United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 15, 2009 Decided January 5, 2010
No. 08-7146
JEROME ROBINSON-SMITH,
APPELLEE
v.
GOVERNMENT EMPLOYEES INSURANCE COMPANY,
APPELLANT
NO. 08-7147
CHRISTINE LINDSAY; ROBERT MCGRUDER,
INDIVIDUALLY AND ON BEHALF OF
ALL OTHER PERSONS SIMILARLY SITUATED,
APPELLEE
V.
GOVERNMENT EMPLOYEES INSURANCE COMPANY,
APPELLANT
Appeals from the United States District Court
for the District of Columbia
(No. 1:01-cv-01340)
2
Eric Hemmendinger argued the cause for the appellant.
Glen Donath and Bruce S. Harrison were on brief.
Charles E. Tompkins argued the cause for the appellees.
Thomas V. Urmy Jr., Todd Heyman, Robert Ditzion, Joseph M.
Sellers and Jenny R. Yang were on brief. Michael D. Hausfeld
entered an appearance.
Before: GINSBURG and HENDERSON, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: Government
Employees Insurance Corporation, better known as GEICO,
underwrites, sells and services insurance policies covering
automobiles and other property. Jerome Robinson-Smith,
Christine Lindsay and Robert McGruder, the named plaintiffs in
the two consolidated cases on appeal, worked for GEICO as
“auto damage adjusters.”1 They sued GEICO for overtime
benefits they claim they are owed under the Fair Labor
Standards Act of 1938 (FLSA), 29 U.S.C. §§ 201 et seq., which
ordinarily requires employers to pay employees time-and-one-
half for hours worked beyond forty per week unless the
employees are exempt. GEICO considers auto damage adjusters
exempt “administrative” employees. On cross motions for
summary judgment, the district court, applying the so-called
“short test” used by the United States Department of Labor
1
The two appeals are Robinson-Smith v. GEICO, No. 08-7146
(filed Dec. 18, 2008), and Lindsay v. GEICO, No. 08-7147 (filed Dec.
18, 2008). More than 200 additional auto damage adjusters joined
each case via the opt-in provision of the FLSA, 29 U.S.C. § 216(b);
the Lindsay action includes more than 200 additional class members
who are employed by GEICO in New York State and who joined the
litigation pursuant to Federal Rule of Civil Procedure 23. Appellees’
Br. i.
3
(Labor or DOL) to describe administrative employees, held that
GEICO’s auto damage adjusters do not exercise “sufficient”
discretion and independent judgment to qualify for the
exemption and granted the plaintiffs summary judgment.2
GEICO appeals the judgment, arguing that the undisputed fact
that the adjusters exercise “some discretion” means that they are
exempt from overtime pay as administrative employees under
the FLSA. For the following reasons, we agree with GEICO and
reverse.
I.
GEICO employs at least three categories of personnel at
varying levels of responsibility who may service a given
automobile claim: the liability adjuster, the auto damage adjuster
and the auto damage appraiser. At the higher end of the
responsibility scale is the liability adjuster (a term used by the
parties to also include a “claims service representative” and a
“telephone adjuster”), who determines coverage and liability,
sets reserves, works with lawyers and evaluates claims for lost
wages, comparative negligence and personal injury. At the
lower end is the auto damage appraiser, an entry-level employee
who works under close supervision in GEICO drive-in locations
inspecting damaged cars that remain in drivable condition.
GEICO considers the former exempt as an administrative
employee under the FLSA (and thus not entitled to overtime
wages) but not the latter.
At a level of responsibility between the liability adjuster and
the auto damage appraiser are the appellees: the auto damage
adjusters. As the district court observed, auto damage adjusters
(also known as “field adjusters”) “assess, negotiate and settle
automobile damage claims.” See Robinson-Smith v. Gov’t
2
The district court had no occasion to decide whether the job of
a GEICO auto damage adjuster is so easy a caveman could do it.
4
Employees Ins. Co., 323 F. Supp. 2d 12, 15 (D.D.C. 2004).
They spend a majority of their time appraising damaged vehicles
and estimating repair costs but also negotiate and settle claims
with body shops over repair costs and with insureds over total
loss vehicles. A newly-hired GEICO employee typically works
as an auto damage appraiser for a probationary period before
being promoted, with sufficient experience, to auto damage
adjuster. Once promoted, he takes on additional responsibility
and autonomy. For example, he begins to handle total loss
claims, which involve vehicles GEICO deems too damaged to
repair. An auto damage adjuster also works in the field3
(typically one or two days per week at a GEICO drive-in
location but otherwise in the field) and under less direct
supervision (usually on his own but with a ride-along supervisor
about once a month). The average auto damage adjuster handles
more than 1,000 claims per year, totaling over $2.5 million.
For most claims, the adjuster’s main task is to determine
how much GEICO should pay to restore a vehicle to its “pre-
loss condition,” using the most economical parts available
unless safety is a consideration. In assessing vehicle damage
and estimating repair costs, the adjuster relies on software that
walks him through the appraisal process. He enters a vehicle
identification number, or VIN, into a laptop computer with
software that provides extensive information about the car. He
then inspects the damaged vehicle and enters a description of the
damage into the computer, which gives him information like the
cheapest generic parts available or standard refinish times and
material prices. An adjuster also makes decisions that are not
dictated by the software, however, such as interviewing insureds
about pre-existing damage, determining whether damage was
caused by a covered event and recommending that payment be
withheld on a claim if the damage did not result from a covered
3
The “field” includes tow yards, body shops and residences.
5
loss. (He is not authorized to decide whether GEICO is liable
for a given claim or to deny liability, however, tasks performed
by the liability adjuster.) An adjuster also spends some time
negotiating with shops over repair times for body work. The
extent of such negotiations is disputed: One witness testified
that “every job has . . . to be negotiated” but several others made
clear that negotiating does not occupy a significant portion of an
adjuster’s time, no more than fifteen or twenty minutes per day.
Other adjuster tasks include checking for indicia of fraudulent
claims, determining whether to repair or replace a part, choosing
which type of replacement part to use and adjusting the base
value of a total loss vehicle to compensate for preexisting
damage. GEICO supervisors initial each estimate and review
some claims but not until the estimate is written and the claim
paid.
Some claims involve vehicles that are so damaged they are
declared a total loss. As a general rule, a vehicle is a total loss
if the repair cost exceeds 75% of the vehicle value. While the
software flags a vehicle as a potential total loss when its repair
cost approaches 75% of the vehicle’s value, it is the adjuster’s
task to decide whether it is economically feasible to repair a
damaged vehicle or instead to pay the owner its value, which is
sometimes based on adjuster estimates of repairing probable
hidden damage in addition to visible damage. Adjuster
determinations of whether to declare a vehicle a total loss can
involve thousands of dollars in additional liability for GEICO.
Approximately 20% of the claims the typical adjuster handles
involve total loss vehicles, although plaintiff Lindsay testified
that her proportion is about 30%. While fewer in number, total
loss claims are more time consuming than partial loss claims
because they involve several steps. After determining that a
vehicle is a total loss, the adjuster first obtains the base valuation
from the computer database. Depending on the similarity of
comparable vehicles in the database, the adjuster then chooses
that valuation or an alternative one from, for example, dealer
6
quotes, internet listings, classified advertisements or dealer
invoices, making sure to adjust that valuation for any preexisting
damage. He then prepares an estimate and presents it to the
vehicle owner, who may accept the offer or request more
money.
About 70% of total loss claims are settled on the first offer
with no subsequent negotiation. For the remaining 30%, the
adjuster initiates settlement negotiations over amounts ranging
from nominal to thousands of dollars. In some regions of the
country the adjuster can transfer a particular total loss claim to
one of GEICO’s “total loss” units after the initial offer, but in all
regions the adjuster can pursue settlement beyond the initial
offer under at least some circumstances. For example, the
adjuster generally has full authority to settle a claim within his
limits ($10,000 for a Level I adjuster or $15,000 for a Level II
adjuster) if he can justify his decision within GEICO guidelines
and based on his experience. Most claims are settled within the
adjuster’s limits but he may also recommend a larger settlement
to his supervisor. Adjustments used to reach settlements include
using an alternative base valuation, waiving prior damage or
making a “customer service concession,” although some of the
adjustments are made only with supervisor approval. GEICO
has no policy or set dollar amount in dispute that requires the
adjuster to consult his supervisor about adjustments. Rather, an
adjuster’s decision to consult with his supervisor is made on a
case-by-case basis and he typically makes minor concessions
without supervisor approval. Nevertheless, some adjusters
routinely call their supervisors in situations involving
adjustments or concessions and at least one adjuster testified that
she was required to do so.
Although the parties agree that the adjuster negotiates with
insureds on total loss claims, they disagree on how often that
occurs. At the high end, the parties agree that approximately
20% of the 1,000 yearly claims (or 200) involve total losses and
7
approximately 70% of the total loss claims (or 140) involve no
negotiation at all. Based on these rough estimates, an adjuster
probably handles about 60 claims per year involving customer
negotiation over total losses. See Appellees’ Br. 10 n.5 (“[A]t
most only 6% of the claims handled by [auto damage adjusters]
involve discussions with customers on total loss claims.”). At
the low end, a one-week sample of total loss claims involving
forty-six adjusters nation-wide revealed that a little over 10% of
the total loss claims—2 to 3% of all claims—apparently
involved the exercise of discretion and independent judgment.
(GEICO maintains that the exercise of discretion is involved in
total loss settlements that deviate from the computer-generated
estimate by $100 or more and, according to the chart attached to
its summary judgment motion, most of the deviations involved
customer negotiations.4) These potential negotiations, which
amount to between 20 and 30 per year when extrapolated from
the 1,000 yearly claims handled by the average GEICO adjuster,
involved deviations ranging from $100 to $2,875. Thus, the
record indicates that the typical number of customer negotiations
regarding total loss vehicles is between 20 and 60 per year.
Because this range includes only deviations of $100 or more
from the computer-estimated vehicle value in total loss
situations, it fails to capture negotiations involving partial loss
claims or situations where an adjuster “holds firm” in declining
to alter GEICO’s initial offer.
4
The appellees point out that of the 858 claims files GEICO
produced, GEICO identified settlements involving deviations from the
computer-generated value of $100 or more in only 20 of the 858
claims, or 2%. GEICO counters that it identified 24 such claims and
that these were drawn only from the 182 total loss claims, meaning
that deviations constituted 3% of all claims but 13% of total loss
claims. At oral argument, GEICO asserted that there is no similar way
to analyze adjuster discretion in partial loss claims.
8
II.
On cross motions for summary judgment, the district court
held that the auto damage adjusters do not come within the
FLSA administrative exemption because their primary duty does
not “include[] the exercise of discretion and independent
judgment.” See Robinson-Smith, 323 F. Supp. 2d at 26.
Although it recognized that “some discretion is certainly
exercised by the adjusters,” it was satisfied that the discretion
exercised was not “sufficient” because “the vast majority of the
adjusters’ work consists of using their training and skills to
assess the value of the damage to the vehicle in accordance with
the standards laid out by GEICO.” Id. It also found that the
adjusters’ negotiations are “limited in scope by both the
information and standards contained in the computer software
and the guidelines and limits on negotiating authority laid out by
GEICO.” Id. In reaching its conclusion, the district court found
the reasoning of other district court decisions persuasive,
particularly In re Farmers Insurance Exchange Claims
Representatives’ Overtime Pay Litigation, 300 F. Supp. 2d 1020
(D. Or. 2003). See Robinson-Smith, 323 F. Supp. 2d at 25 n.7
(“Although not controlling precedent in this Court, the facts
surrounding the In re Farmers decision concerning the Farmers
auto physical damage adjusters are nearly identical to those at
issue here, and the Court finds the reasoning [in Farmers] . . . to
be persuasive.”). Immediately after the district court order
issued on July 1, 2004, GEICO converted its auto damage
adjusters to non-exempt status pending the outcome of this
appeal. The district court subsequently granted summary
judgment to the Lindsay adjusters on their FLSA claims on
September 8, 2006 and on their New York state claims on
March 23, 2007.
But the Farmers decision was reversed by the Ninth Circuit
in October 2006, in an opinion that rejected the precise language
the district court had relied on here. See In re Farmers Ins.
9
Exch., Claims Representatives’ Overtime Pay Litig., 466 F.3d
853 (9th Cir. 2006), as amended, 481 F.3d 1119, 1131 n.9 (9th
Cir. 2007) (“For those reasons, we disagree with the district
court's legal conclusion, quoting the language of the regulations,
that an automobile damage adjuster’s primary duties ‘require the
use of skill in applying techniques, procedures and specific
standards, not the use of discretion and independent judgment.’”
(quoting 29 C.F.R. § 541.207(b))). One month later, in
November 2006, GEICO moved for reconsideration of the
summary judgment rulings in both Robinson-Smith and Lindsay,
citing the Ninth Circuit’s reversal in Farmers as well as a recent
Seventh Circuit decision, Roe-Midgett v. CC Servs., Inc., 512
F.3d 865, 874-75 (7th Cir. 2008), holding automobile insurance
adjusters exempt on similar facts. On January 24, 2008, the
district court denied GEICO’s motion to reconsider and also
explained that its earlier grant of summary judgment to the
Lindsay plaintiffs was based on the reasoning in its 2004
Robinson-Smith opinion. The two appeals, which were
consolidated on February 4, 2009, followed.
III.
Whether an employee comes within the FLSA
administrative employee exemption from overtime benefits is a
question of law. See Icicle Seafoods, Inc. v. Worthington, 475
U.S. 709, 714 (1986). GEICO bears the burden of establishing
that its auto damage adjusters fall within the exemption.5 See
5
Our sister circuits variously state that employers must meet this
burden by a “preponderance of the evidence,” Yi v. Sterling Collision
Ctrs., Inc., 480 F.3d 505, 507-08 (7th Cir. 2007), by “clear and
affirmative evidence,” Archuleta v. Wal-Mart Stores, Inc., 543 F.3d
1226, 1233 (10th Cir. 2008) (internal quotations omitted), or by “clear
and convincing evidence,” Desmond v. PNGI Charles Town Gaming,
L.L.C., 564 F.3d 688, 692 n.3 (4th Cir. 2009). We have had no
occasion to determine the proper standard but conclude that, on the
10
Corning Glass Works v. Brennan, 417 U.S. 188, 196-97 (1974).
In determining whether GEICO has met its burden, we review
de novo the district court's grant of summary judgment. See
Verizon Wash., D.C. Inc. v. Commc’ns Workers of Am., 571 F.3d
1296, 1301 (D.C. Cir. 2009). Each party believes that it is
entitled to prevail even if such factual disputes as exist are
resolved against it. Our task is to ensure that the district court
correctly applied the law to the undisputed material facts. See
Fed. R. Civ. P. 56(c); Bldg. & Constr. Trades Dep’t v. Reich, 40
F.3d 1275, 1279 (D.C. Cir. 1994) (citing Beckett v. Air Line
Pilots Ass’n, 995 F.2d 280, 284 (D.C. Cir. 1993)).
A.
Under the FLSA an employee is ordinarily entitled to pay
equal to one and one-half times his normal hourly wage for all
hours worked beyond forty per week. See 29 U.S.C.
§ 207(a)(1). Certain employees, however, including those who
work in a “bona fide executive, administrative, or professional
capacity,” are exempt from the overtime provision. Id.
§ 213(a)(1). The DOL regulation in effect when these suits were
filed contains two tests governing whether an employee works
in a “bona fide administrative capacity”: (1) a generally
applicable “long test” and (2) a “short test” for employees
making more than $250 per week. See 29 C.F.R. § 541.2 (2003)
(unless otherwise noted, all subsequent references to the Code
of Federal Regulations are to the 2003 version).6 The short test,
largely undisputed record before us, GEICO has satisfied its burden no
matter which standard applies.
6
Shortly after the district court granted summary judgment to the
adjusters, the DOL substantially revised the FLSA overtime
exemption regulations effective August 2004. The revisions were
meant to “consolidate and streamline” the old regulations and to be
“consistent with” the old short test. 69 Fed. Reg. 22,122, 22,126 &
11
which governs the appellees, provides:
The term employee employed in a bona fide * * *
administrative * * * capacity . . . shall mean any
employee . . .[w]hose primary duty consists of . . . the
performance of office or non-manual work directly
related to management policies or general business
operations of his employer or his employer’s
customers, . . . which includes work requiring the
exercise of discretion and independent judgment . . . .
Id. This test has three prongs: first, the employee must make
more than $250 per week (satisfied here); second, the
employee’s primary duty must be administrative in nature; third,
his primary duty must include work requiring the exercise of
discretion and independent judgment. See id. The third prong
of the short test is easier to satisfy than the long test’s
requirement that an administrative employee exercise discretion
“customarily and regularly.” Id. § 541.2(b); see Dymond v. U.S.
Postal Serv., 670 F.2d 93, 95 (8th Cir. 1982) (unlike long test,
short test is “more liberal standard requiring that their duties
merely ‘include’ work requiring the exercise of discretion and
independent judgment”).
The district court found that the adjusters earn more than
$250 per week and that their primary duty is administrative, i.e.,
that it consists of the performance of office or non-manual work
“directly related to GEICO’s management policies and business
operations.”7 Robinson-Smith, 323 F. Supp. 2d at 23; see 29
22,139 (Apr. 23, 2004). For this reason, we cite the new regulations
where appropriate. See Roe-Midgett, 512 F.3d at 870 (although not
directly applicable, “the new regulations are nonetheless
informative”).
7
In a footnote the appellees contend that the latter conclusion is
incorrect, see Appellees’ Br. 28 n.19, but they otherwise fail to support
12
C.F.R. § 541.206(a) (employee employed in bona fide
administrative capacity “must have as his primary duty office or
nonmanual work directly related to management policies or
general business operations of his employer or his employer's
customers”). But the court found that GEICO failed to satisfy
its burden on the third prong. The only issue briefed and argued
to us, therefore, is whether the district court correctly held that
the primary duty of the GEICO auto damage adjuster does not
include “discretion and independent judgment.”8 See
Appellant’s Br. 1 & Appellees’ Br. 1. Such discretion connotes
“the comparison and the evaluation of possible courses of
conduct and acting or making a decision after the various
possibilities have been considered.” 29 C.F.R. § 541.207(a). It
that contention and thus give the court no basis on which to disturb the
district court’s holding. We note, however, that the district court’s
conclusion is consistent with Labor’s regulations. See 29 C.F.R.
§ 541.205(c)(5) (listing “claim agents and adjusters” as examples of
employees whose work is “directly related to management policies or
general business operations”).
8
The Lindsay plaintiffs brought claims based on a New York
statute that the parties agree is at least as protective as the FLSA
because it incorporates the FLSA administrative employee exemption.
See 12 N.Y.C.R.R. § 142-2.2 (requiring that overtime be paid “in the
manner and methods provided in and subject to the exemptions of”
FLSA); Lindsay v. GEICO, C.A. No. 04-1213, slip op. at 1 (D.D.C.
Mar. 27, 2007) (“The parties agree that New York state law expressly
adopts in its entirety the federal exemptions from overtime that are at
issue in this case.”). The appellees argue that the administrative
employee exemption is narrower under New York law than under the
FLSA and that, if we reverse the FLSA claims, the district court
should in the first instance rule on the New York state claims. See
Appellees’ Br. 27 n.18. GEICO apparently disagrees. See Appellant’s
Reply Br. 14 n.6. Because the parties brief this issue by footnote only,
we do not reach it. See, e.g., Hutchins v. District of Columbia, 188
F.3d 531, 539 n.3 (D.C. Cir. 1999).
13
is distinguished from the mere “use of skill in applying
techniques, procedures, or specific standards.” Id.
§ 541.207(b)(1); see id. § 541.207(c)(2) (typical examples of
employees who use skill are “inspectors” who do “specialized
work along standardized lines involving well-established
techniques and procedures which may have been cataloged and
described in manuals or other sources” and who may have
“leeway in the performance of their work but only within closely
prescribed limits”); see also 29 C.F.R. § 541.202(e) (2009) (test
“does not include clerical or secretarial work, recording or
tabulating data, or performing other mechanical, repetitive,
recurrent or routine work”). An employee satisfies this
requirement only if he “has the authority or power to make an
independent choice, free from immediate direction or
supervision and with respect to matters of significance.” 29
C.F.R. § 541.207(a);9 cf. id. § 541.207(d)(1) (discretion not
exercised in matters of significance by truck driver deciding
which route to follow, shipping clerk deciding method of
packing and mode of shipping small orders or bookkeeper
deciding which ledger to post first).
B.
To establish the third prong of the short test for an exempt
administrative employee, GEICO must show that the auto
damage adjuster’s primary duty (1) includes work requiring the
exercise of discretion and independent judgment (as
distinguished from the mere use of skill in applying well
established techniques) and that the discretion is exercised (2)
9
The last requirement has now been incorporated into the revised
regulation, which applies to employees “[w]hose primary duty
includes the exercise of discretion and independent judgment with
respect to matters of significance.” 29 C.F.R. § 541.200(a)(3) (2009)
(emphasis added).
14
free from immediate supervision and (3) with respect to matters
of significance. We conclude that GEICO has done so.
First, the undisputed record shows that the primary duty of
a GEICO auto damage adjuster, which consists of the
assessment, negotiation and settlement of automobile damage
claims, includes the exercise of discretion and independent
judgment. Although the parties disagree on how much
discretion the adjuster exercises, no one disputes that he
exercises “some.” See Robinson-Smith, 323 F. Supp. 2d at 26;
Appellees’ Br. 52 (“[T]here is no question that [auto damage
adjusters] likely exercise ‘some discretion’ in their negotiations,
whether they take place with auto body shops or
customers . . . .”). As noted above, the GEICO auto damage
adjuster exercises discretion as often as 60 times per year in
negotiations with customers over total loss claims alone. The
frequency of such negotiations may be enough to satisfy even
the “customarily and regularly” requirement of the “long test.”
See 29 C.F.R. § 541.701 (2009) (“Tasks or work performed
‘customarily and regularly’ includes work normally and
recurrently performed every workweek; it does not include
isolated or one-time tasks.”). In any event, engaging in total loss
negotiations even 20 times per year satisfies the short test
requirement that the adjuster’s primary duty “include[]” the
exercise of discretion and independent judgment.10 See 29
C.F.R. § 541.2.
10
The total amount of discretion and independent judgment
exercised by the adjuster is probably higher as these numbers include
neither the exercise of judgment in the appraisal process, specifically
as related to negotiations with repair shops over partial loss vehicles,
nor the exercise of discretion by the adjuster who unilaterally decides
not to increase a settlement offer to a total loss claimant who requests
one.
15
The appellees respond that these sporadic total loss
negotiations are “insufficient” to satisfy the discretion and
independent judgment prong. Appellees’ Br. 24. But the
regulation requires that the adjuster’s primary duty “include[]”
the exercise of discretion and independent judgment; it does not
specify how frequently discretion need be exercised. See 29
C.F.R. § 541.2; see also 69 Fed. Reg. 22,122, 22,143 (Apr. 23,
2004) (“[F]ederal court decisions have recognized that the
current ‘short’ duties test does not require that the exempt
employee ‘customarily and regularly’ exercise discretion and
independent judgment, as does the effectively dormant ‘long’
test.”); see, e.g., O'Dell v. Alyeska Pipeline Serv. Co., 856 F.2d
1452, 1454 (9th Cir. 1988) (had district court correctly applied
short test rather than long test, “it could only have come to the
ultimate conclusion that [plaintiff] exercised some discretion
and independent judgment during the course of his job, and
therefore [he] was an exempt administrative employee”). Even
assuming the district court correctly held that “the vast majority
of the adjusters’ work consists of using their training and skills
to assess the value of the damage to the vehicle in accordance
with the standards laid out by GEICO,” Robinson-Smith, 323 F.
Supp. 2d at 26, we conclude that their primary duty nevertheless
“includes” work requiring the exercise of discretion and
independent judgment.
Second, the auto damage adjuster has the power to make
independent choices “free from immediate direction or
supervision.” 29 C.F.R. § 541.207(a). Although the district
court held that the adjusters’ negotiations were too structured by
the estimating process and GEICO’s guidelines to satisfy this
requirement, see Robinson-Smith, 323 F. Supp. 2d at 25-26,
freedom from immediate direction “does not necessarily imply
that the decisions made by the employee must have a finality
that goes with unlimited authority and a complete absence of
review.” Id. § 541.207(e)(1); see also 29 C.F.R. § 541.202(c)
(2009) (“[E]mployees can exercise discretion and independent
16
judgment even if their decisions or recommendations are
reviewed at a higher level.”). Here, the adjusters worked in the
absence of immediate supervision the majority of the time and
made decisions that were reviewed only after the estimate was
written and the claim paid. Moreover, while it is true that some
adjusters routinely called their supervisors in situations
involving non-minor adjustments or concessions, there was no
GEICO policy or procedure requiring them to do so. See
Robinson-Smith, 323 F. Supp. 2d at 17 (adjuster “would not
consult his supervisor, so long as he knew the supervisor would
approve the additional credit”). In fact, adjusters have full
authority to settle claims within their limits of $10,000 or
$15,000 as long as they can justify their decision on the facts of
the claim and within GEICO guidelines or prior practice. Our
sister circuits have held exempt employees who possessed
similar levels of autonomy. See Roe-Midgett v. CC Servs., Inc.,
512 F.3d 865, 869 (7th Cir. 2008) (finding exempt adjusters who
“may settle claims of up to their $12,000 limit of authority” and
whose supervisors “need not formally approve the actual amount
of settlement or underlying estimate, though they informally
review an [adjuster’s] work for errors”); In re Farmers Ins.
Exch., Claims Representatives’ Overtime Pay Litig., 466 F.3d
853 (9th Cir. 2006), as amended, 481 F.3d 1119, 1132 (9th Cir.
2007) (finding exempt claims adjusters who have discretion to
settle claims within settlement authority). We also agree with
the Farmers holding that the ample unsupervised discretion of
the GEICO adjuster distinguishes him from the “claims
specialist” discussed in the DOL opinion letter cited by the
appellees, as the latter “could not conduct additional
investigation without supervisor approval and was ‘so closely
supervised’ that he ‘d[id] not have the authority to make
independent choices.’” Id. (citing DOL Wage & Hour Div. Op.
Ltr., at 2, 6 (Aug. 26, 2005)) (alteration in Farmers).
Finally, the adjuster makes choices “with respect to matters
of significance.” 29 C.F.R. § 541.207(a); see id. § 541.207(d)(2)
17
(employees exercise discretion with respect to matters of
significance if they “exercise authority within a wide range to
commit their employer in substantial respects financially or
otherwise”). He is empowered to negotiate with claimants and
body shops and settles claims up to $10,000 or $15,000—all
actions that bind GEICO financially. See Roe-Midgett, 512 F.3d
at 874 (adjusters “routinely use their discretion and independent
judgment to make choices that impact damage estimates,
settlement, and other ‘matters of significance’”) (citing 29
C.F.R. § 541.207(a)); see also 29 C.F.R. § 541.202(b) (2009)
(factors that bear on discretion and independent judgment
determination include “whether the employee has authority to
commit the employer in matters that have significant financial
impact”); cf. id. § 541.205(b)(2) (work of employees
“performing routine clerical duties” such as “messenger boy . . .
carrying large sums of money” or worker “operating very
expensive equipment” is not of substantial importance). Under
these circumstances, we conclude that the GEICO auto damage
adjusters exercise discretion free from immediate direction or
supervision and with respect to matters of significance, making
them exempt administrative employees under the FLSA and the
applicable DOL regulations.
Although acknowledging the adjusters’ “occasional exercise
of discretion,” the appellees nevertheless argue that it “is
immaterial because it is not an aspect of the [auto damage
adjusters’] primary duty, which is non-exempt appraisal work.”
Appellees’ Br. 52; see id. at 23 (“the essence of the appraiser
tasks GEICO identifies . . . is the determination of facts” and
“[s]uch fact-finding is non-exempt work”). As we suggested
above, however, the regulations do not define “primary duty” so
narrowly. An administrative employee’s “primary duty” does
not consist of one specific task but rather of “administrative
18
duties” generally11—and, as in Roe-Midgett, “appraising damage
is included among many duties [the adjusters] perform in the
course of adjusting auto damage claims.” 512 F.3d at 875. But
even if we were inclined to define the adjuster’s “primary duty”
as narrowly as the appellees request, their own authority shows
that even employees engaged primarily in fact-finding work may
yet come within the administrative employee exemption
provided they exercise discretion and independent judgment.
See DOL Op. Ltr. (Oct. 24, 1957) (employees who primarily
engage in appraisal work to arrive at amount of vehicle loss
may, if “given reasonable latitude in carrying out negotiations
11
The section defining “primary duty” states that an employee
employed in a “bona fide administrative capacity . . . must have as his
primary duty office or nonmanual work directly related to
management policies or general business operations of his employer
or his employer's customers.” 29 C.F.R. § 541.206(a). The same
section refers, for additional guidance, to the definition of “primary
duty” in the “executive” employee exemption section. Id.
§ 541.206(b). The latter regulation specifies that an executive is
exempt if, inter alia, his primary duty “consists of the management of
the enterprise,” id. § 541.1, which generally means an employee who
spends “over 50 percent of his time in managerial duties,” id.
§ 541.103. An employee has “administration” as his primary duty if
his work “consists of” the “performance of office or non-manual work
directly related to management policies or general business operations
of his employer,” id. § 541.2(a)(1), and he spends more than half of
his time performing such “administrative duties,” see id. §§ 541.103,
541.206(b). See Shockley v. City of Newport News, 997 F.3d 18, 28
(4th Cir. 1993) (“[T]he short test for determining whether an employee
is employed in an administrative capacity requires proof either that the
employee spends half his time on administrative duties or that
administrative duties have special significance relative to the
employee’s other duties.”). Although the appellees argue that their
“primary duty” should be narrowly defined as “appraisal work,”
Appellees’ Br. 52, they nonetheless expressly rely on Shockley’s
language in their brief, id. 29.
19
with the insured,” exercise “the kind of discretion and judgment
to qualify for the exemption”). Likewise, Labor’s revised
regulation exempts an insurance claims adjuster if he performs
activities such as “inspecting property damage” and “reviewing
factual information to prepare damage estimates,” see 29 C.F.R.
§ 541.203(a) (2009)—tasks more concisely known as
“appraisal” and “fact-finding.”
Indeed, the latter revised regulation bolsters our conclusion
that GEICO’s auto damage adjusters are exempt as
administrative employees. It provides that:
Insurance claims adjusters generally meet the duties
requirements for the administrative exemption . . . if
their duties include activities such as interviewing
insureds, witnesses and physicians; inspecting property
damage; reviewing factual information to prepare
damage estimates; evaluating and making
recommendations regarding coverage of claims;
determining liability and total value of a claim;
negotiating settlements; and making recommendations
regarding litigation.
29 C.F.R. § 541.203(a) (2009).12 The district court found that
GEICO’s adjusters “cannot be automatically classified as
exempt employees” because they perform only three of the
seven activities listed therein—inspecting property damage,
preparing damage estimates and negotiating settlements. See
Robinson-Smith, 323 F. Supp. 2d at 22. To those we would add
two more activities the adjusters perform, at least in part: they
interview insureds about partial loss claims; and, although they
12
Although the revised version was not in effect when these suits
were filed, the Labor Secretary described the subsection as “consistent
with” then-current regulations, case law and a DOL opinion letter. 69
Fed. Reg. at 22,144-45; see Roe-Midgett, 512 F.3d at 870-71.
20
do not “evaluate or determine coverage issues” in the way a
liability adjuster does, they do assess, as in Roe-Midgett, to the
extent that they evaluate and make recommendations regarding
evidence of preexisting damage and indicia of fraud. See Roe-
Midgett, 512 F.3d at 868, 874 (although adjusters “do not make
coverage or liability determinations,” they “make coverage
recommendations to their superiors” regarding fraud and
preexisting damage issues on claims). Thus, like the Farmers
and Roe-Midgett adjusters, GEICO’s auto damage adjusters can
be said to perform a majority of the listed activities. See Roe-
Midgett, 512 F.3d at 874 (“The balance of [plaintiffs’] day-to-
day responsibilities mirror the duties the new regulations
attribute to exempt ‘claims adjusters,’ . . . .”); Farmers, 481 F.3d
at 1129 (“The district court’s findings almost track word for
word the language in § 541.203.”).
The actions the GEICO adjuster takes are, in fact, virtually
identical to those of the adjusters found exempt in Roe-Midgett,
with the significant difference being that, on the one hand, the
GEICO adjuster interviews only insureds about preexisting
damage (not witnesses and law enforcement) but is authorized
to handle total loss claims (not just partial loss claims) on the
other. See Roe-Midgett, 512 F.3d at 868-69 (Roe-Midgett
adjusters “interview claimants, witnesses, and where relevant,
police personnel” but prepare estimates for partial loss claims
only and have no authority to negotiate with insureds). Given
the district court’s conclusion—and the appellees’
concession—that negotiating with insureds involves “some
discretion,” see Robinson-Smith, 323 F. Supp. 2d at 26 &
Appellees’ Br. 52, the fact that the GEICO adjuster engages in
such negotiations over total loss claims means he is an even
better fit for the administrative employee exemption than the
Roe-Midgett adjusters. See Farmers, 481 F.3d at 1131 (noting
total loss claims are often difficult to negotiate and settle and
require exercise of discretion and independent judgment beyond
computer skill). In finding the Roe-Midgett adjusters exempt,
21
the Seventh Circuit joined every circuit that has recently
considered the application of the administrative employee
exemption to claims processing employees. See Roe-Midgett,
512 F.3d at 875 (citing Farmers, 481 F.3d at 1132; Cheatham v.
Allstate Ins. Co., 465 F.3d 578, 585-86 (5th Cir. 2006);
McAllister v. Transamerica Occidental Life Ins. Co., 325 F.3d
997, 998, 1001 (8th Cir. 2003)). In accord with these decisions,
we conclude that the primary duty of GEICO’s auto damage
adjusters includes the exercise of discretion and independent
judgment, and thus they come within the administrative
employee exemption from the overtime pay requirements of the
FLSA.
IV.
For the foregoing reasons, we reverse the orders of the
district court, remand and direct the court to enter judgment for
GEICO on the FLSA claims and to conduct further proceedings
regarding the Lindsay plaintiffs’ state claims consistent with this
opinion. See supra note 8.
So ordered.