Cora Bucklin et al v. American Zurich Insurance Company, No. 2:2011cv05519 - Document 155 (C.D. Cal. 2013)
Court Description: ORDER GRANTING DEFENDANT'S MOTIONS FOR SUMMARY JUDGMENT 66 68 AND DENYING MOTION FOR CLASS CERTIFICATION 128 ; AND JUDGMENT by Judge Stephen V. Wilson, For the foregoing reasons, Defendants motions for summary judgment are GRANTED, and Plai ntiffs' subsequently filed motion for class certification is DENIED as MOOT. IT IS ORDERED AND ADJUDGED thatBurton and Bucklin take nothing, that the actions by Burton and Bucklinagainst Defendant Zurich be dismissed on the merits with prejudice and that Zurich recover its costs. 128 (MD JS-6, Case Terminated). (pj)
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Cora Bucklin et al v. American Zurich Insurance Company Doc. 155 1 2 3 4 JS-6 5 6 7 UNITED STATES DISTRICT COURT 8 CENTRAL DISTRICT OF CALIFORNIA 9 10 11 12 CORA BUCKLIN and VIRGINIA L. BURTON, individuals, on behalf of themselves, and on behalf of all persons similarly situated, 13 Plaintiffs, 14 15 16 v. AMERICAN ZURICH INSURANCE COMPANY, and Illinois Corporation, 17 Defendant. 18 19 I. 22 23 24 25 26 27 28 2:11-CV-05519-SVW-MRW ORDER GRANTING DEFENDANT'S MOTIONS FOR SUMMARY JUDGMENT [66][68] AND DENYING MOTION FOR CLASS CERTIFICATION [128]; AND JUDGMENT INTRODUCTION On March 21, 2011, Plaintiffs Cora Bucklin and Virginia Burton 20 21 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) (collectively, “Plaintiffs”) filed this putative class action against Defendant Zurich American Insurance Company (“Defendant”),1 alleging wage and hour violations under the California Labor Code and the California Business & Professions Code. Plaintiffs’ Second Amended Complaint alleges four causes of action, all of which stem from Defendant’s alleged failure to pay overtime and to provide meal and rest breaks: (1) unfair competition in violation of Cal. Bus. & Prof. 1 Defendant was erroneously named in the Complaint as “American Zurich Insurance Company.” (See Dkt. 66 at 1). Dockets.Justia.com 1 Code § 17200 et seq.; (2) failure to pay overtime compensation in 2 violation of Cal. Lab. Code §§ 510, 1194, 1198 et seq.; (3) failure to 3 provide accurate itemized statements in violation of Cal. Lab. Code § 4 226; and (4) recovery of penalties under the Private Attorney General 5 Act, Cal. Lab. Code § 2698 et seq. 6 (Dkt. 62). Now before the Court are Defendant’s motions for summary judgment 7 against each of the named Plaintiffs based on the affirmative defense 8 that Plaintiffs were not entitled to overtime compensation or to meal 9 and rest breaks because they were properly classified as exempt 10 administrative employees. 11 class certification. 12 motions are GRANTED and Plaintiffs' motion for class certification is 13 DENIED as MOOT. 14 II. 15 Plaintiffs subsequently filed a motion for For the reasons set forth below, Defendant’s FACTUAL BACKGROUND Defendant underwrites and adjusts insurance policies that cover 16 workers’ compensation. 17 Defendant’s workers’ compensation division, handling claims filed by 18 injured employees of Defendant’s clients. 19 Plaintiffs both had the title of “Claims Specialist III,” and both were 20 classified as exempt from receiving overtime wages. 21 93; Bucklin AMF ¶¶ 1, 112).2 22 April 2010, earning an annual salary ranging from $71,972 to $74,491, 23 plus annual bonuses. Plaintiffs worked as claims adjusters in (Burton AMF ¶¶ 89-90). (Burton AMF ¶¶ 1, Burton worked from November 2002 until (Burton AMF ¶¶ 1-2). Bucklin worked from April 24 25 26 27 28 2 For ease, “Burton SUF” and “Burton AMF” refer to Defendant’s statement of uncontroverted facts and Burton’s statement of additional material facts, respectively, submitted in relation to the summary judgment motion against Burton. Meanwhile, “Bucklin SUF” and “Bucklin AMF” refer to the statements submitted with respect to the motion against Bucklin. 2 1 2005 until December 2010, earning between $75,762 to $78,413 each year, 2 plus annual bonuses. 3 (Bucklin AMF ¶¶ 1-2). During their employment, Burton maintained an average case load of 4 approximately 150 to 175 claims, and Bucklin was responsible for 5 between 100 to 171 claims. 6 Plaintiffs handled their claims from inception until resolution. 7 (Id.). 8 contained in Defendant’s “Best Practices” manual and the California 9 Labor Code. (Burton AMF ¶ 11; Bucklin AMF ¶ 12). In doing so, Plaintiffs were required to follow the guidelines (Burton AMF ¶¶ 101, 123-27; Bucklin AMF ¶¶ 120, 142-146; 10 Bhowmik Decl. Exs. 1-4). 11 Plaintiffs to initiate contact with the claimant, the employer, any 12 witnesses, and the medical provider. 13 13). 14 which additional facts to investigate, which other witnesses to 15 interview, and which methods to employ, including whether or not to 16 obtain recorded statements from declarants. 17 AMF ¶ 14; Bhowmik Decl. Exs. 1-4). 18 Plaintiffs assessed witnesses’ credibility and resolved conflicts in 19 the evidence, including medical opinions. 20 AMF ¶ 15). 21 For example, the Best Practices instructed (Burton AMF ¶ 12; Bucklin AMF ¶ At the same time, Plaintiffs also made their own decisions about (Burton AMF ¶ 13; Bucklin In addition, it is undisputed that (Burton AMF ¶ 14; Bucklin Based on the facts discovered in the investigation, Plaintiffs 22 determined whether the claim was covered and set reserves estimating 23 the probable payout on the claim. 24 ¶¶ 21, 27). 25 regarding the claim required the reserves to be adjusted. 26 ¶ 20; Bucklin AMF ¶ 28). 27 account a variety of factors, including the length of temporary (Burton AMF ¶¶ 15, 19; Bucklin AMF Plaintiffs also determined whether new developments (Burton AMF When setting reserves, Plaintiffs took into 28 3 1 disability, the likelihood of permanent disability, and how disputes 2 about these issues would likely be resolved in settlement or at trial. 3 (Burton AMF ¶ 21; Bucklin AMF ¶ 29). 4 provided a range for the likely cost of treatment and length of 5 disability, Plaintiffs evaluated medical reports and other evidence to 6 select the appropriate figure within that range, or to determine 7 whether adjustments were necessary. 8 ¶¶ 30-33). 9 Although certain resources (Burton AMF ¶¶ 22-25; Bucklin AMF For each claim, Plaintiffs developed a “plan of action” for moving 10 the claim toward resolution. 11 the case, identified objectives for resolving the claim and steps to 12 achieve them – including identifying the issues in the case and the 13 relevant time frames – and where appropriate, litigation strategies. 14 (Burton AMF ¶¶ 42-44; Bucklin AMF ¶ 60-62; Bhowmik Decl. Exs. 1-4). 15 is undisputed that each plan was developed by Plaintiffs without prior 16 supervisor approval. 17 as each case unfolded, Plaintiffs were responsible for flagging whether 18 any facts suggested the potential for fraud, subrogation, or 19 contribution from a third party. 20 Each plan was tailored to the facts of (Burton AMF ¶ 45; Bucklin AMF ¶ 64). It Meanwhile, (Burton AMF ¶ 28; Bucklin AMF ¶ 38). For most of Burton’s employment, she had authority to settle 21 claims up to $75,000, set reserves up to $100,000 per claim, and 22 authorize single payments up to $75,000 and aggregate payments up to 23 $100,000 per claim. 24 Burton authorized on her claims exceeded $500,000 annually, including 25 benefits, settlements, and expenses. 26 her employment, the aggregate reserves on Burton’s claim inventory 27 typically exceeded $7 million. (Burton AMF ¶ 54). The aggregate payments that During the last three years of (Id. ¶¶ 67-68). 28 4 For most of Bucklin’s 1 employment, she had authority to settle claims up to $80,000, set 2 reserves up to $100,000, and authorize single payments up to $50,000 3 and aggregate payments up to $250,000 per claim.3 4 The aggregate payments that Bucklin authorized on her claims exceeded 5 $500,000 annually, and the aggregate reserves on her claim inventory 6 typically exceeded $10 million. 7 (Bucklin AMF ¶ 78). (Id. ¶¶ 82-83). When claims were litigated, Plaintiffs were responsible for 8 determining whether to retain outside counsel and which attorney to 9 hire, developing a litigation strategy with the attorney, and 10 supervising the course of litigation, including deciding whether to 11 conduct discovery and depositions or to seek expert opinions. 12 AMF ¶¶ 38-40; Bucklin AMF ¶ 53-54). 13 settlement and provided advice for conducting negotiations, Plaintiffs 14 determined when to initiate settlement discussions based on several 15 factors, including the evidence, a cost-benefit analysis, the insured 16 client’s priorities, and their caseload. 17 the appropriate settlement amount and conducted the negotiations, 18 either directly with the claimant or through retained counsel. 19 AMF ¶¶ 46-47; Bucklin AMF ¶¶ 66-67; Bhowmik Decl. Exs. 1-4, 14). 20 (Burton Although Defendant encouraged Plaintiffs further decided Plaintiffs were supervised by Claims Managers. (Burton (Burton AMF ¶ 130; 21 Bucklin AMF ¶ 149). 22 supervisor approval, including denials of compensability, hiring a 23 private investigator, setting reserves or entering a settlement above 24 their personal authority limits, retaining an attorney when the 25 claimant was unrepresented, and referring claims to Defendant’s Some of Plaintiffs’ decisions required prior 26 27 28 3 Bucklin’s authority limits decreased significantly – to a range of $7,500 to $10,000 – during the last month of her employment with Defendant. (Bucklin SUF ¶ 78). 5 1 subrogation unit. 2 supervisory approval was needed, Plaintiffs would first formulate a 3 rationale to support their analysis, and they would forward their 4 reasoning and recommendation to their respective supervisor. 5 AMF ¶ 58; Bucklin AMF ¶¶ 35, 69). 6 recommendations to hire an investigator approximately half of the time 7 and almost always approved her other recommendations, occasionally 8 requiring minor revisions or additional information before doing so. 9 (Burton AMF ¶ 59). (Burton SUF ¶¶ 55-56; Bucklin SUF ¶¶ 35, 69). When (Burton Burton’s supervisor approved her Bucklin’s supervisor almost always approved her 10 recommendations for setting reserves or settling a claim beyond her 11 authority. 12 (1) reviewed their handling of their claims at 12, 60, and 180 day 13 intervals after a claim was assigned; (2) audited two open files and 14 two closed files each quarter for compliance with Defendant’s 15 expectations; and (3) performed other informal, periodic reviews of 16 Plaintiffs’ work, including checking to be sure that required deadlines 17 were met and that required communications were made. 18 64, 66; Burton AMF ¶¶ 141-42; Bucklin SUF ¶¶ 79, 81; Bucklin AMF ¶¶ 19 160-61). 20 (Bucklin AMF ¶¶ 35, 69). Plaintiffs’ supervisors also (Burton SUF ¶¶ With respect to some claims, Plaintiffs were also required to 21 adhere to special handling instructions imposed by Defendant’s insured 22 clients, including seeking approval before taking certain actions on a 23 claim. 24 37; Bucklin AMF ¶¶ 140-41). 25 would submit recommendations to the insureds along with their 26 reasoning. 27 recommendations. (Burton SUF ¶ 62; Burton AMF ¶ 121-22; Bucklin SUF ¶ 17-18, 26, When approval was necessary, Plaintiffs The insureds almost always accepted Plaintiffs’ (Burton AMF ¶ 63; Bucklin AMF ¶¶ 19, 26, 37). 28 6 1 2 III. LEGAL STANDARD Rule 56(c) requires summary judgment for the moving party when the 3 evidence, viewed in the light most favorable to the nonmoving party, 4 shows that there is no genuine issue as to any material fact, 5 and that the moving party is entitled to judgment as a matter of law. 6 See Fed. R. Civ. P. 56(c); Tarin v. County of Los Angeles, 123 F.3d 7 1259, 1263 (9th Cir.1997). 8 9 The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex Corp. v. 10 Catrett, 477 U.S. 317, 323–24 (1986). 11 summary judgment would bear the burden of proof at trial, it must come 12 forward with evidence which would entitle it to a directed verdict if 13 the evidence went uncontroverted at trial.” 14 Co., Inc. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) 15 (internal quotations and citations omitted). 16 party does not bear the burden of proof, it can satisfy its Rule 56(c) 17 burden by “‘showing’ – that is, pointing out to the district court – 18 that there is an absence of evidence to support the nonmoving party’s 19 case.” 20 fails to meet its initial burden, summary judgment must be denied and 21 the court need not consider the nonmoving party’s evidence. 22 Adickes v. S.H. Kress & Co., 398 U.S. 144, 159–60 (1970). 23 Celotex, 477 U.S. at 325. “When the party moving for C.A.R. Transp. Brokerage However, if the moving Either way, if the moving party See If the moving party meets its initial burden, Rule 56(e) requires 24 the nonmoving party to go beyond the pleadings and identify specific 25 facts – by affidavits or as otherwise provided in the rule – that show 26 a genuine issue for trial. 27 U.S. 242, 248 (1986). See Anderson v. Liberty Lobby, Inc., 477 An issue is genuine only “if the evidence is 28 7 1 such that a reasonable jury could return a verdict for the nonmoving 2 party.” 3 data cannot defeat summary judgment.” 4 Corp., 331 F.3d 1074, 1078 (9th Cir. 2003). 5 has “refused to find a genuine issue where the only evidence presented 6 is uncorroborated and self-serving testimony.” 7 Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (internal 8 quotation marks omitted). 9 IV. 10 Id. at 248. “Conclusory allegations unsupported by factual Rivera v. Nat’l R.R. Passenger Thus, the Ninth Circuit Villiarimo v. Aloha DISCUSSION The parties agree that Plaintiffs’ claims must fail if Plaintiffs 11 were exempt from the overtime and break requirements under California 12 law. 13 burden of proving Plaintiffs were properly classified as exempt 14 workers. 15 1999). 16 Defendant has met this burden and is entitled to summary judgment. (See Burton Opp. at 22; Bucklin Opp. at 22). Defendant bears the Ramirez v. Yosemite Water Co., Inc., 978 P.2d 2, 8 (Cal. For the reasons set forth below, the Court concludes that 17 A. 18 California Industrial Welfare Commission (“IWC”) Wage Order 4-2001 19 applied at all relevant times to Plaintiffs’ employment with Defendant. Administrative Exemption4 20 21 22 23 24 25 26 27 28 4 In considering whether Plaintiffs are administratively exempt, the Court rejects the testimony of Plaintiffs’ retained expert, David Pilcher, for two reasons. First, Plaintiffs did not disclose Pilcher pursuant to Rule 26. (Decker Supp. Decl. ¶ 3). “If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or harmless.” Fed. R. Civ. P. 37. Plaintiffs have not explained their failure to disclose Pilcher, and their failure has prejudiced Defendants, who have not been able to depose Pilcher. Second, Pilcher’s declaration is not signed under penalty of perjury. Therefore, it is ineligible for consideration pursuant to Fed. R. Civ. P. 56(e). 8 1 See California Wage Order 4-2001, codified as 8 Cal. Code Regs. 2 § 11040; Harris v. Super. Ct. (Harris I), 266 P.3d 953, 956 n.1 (Cal. 3 2011) (analyzing exempt treatment of claims adjusters employed after 4 October 1, 2000 under Wage Order 4-2001).5 5 “persons employed in administrative . . . capacities” exempt from 6 California’s overtime and meal and rest period requirements. 7 Code Regs. §§ 11040.1.(A)(2), 11040.3, 11040.11, 11040.12. 8 9 Wage Order 4-2001 made 8 Cal. Employees fall within the administrative exemption from these laws if: (1) their duties and responsibilities involve the performance of 10 office or non-manual work “directly related” to the management policies 11 or general business operations of their employer or their employer’s 12 customers; (2) they “customarily and regularly exercise discretion and 13 independent judgment;” (3) they “perform under only general supervision 14 work along specialized or technical lines requiring special training, 15 experience, or knowledge;” (4) they are “primarily engaged” in duties 16 meeting the test of exemption; and (5) they earn a monthly salary at 17 least two times the state minimum wage for full-time employment. 18 Cal. Code Regs. § 11040.1.(A)(2). 19 exemption extends to “all work that is directly and closely related to 20 exempt work and work which is properly viewed as a means for carrying 21 out exempt functions.” 22 8 Further, the administrative Id. § 1.(A)(2)(f). Additionally, Wage Order 4-2001 states that “[t]he activities 23 constituting exempt work and non-exempt work shall be construed in the 24 same manner as such terms are construed in the following regulations 25 26 27 28 5 California Labor Code § 510 requires that employees be paid overtime for any work in excess of eight hours per day or in excess of forty hours in one week. Section 515 of the Labor Code authorizes the Industrial Welfare Commission (“IWC”) to establish exemptions from this overtime requirement for certain employees. 9 1 under the Fair Labor Standards Act effective as of the date of this 2 order: 3 541.215.” 4 the [labor] statute is understood in light of the wage order, the wage 5 order is construed in light of the incorporated federal regulations.” 6 Harris I, 266 P.3d at 958.6 7 plaintiffs’ work as claims adjusters is encompassed” by the 8 administrative exemption as construed in accordance with the relevant 9 statute, wage orders, and federal regulations. 10 29 C.F.R. Sections 541.201-205, 541.207-208, 541.210, and Id. In other words, in applying Wage Order 4–2001, “just as Thus, the “precise question here is whether Id. at 958. Here, Plaintiffs do not dispute that their duties involved office 11 or non-manual work, 8 Cal. Code Regs. § 11040.1.(A)(2)(a)(I), or that 12 they earned more than twice the state minimum wage for full time 13 employment, id. § 11040.1.(A)(2)(g). 14 4). 15 administrative exemption. 16 element, whether Plaintiffs’ work was “directly related” to the 17 management policies or general business operations of Defendant. (Burton AMF ¶ 4; Bucklin AMF ¶ Rather, the dispute centers around the remaining elements of the 18 1. The Court therefore turns to the first “Directly Related” Requirement 19 In Harris I, the California Supreme Court clarified that the 20 phrase “directly related” was defined by the incorporated federal 21 regulation located at 29 C.F.R. § 541.205 (2000).7 To be “directly 22 6 23 24 25 26 27 28 With respect to the Wage Order 4-2001, the IWC separately issued a statement indicating that it “deems only those federal regulations specifically cited in its wage orders, and in effect at the time of promulgation of these wage orders, to apply in defining exempt duties under California law.” Harris I, 266 P.3d at 180 (emphasis added). 7 Title 29 C.F.R. § 541.205 (2000) states, in pertinent part: (a) The phrase “directly related to management policies or general business operations of his employer or his employer’s customers” describes those types of activities 10 1 related” to management policies or general business operations, the 2 court explained, an employee’s work must be both “qualitatively 3 administrative” and “quantitatively . . . of substantial importance to 4 the management or operations of the business.” 5 959. 6 “courts must consider the particular facts before them and apply the 7 language of the statutes and wage orders at issue.” 8 this in mind, the Court examines the qualitative and quantitative 9 factors separately below. Harris I, 266 P.3d at The administrative exemption inquiry is fact-specific, and thus Id. at 965. 10 11 relating to the administrative operations of a business as distinguished from “production” or, in a retail or service establishment, “sales” work. In addition to describing the types of activities, the phrase limits the exemption to persons who perform work of substantial importance to the management or operation of the business of his employer or his employer's customers. 12 13 14 15 16 (b) The administrative operations of the business include the work performed by so-called white-collar employees engaged in “servicing” a business as, for, example, advising the management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control. An employee performing such work is engaged in activities relating to the administrative operations of the business notwithstanding that he is employed as an administrative assistant to an executive in the production department of the business. (c) As used to describe work of substantial importance to the management or operation of the business, the phrase “directly related to management policies or general business operations” is not limited to persons who participate in the formulation of management policies or in the operation of the business as a whole. Employees whose work is “directly related” to management policies or to general business operations include those work affects policy or whose responsibility it is to execute or carry it out. The phrase also includes a wide variety of persons who either carry out major assignments in conducting the operations of the business, or whose work affects business operations to a substantial degree, even though their assignments are tasks related to the operation of a particular segment of the business. 17 18 19 20 21 22 23 24 25 26 27 28 11 With 1 i. Qualitative Component 2 The qualitative prong asks whether an employee’s duties constitute 3 “those types of activities relating to the administrative operations of 4 a business as distinguished from ‘production’ or, in a retail or 5 service establishment, ‘sales’ work.” 6 “administrative operations of a business” may “include work done by 7 ‘white collar’ employees engaged in servicing a business. 8 servicing may include, as potentially relevant here, advising 9 management, planning, negotiating, and representing the company.” 10 11 29 C.F.R. § 541.205(a). The Such Harris I, 266 P.3d at 960 (citing 29 C.F.R. § 205(b) (2000)). Several courts have held that the duties of claims adjusters such 12 as Plaintiffs constitute “servicing” a business because they involve 13 evaluating claims and representing Defendant in negotiating and 14 settling claims. 15 1040, 1047 (C.D. Cal. 2002), the court reasoned that “an employee who 16 negotiates with clients and settles damage claims on behalf of an 17 employer engages in duties consistent with the servicing of a business” 18 under 29 C.F.R. 541.205(b) (2000). 19 adjuster met the qualitative test because she (1) “regularly and 20 continually represented [the insurer] during negotiations with 21 attorneys and claimants,” (2) “had absolute authority to settle within 22 her limits, which included approximately ten percent of her cases,” and 23 (3) “regularly advised management regarding claims handling and related 24 matters.” 25 Allstate Ins. Co., 465 F.3d 578, 585 (5th Cir. 2006) (holding that 26 under section 541.205(b), claims adjusters’ duties were “administrative 27 in nature” because they “advised the management, represented [the In Palacio v. Progressive Ins. Co., 244 F. Supp. 2d Thus, the court held that a claims Palacio, 244 F. Supp. at 1047. 28 12 See also Cheatham v. 1 insurer], and negotiated on [the insurer’s] behalf”)8; Jastremski v. 2 Safeco Ins. Co., 243 F. Supp. 2d 743, 751 (N.D. Ohio 2003) (reasoning 3 that claims representative’s duties were administrative in nature where 4 he “advised management of his findings on insurance claims, planned how 5 to handle insurance claims, and negotiated binding settlements with 6 claimants while representing the company”). 7 Given the analogous facts in this case, the Court concludes that 8 Plaintiffs’ duties satisfy the qualitative prong of the “directly 9 related” test. Here, as in the cases above, Plaintiffs “serviced” 10 Defendant’s business by “advising management, planning, negotiating, 11 and representing the company.” 12 uncontroverted facts establish that Plaintiffs (1) planned the 13 processing of their claims; (2) represented Defendant in investigating 14 claims, determining coverage, and setting reserves; (3) managed 15 litigation and negotiated settlements on behalf of Defendant; and (4) 16 where necessary, made recommendations to their supervisors (which 17 frequently were accepted). 18 58-59; Bucklin AMF ¶¶ 13, 35, 53-54, 60-61, 66, 78, 69). 19 foregoing tasks were directly related in a qualitative sense to the 20 administrative operations of Defendant’s business. Harris I, 266 P.3d at 960. The (Burton AMF ¶¶ 12, 38-40, 42-43, 46, 54, Thus, the 21 Plaintiffs object on three grounds, none of which are availing. 22 First, Plaintiffs protest that Defendant’s reading of “servicing” is 23 overly broad because it would exempt any employee who represents his or 24 her employer. (Burton Opp. at 16). As a cautionary example, 25 26 27 28 8 Plaintiffs object that Cheatham is inapposite because it interpreted the 2004 version of 29 C.F.R. § 541.205(b), instead of the 2000 version at issue here. Cheatham remains instructive, however, because the text of the 2004 version is identical to the 2000 version. 13 1 Plaintiffs cite Rieve v. Coventry Health Care, Inc., 870 F. Supp. 2d 2 856 (C.D. Cal. 2012), in which the defendant argued that its employee, 3 a nurse case manager, was exempt because she “represented” the company 4 when she interacted with the public. 5 the nurse case manager was not exempt by virtue of the fact that she 6 “attempted to provide her employer with a positive public image.” 7 The court reasoned that “a cashier at a fast food restaurant represents 8 his employer, as a bank teller represents his bank,” yet the 9 regulations are clear that such employees are not exempt. 10 11 Id. at 873. The court held that Id. Id. (citing 29 C.F.R. § 541.205(c)(1) (stating that bank tellers are not exempt)). Rieve is distinguishable, however, because Plaintiffs’ work is 12 significantly different from the role of a fast food cashier or a bank 13 teller, or even the nurse case manager found to be non-exempt in Rieve. 14 In that case, the court emphasized that even though the nurse could 15 “make recommendations and advise patients, . . . ultimately the 16 decisions about patient care are made by the physician and the claims 17 adjustors. . . . Defendants have presented no evidence that Plaintiff 18 can take affirmative action that would bind anyone other than herself.” 19 870 F. Supp. 2d at 874-75. 20 Plaintiffs had the authority to make certain binding, affirmative 21 decisions on behalf of Defendant without obtaining supervisory 22 approval, including setting reserves and negotiating settlements within 23 their personal authority limits, issuing payments, and making 24 litigation decisions. 25 “servicing” Defendant’s business. 26 27 Here, by contrast, it is undisputed that Therefore, Plaintiffs genuinely engaged in Second, Plaintiffs argue that Palacio, Jastremski, and Cheatham are unworthy of reliance inasmuch as they rely on the argument that 28 14 1 claims adjusters are exempt because they do not “produce” their 2 employers’ product—i.e., insurance policies—but rather provide 3 ancillary services. 4 improperly rely on the “administrative/production dichotomy,” an 5 approach Plaintiffs assert was “condemned” in Harris I. 6 misunderstand Harris I. 7 that the administrative/production worker dichotomy . . . can never be 8 used as an analytical tool. 9 improperly applied the administrative/production worker dichotomy as a In short, Plaintiffs contend that these cases Plaintiffs Harris I expressly stated: “We do not hold We merely hold that the Court of Appeal 10 dispositive test.” 11 that the above-cited cases employ the administrative/production 12 dichotomy as an analytical tool to evaluate whether the claims 13 adjusters’ work was “directly related” to administrative operations, 14 they did not rely on this logic exclusively. 15 examined whether the adjusters’ duties “serviced” their employers’ 16 businesses within the meaning of section 541.205(b). 17 F. Supp. 2d at 1046-47; Jastremski, 243 F. Supp. 2d at 751; Cheatham, 18 465 F.3d at 585. 19 claim. 266 P.3d at 965 (emphasis added). While it is true Rather, the cases also See Palacio, 244 Thus, the cases did not err in the way Plaintiffs 20 Third, Plaintiffs urge the Court to follow the reasoning of the 21 California Court of Appeals in Harris v. Superior Court (Harris II), 22 144 Cal. Rptr. 3d 289, 306 (Ct. App. 2012), which was decided on remand 23 from the California Supreme Court’s decision in Harris I. 24 II, as here, the plaintiffs were insurance claims adjusters who planned 25 the claims process, represented and bound the insurer in negotiating 26 settlements, and advised management about potential subrogation or 27 fraud issues. Id. at 299. In Harris Nonetheless, the state appellate court 28 15 1 concluded that the plaintiffs’ duties did not satisfy the qualitative 2 prong because none of their work was “carried on at the level of 3 management policy or general operations,” but rather was part of the 4 “day-to-day operation of Employers’ business.” 5 rejected the argument that plaintiffs “serviced” the insurer’s business 6 by representing the company, negotiating on its behalf, and planning 7 the claims process. 8 some forms of representation, negotiation, and planning constitute 9 “servicing,” some do not. Id. at 299-300. Id. at 298. The court The court reasoned that although It concluded that “[b]ecause Employers make 10 no attempt to specify where the line should be drawn, let alone to show 11 that Adjusters’ work falls on the proper side, their argument fails.” 12 Id. at 301. 13 This Court declines to follow Harris II for three reasons. First, 14 the Harris II court invented its own test to determine whether the 15 claims adjusters’ activities were administrative in character. 16 Specifically, the court required that claims adjusters’ activities 17 occur “at the level of management policy or general operations” to 18 qualify as administratively exempt. 19 however, is a “judicially created” gloss that was invalidated in Harris 20 I on the ground that it failed to give full effect to the governing 21 federal regulations. 22 teaches, “Federal Regulations former part 541.205(a), (b), and (c) must 23 be read together in order to apply the ‘directly related’ test and 24 properly determine whether the work at issue satisfies the 25 administrative exemption.” 26 that the phrase “directly related to management policies or general 27 business operations of his employer” describes those activities Id. at 298. That articulation, Harris I, 266 P.3d at 963-64. Id. at 964. 28 16 As Harris I Section 541.205(a) provides 1 “relating to the administrative operations of a business.” 2 section 541.205(b) explains that the phrase “administrative operations 3 of a business” includes work performed by “employees engaged in 4 ‘servicing’ a business as, for example, advising the management, 5 planning, negotiating, [and] representing the company . . . .” 6 in this text suggests that the activities must occur at the level of 7 management or general operations. 8 unmistakably clear that the phrase “‘directly related to management 9 policies or general business operations’ is not limited to persons who In turn, Nothing Indeed, section 541.205(c) makes it 10 participate in the formulation of management policies or in the 11 operation of the business as a whole.” 12 (emphasis added). 13 the contrived requirement in Harris II that an employee must work “at 14 the level of management policy or general operations” to satisfy the 15 qualitative prong of the “directly related” standard.9 29 C.F.R. § 541.205(c) Read together, these regulations lend no support to 16 Second, and in any event, the decision in Harris II was 17 depublished by the California Supreme Court, which means it has no 18 precedential value among California courts and, perhaps more 19 importantly, suggests that the California Supreme Court would not adopt 20 21 22 23 24 25 26 27 28 9 Harris II attempts to blunt the force of section 541.205(c) by arguing that it only applies to the quantitative prong of the “directly related” test – i.e., whether the adjuster’s work is of “substantial importance” to business operations. Nonetheless, Harris I instructs that the regulations must “be read as a whole” and as such, “interpretations are to be avoided if they render part of an enactment nugatory.” 266 P.3d at 964. Here, adopting Harris II’s invented “policy level” test would render pointless the caveat in section 541.205(c) that work need not occur at the policy level to meet the quantitative prong. Stated differently, if the only activities that could satisfy the “directly related” test were limited to those that occur at the policy level, such a reading in effect would render meaningless the caveat in section 541.205(c). 17 1 its reasoning. 2 all forms of representation, negotiation, and planning constitute 3 “servicing” a business is unhelpful, since defining which types of 4 representation, negotiation, and planning constitute “servicing” is a 5 question of law for the courts to elucidate.10 6 described earlier, the Court concludes that Plaintiffs have satisfied 7 the qualitative prong of the “directly related” test because their 8 activities as claims adjusters serviced the business operations of 9 Defendant. 10 Third, the Harris II court’s facile refrain that not ii. 11 Here, for the reasons Quantitative Component The quantitative prong holds that an administrative employee’s 12 duties are “directly related” to management policies or general 13 business operations only if they are of “substantial importance to the 14 management or operation of the business of his employer or his 15 employer’s customers.” 16 959. 17 formulation of management policies or in the operation of the business 18 as a whole.” 19 (stating that section 541.205(c) governs the quantitative component). 20 Rather, employees whose work is “of substantial importance” to the 29 C.F.R. § 541.205(a); Harris I, 266 P.3d at To satisfy this test, an employee need not “participate in the 29 C.F.R. 541.205(c); see also Harris I, 266 P.3d at 960 21 22 23 24 25 26 27 28 10 To bolster its point, the Harris II court compares the claims adjusters to legal secretaries. The court explained that although a legal secretary might “negotiate” with couriers about filing documents, or “advise” a partner that a filing should not be “planned” for a certain day, such work is not “directly related to management policies or general business operations.” Id. True enough, but the court’s logic is in fact an application of the quantitative prong of the “directly related” test, which requires that the work performed be of “substantial importance” to the management or operation of the business. Here, the Court concludes that the adjusters’ work was both administrative in nature and substantially important to its business operations. 18 1 management or operations of a business also includes those whose “work 2 affects policy or whose responsibility it is to execute or carry it 3 out. 4 carry out major assignments in conducting the operations of the 5 business, or whose work affects business operations to a substantial 6 degree, even though their assignments are tasks related to the 7 operation of a particular segment of the business.” 8 § 541.205(c). 9 “claim agents and adjusters” as an example of the kind of employee who 10 11 The phrase also includes a wide variety of persons who either 29 C.F.R. Instructively, the regulation specifically identifies meets the quantitative component. 29 C.F.R. § 541.205(c)(5). Here, Plaintiffs’ work substantially affected Defendant’s business 12 with respect to the setting of reserves and settlements. 13 undisputed that Plaintiffs had independent authority to set reserves up 14 to $100,000 per claim, and thus handled claims with aggregate reserves 15 of $7-10 million. 16 Defendant or its insureds were required to set aside funds to satisfy 17 these reserves, which funds were then unavailable for other purposes. 18 (Burton AMF ¶¶ 68-69; Bucklin AMF ¶¶ 83-84). 19 Plaintiffs’ decisions regarding the reserve amount carried consequences 20 for Defendant’s business: setting reserves too low could cause 21 Defendant to violate regulatory requirements, while setting reserves 22 too high could deprive Defendant or its clients of funds needed for 23 other purposes. 24 it is uncontroverted that Plaintiffs had independent authority to 25 settle claims up to $75,000-$80,000 and to authorize single payments up 26 to $50,000-75,000. 27 authorized on their claims—for benefits, expenses, and settlements— First, it is (Burton AMF ¶¶ 54, 67-68; Bucklin AMF ¶¶ 78, 82-83). It is undisputed that (Burton AMF ¶¶ 70-71; Bucklin AMF ¶¶ 85-86). Second, As a result, the aggregate payments that Plaintiffs 28 19 1 exceeded $500,000 annually. 2 83).11 3 authority limits, Plaintiffs furnished recommendations to their 4 supervisors, which were generally accepted. 5 Bucklin AMF ¶¶ 35, 69). 6 Plaintiffs’ contributions affected Defendant’s business to a 7 substantial degree. 8 work “of substantial importance” even when adjusting or settling 9 relatively smaller claims. (Burton AMF ¶¶ 67-68; Bucklin AMF ¶¶ 82- Moreover, when a proposed settlement exceeded their personal (Burton AMF ¶¶ 58-59; Thus, the uncontroverted facts illustrate that Indeed, courts have held that adjusters perform See Roe-Midgett v. CC Servs., Inc., 512 10 F.3d 865, 871 (7th Cir. 2008) (large percentage of claims under 11 $10,000); Jastremski, 243 F. Supp. 2d at 746, 755 (adjuster had 12 authority to determine coverage, set reserves, and settle claims up to 13 $15,000).12 14 * 15 * * In sum, the Court concludes that Plaintiffs’ work was “directly 16 related” to the management policies or general business operations of 17 Defendant. 18 necessary to the Court’s analysis, two additional authorities bolster 19 the Court’s conclusion. 20 insurance claims adjusters who perform substantially the same 21 duties as Plaintiffs are administratively exempt. 8 Cal. Code Regs. § 11040(1)(A)(2). Though not strictly First, the Ninth Circuit has recognized that See In re Farmers 22 23 11 24 25 26 27 28 So great was Burton’s influence that one of Defendant’s clients expressed that it would only maintain its policy with Defendant if Burton were assigned to handle claims under the policy. (Burton SUF ¶ 73). 12 Accordingly, the fact that Bucklin's payment authority limits decreased during her last month of employment does not vitiate the substantial importance of her work, which also included setting reserves and managing litigation. 20 1 Ins. Exchange, Claims Representatives’ Overtime Pay Litigation, 481 2 F.3d 1119, 1129 (9th Cir. 2007). 3 on a new regulation published by the Department of Labor in April 2004, 4 which states: 5 6 7 8 9 10 In Farmers, the Ninth Circuit relied Insurance claims adjusters generally meet the duties requirements for the administrative exemption, whether they work for an insurance company or other type of company, 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. 11 29 C.F.R. § 541.203(a). 12 court’s factual findings “almost track word for word the language of 13 § 541.203.” 14 that the plaintiffs’ duties included determining whether the policy 15 covered the loss, recommending a reserve after estimating the 16 employer’s exposure according to state law, interviewing the insured 17 and assessing witness credibility, advising the employer regarding 18 fraud or subrogation, negotiating settlements, seeking authority from 19 supervisors when settlement recommendations exceeded the adjustors’ 20 authority (which was granted more than 75 percent of the time), and 21 communicating with litigation counsel. 22 within section 541.203(a), the Ninth Circuit concluded that the claims 23 adjusters were exempt from the FLSA. 24 The Ninth Circuit noted that the district 481 F.3d at 1129. In particular, the district court found Id. Because these duties fell Id. Plaintiffs contend that Farmers is inapplicable here because the 25 Court may rely only on those existing federal regulations cited in Wage 26 Order 4-2001, not later revisions such as above-cited section 541.203. 27 On one hand, it is true that “[t]he IWC Statement issued in connection 28 21 1 with Wage Order 4–2001 clearly states that ‘only those federal 2 regulations specifically cited in its wage orders, and in effect at the 3 time of promulgation’ shall be applied in defining exempt duties under 4 California law.” 5 also recognized that Farmers remains “instructive because the 6 regulations enacted by the United States Department of Labor after Wage 7 Order 4-2001 were intended to be consistent with the old regulations.” 8 Id. at 964 n.8. 9 that the new regulation ‘is consistent with existing section Harris I, 266 P.3d at 965. Nevertheless, Harris I Thus, “when the DOL promulgated § 541.203, it said 10 541.205(c)(5).’” 11 22122, 22144 (April 23, 2004)). 12 noted, specifically enumerates claims adjusters as an example of 13 employees who satisfy the quantitative test. 14 and 541.205(c) are congruous, it stands to reason that any employee who 15 meets the criteria of section 541.203 also satisfies the quantitative 16 prong under former section 541.205(c). 17 performed all the duties described in section 541.203, they also 18 satisfy the quantitative component under former section 541.205(c). 19 Farmers, 481 F.3d at 1128 (quoting 69 Fed. Reg. Section 541.205(c)(5), as already Because sections 541.203 Thus, because Plaintiffs Second, even if Farmers does not apply, the Court, in interpreting 20 federal regulations, “must give deference to the Department of Labor’s 21 interpretation of its own regulations through, for example, Opinion 22 Letters.” 23 Administrator of the Wage and Hour Division issued an opinion letter 24 that applied former 29 C.F.R. § 541.205 to conclude that insurance 25 claims adjusters perform work that meets the “directly related” test 26 and is therefore administrative in character. Farmers, 481 F.3d at 1129. 27 28 22 On November 19, 2002, the DOL Wage & Hour Div. Op. 1 Ltr. (Nov. 19, 2002), Daily Lab. Rep. (BNA), Nov. 20, 2002.13 2 letter observed that “Wage and Hour has long recognized that claims 3 adjusters typically perform work that is administrative in nature.” 4 Id. at 2. 5 DOL letter substantially mirrored the duties of Plaintiffs: 6 The Notably, the duties of the claims adjusters at issue in the They are responsible for planning the processing of a claim from the beginning to the end, whether it is easily and quickly resolved or whether it proceeds to litigation. They represent the company and advise the management throughout the process of gathering the evidence, assessing credibility, reviewing the insurance policy, determining whether there is coverage, evaluating liability, making a decision on whether and how much to pay on the claim, establishing a reserve for the case, making a recommendation on claims above their established authority, and collaborating with the company’s counsel if the case results in litigation. They also negotiate on behalf of the company with the claimant, whether the claimant is a policyholder or a third-party claimant. Because these duties involve servicing the insurance company in the same manner that claims adjusters traditionally have done so, as is reflected in the regulatory reference to claims adjusters, we find that their duties are administrative in nature. 7 8 9 10 11 12 13 14 15 16 17 Id. 18 position with respect to claims adjusters has been consistent over the 19 years and that its reasoning was persuasive. 20 Court follows Farmers in concluding that the Opinion Letter is 21 persuasive authority that is entitled to deference. 22 Harris County, 529 U.S. 576, 587 (2000) (“[I]nterpretations . . . such 23 as opinion letters are entitled to respect . . . to the extent that 24 those interpretations have the power to persuade.” (internal quotations The Ninth Circuit in Farmers acknowledged that the DOL’s foregoing 481 F.3d at 1119. This See Christensen v. 25 26 27 28 13 Available at: http://www.dol.gov/whd/opinion/FLSA/2002/2002_11_19_11_FLSA.pdf. The FLSA grants the Secretary of Labor broad authority to “define and delimit” the scope of the exemption for executive, administrative, and professional employees. 29 U.S.C. § 213(a)(1). 23 1 and citation omitted)). 2 held that the duties of claims adjusters such as Plaintiffs are 3 administrative in nature pursuant to the then-applicable federal 4 regulations, bolsters the Court’s conclusion that Plaintiffs satisfy 5 the “directly related” element of Wage Order 4-2001. 6 2. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 That the promulgating agency has consistently Customarily and Regularly Exercised Discretion and Independent Judgment The Court next examines whether Plaintiffs customarily and regularly exercised discretion and independent judgment. The “exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered.” C.F.R. § 541.207(a) (2000). 29 The phrase “implies that the person has the authority or power to make an independent choice, free from immediate direction or supervision and with respect to matters of significance.” Id. In Cheatham, the Fifth Circuit affirmed the district court’s decision holding that a group of claims adjusters satisfied section 541.207(a) where they “exercised discretion in determining coverage, conducting investigations, determining liability and assigning percentages of fault to parties, evaluating bodily injuries, negotiating a final settlement, setting and adjusting reserves based upon a preliminary evaluation of the case, investigating issues that relate to coverage and determining the steps necessary to complete a coverage investigation, and determining whether coverage should be approved or denied.” 465 F.3d at 586. Although the adjusters had to seek approval in certain situations, the court ruled that their “recommendations for action” still involved discretion and judgment 24 1 because they were expected to make a recommendation based on their 2 experience and knowledge of the case and to explain their reasons for 3 recommendation. 4 Occidental Life Ins. Co., 325 F.3d 997, 1001 (8th Cir. 2003) (claims 5 adjuster exercised discretion and independent judgment in directing 6 claim investigations, deciding whether to pursue fraudulent claims, 7 approving contestable claims up to $150,000 and inconstestable claims 8 up to $250,000, disbursing payments up to $50,000, and applying 9 contract and insurance law to facts); Roe-Midgett, 512 F.3d at 873-75 Id. at 585-86. Accord McAllister v. Transamerica 10 (auto claims adjusters exercised discretion and independent judgment in 11 distinguishing covered damage from fraudulent or preexisting damage, 12 deciding what parts to replace instead of repair, negotiating cost of 13 repairs with body shops, and settling claims up to $12,000 personal 14 authority limit without supervision). 15 There is ample uncontroverted evidence that Plaintiffs routinely 16 used their discretion and independent judgment to make choices that 17 impacted “matters of significance.” 18 Plaintiffs decided whether to interview witnesses or gather facts 19 beyond the required minimum, assessed witnesses’ credibility, and 20 resolved conflicts in the evidence. 21 ¶¶ 14-15). 22 of the relevant law to the facts of the case. 23 Bucklin AMF ¶ 22). 24 decide whether any facts pointed to the possibility of fraud, 25 subrogation, or contribution from a third party, and if so, whether to 26 refer the claim to Defendant’s fraud, subrogation, or underwriting 27 units. In investigating claims, (Burton AMF ¶¶ 13-14; Bucklin AMF In determining coverage, Plaintiffs applied their knowledge (Burton AMF ¶ 16; In addition, for each claim, Plaintiffs had to (Burton AMF ¶¶ 28-29; Bucklin AMF ¶¶ 38-39). 28 25 Plaintiffs also 1 had independent authority to authorize payments of temporary disability 2 benefits which required verifying the applicant’s income, determining 3 when the claimant become disabled, and obtaining medical evidence that 4 the applicant was fit for work again. 5 51). 6 (Burton AMF ¶ 36; Bucklin AMF ¶ Next, Plaintiffs had unfettered authority to set reserves up to 7 $100,000 based on their estimate of the probable payout on the claim. 8 (Burton AMF ¶ 19; Bucklin AMF ¶ 27). 9 Plaintiffs weighed a number of factors, including cost of treatment, 10 length of temporary disability, likelihood of permanent disability, 11 prior injuries, and how claims would likely unfold at settlement or 12 trial. 13 In calculating reserves, (Burton AMF ¶ 21; Bucklin AMF ¶ 29). Approximately 80 percent of the claims Burton handled, and 50-60 14 percent of the claims Bucklin handled were eventually litigated. 15 (Burton AMF ¶ 37; Bucklin AMF ¶ 52). 16 Plaintiffs decided whether to retain an outside attorney and if so 17 whom, developed a litigation strategy with the attorney, and supervised 18 the litigation. 19 whether to conduct discovery, to depose the claimant, to seek expert 20 opinions, to conduct settlement negotiations, or to take a case to 21 trial. 22 of the foregoing actions without first obtaining the Plaintiffs’ 23 authorization. 24 Plaintiffs later decided that settlement was appropriate based on their 25 evaluation of the costs and benefits of going forward, they calculated 26 the appropriate settlement amount and negotiated the settlement, 27 provided it was within their respective personal authority limits of When claims were litigated, In overseeing the litigation, Plaintiffs decided Indeed, the attorneys defending these claims could not take any (Burton AMF ¶¶ 38-40; Bucklin AMF ¶¶ 53-54). 28 26 If 1 $75,000 (Burton) and $80,000 (Bucklin). 2 ¶¶ 66-68). 3 Plaintiffs submitted a recommendation explaining their rationale to 4 their supervisors; these recommended settlements were almost always 5 approved. 6 Plaintiffs also independently resolved the claims of lien holders by 7 choosing either to settle the claims, which entailed valuing the claims 8 and determining the settlement amount, or by taking the lien claims to 9 trial. 10 (Burton AMF ¶¶ 46, 54; Bucklin If the settlement amount exceeded their authority limit, (Burton AMF ¶¶ 58-59; Bucklin AMF ¶ 69). Finally, (Burton AMF ¶¶ 49-51; Bucklin AMF ¶¶ 71-73). Undeterred by the foregoing evidence, Plaintiffs insist that they 11 did not exercise discretion or independent judgment because (1) their 12 actions were “severely restricted” by procedures set forth in 13 Defendant’s Best Practices, Defendant’s pre-formatted macros, the 14 insured’s special handling instructions, and the California Labor Code; 15 and (2) they were closely supervised to ensure that they were adhering 16 to those standards. 17 Upon closer scrutiny, however, the cited procedures and purported 18 oversight were not so exhaustive as to obviate the need to exercise 19 discretion and judgment regarding significant matters.14 20 i. 21 22 (Burton Opp. at 20-21; Bucklin Opp. at 20-21). Best Practices Plaintiffs argue that Defendant’s Best Practices provided “wellestablished techniques and procedures within closely prescribed limits 23 24 25 26 27 28 14 The Court only considers evidence specifically identified in Plaintiffs’ opposition papers. “A party opposing summary judgment must direct our attention to specific, triable facts.” S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (emphasis added); see also Forsberg v. Pac. Northwest Bell Tel. Co., 840 F.2d 1409, 1418 (9th Cir. 1988) (“The district judge is not required to comb the record to find some reason to deny a motion for summary judgment.”). 27 1 that Plaintiff[s] [were] required to use to determine the correct 2 response to any inquiry or set of circumstances.” 3 Bucklin AMF ¶ 126). 4 prescribed” as Plaintiffs portray them to be. 5 the Best Practices set deadlines for when Plaintiffs needed to take 6 action (i.e., make initial contacts, determine coverage, document a 7 compensability decision, set reserves, send Acknowledgment and Closing 8 notices, and refer files to attorneys), these deadlines did not nullify 9 the need for Plaintiffs to exercise discretion and judgment in making (Burton AMF ¶ 107; These limits, however, were not as “closely For example, although 10 these decisions. 11 127, 129, 132-34, 138). 12 the Best Practices manual highlights certain “triggers” for denial of 13 coverage, and requires claims adjusters to notify certain individuals 14 in the event of such denial. 15 131-32). 16 faced with a case not involving a clear-cut denial, Plaintiffs needed 17 to exercise their judgment at every subsequent step, including 18 coverage, reserves, settlement, and litigation. 19 (Burton AMF ¶¶ 108, 110, 113-15, 119; Bucklin AMF ¶¶ In addition, Plaintiffs seize on the fact that (Burton AMF ¶¶ 111-12; Bucklin AMF ¶¶ However, none of this evidence alters the fact that, when On the contrary, the Best Practices manual explicitly envisions 20 that Plaintiffs would exercise judgment in completing their tasks. 21 example, the section of “Initial Contacts” states that “[i]f the Claim 22 Professional determines that employee contact is not necessary, the 23 rationale for this decision must be documented in Z-Notes.” 24 Decl, Ex. 3 at 10). 25 advises that the “Claim Professionals need to use their best judgment 26 as to whether a recorded statement is needed from the employer’s 27 supervisor/foreman,” as well as from other witnesses. For (Bhowmik Similarly, the chapter on “Information Gathering” 28 28 (Id. at 12-13). 1 Further, the document states that “[a]t each stage of the case, the 2 Claim Professional must continually reevaluate whether the time is 3 right for settlement of those cases that can and should be settled.” 4 (Id. at 23). 5 that “[t]he Claim Professional has the ultimate responsibility for the 6 maintenance and control of all litigation activities.” 7 In short, the Best Practices manual does not controvert, but rather 8 reinforces the substantial evidence that Plaintiffs exercised 9 discretion and judgment on matters of significance. 10 And when settlement is not an option, the manual provides ii. 11 (Id. at 24). Preformatted Macros As additional evidence that their actions were severely 12 restricted, Plaintiffs argue that they were obligated to answer 13 questions generated by “preformatted macros” during the handling of a 14 claim. 15 several stock questions that guided four specific avenues of 16 Plaintiffs’ investigation: initial contacts (5-6 questions); 17 confirmation of coverage (5 questions)15; benefits notices (4 18 questions)16; and subrogation potential (3 questions)17. 19 ¶ 109; Bucklin AMF ¶ 128). (Burton Opp. at 6; Bucklin Opp. at 6). These macros generated (See Burton AMF 20 21 22 23 24 15 The five questions concern whether the date of injury was within the policy period, the location is listed on the policy, there was a review of endorsements on the policy, the state listed is covered, and claimant is verified to be an employee of the insured. (Klicker Depo. at 16-17). 16 25 26 27 28 The four questions concern the first day of disability, the average weekly wage, the temporary disability rate, and the date on which the check would be issued. (Klicker Depo. at 19). 17 The three questions concern whether there is subrogation potential, who the responsible party is, and whether to make a referral to subrogation department. (Klicker Depo. at 21). 29 1 As an initial matter, Plaintiffs’ own evidence shows that these 2 macros left significant room for independent judgment. 3 in his deposition, Bucklin’s supervisor, Alberto Rodriguez, described 4 the “initial contacts” macro as “a set of questions or a set of items 5 that they need to cover, but . . . it’s just a guideline.” 6 Decl. Ex. 7 at 36). 7 that is involved, then they [the claims adjusters] need to free form 8 exactly how their investigation goes or added questions that need to be 9 addressed.” For instance, (Bhowmik He explained that “depending on the type of injury (Id.) (emphasis added). Further, Burton’s supervisor, 10 Patrick Klicker, attested that the initial contact macro contained only 11 “five to six questions.” 12 the “subrogation” questions, Rodriguez explained that “it’s a couple of 13 questions. 14 referred to the recovery unit? 15 in there for the subrogation folks to look at.” 16 at 43).18 17 macros indicate that Plaintiffs were required to exercise independent 18 judgment and discretion in their investigation—to “free form”—depending 19 on the facts of the specific claim, and to independently evaluate such 20 issues as subrogation potential, for which the preformatted questions 21 were limited in number and lacking in specificity. 22 own evidence shows that these preformatted macros did not overcome the 23 need for Plaintiffs to exercise judgment and discretion. 24 25 (Bhowmik Decl. Ex. 8 at 20). One, is there a subrogation potential? With respect to And, two, was it And the adjuster will free form notes (Bhowmik Decl. Ex. 7 Plaintiffs’ supervisors’ discussion of the preformatted Thus, Plaintiffs’ Moreover, and in any event, the preformatted macros were essentially glorified checklists that reminded Plaintiff to ascertain 26 27 28 18 Klicker gave a similar description of the subrogation questions. (Bhowmik Decl. Ex. 8 at 21). 30 1 certain facts with respect to four limited subject areas: initial 2 contacts, confirmation of coverage, disability benefits, and 3 subrogation. 4 not—predetermine how Plaintiffs should analyze the facts to make 5 significant decisions such as determining coverage, setting reserves, 6 negotiating settlement, or supervising litigation. 7 macros did not eliminate the need for judgment and discretion. 8 9 As such, these macros did not—indeed, could Accordingly, these The Court’s conclusion comports with the Ninth Circuit’s decision in Farmers. There, the court concluded that auto claims adjusters were 10 administratively exempt even though the employer provided them with 11 “written guidelines and training materials to aid them in the claims 12 handling process” that included some mandatory procedures and some 13 recommendations. 14 conclusion even though the claims adjusters used computer software to 15 help estimate damage or loss. 16 “while software exists for estimating the value of totaled vehicles, an 17 automobile damage adjuster ‘must use good judgment’ in deciding whether 18 it is the ‘best tool’ for a total loss.” 19 concluded that “the use of computer software to estimate claims does 20 not eliminate the need for discretion and judgment any more than does 21 resort to other reference works or to the opinions of appraisers and 22 other experts.” 23 (rejecting argument that adjusters “are limited in their ability to 24 negotiate by having to adhere to computer software,” and holding that 25 consulting manuals or guidelines “does not preclude their exercise of 26 discretion and independent judgment”)). 27 Plaintiffs answered a few computer-generated questions in four limited 481 F.3d at 1125. Further, the court reached this Id. at 1130-31. Id. The court reasoned that Accordingly, the Court Id. at 1130-31 (citing Cheatham, 465 F.3d at 585 28 31 Similarly here, the fact that 1 subjects does not alter the fact that Plaintiffs made significant 2 independent decisions in other respects, including determining 3 coverage, setting reserves, negotiating settlement, and stewarding 4 litigation. 5 6 iii. Special Handling Instructions Plaintiffs next argue that their conduct was constrained by the 7 insured’s special handling instructions. 8 AMF ¶ 140). 9 Defendant’s Quick Reference Guide, which states that “[a]dherence to (Burton AMF ¶ 121; Bucklin The only evidence cited in support of this contention is 10 all Special Handling Instructions must be timely, with compliance 11 documented in Z-Notes and/or the file.” 12 This vague assertion is wholly insufficient to controvert the 13 overwhelming evidence that Plaintiffs exercised discretion and judgment 14 in handling claims. 15 needed an insured’s approval before taking action, Plaintiffs would 16 submit reasoned recommendations to the insured, and the insured almost 17 always accepted Plaintiffs’ recommendation. 18 Bucklin AMF ¶¶ 19, 26, 37). 19 20 iv. (Bhowmik Decl., Ex. 11 at 3). Moreover, it is undisputed that when Plaintiffs (Burton AMF ¶¶ 61-63; Accordingly, this argument fails. California Labor Code Plaintiffs contend that the California Labor Code also restricted 21 their activities. 22 deadlines and generally require that a denial of coverage must be based 23 on a medical, legal, or factual basis, none of this evidence 24 controverts the fact that Plaintiffs were required to apply California 25 labor law to the specific facts of each case to resolve their claims. 26 Plaintiffs have presented no evidence that their task of applying the 27 law to the facts was devoid of independent judgment or discretion. While it is true that the labor laws mandate certain 28 32 1 Therefore, this argument fails. 2 3 v. Supervision Finally, Plaintiffs argue that they did not exercise independent 4 judgment because their work was never “free from immediate direction or 5 supervision.” 6 explain, however, that the term “discretion and independent judgment” 7 does not necessarily imply that an employee’s decisions “must have a 8 finality that goes with unlimited authority and a complete absence of 9 review.” 29 C.F.R. § 541.207(a) (2000). 29 C.F.R. § 541.207(e)(1) (2000). Federal regulations “The decisions made as a 10 result of the exercise of discretion and independent judgment may 11 consist of recommendations for action rather than the actual taking of 12 action. 13 and that upon occasion the decisions are revised or reversed after 14 review does not mean that the employee is not exercising discretion and 15 independent judgment . . . .” 16 The fact that an employee’s decision may be subject to review Id. Although Plaintiffs have adduced evidence that their supervisors 17 exerted some oversight over their tasks, it did not eliminate the 18 substantial independence Plaintiffs otherwise enjoyed. 19 certain decisions required prior supervisory approval, including 20 denials of claims, hiring a private investigator, setting reserves or 21 entering a settlement above personal authority limits, and referring 22 claims to the subrogation or fraud units. 23 135, 145; Bucklin AMF ¶¶ 35, 43, 69, 153, 155, 163). 24 is undisputed that even where such decisions required pre-approval, 25 Plaintiffs were expected to offer a reasoned recommendation for the 26 action, which was accepted the vast majority of the time. 27 ¶¶ 58-63; Bucklin AMF ¶¶ 25-26, 35-36, 69). 28 33 To be sure, (Burton AMF ¶¶ 55-59, 134, Nonetheless, it (Burton AMF These recommendations show 1 that Plaintiffs exercised discretion and independent judgment. 2 C.F.R. §541.207(e)(1). 3 do not negate the myriad other decisions over which Plaintiffs enjoyed 4 absolute authority, including granting coverage, setting reserves or 5 negotiating settlements within their personal authority limits, 6 managing litigation, and resolving lien claims. 7 evidence fails to create a triable issue that Plaintiffs did not 8 exercise independent judgment. 9 29 Moreover, the decisions requiring pre-approval Thus, the foregoing Plaintiffs next argue that they lacked independent discretion 10 because their supervisors periodically monitored and audited 11 Plaintiffs’ work. 12 60-day, and 180-day reviews to ensure that Plaintiffs had completed 13 certain tasks in a timely manner and to review Plaintiffs’ answers to 14 the preformatted macro questions. 15 AMF ¶¶ 157-59, 161). 16 ensure that Plaintiffs were completing specific tasks to move the claim 17 process along. 18 Supervisors also generated reports monitoring Plaintiffs’ productivity. 19 (Burton AMF ¶ 147; Bucklin AMF ¶ 165). 20 supervisors were concerned with whether Plaintiffs were following 21 protocols and documenting their reasons for each decision, not with 22 dissecting the substantive decisions made. 23 Klicker Decl. ¶ 17). 24 they “typically limited [their] reviews to no more than 10 minutes, 25 which did not allow [them] to review all of the evidence relevant to 26 each claim or to evaluate whether [they] agreed with all of the 27 determinations [Plaintiffs] had made based on that evidence.” For instance, supervisors performed 12-day, 30-day, (Burton AMF ¶¶ 138-40, 143; Bucklin Additionally, supervisors entered “diaries” to (Burton AMF ¶¶ 141-42; Bucklin AMF ¶¶ 160-61). For the most part, however, the (Rodriguez Decl. ¶ 18; Indeed, Plaintiffs’ supervisors testified that 28 34 1 (Rodriguez Decl. ¶ 18; Klicker Decl. ¶ 17). 2 supervisors checked the adequacy of the reserves set and any subsequent 3 calculation of benefits, this does not alter the fact that Plaintiffs 4 had to exercise discretion and judgment in calculating those figures in 5 the first place. 6 that Plaintiffs lacked discretion. 7 Further, although the These periodic reviews, therefore, do not suggest Moreover, while it is true that supervisors performed quarterly 8 audits to assess how well Plaintiffs adhered to Defendant’s Best 9 Practices, such evidence carries minimal weight for two reasons. 10 First, as already discussed, the Best Practices themselves delegate 11 authority to adjusters to exercise judgment in handling claims. 12 the mere fact that supervisors reviewed whether adjusters were 13 “adhering” to Best Practices does not change the fact that adjusters 14 exercised discretion and judgment. 15 audits were both infrequent and limited in scope. 16 audited four files per quarter— two on open claims and two on closed 17 claims—even though Plaintiffs each carried more than 100 cases at any 18 given time. 19 that any of these audits resulted in a reversal of Plaintiffs’ 20 recommendations. 21 triable issue of fact that Plaintiffs did not exercise discretion and 22 independent judgment. 23 24 Thus, Second, it is undisputed that these (Burton AMF ¶ 66; Bucklin AMF ¶ 81). Supervisors only There is no hint Therefore, this evidence is insufficient to create a * * * To summarize, the Court concludes that Plaintiffs exercised 25 discretion and independent judgment in the course of investigating 26 claims, setting reserves, determining coverage, handling temporarily 27 disability payments, resolving liens, identifying potential for fraud 28 35 1 or subrogation, negotiating settlement, and managing litigation. 2 Further, it is undisputed that Plaintiffs spent at least 40 percent of 3 their work week performing the foregoing duties. 4 Bucklin AMF ¶ 87). 5 regularly” threshold, which means “greater than occasional” but may be 6 “less than constant.” 7 Court concludes that there is no genuine dispute of material fact and 8 that Defendant has proven that Plaintiffs “customarily and regularly” 9 exercised discretion and independent judgment within the meaning of 10 Wage Order 4-2001. 11 3. 12 13 (Burton AMF ¶ 74; This suffices to meet the “customarily and 29 C.F.R. § 541.207(g) (2000). Accordingly, the See 8 Cal. Code Regs. § 11040(1)(A)(2)(b).19 Remaining Elements The two remaining components of the administrative exemption test are that the employee must perform “under only general supervision work 14 15 19 16 17 18 19 20 21 22 23 24 25 26 27 28 After the close of briefing, Plaintiffs cited a new case to support its contention that Plaintiffs are not administratively exempt. See Gentile v. Keenan & Assocs., No. BC471005 (Los Angeles Super. Ct. May 28, 2013). Leaving aside for the moment that Gentile is an unpublished, non-binding opinion, the case also lacks persuasive force because it is distinguishable. First, the court erroneously applied the same invented standard in Harris II that work must “operate[] on the policy level” to be administrative in character. (Dkt. 134 at 13). With respect to the quantitative prong, the court detected a factual dispute about whether plaintiff had any final authority to settle claims and set reserves. (Id. at 14). Here, by contrast, it is undisputed that Plaintiffs had absolute authority to settle claims and set reserves up to their personal authority limits, and provided reasoned recommendations where the requested amounts exceeded the limits. Second, the court found a triable issue whether the claims adjusters exercised discretion and independent judgment, citing (1) the absence of evidence that they had discretion to determine coverage, conduct investigations, determine liabilities, and negotiate and authorize settlements; and (2) the contrary evidence that the adjusters needed pre-approval to accomplish any of the foregoing tasks. (Id. at 15). Here, however, the uncontroverted facts prove that Plaintiffs performed such functions without prior approval. For all these reasons, Gentile does not compel a different conclusion in this case. 36 1 along specialized or technical lines requiring special training, 2 experience, or knowledge,” and must be “primarily engaged in duties 3 that meet the test of the exemption.” 4 11040(1)(A)(2)(d), (f). 5 8 Cal. Code Regs. §§ The first element is clearly satisfied. For the same reasons 6 discussed in Subsection IV(A)(2)(v), Plaintiffs were subject to 7 “general supervision” that did not curtail the need for Plaintiffs to 8 exercise discretion and judgment. 9 that they were subject to overriding supervision, they cannot and do Moreover, given Plaintiffs’ position 10 not now dispute that they were, at a minimum, subject to general 11 supervision. 12 Nor do Plaintiffs take issue with the fact that their work 13 required special training, experience, and knowledge. 14 seventeen years of prior experience before becoming employed by 15 Defendant, she completed the required thirty hours of continuing 16 education in claims handling every two years, and she obtained a “self- 17 insured certificate” from the State of California. 18 7). 19 than twenty years of workers’ compensation claims adjustment 20 experience, completed the required continuing education in claims 21 handling, and held a certification in claims adjusting from the 22 Insurance Educational Association. 23 description for Plaintiffs’ position, Claims Specialist III, required, 24 among other qualifications, “in-depth knowledge of the insurance 25 industry, claims, and the insurance legal and regulatory environment.” 26 (Burton AMF ¶ 8; Bucklin AMF ¶ 8). 27 relied on their experience and knowledge in making decisions related to Burton had (Burton SUF ¶¶ 5- When Bucklin began her employment with Defendant, she had more (Bucklin SUF ¶¶ 5-7). The job It is undisputed that Plaintiffs 28 37 1 adjusting claims. 2 22 (“Plaintiff agrees that her position requires the exercise of skills 3 and knowledge.”); Bucklin Opp. at 22 (same)). 4 demonstrated beyond dispute that they worked “under only general 5 supervision work along specialized or technical lines requiring special 6 training, experience, or knowledge.” 7 (Burton AMF ¶ 10; Bucklin AMF ¶ 23); (Burton Opp. at Thus, Plaintiffs have Next, Plaintiffs do not point to sufficient facts to dispute that 8 they were “primarily” engaged in exempt duties, which means more than 9 one-half of their work time. See Cal. Lab. Code § 515(e); 8 Cal. Code 10 Regs. § 11040(2)(N). 11 includes “all work that is directly and closely related to exempt work 12 and work which is properly viewed as a means for carrying out exempt 13 functions.” 14 concedes that she spent more than half of her work week engaged in 15 exempt activities described above, including conducting investigations, 16 determining coverage and compensability, identifying subrogation 17 opportunities, setting reserves, obtaining medical evidence, managing 18 litigation, and negotiating settlements, among other similar duties. 19 (Bucklin AMF ¶ 87). 20 requirement. 21 For purposes of this calculation, exempt work 8 Cal. Code Regs. § 11040(1)(A)(2)(f). Here, Bucklin Thus Bucklin satisfies the “primarily engaged” Burton agrees that she devoted 40 percent of her work week to the 22 same exempt duties. 23 Burton devoted the other 60 percent of the work week to directly 24 related tasks, including inputting the reserves she had determined into 25 the computer, documenting her plan of action and developments regarding 26 the claim, summarizing deposition testimony, handling correspondence, 27 reviewing medical and legal bills for payment, and preparing (Burton AMF ¶ 74). 28 38 Further, it is undisputed that 1 correspondence to claimants to inform them of the status of their 2 claims and her decisions. 3 categorized as “work that is directly and closely related to exempt 4 work and work which is properly viewed as a means for carrying out 5 exempt functions,” to which the administrative exemption also applies. 6 8 Cal. Code Regs. § 11040(1)(A)(2)(f). 7 the “primarily engaged” prong. 8 9 (Id. ¶ 75). These tasks are properly Burton therefore also satisfies For the foregoing reasons, there is no triable issue that precludes the entry of summary judgment. In reviewing the undisputed 10 facts, the Court concludes that Plaintiffs’ duties satisfy each of the 11 requirements for administrative exemption under Wage Order 4-2001, and 12 therefore Defendant properly classified Plaintiffs as exempt. 13 B. 14 Plaintiffs do not dispute that their claims for overtime, meal and 15 rest breaks, accurate wage statements, and wage penalties are dependent 16 on their being classified as non-exempt under Wage Order 4-2001. 17 Because Plaintiffs were properly classified as administratively exempt, 18 these claims fail as a matter of law and the Court need not address 19 them further. 20 // 21 // 22 // 23 // 24 // 25 // 26 // 27 // Remaining Claims 28 39 1 2 V. CONCLUSION For the foregoing reasons, Defendant’s motions for summary 3 judgment are GRANTED, and Plaintiffs' subsequently filed motion for 4 class certification is DENIED as MOOT. 5 Burton and Bucklin take nothing, that the actions by Burton and Bucklin 6 against Defendant Zurich be dismissed on the merits with prejudice and 7 that Zurich recover its costs. IT IS ORDERED AND ADJUDGED that 8 9 IT IS SO ORDERED. 10 11 12 DATED: June 19, 2013 13 STEPHEN V. WILSON 14 UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 40
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