According to the Court’s opinion, the plaintiffs were well
compensated (at an average $75,000) and experienced in law enforcement or insurance
claims and spend the majority of their time investigating suspicious
claims. The investigators, however, do
not make final decisions about whether to pay or deny claims. The plaintiffs conducted investigations
relatively free from supervision, but subject to guidelines and auditing
standards. They gathered evidence, interviewed witnesses, supervised
recommended experts, resolved factual questions about fraud, and made
recommendations about whether to refer the matters to local law enforcement.
Directly Related to
Business Operations
The Court rejected the plaintiffs’ argument that they should
not be administratively exempt when the FLSA regulations make clear that law
enforcement personnel, public safety personnel and other first-responders performing
similar tasks are not exempt under 29
C.F.R. § 541.3(b)(1).
The Court also
rejected the argument that the plaintiffs’ work was more akin to non-exempt production/retail
sales work than work directly related to the company’s general business
operations. The Court found the case of an investigations company to be
dissimilar because conducting investigations was that employer’s core business,
unlike this case. The plaintiffs argued that the defendant employer’s primary
business was asset protection, but the Court concluded that it was creating and
marketing insurance policies to the public.
Because the plaintiffs did not write or sell insurance policies, their
work could not be production work.
The Court also found
the plaintiffs’ job to be more similar to the functions which are identified in
the regulation as examples of administratively exempt jobs: human resources, insurance, auditing,
insurance, legal compliance, etc. under 29 C.F.R. § 541.201(b) and insurance claims adjusters which are generally
exempt under 29 C.F.R. § 541.203(a). Independent Judgment and Discretion
The plaintiffs argued that they lacked independent judgment
and discretion because they were required to comply with certain investigation
guidelines and were audited. The Court
found that the plaintiffs retained significant discretion about how to conduct
their investigations and resolve factual questions. Resolving questions about indications of fraud
necessarily involved exercising judgment and independent discretion because
they were so fact specific. Virtually
all of the plaintiffs testified that their jobs required them to “search for
the truth” and to determine whether certain claims were legitimate or fraudulent. Although some of the claims were fairly
simple to resolve, because “truth” is not an objective concept, there was
nothing mechanical about their duties.
The Court rejected a comparison to a 2005 DOL opinion letter
which found that background investigators hired by the Department of Defense to
assist with security clearances did not exercise independent judgment because they
were not resolving significant factual questions, but were mostly gathering
information from pre-listed sources. The
Court also rejected comparisons to two other federal court decisions where
those investigators merely gathered information which a claims adjuster or
supervisor then reviewed, analyzed and resolved.
The plaintiffs’ duties were also necessarily significant
because their conclusions were relied upon to resolve insurance claims. The Court also found in favor of the employer on similar wage claims brought under New York and California law.
NOTICE:
This summary is designed merely to inform and alert you of recent legal
developments. It does not constitute legal advice and does not apply to any
particular situation because different facts could lead to different results.
Information here can change or be amended without notice. Readers should not
act upon this information without legal advice. If you have any questions about
anything you have read, you should consult with or retain an employment
attorney.
