4th Circuit: GEICO Investigators Not Exempt from FLSA Overtime Requirement

Posted by Sean P. CecilJan 29, 20160 Comments

The Fair Labor Standards Act requires, subject to several exceptions, overtime pay of 150% an employees' regular rate for work in excess of 40 hours in a week. (It is not true that you are exempt from overtime merely by virtue of being a salaried employee.) One common set of exceptions that cause a lot of confusion is the Executive, Administrative, and Professional (EAP) exceptions, commonly referred to as the “white collar” exceptions. The EAP exceptions focus on actual job duties as opposed to job titles, and have been subject to extensive litigation over the years. As a threshold matter, no EAP exemption applies to employees who are paid less than $455/week (the Obama Administration is in the process of an administrative rulemaking that would increase this minimum threshold to $955/week).  Federal regulations provide some guidance regarding how the white collar exemptions should be interpreted, and the 4th Circuit recently provided a little more, when a circuit panel affirmed a trial court ruling that Geico insurance investigators are not exempt.

Geico claimed that its investigators were subject to the “administrative function” exemption to the FLSA. Although the court ruled against the company, it also held that it acted in good faith, thus limiting the statute of limitations (the period during which the plaintiff could recover unpaid overtime) to two years, and denying the plaintiffs' request for liquidated damages which would have doubled the amount of back-pay owed. However, noting that in the 4th Circuit an employer must prove application of overtime exemptions by “clear and convincing” evidence (a higher burden than the usual “preponderance” requirement), the court rejected Geico's argument that the investigators were subject to the administrative exemption, finding that they did not prove all the elements of the exemption:

  1. Compensated at no less than $455/week
  2. Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and
  3. Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

There was no argument whether the first element was satisfied, and the trial court ruled that the second was “likely” met; however, the trial court ruled that the plaintiff class was entitled to partial summary judgment on the issue of liability because Geico failed to establish the third element- exercise of discretion and independent judgment. In a turn, the 4th Circuit ruled that in fact the company did not satisfy the “directly related” element, number 2. The court examined what is meant by the terms “primary duty” and “directly related to management or general business operations” and held that the critical focus regarding this element remains whether an employee's duties involve “the running of a business” as opposed to day-to-day carrying out of the business's affairs.

The court went on the examine the duties of Geico's insurance investigators, finding that they have no supervisory responsibility and do not develop, review, evaluate, or recommend Geico's business policies or strategies with regard to claims they investigated. Rather, by assisting adjustors by investigating factual issues related to insurance claims, the Investigators' duties consist of “day-to-day carrying out of Geico's affairs” to the public. Noting that it was still a close legal question, the court concluded the liability portion of its opinion by holding that Geico did not establish that the Investigators' primary duty is, plainly and unimistakably, directly related to Geico's management or general business operations and that the district court's ruling was correct.

On the issue of willfulness, which affects the statute of limitations and thus, the amount of damages, the 4th Circuit panel again upheld the trial court, citing precedent that “Only those employers who either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA have willfully violated the statute” and noting that the burden to prove willfulness rests with the employee. Thus, the panel upheld the trial court's limitation of the period of damages to two years and denyied doubled-damages to the workers. The panel noted that evidence of willfulness was scant, and that the company had revisited the issue a few times, so their decision was a reasonable one.

The decision then addressed the issues of the “fluxuating workweek” calculation of overtime that was due, rejecting the plaintiff's argument that there was a genuine question of material fact for a jury to decide their compensation, and ruling that the Investigators were not owed liquidated damages because the company had a “good faith” basis for denying them overtime. Finally, it ruled with the plaintiffs that the trial court erred in denying them pre-judgment interest, because “normally, prejudgment interest is necessary, in the absence of liquidated damages, to make the plaintiff whole.”

This was a decent decision for working folks- the court ruled that the workers were owed overtime. However, it is a bad decision insofar as it makes it even more difficult for plaintiffs to establish grounds for liquidated damages and damages that go back three years, not two, effectively reducing the plaintiffs' compensation to a significant degree. Judge Traxler authored to opinion in the case, Calderon v. Geico,  and Judge King and Senior Judge Davis concurred.

We have significant experience with FLSA overtime claims and representing individuals who are unlawfully classified as overtime exempt. Travis Payne, in particular has litigated an impressive number of overtime cases, including a lot of cases involving first responders. We also have experience counseling folks who were subject to unlawful retaliation for asserting claims for unpaid wages or overtime. We are available for counseling and/or representation; appointments can best be scheduled by visiting our employment law page and filling out the employment-law specific form there.