Overtime pay under the Fair Labor Standards Act (FLSA) continues to be a contentious issue in U.S. courts. In the recent Garrison v. ConAgra Packaged Foods, the Eighth Circuit Court of Appeals was tasked with deciding whether the trial court had properly granted summary judgment in favor of an employer. The employer’s argument? That the employees fell under the “executive exemption.”

Defining “executive”

Employees who worked as salaried “team leaders” brought suit against their employer, alleging they were misclassified as exempt and weren’t paid overtime in violation of the FLSA. The employer argued that the employees came under the executive exemption and therefore weren’t entitled to overtime pay. As team leaders, they were charged with monitoring the work and behavior of other hourly employees. This included identifying poor work performance and any rule violations.

According to Department of Labor (DOL) regulations, an employee is employed in a bona fide executive capacity and exempt from overtime if:

1. The employee is compensated on a salary basis at a rate of not less than $455 per week,
2. The employee’s primary duty is management of the enterprise,
3. The employee customarily and regularly directs the work of two or more other employees, and
4. The employee has the authority to hire or fire other employees, or his or her “suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.”

Both parties agreed that the first three prongs were met. And the employer conceded that the team leaders didn’t have authority to hire or fire. The issue before the court was whether their suggestions on any change of status of other employees were given “particular weight.”

The trial court found that the exemption applied because the team leaders monitored the performance and behavior of hourly workers and could reassign or recommend the reassignment or discipline of those workers. The team leaders appealed.

Appeals court agrees

On appeal, the team leaders argued that their recommendations didn’t have “particular weight” because they didn’t always represent the final say about another employee’s employment status. However, the Eighth Circuit agreed with the trial court, affirming its grant of summary judgment in favor of the employer.

The court relied in part on DOL regulation 29 C.F.R. § 541.105. It states that an employee’s recommendation may have “particular weight” even if a higher-level manager’s recommendation receives greater weight and the employee lacks authority to “make the ultimate decision” about a subordinate worker’s status.

The court pointed out that:

• The team leaders had testified that upper management followed their advice most of, if not all of, the time,
• There was evidence that each team leader was involved in at least one personnel decision regarding an hourly employee he or she supervised,
• Evidence showed that upper management primarily relied on the team leaders’ evaluations of hourly workers when determining whether to discharge, promote or demote, reassign, and discipline employees.

Thus, the plaintiffs were properly classified as exempt.

The court also vacated the trial court’s denial of the employer’s motion for costs. It stated that, because the FLSA was silent on whether a prevailing defendant employer could recoup costs, the employer in this case wasn’t precluded from collecting the costs. The appeals court remanded that matter back to the trial court.

Make it clear

Many employers are understandably confused about which employees are exempt from overtime — particularly since the DOL sought to raise the minimum salary threshold for executives from $455 to $913 per week in 2016. (See our update on the status of the DOL overtime rule.) 

When evaluating employees, keep in mind that executive-exempt employees should actually have the authority to hire and fire, or their suggestions should have “particular weight.” Also be sure to document these employees’ suggestions and the personnel decisions taken in response. Bottom line: It takes more than the supervision of two or more employees to meet executive exemption requirements.

Sidebar: Opaque evidence leads to unclear conclusion

The executive exemption to overtime pay under the Fair Labor Standards Act (FLSA) was asserted by an employer in another recent case (see main article). However, when asked to decide whether an employee was exempt from overtime under the executive exemption, the U.S. District Court, N.D. Alabama, wasn’t as decisive as the Garrison v. ConAgra Packaged Foods court.

The employee in Lankford v. Double Eagle Sports and Events argued that he didn’t fall within the executive exemption because his suggestions and recommendations as to the hiring, firing and advancement of other employees weren’t given particular weight. When the employer moved for summary judgment, arguing that the employee was exempt, it was denied. According to the court, there were genuine issues of material fact regarding the employee’s duty to make suggestions and whether those suggestions were given particular weight.

On that issue, the court considered DOL regulations — questioning whether it was the employee’s duty to make suggestions and recommendations, how often he made them, and how often the employer relied on his opinions. His job description didn’t include the duty to make suggestions or recommendations regarding the status of other employees and the employee testified that it wasn’t part of his regular responsibilities. Therefore, the duty factor wasn’t met.

Regarding how often the employee made suggestions and how often they were relied on, the evidence was unclear. The employee had testified that the employer hired individuals he’d recommended “a couple” of times but in “some cases” it didn’t. He was once given approval to terminate an employee but wasn’t approved to fire “several” others. In addition, he could recommend pay raises but wasn’t sure how often he did. In the end, the court couldn’t conclusively determine if the factors were met.

© 2016