Skip Page Banner  
Skip Navigation

Seeking Informal Input About Job Applicants Not Enough for FLSA Executive Exemption

Tuesday, March 18, 2014

By Jay-Anne B. Casuga  

March 17 --The U.S. Court of Appeals for the Eighth Circuit March 17 partially affirmed the reversal of a jury verdict in favor of a lumberyard operator in Arkansas, ruling that it failed to show two former managers were properly classified as executives exempt from overtime pay under the Fair Labor Standards Act (Madden v. Lumber One Home Ctr., Inc., 2014 BL 72018, 8th Cir., No. 13-2214, 3/17/14).

Upholding a lower court's post-trial grant of judgment as a matter of law to Terry Madden and Rebecca O'Bar, the Eighth Circuit found that Lumber One Home Center Inc. did not establish that the employees had the authority to hire or fire other workers, or that it gave “particular weight” to their suggestions and recommendations about personnel decisions.

The appeals court rejected Lumber One's argument that it heeded the workers' suggestions and recommendations because its owner informally asked all of the company's employees if they knew particular job applicants.

The court also wasn't persuaded by Lumber One's contention that it intended for the managers to have the authority to make personnel decisions, but that the employees never exercised that power because the economic downturn had slowed hiring.

Citing FLSA regulations pertaining to federal employees, the court said the law's exemptions must be “based on actual job functions, not intended responsibilities.”

In addition, the Eighth Circuit reversed the district court's judgment in favor of plaintiff Doug Wortman, finding that Lumber One presented sufficient evidence that it relied on at least one hiring recommendation from Wortman.

Judge Michael J. Melloy wrote the opinion, joined by Judges Raymond W. Gruender and Myron H. Bright.

Owner Generally Asked for Information

According to the court, Lumber One is owned and managed by John Morton, who made all of the company's hiring and firing decisions.

Between May and September 2008, Lumber One hired Madden, O'Bar and Wortman to serve as managers of the company's lumberyard in Mayflower, Ark. The company classified them as overtime-exempt executives under the FLSA.

The three employees generally performed similar tasks, including assembling shelves, receiving merchandise, loading and unloading trucks and assisting customers. However, only Wortman occasionally directed truck driver deliveries.

When Morton prepared to hire a new employee, he asked all of the lumberyard's current workers if anyone knew the applicants. Morton hired about six to eight new employees at the Mayflower site between 2008 and 2009. One of those hires was a truck driver recommended by Wortman.

Madden, O'Bar and Wortman eventually sued Lumber One in August 2010, seeking unpaid overtime wages. A jury in March 2012 ruled in favor of Lumber One.

The employees filed a post-trial motion for judgment as a matter of law, which the U.S. District Court for the Eastern District of Arkansas granted in April 2012.


The owner “asserts that he would have involved the plaintiffs more if he had hired more employees,” the Eighth Circuit said. “This may be true, but it requires the jury to impermissibly speculate and to rely on intended rather than actual job functions.”  

 


The district court found that Lumber One failed to prove one of the elements of the FLSA's executive exemption--that the workers had the power to hire or fire other employees or that Morton gave “particular weight” to their recommendations about personnel decisions.

The court awarded a total of about $11,129 in unpaid overtime wages and liquidated damages to Madden, O'Bar and Wortman, as well as approximately $50,697 in attorneys' fees and costs.

Focus on Actual Job Functions

On appeal, the Eighth Circuit explained that the Labor Department's regulations implementing the FLSA (29 C.F.R. § 541.100) provide a four-prong definition of an executive employee not entitled to overtime pay.

Among other things, the rules state 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.”

To determine whether an employee's suggestions and recommendations are given “particular weight,” the regulations list several factors for a court to consider. For example, a court may evaluate an employee's job duties and whether they require him or her to make suggestions and recommendations about personnel decisions, as well as the frequency with which the suggestions and recommendations are requested, made and relied upon.

The Eighth Circuit also looked to district and appeals court rulings from the First, Fourth and Fifth circuits for “useful guidance” for its conclusion that something “more than informal input, solicited from all employees, is needed to prove applicability of the executive exemption.”

In the present case, the court said, Morton's practice of soliciting information about job applicants from all of Lumber One's employees is insufficient to show that certain employees had the power to hire and fire other workers, or that he gave “particular weight” to their suggestions regarding personnel decisions.

Lumber One argued that it did not hire many employees between 2008 and 2009 because of the economic downturn. As a result, it said managers like Madden, O'Bar and Wortman were “simply unable to participate in personnel decisions because none were being made.”

The appeals court rejected Lumber One's contention, finding “persuasive” an Office of Personnel Management regulation stating that the FLSA's exemptions, as they pertain to federal employees, must be “based on actual job functions, not intended responsibilities” (5 C.F.R. § 551.202(e)).

“Morton asserts that he would have involved the plaintiffs more if he had hired more employees,” the court said. “This may be true, but it requires the jury to impermissibly speculate and to rely on intended rather than actual job functions.”

Two Managers Lacked Hiring/Firing Power

Applying the above standards, the Eighth Circuit affirmed the district court's judgment in favor of Madden and O'Bar.

During the trial, the court said, Morton testified that he could not recall whether either employee provided any personnel recommendations.

“Morton's testimony is simply not enough to satisfy the … FLSA's executive exemption for Madden or O'Bar,” the court said.

However, the appeals court reversed the judgment in favor of Wortman, finding sufficient evidence that he recommended the hiring of at least one truck driver and that Morton relied on that recommendation.

“Because there is evidence regarding Wortman's involvement in at least one personnel decision, we conclude that the district court erred by overturning the jury's verdict finding that Wortman was an executive employee who was exempt from FLSA overtime pay requirements,” the court said.

In light of its partial reversal, it remanded the case back to the district court for recalculation of the attorneys' fee award.

John T. Holleman, Maryna O. Jackson and Timothy A. Steadman of Holleman & Associates in Little Rock, Ark., represented the employees. Harold W. Young Jr. of Friday & Eldredge in Little Rock represented Lumber One.

 

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com


Text of the opinion is available at http://www.bloomberglaw.com/public/document/Terry_Madden_et_al_v_Lumber_One_Home_Center_Docket_No_1302214_8th.

To view additional stories from Daily Labor Report® register for a free trial now