Number: 541.202
Section Name: Discretion and independent judgment.
(a) To qualify for the administrative exemption, an employee's
primary duty must include the exercise of discretion and independent
judgment with respect to matters of significance. 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.
(b) 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 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.
(c) The exercise of discretion and independent judgment implies
that the employee has authority to make an independent choice, free
from immediate direction or supervision. However, employees can
exercise discretion and independent judgment even if their decisions or
recommendations are reviewed at a higher level. Thus, the term
``discretion and independent judgment'' does not require that the
decisions made by an employee have a finality that goes with unlimited
authority and a complete absence of review. The decisions made as a
result of the exercise of discretion and independent judgment may
consist of recommendations for action rather than the actual taking of
action. The fact that an employee's decision may be subject to review
and that upon occasion the decisions are revised or reversed after
review does not mean that the employee is not exercising discretion and
independent judgment. For example, the policies formulated by the
credit manager of a large corporation may be subject to review by
higher company officials who may approve or disapprove these policies.
The management consultant who has made a study of the operations of a
business and who has drawn a proposed change in organization may have
the plan reviewed or revised by superiors before it is submitted to the
client.
(d) An employer's volume of business may make it necessary to
employ a number of employees to perform the same or similar work. The
fact that many employees perform identical work or work of the same
relative importance does not mean that the work of each such employee
does not involve the exercise of discretion and independent judgment
with respect to matters of significance.
(e) The exercise of discretion and independent judgment must be
more than the use of skill in applying well-established techniques,
procedures or specific standards described in manuals or other sources.
See also Sec. 541.704 regarding use of manuals. The exercise of
discretion and independent judgment also does not include clerical or
secretarial work, recording or tabulating data, or performing other
mechanical, repetitive, recurrent or routine work. An employee who
simply tabulates data is not exempt, even if labeled as a
``statistician.''
(f) An employee does not exercise discretion and independent
judgment with respect to matters of significance merely because the
employer will experience financial losses if the employee fails to
perform the job properly. For example, a messenger who is entrusted
with carrying large sums of money does not exercise discretion and
independent judgment with respect to matters of significance even
though serious consequences may flow from the employee's neglect.
Similarly, an employee who operates very expensive equipment does not
exercise discretion and independent judgment with respect to matters of
significance merely because improper performance of the employee's
duties may cause serious financial loss to the employer.
