Dolly Parton may have popularized the song, “9 to 5,” but sooner or later, adjusters realize their jobs do not conform to that time span. A claims adjuster’s work is never really done. There is always another file, one more case assignment, and one more investigative task to complete. Adjusters are knowledge workers; they don’t always leave their jobs when they leave the office.
West coast clients want conference calls at 8 p.m. to discuss a claim. Policyholders, claimants, or key witnesses often can only meet with adjusters after 7 p.m. At 3:30 a.m., the phone rings, summoning the snoozing adjuster to the scene of a tractor trailer cargo overturn. The 8-hour work day is as common as the three-martini lunch.
Historically, courts have viewed adjusters as professional employees and thus ineligible for overtime pay. Instead, overtime pay was for those in support roles: hourly workers like receptionists, file clerks, or mailroom attendants. An adjuster “privilege” was to be ineligible for overtime pay. Even if you worked 70 hours that week, then you earned the same amount as if you had logged 40 hours. A trade-off for being considered “professional” is that, typically, professionals do not receive overtime pay. They work as long as needed to accomplish the job.
However, some adjusters complain that heightened automation, routinization, and procedures have denuded discretion and independent judgment aspects from their jobs. Some feel management gets the best of both worlds: adjusters are tightly controlled, but nevertheless receive no overtime pay. But claims personnel are now pushing back, saying that technology and micromanaging makes them glorified admin clerks, and adjusters in name only. As such, they feel they are non-exempt and entitled to overtime pay. Instead of singing “9 to 5,” some are adopting Johnny Paycheck’s “Take This Job and Shove It” as their anthem.
Risk-Managing the Overtime Exposure
Claims managers and supervisors must be savvy about this employment issue. While it impacts the operation of departments, the issue also carries both financial and employment practice ramifications. (Caveat: I am not a lawyer, and the following is not intended as legal advice.)
Typically, private businesses have two classes of employees in respect to overtime: exempt and non-exempt. Workers wielding discretion or independent judgment are exempt employees and thus are ineligible for overtime pay under the 1938 Fair Labor Standards Act (FLSA). The crux of the litigation is whether adjusters truly exercise discretion and independent judgment. Historically, exempt employees were managers, executives, and professionals, as well as outside and commissioned sales representatives.
Over the past decade, the issue of adjuster overtime pay has refused to die. In July 2001, a Calif. jury awarded a class of more than 2,400 Farmers Insurance Company adjusters a total of $90 million in overtime pay. At the time, this award was the biggest ever in Calif. for a claim seeking overtime pay.
In January 2010, a Washington, D.C. federal appeals court found that auto damage adjusters working for GEICO did not qualify for overtime benefits under the FLSA (Robinson-Smith v. GEICO). More recently, adjusters handling claims related to the BP oil spill in the Gulf have also filed claims for overtime pay.
Claims managers and organizations—that help manage risk for others—need to practice what they preach. Specifically, they can work to improve sound employment practices, risk management, and avert overtime claims by embracing eight risk management tips:
- Communicate. Regularly instruct and remind non-exempt claim staff to clock in and out when they work. This helps ensure that they are not working beyond the periods reflected on time records.
- Limit tech perks. Beware of providing non-exempt employees with PDAs, laptops, or cell phones. If you do, then make sure they know they cannot check work-related messages, return business calls, or send work emails outside of “standard” hours without recording the time.
- Conduct internal assessments periodically to ensure that the claim office does not have admin staff working extra time without pay or “gaming” time sheets. (Retaining outside legal counsel for such audits can help preserve the confidentiality of the process.)
- Review claims department record-keeping policies and procedures regarding compliance with wage and hour laws. Document regular reviews of these policies, procedures, and practices with a human resource professional. Periodic assessments might include the company’s or claims department’s actual practices plus employee compliance with policies to prevent the most common areas of tension. The latter include off-the-clock work, remote working, proper time keeping, interrupted or missed meal periods, and various options for reporting policy violations or errors.
- Scan other compliance areas. These include ensuring that all required posters and labor/employment materials are in place. Such evidence, with dates of site visits, helps thwart claims by adjusters who could try to circumvent the statute of limitations by saying that they were not notified of their rights.
- Provide training on timekeeping. Be sure to document how that claims managers and claims staff were effectively trained on legally compliant payroll procedures and timekeeping. This helps defeat allegations from adjusters that the company condoned off-the-clock work. Other useful evidence includes periodic reinforcement of policies, in addition to regular reminders to the adjusting staff of key policies and wage and hour requirements. This helps demonstrate the company’s good faith in enforcing legally compliant wage and hour policies.
- Discipline non-compliance. To underscore the training, discipline employees and managers who deviate from these procedures. Building a record of disciplinary actions for failing to comply with timekeeping can be evidence that the employer takes compliance obligations and policies seriously.
- Create in-house complaint options. Make sure the adjusting staff knows about all of these in-house options. A well-publicized complaint option and process for thoroughly investigating complaints, coupled with remedial action, helps defend wage and hour lawsuits. If adjusters must report pay issues to a specific compliance officer or a toll-free hotline, then the scarcity of adjuster complaints can be further evidence of compliance. However, if adjuster complaints do arise, then the company or manager should seek written confirmation from the employee that his or her issue has been resolved satisfactorily. This also strengthens a company’s good-faith defenses and helps document its commitment to compliance.
Nowadays, it seems like every problem has “an app for that” or some other type of ready-made tech solution. Sadly, there is no quickie “app” to inoculate claim operations from overtime pay claims. There is, however, a basket of risk-mitigating techniques that management can use to save money, reduce liability exposure, and forestall disputes about overtime eligibility.