USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 1 of 24
[PUBLISH]
In the
United States Court of Appeals For the Eleventh Circuit
____________________
No. 19-12277 ____________________
PHILIP FOWLER JEFFREY SWANS, Plaintiffs-Appellants, versus OSP PREVENTION GROUP, INC. WILLIAM E MABRY II,
Defendants-Appellees. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 2 of 24
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Appeal from the United States District Court for the Northern District of Georgia D.C. Docket No. 1:17-cv-03911-MHC ____________________
Before ROSENBAUM, LAGOA, and ED CARNES, Circuit Judges. ED CARNES, Circuit Judge:
Philip Fowler and Jeffrey Swans worked as property damage investigators for OSP Prevention Group. It contracts with broad- band service providers to investigate damage to the providers’ in- frastructure and then tries to collect money for them from the peo- ple who caused the damage. After their employment with OSP ended, Fowler and Swans brought Fair Labor Standards Act (“FLSA”) claims against the company and its owner (collectively “OSP”) for unpaid overtime wages. The district court granted summary judgment in OSP’s fa- vor after concluding that Fowler and Swans fit within an FLSA ex- emption covering “administrative” employees. They both contend that they weren’t administrative employees but instead were “pro- duction” employees who performed the core service that OSP sold to its clients: investigating damage to property. I. The Statutory and Regulatory Background USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 3 of 24
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The FLSA generally requires employers to pay overtime to covered employees who work more than 40 hours a week, 29 U.S.C. § 207(a), but it exempts certain categories of employees from that requirement, see id. § 213. See also Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1138 (2018). This “administrative exemption” applies to workers who are “employed in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). The employer has the burden of showing that the ex- emption applies. See Corning Glass Works v. Brennan, 417 U.S. 188, 196–97 (1974) (stating that generally “the application of an ex- emption under the Fair Labor Standards Act is a matter of affirma- tive defense on which the employer has the burden of proof”); Diaz v. Jaguar Rest. Grp., LLC, 627 F.3d 1212, 1214–15 (11th Cir. 2010) (describing the administrative exemption as an affirmative defense to an FLSA claim); see also Novick v. Shipcom Wireless, Inc., 946 F.3d 735, 738 (5th Cir. 2020) (“In a FLSA suit for unpaid overtime, the defendant employer bears the burden of proof to establish that an employee falls under an exemption.”). FLSA exemptions must be given a “fair reading” and not a “narrow” one. Encino Motor- cars, 138 S. Ct. at 1142. 1
1 In its order granting summary judgment to OSP, the district court referred to the old rule that FLSA exemptions must be “narrowly construed,” and OSP repeated the old rule in its brief to this Court. Counsel for Fowler and Swans correctly pointed out in their reply brief that regrettably (for their clients) the Supreme Court has held that the old “narrow reading” standard no longer ap- plies. Encino Motorcars decision. See 138 S. Ct. at 1142. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 4 of 24
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The requirements for establishing that a person is an “ad- ministrative employee” are set out in a Department of Labor Wage and Hour Division regulation. See 29 C.F.R. § 541.200. Because the regulation is unambiguous, we must give it the meaning its terms indicate. See Kisor v. Wilkie, 139 S. Ct. 2400, 2415 (2019) (explaining that if an agency’s regulation is unambiguous, it “just means what it means—and the court must give it effect, as the court would any law”); see also Schaefer-LaRose v. Eli Lilly & Co., 679 F.3d 560, 572 (7th Cir. 2012) (“Under the statute’s express del- egation of rule-making authority, the Secretary has issued, after no- tice-and-comment procedures, detailed regulations that define each of the exemptions in § 213(a)(1).”); Clements v. Serco, Inc., 530 F.3d 1224, 1227 (10th Cir. 2008) (“The Department of Labor regulations are entitled to judicial deference and are the primary source of guidance for determining the scope of exemptions to the FLSA.”) (quotation marks omitted). According to the regulation, for the administrative exemp- tion to apply an employer must show that an employee’s “primary duty” was “the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and” that it “include[d] the exercise of discretion and independent judgment with respect to
We do appreciate the candor and adherence to high standards of professional responsibility displayed by their counsel, Mitchell D. Benjamin and Matthew W. Herrington. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 5 of 24
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matters of significance.” 29 C.F.R. § 541.200(a)(2)–(3) (emphasis added). The conjunctive means that unless both of those require- ments are met, the exemption does not apply. See McKeen-Chap- lin v. Provident Sav. Bank, FSB, 862 F.3d 847, 849 n.1 (9th Cir. 2017) (noting that the “test to qualify for the administrative exemption under FLSA is conjunctive, not disjunctive,” so employers must “satisfy each of” its requirements); cf. Kisor, 139 S. Ct. at 2415 (not- ing that courts must give effect to unambiguous regulations). It is undisputed that Fowler and Swans’ work was “non- manual” and that their “primary duty” was conducting property damage investigations for OSP. The question, then, is whether their investigative work was “directly related to” OSP’s “manage- ment or general business operations” and, if so, whether Fowler and Swans “exercise[d] . . . discretion and independent judgment with respect to matters of significance” when they did that work. 29 C.F.R. § 541.200(a)(2)–(3). 2 II. Facts OSP contracts with broadband service providers to provide them with services related to damage that occurs to their property. The property the contract covers, if there is damage, is the
2The regulation also covers a primary duty that is directly related to the man- agement or general business operations of an employer’s customers. See 29 C.F.R. § 541.200(a)(2). But OSP hasn’t argued that Fowler and Swans’ duties had anything to do with the management or general business operations of its customers, so we don’t need to address that part of the regulation. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 6 of 24
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providers’ infrastructure, including fiber optic cable, aerial wires, and above ground “housing” where wires or cables are bundled and enclosed. To provide its services, OSP divides its operations into three separate departments: damage investigation, subroga- tion, and recovery. First, its investigators conduct investigations, calculate damages, and determine who caused the damage. Then the subrogation department creates and sends to the liable party a “subrogation package,” which includes an invoice for the damage. After that, the recovery department attempts to obtain a monetary settlement to compensate the broadband service provider cus- tomer for the damage. When Fowler and Swans worked for OSP as property dam- age investigators in Georgia, Comcast was OSP’s only client. Fowler and Swans’ primary duty was to investigate damage to Comcast’s infrastructure, determine who was liable for it, and cal- culate the cost of repairs. They did not directly participate in the subrogation or recovery parts of OSP’s business, and they did not settle claims. OSP billed Comcast by the hour for Fowler and Swans’ work. OSP classified the two of them as administrative em- ployees under the FLSA, and as a result, did not pay them for hours they worked beyond a 40-hour work week. According to OSP’s Director of Investigations, there are “standard operating procedures that all [damage investigators] are required to follow when conducting investigations, and there are certain steps [they] have to follow.” When conducting their inves- tigations, Fowler and Swans followed the procedures and steps USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 7 of 24
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outlined in two documents: the “Damage Investigator’s Responsi- bilities” and the “Georgia [Damage Investigator] Employee Man- ual.” 3 The two of them were free to choose the order in which they completed those procedures and steps, but whatever order they chose they had to gather the necessary information about the damage to Comcast’s property — the “who, what, where, and when” facts. And whatever order they chose, in virtually every in- vestigation OSP required its investigators to complete all of the steps. That was true even when the damage came from a rodent with a bushy tail (aka a squirrel) chewing through wires. As the Director of Investigations explained, even when that happens: [Y]ou still have to do your full investigation, your in- terviews, the whole nine yards. You still have to fol- low the same format. So once you do that and you come to your conclusion, you write your conclusion and your recommendation. So it goes to your man- ager. Your manager will review it and determine whether or not, you know, the case is not going to be pursued. So you still have to follow — it doesn’t mat- ter what the situation is. You still have to follow all of the steps for investigation.
3 Fowler helped OSP develop the manual, but that was not his primary duty; it is undisputed that his primary duty was conducting damage investigations. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 8 of 24
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Although hungry squirrels, thieves, vandals, and car acci- dents, occasionally caused property damage, sixty percent of the time the cause was excavation, which most of us would call dig- ging. That’s why, as part of their classroom and field-based damage investigation training, Fowler and Swans learned to apply Georgia “dig laws” to identify who was liable for excavation damage to an- other’s property. It was, however, rarely unclear who violated which dig laws and was therefore responsible for the damage. As OSP’s Director of Investigations testified, a “thorough investigation . . . can easily determine who’s at fault and what laws they violated.” He ex- plained that most damage investigations were “simple”: investiga- tors go out, take pictures, and conduct interviews. As he said, “it’s not homicide or robbery.” The “biggest problem” was “just track- ing [down] the people to interview.” In addition to conducting general investigations and apply- ing state dig laws, Fowler and Swans performed onsite investiga- tions and compiled their findings into reports that were eventually submitted to OSP’s subrogation department. OSP’s Director of In- vestigations described its overall investigation process this way: Once you do your onsite investigation, basically it’s simple. It’s the who, what, where, and when, you know, that’s what you determine. And once you do your investigation, you go out to the damage scene, you collect all your information, you pull the dig ticket, and you pull pre-locate photos that the locate USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 9 of 24
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company puts down.[ 4] You get their post-locate pho- tos. That’s all part of your investigation. Once you collect all this data, you type and you write a report based off your independent investigation who you be- lieve is at fault. Once you put all that information in, you take your documents, you put it in your case folder, and once you feel that you’ve completed your investigation, you send it to your manager for review. Your manager will review it and make sure all the documents are there, the case makes sense, and you pretty much determine who is at fault and they’ll sign off on it, and it goes over to the next department. The next department to be involved was subrogation (or “invoic- ing”), followed by recovery. As we have mentioned, Fowler and Swans did not do subrogation or recovery work, only investiga- tions. Fowler and Swans did analyze the facts and evidence they collected during their onsite investigations to determine whether a liable party could be identified. If a liable party couldn’t be identi- fied, they could request that a claim be abandoned. But for all prac- tical purposes the liability determination was akin to plugging data into a formula. OSP’s Area Manager and Supervisor of Damage Investigators in Georgia testified that if a thousand different
4A “locate company” is a utility location company that visits sites and “put[s] down the locate marks” for utilities before any digging is done, creating a “ticket” for the digging. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 10 of 24
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investigators each investigated the same damage, they should all reach the same conclusions and have roughly the same measure- ments, 5 even though they might arrive at their answers by slightly different methods. Once they determined the liable party, OSP’s investigators used a cost sheet furnished by Comcast to calculate the monetary value of the damages. Investigators did not have discretion to de- termine the cost of Comcast’s infrastructure repairs. Instead, a Comcast technician would tell the investigators how much mate- rial was used in a repair and the type of material used, and the in- vestigators would enter that information into a database, which would tabulate the cost of the repair materials. Investigators had no authority to challenge the method the technicians used to make the repairs or the amount of time the technicians reported that they had spent on their work. They took what they were told and plugged it in. After that, OSP’s investigators wrote reports summarizing their investigative findings, liability determinations, and damage calculations. Managers reviewed those reports and then sent them to OSP’s subrogation department so that the responsible party could be invoiced. OSP did not send its investigators’ reports to
5 OSP’s investigators took measurements during their onsite investigations, including using a measuring wheel to calculate damaged sections of cable. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 11 of 24
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Comcast. Investigators were not involved in invoicing or settling claims. OSP classified the following investigative duties as adminis- tratively exempt work: “reviewing permits and applicable dig laws, interviewing witnesses, conducting site inspections, and making general requests for information regarding the damage incident.” III. Procedural History Fowler and Swans sued OSP for violating the FLSA by not paying them overtime wages, and they sought to recover those wages, liquidated damages or prejudgment interest, attorney’s fees, and costs. OSP moved for summary judgment, asserting the affirmative defense that, as salaried investigators, Fowler and Swans were FLSA exempt administrative employees. Fowler and Swans moved for partial summary judgment, asking the court to rule that: (1) they were not exempt administrative employees; (2) they were entitled to overtime pay under the FLSA calculated at one-and-one-half times their regular hourly rates; and (3) OSP could not prove a “good faith” defense to the FLSA violation. 6
6 Fowler and Swans argued in their motion for partial summary judgment that
OSP had produced no evidence to establish a good faith defense to liquidated damages, see 29 U.S.C. § 260, and that it could not establish that defense as a matter of law. In OSP’s response to that motion, it argued that good faith involves a jury question involving credibility determinations about a subjec- tive state of mind and that it could not be decided as a matter of law. Neither side has brought up to us any issue involving good faith, so we will not address the subject. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 12 of 24
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Their primary contention was that OSP sold damage investigation services, and as the workers who performed those investigations, they were production employees not administrative ones. The district court applied § 541.200(a), the regulation that governs the administrative exemption. The court analyzed Fowler and Swans’ primary job duties as they related to the management of OSP’s business, and it considered their exercise of discretion and independent judgment. Concluding that Fowler and Swans were administrative employees, the court granted summary judgment to OSP and denied Fowler and Swans’ cross-motion for it. Because it determined that the administrative exemption applied, the court did not consider whether the alleged FLSA violation was willful, or the rate of any overtime compensation Fowler and Swans would have been entitled to receive. It didn’t get to damages. IV. Discussion We review de novo the grant of summary judgment. Huff v. Dekalb Cnty., 516 F.3d 1273, 1277 (11th Cir. 2008). To deter- mine whether OSP has established as a matter of law that Fowler and Swans’ work fit within the administrative exemption, we con- sider their “primary duty,” which is “the principal, main, major or most important duty that the employee performs.” 29 C.F.R. § 541.700(a). It is undisputed that Fowler and Swans’ primary duty was conducting factfinding investigations of damage to Comcast’s property. Those investigations, along with subrogation and recov- ery, are the service that OSP sells, the product it produces. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 13 of 24
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As we have mentioned, to establish that the administrative exemption applies to Fowler and Swans, in addition to certain sal- ary minimums that everyone agrees are satisfied here, OSP must show that their “primary duty”: (1) was “work directly related to [OSP’s] management or general business operations” and (2) “in- clude[d] the exercise of discretion and independent judgment with respect to matters of significance.” Id. § 541.200(a). “To meet [the first] requirement, an employee must perform work directly re- lated to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing pro- duction line or selling a product in a retail or service establish- ment.” Id. § 541.201(a). Fowler and Swans contend that, as inves- tigators, they performed “production” work, not administrative work directly related to running or servicing of OSP’s business. A Department of Labor regulation provides a non-exhaus- tive list of “functional areas” that are representative of administra- tive work: “tax; finance; accounting; budgeting; auditing; insur- ance; quality control; purchasing; procurement; advertising; mar- keting; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations, gov- ernment relations; computer network, internet and database ad- ministration; legal and regulatory compliance; and similar activi- ties.” Id. § 541.201(b). Conducting investigations is not on the list. The jobs that are on the list generally involve duties that call for discretionary analysis and decision making. By contrast, investiga- tive duties primarily involve investigation (of course) and USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 14 of 24
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factfinding, compiling reports, and making calculations and recom- mendations about liability according to prescribed criteria. A related regulation provides examples of categories of workers who “generally meet the duties requirements for the ad- ministrative exemption.” Id. § 541.203(a)–(f) (listing categories of workers and some of the duties they perform). Workers who gen- erally are administratively exempt employees include: insurance claims adjusters (so long as they have certain responsibilities, in- cluding the authority to settle claims), id. § 541.203(a); financial ser- vices employees (so long as they conduct analysis and do not simply sell financial products), id. § 541.203(b); team leaders as- signed to complete major projects, id. § 541.203(c); executive or ad- ministrative assistants to business owners or senior executives (so long as they work “without specific instructions or prescribed pro- cedures” and have delegated authority on matters of significance), id. § 541.203(d); human resources managers (but not personnel clerks who just gather information to “screen” job applicants based on minimum requirements), id. § 541.203(e); and purchasing agents who have the authority to bind a company on significant purchases, id. § 541.203(f). That same regulation provides examples of categories of workers who “generally do not meet the duties requirements for the administrative exemption.” Id. § 541.203(g)–(j). Workers who generally aren’t administratively exempt include: employees who do “[o]rdinary inspection work” using “well-established techniques and procedures” often derived from manuals, id. § 541.203(g); USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 15 of 24
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“examiners or graders” who compare products using established standards, id. § 541.203(h); comparison shoppers who report com- petitors’ prices (so long as they are not responsible for evaluating reports on competitors’ prices), id. § 541.203(i); and “inspectors or investigators of various types” in the public sector whose work in- volves using “skills and technical abilities in gathering factual infor- mation,” applying “known standards or prescribed procedures, de- termining which procedure to follow, or determining whether pre- scribed standards or criteria are met,” id. § 541.203(j). The regula- tion draws a line between administrative employees, who help run the business by setting standards, and “production” employees, who help the business run by following the standards that have been set for them. Production employees who perform the core function of the business are not transformed into administrative employees just because the work they do is essential to what the company sells — its “marketplace offerings.” See Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1127 (9th Cir. 2002) (“The administration/production distinction . . . distinguishes between work related to the goods and services which constitute the business’ marketplace offerings and work which contributes to running the business itself.”) (quo- tation marks omitted); Desmond v. PNGI Charles Town Gaming, L.L.C., 564 F.3d 688, 694–95 (4th Cir. 2009) (holding that horse race track “officials” were not administrative employees and explaining that “non-manufacturing employees can be considered ‘produc- tion’ employees in those instances where their job is to generate USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 16 of 24
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(i.e., ‘produce’) the very product or service that the employer’s business offers to the public”) (quoting Reich v. John Alden Life Ins. Co., 126 F.3d 1, 9 (1st Cir. 1997)); Dalheim v. KDFW-TV, 918 F.2d 1220, 1230–31 (5th Cir. 1990) (holding that television news produc- ers were not administrative employees and explaining that the ex- emption differentiates “those employees whose primary duty is ad- ministering the business affairs of the enterprise from those whose primary duty is producing the commodity or commodities, whether goods or services, that the enterprise exists to produce and market”). Department of Labor guidance indicates that when a fact- finding investigator works for a company whose business is to pro- vide investigative services, that investigator is likely a production employee and not an administrative one. In an August 2005 Wage and Hour Division opinion letter, for example, the Division’s Dep- uty Administrator determined that background investigators who worked for a private firm that contracted with government agen- cies for background checks were production employees: [T]he activities performed by Investigators employed by your client are more related to providing the on- going, day-to-day investigative services, rather than performing administrative functions directly related to managing your client’s business. From the infor- mation provided in your letter, it appears that the pri- mary duty of the Investigator is diligent and accurate fact-finding, according to [agency] guidelines, the re- sults of which are turned over to [the agency] who USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 17 of 24
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then makes a decision as to whether to grant or deny security clearances. Such activities, while important, do not directly relate to the management or general business operations of the employer within the mean- ing of the regulations. U.S. Dep’t of Labor, Wage & Hour Div., Opinion Letter on the FLSA’s Administrative Exemption (Aug. 19, 2005), https://www.dol.gov/sites/dol- gov/files/WHD/legacy/files/2005_08_19_21_FLSA_Investigator s.pdf; see also U.S. Dep’t of Labor, Wage & Hour Div., Opinion Letter on the FLSA’s Administrative Exemption, 1997 WL 971811, at *3 (Sep. 12, 1997) (concluding that investigators who performed background investigations were “production” employees because investigations were the product that the business existed to pro- duce). Like the background investigators the opinion letter dis- cussed, Fowler and Swans performed duties that focused on dili- gent and accurate factfinding according to guidelines set by their employer. And duties that are focused on diligent and accurate factfinding differ substantively from duties related to managing a company’s business. Duties related to managing a company’s busi- ness typically involve significant decision-making authority, includ- ing authority to make policy-level decisions. Compare 29 C.F.R. § 541.203(a) (referring to administratively exempt insurance claims adjusters’ authority to negotiate settlements and make recommen- dations about litigation), with Deluca v. Farmers Ins. Exch., 386 F. Supp. 3d 1235, 1256–57 (N.D. Cal. 2019) (determining that special USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 18 of 24
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investigators’ “primary duty of conducting factual investigations that inform the [insurance] [c]laims representatives’ ultimate deter- mination of whether to pay claims does not qualify as ‘directly re- lated’ to running [the insurance company’s] business or formulat- ing or helping to execute policy,” and as a result, the administrative employee exemption does not apply). The reason that insurance claims adjusters, a category of employees that the district court relied heavily on, are generally considered administrative employees is that they do have signifi- cant, policy-infused, decision-making authority, including evaluat- ing and making recommendations about coverage for claims, ne- gotiating settlements, and making recommendations about litiga- tion. See 29 C.F.R. § 541.203(a). 7 There is no evidence that Fowler
7 The regulation relating to insurance claims adjusters provides: Insurance claims adjusters generally meet the duties require- ments 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, wit- nesses 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 litiga- tion. 29 C.F.R. § 541.203(a). While it’s true that Fowler and Swans performed some of the activities listed in § 541.203(a), they had no authority to negotiate set- tlements or make recommendations about litigation, which are key USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 19 of 24
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and Swans’ duty to conduct factfinding investigations involved any authority to make higher-level business decisions, like administra- tively exempt insurance claims adjusters have. See Deluca, 386 F. Supp. 3d at 1256–57. The Department of Labor has also determined that certain public sector investigators who focus on factfinding investigations are not administrative employees. A regulation covering law en- forcement investigators explains that: [I]nvestigators, inspectors, . . . and similar employees, regardless of rank or pay level, who perform work such as . . . preventing or detecting crimes; conduct- ing investigations or inspections for violations of law; . . . interviewing witnesses; . . . preparing investigative reports; or other similar work . . . do not qualify as exempt administrative employees because their pri- mary duty is not the performance of work directly re- lated to the management or general business opera- tions of the employer or the employer’s customers as required under § 541.200. 29 C.F.R. § 541.3(b)(1), (3). Like law enforcement investigators, Fowler and Swans were primarily engaged in factfinding investiga- tive work. And the Department of Labor’s opinion letters and
components of the authority vested in insurance claims adjusters. Nor did Fowler and Swans’ duties include any comparable authority. USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 20 of 24
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regulations reflect its position that the administrative exemption does not apply to investigators with those types of duties. Other circuits that have considered whether factfinding in- vestigators are administrative employees have concluded they are not. Evaluating investigators with job duties strikingly similar to the ones Fowler and Swans performed, the Fourth Circuit deter- mined the administrative exemption did not apply to them. See Calderon v. GEICO Gen. Ins. Co., 809 F.3d 111, 130 (4th Cir. 2015). In Calderon, the court concluded that insurance company employ- ees who investigated fraudulent claims were not administratively exempt because the “applicable regulations and Labor Department opinion letters . . . indicate that employees whose primary duty is to conduct factual investigations do not satisfy the directly related [to business operations] element, even when the work is of signifi- cant importance to the employer.” Id. at 125. The court affirmed the grant of summary judgment in the investigators’ favor, holding that the administrative exemption did not apply because their pri- mary duty was to conduct interviews and report their findings, which was not directly related to the insurance company’s man- agement or general business operations. Id. at 130. Comparing the fraud investigators in Calderon to claims ad- justers, the Fourth Circuit explained that an adjuster’s primary duty involved more than just investigation; an adjuster had to “adjust insurance claims by investigating, assessing, and resolving them.” Id. at 117. An adjuster had the important responsibilities of “de- cid[ing] how much, if anything,” the insurance company would USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 21 of 24
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pay on a claim and of “negotiat[ing] any settlements.” Id. By con- trast, the fraud investigators’ primary duty, on which they spent “about 90%” of their work time, was to investigate claims that were referred to them as potentially fraudulent; they initiated in- vestigations only in “limited circumstances.” Id. The fraud inves- tigators had to follow company procedures when handling the re- ferred claims, which required a “thorough investigation,” “[i]den- tification and interviews of potential witnesses,” use of “industry recognized databases,” “[p]reservation of documents and other ev- idence,” and a summary of the investigation that included their findings about “the suspected insurance fraud and the basis for their findings.” Id. Those company-mandated procedural steps in Calderon of- ten required the fraud investigators to interview witnesses, includ- ing preserving their testimony and evaluating their credibility; tak- ing photographs; and reviewing property damage. Id. While those procedural steps “govern[ed]” investigations, the fraud investiga- tors still had to “use their judgment to determine exactly how to conduct their investigations and what inferences to draw from the evidence they uncover[ed].” Id. at 117–18. And most fraud inves- tigators had to submit their investigation reports to a supervisor for input and review. Id. at 118. They had “no supervisory responsi- bility” and didn’t “develop, review, evaluate, or recommend” busi- ness “polices or strategies.” Id. at 124 (quotation marks omitted). As a result, the Fourth Circuit concluded in Calderon that even though the fraud investigators’ work was “important” to the USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 22 of 24
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company, they were “in no way part of the management” and did not “run or service the general business operations” of the com- pany. Id. (cleaned up). Instead, “by assisting” adjusters in pro- cessing claims, the fraud investigators’ “duties simply consist[ed] of the day-to-day carrying out of [the company’s] affairs to the pub- lic.” Id. (cleaned up). Like the Calderon fraud investigators, Fowler and Swans in- terviewed witnesses, made credibility determinations, preserved evidence, took photographs, and reviewed property damage. They followed OSP’s prescribed procedures while using their judg- ment to decide the order of the steps in their investigations and what inferences to draw from the data they gathered. They wrote reports and submitted them to their supervisors. They did not set- tle claims or develop business strategies. And like the fraud inves- tigators, Fowler and Swans performed duties that were important but were neither managerial nor directly related to running OSP’s business. They were factfinders whose work enabled OSP’s subroga- tion and recovery departments to collect money from those who damaged property belonging to its client, Comcast. The nature of the jobs Fowler and Swans did is similar to that of the Calderon fraud investigators, whose investigations helped insurance adjust- ers resolve claims but who were not adjusters themselves, and who had no authority to settle a claim. See 809 F.3d at 129–30. There can be no doubt that Fowler and Swans’ work was essential to the service OSP provides — the company bills by the USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 23 of 24
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hour for its investigators’ time and uses investigative findings as the basis for collecting money from people who have damaged its cli- ents’ property. But as essential as their work was, Fowler and Swans were not part of OSP’s management, and they did not run or service the general business operations of the company. The importance of the work that employees do does not make them administrative employees. See Desmond, 564 F.3d at 694; Bothell, 299 F.3d at 1128; Reich, 126 F.3d at 11; Dalheim, 918 F.2d at 1231. Fowler and Swans did important work, but the ex- emption is not for all of those who do important work; it is only for those who do administrative work. The two of them did im- portant, non-administrative work. Fowler and Swans engaged in OSP’s core function of dam- age investigations. Given the nature of their employer’s business, their investigative factfinding duties amounted to production work. Those duties did not involve “work directly related to [OSP’s] management or general business operations.” 29 C.F.R. § 541.200(a)(2). We need not address whether their work met the ad- ditional administrative exemption requirement of “includ[ing] the exercise of discretion and independent judgment with respect to matters of significance.” Id. § 541.200(a)(3). Both requirements must be met for the exemption to apply. See id. V. Conclusion OSP has failed to show that the FLSA’s administrative ex- emption applies to Fowler and Swans. As a result, we VACATE USCA11 Case: 19-12277 Date Filed: 06/27/2022 Page: 24 of 24
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the judgment of the district court and REMAND for further pro- ceedings consistent with this opinion. VACATED AND REMANDED.