Last month, the Eighth Circuit examined the hire/fire prong of the executive exemption under the Fair Labor Standards Act (“FLSA”). Specifically, the Court found that Lumber One Home Center Inc. (“Lumber One” or “the employer”) failed to establish that two employees had authority to hire/fire workers and did not give “particular weight” to their suggestions about personnel decisions.
Lumber One’s Managers
In Madden v. Lumber One Home Ctr., Inc., 2014 U.S. App. LEXIS 4929 (8th Cir. 2014), Lumber One hired Terry Madden (“Madden”), Rebecca O’Bar (“O’Bar”), and Doug Wortman and (“Wortman”) to serve as managers of the company’s lumberyard in Arkansas, classifying them as executives under the FLSA. Madden, O’Bar and Wortman performed tasks such as loading and unloading trucks, assisting customers, assembling shelves, and receiving merchandise. Wortman also sporadically directed truck driver deliveries. During their tenure at the company, Lumber One hired six to eight new employees—including a truck driver that Wortman recommended.
Madden, O’Bar, and Wortman eventually brought an FLSA lawsuit against their employer seeking overtime wages. Following a jury verdict in favor of Lumber One, the trial court granted the plaintiffs’ motion for JNOV, holding that, as a matter of law, the employer had failed to satisfy its burden of proof regarding the executive exemption.
Eighth Circuit’s Decision
On appeal, the Eighth Circuit explained that the Labor Department’s regulations implementing the FLSA (29 C.F.R. § 541.100) set forth a four-prong definition of an executive employee who is not entitled to overtime pay. The rules state—among other things—that an executive is one who “has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.”
The Eighth Circuit affirmed with respect to Madden and O’Bar, holding that the employer failed to establish that these employees were exempt. However, the Court reversed as to Wortman, finding sufficient evidence that he was exempt under the executive exemption.
In finding that Madden and O’Bar were not exempt executives, the Court noted that “many different employee duties and levels of involvement can work to satisfy” the particular weight requirement. However, “informal input, solicited from all employees” does not. For this reason, the Court held Madden and O’Bar did not qualify for the exemption. Because Lumber One could not recall Madden and O’Bar providing a single personnel recommendation, the Court concluded that the employer failed to present evidence that would allow a jury to determine that it had satisfied the particular weight clause.
As to Wortman, the Court held that his “involvement in at least one personnel decision” was enough evidence for a jury to reasonably conclude that he was exempt. Therefore, the Court reversed a lower court’s ruling overturning a jury verdict finding Wortman was exempt.
Bottom Line
Employers should be aware that “informal input, solicited from all employees” is insufficient to satisfy the hire/fire prong of the executive exemption under the FLSA. Instead, employers must actively involve employees in the personnel decision in order for this particular prong of the executive exemption analysis to be satisfied.
Moreover, employers should remember that President Obama recently issued a Presidential Memorandum directing the Department of Labor to begin overhauling its overtime regulations. There is speculation that the new rules will also implicate the executive exemption, potentially raising the minimum weekly wage from $455 to $1,000 and making clear that exempt managers can only spend a certain amount of their time performing non-managerial duties.
Stay tuned for more developments.