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Property Damage Investigators Do Not Meet FLSA Administrative Exemption Test: Another Lesson For Employers On This Grayest of Gray Exemptions


As I have written numerous times, the administrative exemption is the grayest and most difficult for an employer to prove  The tension between whether duties involve skill and experience or “discretion and independent judgment” is where most of these cases fail for the employer.  A recent case highlights this principle but the Court did not even reach this element of the test as it held the workers did not perform vital administrative functions.  The Eleventh Circuit Court of Appeals has ruled (in reversing a lower court) that property damage investigators were not administratively exempt precisely because they did not meet the first prong of the test. The case is entitled Fowler v. OSP Prevention Group, Inc., and issued from the Court of Appeals for the Eleventh Circuit.

The lower court had ruled that the damage investigators were exempt under the administrative exemption.  The appellate court concluded that these employees were really white-collar production workers.  The workers investigated damage to the property of broadband service providers; they examined fiber optic cables and aerial wires, and then made conclusions on liability and the financial levels of the damages.  They also assessed who was responsible for the damage and estimated repair costs.  They then prepared reports and submitted those papers to the Company’s subrogation department.  Significantly, they were not tasked with the duties of seeking monetary recovery.  Nor could they negotiate on claims or try to settle them.

The issue is (as it always is in these cases) whether the plaintiffs were white collar production workers because they did not perform work directly related back-office type functions, such as running or servicing of the business.  The appellate court concluded that conducting investigations was not one of the functional categories listed in the regulations.  The Court also noted that ordinary inspection work had always been deemed as non-exempt work.  Such employees are following established methods and techniques, or being guided by manuals.  That is the antithesis of discretion and independent judgment and not a function auxiliary to the main business of the employer.

Although the Court agreed that these employees performed important work for their employer, that did not, by itself, make them exempt from overtime under the administrative exemption.  As the Court observed, these workers were not  “part of OSP’s management, and they did not run or service the general business operations of the company.”  Interestingly, as the Court ruled the employees did not meet the first part of the duties test under this exemption, it did not have to formally consider whether they utilized discretion and independent judgment in their work.

The Takeaway

The other white-collar exemptions, executive and professional, are much easier for an employer to defend than administrative cases.  Usually, these cases fail on the discretion and judgment prong but this is interesting because the employer failed to meet the first prong.  I daresay the writing was on the wall on this one, as there are numerous Opinion Letters and judicial cases holding many similar types of employees were “merely” production workers.

As these people were…


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