Employees' Job Duties Did Not Satisfy the Fourth Element of the FLSA's Executive Exemption: Eighth Circuit

Practical Law Legal Update 0-561-6205 (Approx. 5 pages)

Employees' Job Duties Did Not Satisfy the Fourth Element of the FLSA's Executive Exemption: Eighth Circuit

by Practical Law Labor & Employment

Background

Lumber One Home Center, Inc. (Lumber One) in Arkansas is owned and managed by John Morton. Before Lumber One opened in November 2008, Morton hired the following three employees to serve as supervisors:

Terry Madden to work in shipping and receiving, assemble shelves, receive merchandise and, once the store opened, complete data entry tasks and help out in the lumberyard by assisting customers, unloading trucks and collecting trash when needed.
Rebecca O'Bar to assemble shelves, stock merchandise and, once the store opened, work in the lumberyard and in shipping and receiving.
Doug Wortman to wait on customers, help load trucks and, on occasion, direct truck drivers on where to make deliveries.

Plaintiffs Madden, O'Bar and Wortman were classified as executives exempt from overtime pay under the FLSA. The parties agree that the plaintiffs worked overtime hours throughout their employment at Lumber One.

Morton made all of the hiring and firing decisions at Lumber One. When hiring a new employee, Morton generally asked all existing supervisors and hourly employees if they knew the applicant. Morton explained that he did this because he was new to the area and did not know all of the local applicants or even the existing employees. Morton hired six to eight employees at Lumber One in 2008 and 2009, fewer than he originally intended.

Madden ended his employment with Lumber One in July 2010, O'Bar in February 2009 and Wortman in September 2009.

In August 2010, the plaintiffs sued, alleging that Lumber One erroneously classified them as exempt executives under the FLSA. After a trial, the jury found in favor of Lumber One and against all three plaintiffs. The plaintiffs then moved for a judgment as a matter of law, claiming that Lumber One had not presented sufficient evidence to meet its burden to show that the plaintiffs were exempt executives under the FLSA. In April 2012, the district court overturned the jury verdict and granted the plaintiffs' motion, finding that Lumber One had failed to prove the fourth element of the executive employee exemption because it presented no evidence that:

The plaintiffs had the authority to make personnel decisions.
Morton gave the plaintiffs' hiring decisions particular weight.

Outcome

On appeal, the Eighth Circuit held that Lumber One:

Failed to show that Madden and O'Bar satisfied the FLSA's executive exemption.
Established that Wortman did satisfy the exemption.

The Eighth Circuit found that:

At issue in this case is whether the plaintiffs' job duties at Lumber One satisfied the fourth element of the executive exemption. The fourth element states that an executive employee must have:
"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."
(29 C.F.R. § 541.100.)
To determine whether an employee's suggestions and recommendations are given "particular weight" the DOL considers:
- whether it is part of the employee's job duties to make such suggestions and recommendations;
- how frequently the employee makes such recommendations and suggestions; and
- how frequently the employee's suggestions and recommendations are relied on.
(29 C.F.R. § 541.105.)

The Eighth Circuit first addressed what type and what amount of input into personnel decisions is sufficient to satisfy the fourth element of the executive exemption. The court found that:

Several district courts provided useful guidance in the following decisions:
- Lovelady v. Allsup's Convenience Stores, Inc. Store managers satisfied the fourth element because their hiring recommendations were almost always followed and they could fire employees without needing higher manager authorization (304 F. App'x 301 (5th Cir. 2005));
- Grace v. Family Dollar Stores, Inc. Store manager satisfied the fourth element because she selected applicants for interviews, conducted interviews and recommended employees for promotions and demotions, and her recommendations were almost always followed by the district manager (845 F. Supp. 2d 653 (W.D. N.C. 2012));
- Rainey v. McWane, Inc. Production supervisor satisfied the fourth element because he completed weekly employee evaluations, recommended employee discipline and recommended which temporary employees should be hired permanently (552 F. Supp 2d 626 (E.D. Tex. 2008)); and
- Goulas v. LaGreca. The fourth element was satisfied because the employer was grooming the plaintiff to take over the company and terminated employees based on the plaintiff's recommendations (No. 12-898, (E.D. La. June 7, 2013)).
Many different employee duties and levels of involvement can satisfy the fourth element.
Morton's practice of informally asking for input from all employees about applicants was insufficient to satisfy the fourth element. Instead, Lumber One had to prove that the plaintiffs' input into personnel decisions was given particular weight. For example, that the plaintiffs' input had more influence than the hourly employees' input.
Lumber One's argument that the plaintiffs were unable to participate in personnel decisions because there were fewer decisions made than expected failed because FLSA exemptions are based on "duties actually performed by the employee" not intended responsibilities (5 C.F.R. § 551.202(e)). Relying on intended responsibilities would require the jury to speculate about what those duties might have been.
Rooney v. Town of Groton, in which the job duties of a lieutenant in a small police department satisfied the fourth element because he was part of an interview panel, ranked applicants, discussed their merits, made applicant recommendations and discussed promotions, was distinguishable because there was no evidence in Lumber One that the plaintiffs had any similar involvement in the hiring process. For example, unlike in Rooney, Morton asked all of the employees for input, not just the plaintiffs. (577 F. Supp. 2d 513 (D. Mass. 2008).)

Regarding Madden and O'Bar, Morton was unable to recall either of the plaintiffs ever having:

Made a personnel recommendation.
Suggested an applicant for hire.
Been involved in a personnel decision.

Because Morton could not recall specific recommendations and hiring decisions (which would force the jury to speculate), and because he admitted Madden and O'Bar were not directly involved in hiring, the Eighth Circuit concluded that the job duties of Madden and O'Bar were not sufficient to satisfy the fourth element of the executive exemption.

As to Wortman, the Eighth Circuit found that Lumber One demonstrated that he provided a recommendation for at least one employee and that Morton relied on that recommendation when deciding to hire the applicant. In addition, Morton stated he would not have hired that applicant if Wortman had provided a bad recommendation and that Wortman occasionally directed the truck drivers regarding where to make deliveries. The Eighth Circuit concluded that the district court erred in overturning the jury's verdict that Wortman was properly classified as an exempt executive.

Practical Implications

In what appears to be the first published circuit court decision on the issue, the Eighth Circuit concluded that an employee's "involvement in at least one personnel decision" was enough evidence for a jury to reasonably conclude that he was properly classified as an exempt executive under the FLSA. The court also held that only an employee's actual, not intended, job duties could be considered for exemption purposes. Where employees are classified as exempt executives, employers should carefully evaluate the level of their involvement in personnel decisions.

Employees' Job Duties Did Not Satisfy the Fourth Element of the FLSA's Executive Exemption: Eighth Circuit | Practical Law