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The AR Group

Supervisors ? To classify or not to classify, properly

By Victoria Aguilar

Most business owners are acutely aware of the difficulties associated with the proper classification of employees. After all, employers know or at least have a sense that:

  • Some employees are entitled to overtime compensation while others are not.
  • Some employees have a right to unionize while others may not.
  • Some people may not even need to be classified as employees since they can be properly labeled as independent contractors.

You get the picture. It can be complicated.

Of course, this complexity does not exactly provide employers with much in the way of comfort. And in reality, it causes a fair amount of concern. Since improper classification of employees (versus independent contractors) or misclassification of employees as ?exempt? versus ?non exempt? can lead to audits and investigation ? as well as fines and penalties ? by various state and federal regulatory agencies (e.g., federal and state Departments of Labor, federal and state tax authorities, and the National Labor Relations Board), it is pretty important to have at least some guidance that might be useful.

A recent Eleventh Circuit Court decision provides some guidance as it relates to steps that employers can take to ensure the proper classification of employees as “Supervisors.” (See Lakeland Health Care Associates, LLC v. NLRB.) The decision is important in this context, because those who are qualified as “supervisors” do not have Section 7 rights under the National Labor Relations Act, which include the right to unionize. It is also worth noting because many of the standards outlined in this decision comport with some of the guidance we have seen from the Department of Labor as it relates to the proper classification of supervisors under the Fair Labor Standards Act.

Accordingly, when classifying an employee as a “Supervisor,” employers should undertake an effort to determine whether the employee will have:

  • Autonomy and discretion in certain employment-related decisions
  • Demonstrated authority to discipline and evaluate other employees and, if this does not include the authority to fire employees, articulate how that discipline and evaluation affects other employment decisions (such as terminations, promotions, demotions or changes in compensation)
  • Discretion and judgment in the supervision of others to impose discipline or take other employment-related actions

SMART TIP: Employers should review their performance evaluation documentation to ensure it includes sections that require supervisors and/or managers to specifically address the degree to which they exercise discretion in conjunction with employment-related decisions they make routinely or otherwise (i.e., provide examples of having used such discretion properly). Employers should also consider requiring supervisors or managers to address in their employment reviews the degree to which they supervised others and their performance associated with that (e.g., in managing a team of eight, I provided reviews on each resulting in the following distribution: 10% as high achievers, 25% as exceeding expectations, 50% as meeting expectations, and 15% not meeting expectations). It is also prudent for employers to consider undertaking a critical evaluation and editing job descriptions, employer records, performance evaluation standards, disciplinary procedures and related policies to ensure that the documentation reflects practice and classification compliance standards.