Power to fire doesn’t qualify worker for executive exemption — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Power to fire doesn’t qualify worker for executive exemption

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Although U.S. Labor Department regulations say exempt executives must supervise the equivalent of two full-time employees, that doesn’t mean an employee is exempt just because he has narrow authority over all employees within the company. The key to the Fair Labor Standards Act’s (FLSA) “executive exemption”—one way employees may be classified as exempt—is that the employee “customarily and regularly” directs the work of the equivalent of two employees.

In the following case, the allegedly exempt employee had the theoretical power to fire anyone working for the company, but no other supervisory power. He didn’t qualify as an exempt executive employee.

Recent case: Randy Jones worked as a safety supervisor for an electrical and mechanical contractor that builds and repairs power facilities. The company classified Jones as an exempt executive employee. Jones did not, however, directly supervise the work of other employees. When he wasn’t paid overtime, he sued, alleging he was an hourly employee and that his employer had wrongly classified him as exempt.

The company said that Jones had the power to fire anyone and everyone for safety violations. It then claimed that was clear evidence that he had supervisory power over the equivalent of two full-time employees.

The court disagreed and allowed the lawsuit to proceed. The court said having the power to fire employees who don’t follow safety regulations is “a far cry from customarily and regularly directing their work.” (Jones v. Riggs Distler & Company, No. 6:07-CV-168, MD FL, 2007)

Advice: Consult your attorney when classifying employees under the FLSA. Misclassifying employees is one of the biggest mistakes employers can make. Remember, if you wrongly classify an employee as exempt, you may be liable for any unpaid overtime and an equal amount in damages—plus attorneys’ fees. Also, if you didn’t track the hours worked, it will be the employee’s word against yours as to exactly how many hours he spent at work. That’s a good reason to track everyone’s hours—exempt and hourly. Just make sure you pay employees you classify as exempt on a salary basis.

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