Employment-Sixth Circuit Finds That Special Investigators At Nationwide Are Exempt From FLSA Overtime Requirements

May 6, 2013

In Foster v. Nationwide Mutual Insurance, No. 12-3107 (6th Cir. 2013), the plaintiffs, who are or had been special investigators ("SIs") at Nationwide Mutual Insurance Company ("Nationwide") ,were appealing the district court's judgment against them in their claim that, among other matters, Nationwide had improperly classified the SIs as exempt from the overtime requirements of the Fair Labor Standards Act (the "FLSA").

In this case, Nationwide is an insurance company in the business of providing a wide range of insurance products. It employs the SIs to investigate nonmeritorious claims against insurance policies. The Sixth Circuit Court of Appeals (the "Court") noted that the FLSA exempts from its overtime requirements any employee employed in a bona fide executive, administrative, or professional capacity. The Court further noted that the administrative exemption is the potentially applicable exemption here. Under the FLSA regulations, an administrative employee is one: (1) who is compensated at a rate of not less than $455 per week, (2) whose 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) whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. The Court said that condition (1) is met and not in issue here.

The Court concluded that condition (2) was satisfied, since an SI's work is office or non-manual. Also, claims adjusting is ancillary to Nationwide's general business operations, and the SIs' investigative work drives the claims adjusting decisions with respect to suspicious claims, so that such work is directly related to assisting with the servicing of Nationwide's business. The Court concluded that condition (3) was satisfied, since the Court agreed with the district court's conclusion, based on its factual findings, that the SIs'primary duty was to conduct investigations of suspicious claims with the goal of determining if fraud had occurred, and this involves the exercise of discretion and independent judgment with respect to matters that are significant to Nationwide. As such, the Court found that the administrative exemption applies to the SIs, and it affirmed the district court's judgment against the plaintiffs.