The 6th Circuit Court of Appeals has ruled that insurance investigators tasked with detecting and deterring insurance fraud are exempt from the overtime requirements of the Fair Labor Standards Act (FLSA). Foster v. Nationwide Mut. Ins. Co., +2013 U.S. App. LEXIS 5539 (6th Cir. 2013).
While this ruling directly impacts employers operating in Kentucky, Michigan, Ohio and Tennessee and suggests they may reclassify investigators with similar job duties as FLSA-exempt administrators, it is contrary to several federal decisions in other states determining that insurance investigators with similar job duties were nonexempt. See, e.g., Ahle v. Veracity Research Co., +738 F. Supp. 2d 896 (D. Minn. 2010), Fenton v. Farmers Ins. Exch., +663 F. Supp. 2d 718 (D. Minn. 2009), Calderon v. Geico Gen. Ins. Co., +2012 U.S. Dist. LEXIS 169285 (D. Md. Nov. 29, 2012), Gusdonovich v. Business Info. Co., +705 F. Supp. 262 (W.D. Pa. 1985).
There is a critical difference between the insurance investigators in the cases where nonexempt status was upheld and Foster. In the nonexempt cases, the investigators did not make evaluations or express opinions about the investigations. On the other hand, the investigators in Foster satisfied the administrative exemption requirement that an employee exercise "discretion and independent judgment with respect to matters of significance" they were free to decide for themselves "who to interview, what documents to review, what leads to pursue, and similar tactical matters."
All of these courts are in agreement that the language in +29 C.F.R. § 541.3(b)(1) stating that investigators are not exempt pertains only to law enforcement and public safety personnel and not to private-sector insurance investigators and other similar employees.
Advice for Employers
The Foster ruling shows that the line between an employee who qualifies for the FLSA's administrative exemption and one who does not is seldom black and white, especially in the case of insurance investigators. An employer that wishes to take advantage of the administrative exemption should carefully review its employees' job duties against the requirements of the exemption and consult with an attorney if there are any doubts.