Discretion and Independent Judgment with Respect to Matters of Significance


Discretion and Independent Judgment with Respect to Matters of Significance – Administrative Employee Exemption

Discretion and independent judgment for purposes of the administrative employee exemption under the Fair Labor Standards Act (FLSA) mean evaluating and comparing possible courses of conduct and making a decision based on the evaluation and comparisons. Whether a matter is significant depends on its importance or consequences. 29 CFR 541.202(a)

An employee may be deemed to exercise discretion and judgment with respect to matters of significance even if their decisions are subject to review by higher levels of management and may be rejected. An exempt administrative employee does not need to possess final decision-making authority. The ability to effectively recommend action is sufficient. 29 CFR 541.202(c) Additionally, the fact that there are other employees that perform identical work or work of the same importance does not, by itself, defeat an employee’s exercise of discretion and judgment with respect to matters of significance. 29 CFR 541.202(d)



Factor considered in determining if an employee exercises discretion and judgment with respect to matters of significance include, but are not limited to:

  • can the employee formulate, affect, interpret, or implement management policies or operating practices;
  • can the employee carry out major assignments in conducting the operations of the business;
  • can the employee performs work that affects business operations or a particular segment of the business to a substantial degree;
  • can the employee commit the employer in matters that have significant financial impact;
  • can the employee waive or deviate from established policies and procedures without prior approval;
  • can the employee negotiate and bind the company on significant matters;
  • can the employee provide consultation or expert advice to management;
  • can the employee participate in planning long- or short-term business objectives;
  • can the employee investigate and resolve matters of significance on behalf of management; and
  • can the employee represent the company in handling complaints, arbitrating disputes, or resolving grievances.

29 CFR 541.202(b)

An employee does not exercise discretion or judgment with respect to matters of significance is they only apply well-established techniques, procedures, or standards described in manuals or similar sources. Additionally, an employee does not exercise discretion or judgment with respect to matters of significance if they perform clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent, or routine work. 29 CFR 541.202(e) The fact that an employee may cause his or her significant financial loss in the performance of their job does not necessarily mean they exercise discretion or judgment with respect to matters of significance. For example, an employee that operates an expensive machine does not exercise discretion or judgment with respect to matters of significance just because the employer could suffer significant financial loss if the employee broke it. 29 CFR 541.202(f)


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