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Fourth Circuit Says Insurance Investigators Do Not Qualify for Overtime Exemption

    Client Alerts
  • January 11, 2016
Property and liability insurance carriers typically employ inspectors whose jobs involve investigations in support of their claims adjustment functions. Last month, the Fourth Circuit Court of Appeals (which includes North Carolina and South Carolina) concluded that such investigators do not meet the requirements for exempt status under the overtime provisions of the Fair Labor Standards Act.

In Calderon v. GEICO Gen. Ins. Co., the plaintiffs were a class of insurance inspectors who investigate possible insurance fraud. This work supports that of claims adjusters who make initial decisions with regard to compensability of claims. GEICO classified the plaintiffs as Administrative exempt under the FLSA, paying a guaranteed salary, but not providing overtime compensation. The plaintiffs contended that their work was non-exempt because the primary duties did not involve tasks that were directly related to the employer’s management or general business operations. The district court agreed, finding the Administrative exemption inapplicable.

The Fourth Circuit affirmed the district court’s findings. Although a close question, the court agreed that the investigator’s functions largely involve routine, day-to-day business operations, without the required degree of responsibility or control over business policies or strategies. The Fourth Circuit distinguished the inspectors from insurance claims adjusters who can be recognized as exempt employees. This decision should prompt insurance carriers with operations in the Fourth Circuit to review and if necessary adjust their employee overtime classifications.