Revisiting The “Personnel Authority” Requirement Under The Executive Exemption To Overtime Coverage
Two years ago I wrote a Des Moines employment law blog post regarding the "personnel authority" requirement for the executive exemption to the default federal requirement that all salaried employees receive overtime for any week in which they exceed forty hours of work. I predicted that, because of common employer treatment of mid-level managers, the personnel authority requirement would receive increasing attention in overtime lawsuits. A decision by the United States Court of Appeals for the Eighth Circuit (whose appellate jurisdiction includes Iowa's federal courts) demonstrates just how important the personnel authority requirement is becoming.
In that case, Madden v. Lumber One Home Center, the employer classified the suing employees as exempt executive employees, i.e., managers. The fight was over whether these employees could truly be considered "executives," such that they weren't entitled to overtime pay no matter how many hours they worked in a week. At the center of that issue was the "personnel authority" requirement.
The Eight Circuit noted that " to qualify for an executive exemption, Lumber One must show, among other things, that the plaintiffs were involved in making personnel decisions." That required the employer to prove that the plaintiffs had the authority to hire or fire employees, or that their recommendations regarding personnel decisions were given "particular weight" by the decisionmaker. Although the trial jury concluded that the employer had proved the personnel authority requirement for all plaintiffs, the trial court reversed that decision for two of three plaintiffs and ruled that they were in fact entitled to overtime pay. In reaching that determination, the district court found that Lumber One presented no evidence that the plaintiffs had the authority to make personnel decisions or that Lumber One's owner gave their hiring recommendations particular weight.
On appeal, the Eighth Circuit first answered what had been an open question in this federal jurisdiction -- What type and what amount of input into personnel decisions is sufficient to satisfy the personnel authority element of the FLSA's executive exemption. The answer is that more than informal input, of the type solicited from all employees, is needed to prove the requisite level of personnel authority. The court held that two of the plaintiffs did not have sufficient authority to satisfy that test.
The owner testified that none of the plaintiffs hired or fired other employees. Thus, in order to satisfy the personnel authority requirement, the employer needed to present evidence at trial that the plaintiffs were consulted about personnel decisions and that the employer gave each of their opinions particular weight regarding specific personnel decisions. That is where this employer came up short. There was no evidence that the owner gave any special consideration to personnel recommendations made by the plaintiffs or allowed those recommendations to have more influence than that from other, nonmanagement employees. The entirety of his attempts to seek the plaintiffs' personnel input consisted of running names by them to see whether they knew applicants and whether they thought that any shouldn't be hired. That's simply not enough to satisfy the "personnel authority" requirement.