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Informal hiring input does not an exec make

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in Compensation and Benefits,Human Resources

Managers and supervisors are often classified as exempt from overtime under the Fair Labor Standards Act’s executive exemption. It requires that the employee receive at least $455 per week, have a primary duty of managing the enterprise (or a subdivision of it), direct the work of two or more employees and have the authority to hire and fire or make hiring and firing recommendations that carry particular weight. All four duties must be met.

Some employers believe they can meet the final hiring and firing requirement by asking for recommendations or insight into potential hires. That’s not enough.

Recent case: When a lumberyard opened for business in a new location, the owner hired two supervisors, classified them as exempt executives and put them to work running the enterprise. The owner, however, remained largely in charge of finding new employees. He did ask all his managers and supervisors if they knew any of the candidates. He also asked if they knew of any possible applicants.

Then the Department of Labor came to investigate the operations. Soon, it informed the supervisors and managers that they were owed overtime because they were ­misclassified as exempt. They sued.

Now the 8th Circuit Court of Appeals has concluded that the limited role the “executive” employees had was not enough to meet the final exemption requirement. Executive employees have to have far more say in who is hired than these employees had. (Madden, et al., v. Lumber One Home Center, No. 13-2214, 8th Cir., 2014)

Final note: Give exempt executive employees as much authority as possible in hiring and firing. Let them participate in interviews and have a vote in the final decision.

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