When you have problems from above and below, along with a connection between the two, you are in a corporate conundrum.
Communication lines with your boss are definitely frayed if you ever end up saying, "I don't believe you." You are in charge of the employees who report to you, and the decision to terminate someone who is belligerent and insubordinate is your call. You should meet with your boss to clarify your role and responsibilities so you can make your own managerial decisions.
Your company probably has written or unwritten guidelines regarding acceptable hours for salaried staff. If not, you should develop some for your department and make sure they are followed. If the employee in question ignores these standards, he should be formally counseled and advised that continued problems in this area will result in disciplinary action up to and including termination.
You say this employee "supposedly" reports to you, but it also sounds like you "supposedly" manage him. It is time to remove "supposedly" from the equation.
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