[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR541.202]

[Page 183-184]
 
                             TITLE 29--LABOR
 
         CHAPTER V--WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR
 
PART 541_DEFINING AND DELIMITING THE EXEMPTIONS FOR EXECUTIVE, 
 
                   Subpart C_Administrative Employees
 
Sec. 541.202  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

[[Page 184]]

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.