Labor Dept. Denies Adjusters’ OT Claim
Claims adjusters are not entitled to overtime pay because they meet the exemption requirements in the Fair Labor Standards Act, according to a recent opinion from the U.S. Department of Labor.
The issue of whether insurers can compensate adjusters on a salary basis without overtime pay has been a subject of class action litigation in recent years, and an insurance industry expert said the statement from the Labor Department, while not legally binding, could be of major importance. However, an attorney who has represented adjusters called the finding a product of industry lobbying.
The Labor Department interpretation was issued in response to an inquiry by Washington, D.C.-based law firm Akin, Gump, Strauss, Hauer & Feld. Some observers said it could have impact on pending litigation since the law gives the Labor Department the authority to define specific exemption terms.
Under the Fair Labor Standards Act, employers are generally required to pay overtime wages for hours worked in excess of 40 per week, but certain types of employees–including executives and managers, professionals, and administrative personnel–are exempt.
“The Department’s regulations provide that the administration exemption applies to an employee whose primary duty consists of the ‘performance of office or non-manual work directly related to management policies or general business operations of his employer or his employer’s customers,’ which includes work requiring the exercise of discretion and independent judgment,” the Labor Department stated in its opinion letter.
“The next issue is whether the claims adjusters perform work of substantial importance to the management or operation of the business of the employersWe conclude that these claims adjusters satisfy the standard for exemption as bona fide administrative employees,” the letter said.
There are several pending class action lawsuits on behalf of adjusters seeking overtime pay. Most of the suits have been filed in California, where the state legislature passed a law in 2000 making it easier for employees, especially managers, to file for overtime wages.
Kirk Hansen, director of claims at the Downers Grove, Ill.-based Alliance of American Insurers, applauded the Labor Department’s statement. “We are glad to see it. It is consistent with the job description of claims adjusters. We hope the courts will weigh this heavily. If you ask most adjusters whether they are exempt or not, I think most adjusters nationwide would say they are. They will agree that their jobs are complicated and require lots of training, expertise and judgment,” he said.
“Pending lawsuits assume that adjusters don’t use independent judgments on their job, and that’s just not true, and it’s also insulting,” Mr. Hansen said. “They are constantly making evaluations and decisions throughout the work day, and to suggest that they don’t is demeaning.”
But those who represent adjusters in actions to obtain overtime wages argue that the statement doesn’t interpret the law correctly. “The opinion letter has, shall I say, some political overtones. It’s a one-sided letter. I think the insurance industry lobbied hard to get the Labor Department to issue this letter–that’s my take on it,” said Arnold Schwartz, managing partner at Mazursky, Schwartz & Angelo. His firm recently settled a class action suit against Fort Lauderdale, Fla.-based Bristol West Insurance Service Inc. on behalf of 450 adjusters.
“The main issue on exemption for adjusters is their role in the business. The question here is, are adjusters truly administrative? They don’t run or administer the business, and they just settle routine claims for the most part. They work hard for doing it, and they deserve overtime pay,” he said.
Mr. Schwartz said he felt there would be little impact on such cases that are brought in California.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 6, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.