Employers continue to face a staggering number of collective action claims seeking alleged unpaid overtime under the Fair Labor Standards Act. Most of the suits are premised on the employer misclassifying the plaintiffs as exempt under the “White Collar” Executive, Administrative, and Professional overtime exemptions. Last week, the Seventh Circuit Court of Appeals rejected a claim that insurance claims adjusters fall outside of the exemption, and are therefore entitled to overtime payment.
In Roe-Midgett v. CC Services, Inc., the plaintiffs were four classes of insurance claims adjusters who processed large numbers of relatively small claims. Their employer was not an insurer, but a third-party claims adjusting service. The plaintiffs claimed that the adjusters failed to meet the Administrative exemption because their job duties were not directly related to management policies, and because they did not have sufficient discretion and independent judgment in carrying out their job duties. The adjusters did not make coverage or liability determinations, and mostly investigated automobile damage claims below $12,000.
In 2004, the Department of Labor revised the White Collar exemptions to specifically include insurance adjusters in the Administrative exemption. This suit was filed prior to those revisions, and the plaintiffs claimed that they handled routine matters of small overall importance to the insurer, and therefore did not meet the exemption. The Seventh Circuit affirmed summary judgment for the employer, noting the cumulative importance of the adjusters’ work to the insurer. Even though each claim was small, the total claims represented a majority of the insurer’s business. The court concluded that the adjusters were not production workers, relying upon DOL opinion letters issued prior to the 2004 rule changes.
The Seventh Circuit also found that the employee has sufficient discretion and independent judgment to meet the exemption. Despite their use of estimating software, the adjusters had complete discretion within their authority limits to deal with collision claims. Again the court relied upon DOL opinion letter finding adjusters as meeting the requirements for this test.