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The Fourth Circuit’s Countdown to 2016 Includes Two FLSA Classification Decisions

While we were in the midst of office holiday parties and end of the year celebrations, the Fourth Circuit Court of Appeals came down with two precedential decisions for employers to ponder in the New Year.  In Williams v. Genex Services, LLC, the Court analyzed the FLSA’s learned professional exemption, while in Calderon v. GEICO General Insurance Co., the Court analyzed the FLSA’s administrative function exemption.

Exempt – Medical Case Manager

Learned Professional Exemption At Issue.  In Williams, the plaintiff, a Field Medical Case Manager at Genex, claimed Genex incorrectly classified her as an exempt employee and was owed overtime under the FLSA and Maryland law.  Genex argued that since it employed the plaintiff in a professional capacity, the plaintiff was not entitled to overtime compensation.  The lower court found in Genex’s favor, noting that Genex required the plaintiff to be a registered nurse and that the plaintiff used her advanced knowledge to examine and advise injured employees and was not closely supervised in doing so.  The plaintiff appealed.

Check the Employee’s Resume.  Taking a fresh look at the facts, the Fourth Circuit affirmed the lower court’s decision, agreeing that the primary duties of the Field Medical Case Manager position involved the performance of exempt work.  In conducting its analysis, the Court called the plaintiff’s bluff – it compared the plaintiff’s own resume against her claims that her job duties were primarily clerical and found that her “own description of her core job responsibilities fatally undermines her argument that her work involves primarily clerical, nondiscretionary, and routine work.”

High Salary, No Direct Supervision, and Use of Training and Experience Support Exempt Status.  Even without uncovering this “ploy” by the plaintiff, the Court still would have reached the same conclusion based on its analysis of the facts in evidence.  Three aspects of the Court’s decision stand out:

  1. The Court found that the plaintiff used “indispensable” training and experience as a registered nurse in the performance of her duties, she performed these duties “with little or no direct supervision,” and she regularly used her professional discretion and judgment.
  2. The Court dismissed the idea of a dispositive 50 percent threshold (i.e., the plaintiff must spend at least 50% of her time doing exempt work to be classified as exempt) and stated that even if such a threshold existed, here, “the vast majority of [the plaintiff’s] work involved the use and application of her RN skills.
  3. The Court took issue with the plaintiff’s salary of over $80,000.00, noting that such a high salary “creates doubt as to whether she falls within the FLSA’s intended protected class . . . low paid rank and file employees.”

Nonexempt – Insurance Fact Investigator

Administrative Exemption At Issue.  In Calderon, the plaintiffs, Investigators at GEICO, claimed GEICO incorrectly classified them as exempt employees and owed overtime compensation under the FLSA and New York law.  GEICO argued that the Investigators, like Claims Adjusters, fell within the FLSA’s “administrative function” exemption.  The district court sided with the plaintiffs, holding that the Investigators were nonexempt and owed overtime pay.  However, since GEICO acted in good faith by undertaking regular review of employee classifications under the FLSA, the district court limited the statute of limitations for the plaintiffs’ claims to two years, not three.  GEICO appealed the misclassification decision and the plaintiffs appealed the statute of limitations decision.

The Ultimate Consequence of Employees’ Primary Duties Must Relate to The Employer’s Management or General Business Operations. The Fourth Circuit affirmed the district court’s decision that the Investigators were nonexempt.  Focusing primarily on the second element required to satisfy this exemption, the Court deemed the following primary duties “too far removed from their employer’s management or general business operations to satisfy the directly related element”: (a) conducting investigations to resolve narrow factual questions and (b) assisting Claims Adjusters in processing claims.  Rather, these duties merely assisted GEICO in carrying on their day-to-day services to the public.  In contrast, the Court noted that Claims Adjusters, whose primary duties involved negotiating settlements and making recommendations in litigation, fit properly under the administrative function exemption.

Periodic, Well-Documented Job Classification Reviews Can Limit The Damages An Employer Owes For Misclassification.  The Court’s decision was not all bad news to GEICO – by acknowledging that the issue of properly classifying the Investigators was a “close and complex one,” the Court held that GEICO used its “best attempts” properly classify the Investigators in 2004 and again, in 2007.  Therefore, since GEICO’s misclassification was not knowingly incorrect or reckless, the district court properly set the statute of limitations for the plaintiff’s claims to two years.

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Alta Ray