Vasilios Zannikos v. Oil Inspections (U.S.A.), Inc , 605 F. App'x 349 ( 2015 )

Case: 14-20253 Document: 00512983854 Page: 1 Date Filed: 03/27/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 27, 2015
No. 14-20253 Lyle W. Cayce
Clerk
VASILIOS ZANNIKOS, Individually and On Behalf of Others Similarly
Situated, JAMES CORMIER,
Plaintiffs-Appellees-Cross Appellants
WILLIAM CORMIER, SR.,
Plaintiff-Cross Appellant
v.
OIL INSPECTIONS (U.S.A.), INCORPORATED; STEPHEN TAYLOR,
Defendants-Appellants-Cross Appellees
Appeals from the United States District Court
for the Southern District of Texas
USDC No. 4:12-CV-2508
Before BARKSDALE, SOUTHWICK, and HIGGINSON, Circuit Judges.
PER CURIAM: *
The plaintiffs sued Oil Inspections (U.S.A.), Inc., their former employer,
for alleged violations of the Fair Labor Standards Act’s (“FLSA”) overtime
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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provisions. On cross-motions for summary judgment, the district court held
that the plaintiffs did not fall within the administrative exemption to the
FLSA, but that the “highly compensated employee” exemption applied to
Plaintiff Vasilios Zannikos. It also held that all of the plaintiffs’ claims were
subject to the FLSA’s two-year statute of limitations for non-willful violations.
Both parties appealed. We AFFIRM.
FACTS AND PROCEDURAL BACKGROUND
Oil Inspections specializes in loss-control operations in connection with
oil cargo transfers. It oversees and monitors transfers of oil between trading
partners to ensure that the oil is transferred in accordance with industry
standards and customer specifications. Because the failure to monitor these
transfers adequately can result in product losses, accurate monitoring is a
matter of financial significance to the trading partners.
Oil Inspections employed Zannikos, James Cormier, and William
Cormier (“plaintiffs”) as marine superintendents until January 2012, May
2011, and February 2011, respectively. Their responsibilities included
observing oil transfers to verify that performance was accurate, legal, and safe.
They monitored the loading and unloading of cargo and reported any errors or
losses; monitored and reported on transfers’ compliance with Oil Inspections’
safety policies and nationally recognized safety standards; and performed
quality control functions, including inspecting loading and discharge
equipment, identifying problems with equipment safety or calibration, and
recommending remedial measures to ship personnel or Oil Inspections.
The plaintiffs also oversaw the work of independent inspectors during
the transfer process and inspected certain elements of transfers themselves.
Their responsibilities included inspecting cargo tanks prior to and during
transfers to ensure the absence of contaminants and proper minimization of
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sediment; overseeing the sampling of cargo by independent inspectors prior to
transfers to ensure that they used properly calibrated gear and properly
assessed cargo temperatures; inspecting onshore tank placement to ensure
that it was in the “critical zone” (i.e., the gap above the tank met customer
specifications); and examining “line displacement,” or fluid flow through the
line, to ensure that no oil was lost during the transfer.
Finally, the marine superintendents oversaw “line blending,” during
which a number of onshore components, such as oil and gas, are combined and
moved onto a ship based on specifications relevant to overseas markets. They
assured that tanks were prepared properly for such transfers and that
components were blended according to the proper ratios.
In August 2012, Zannikos brought suit against Oil Inspections and its
president, Stephen Taylor, alleging violations of the FLSA’s overtime
provisions. In March 2013, James and William Cormier consented to join the
suit pending collective or class action certification. In May 2013, the district
court, pursuant to 29 U.S.C. § 216(b), conditionally certified a collective action
of marine superintendents who were employed by Oil Inspections during the
prior three years and had not signed arbitration agreements. No one besides
Zannikos and the two Cormiers joined the collective action.
All parties moved for summary judgment on various issues. The district
court held, inter alia, that: (1) the plaintiffs were not subject to the
administrative exemption to the FLSA’s overtime provisions, (2) Plaintiff
Zannikos was subject to the “highly compensated employee” exemption to the
overtime provisions beginning in January 2011, and (3) the plaintiffs’ claims
were subject to the FLSA’s two-year statute of limitations for non-willful
violations.
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Following the summary-judgment ruling, Oil Inspections filed a motion
for reconsideration, which the court denied. The parties then settled the
remaining claims while reserving their right to appeal. The district court
entered a final judgment recognizing the settlement. The parties timely
appealed.
DISCUSSION
We review a grant of summary judgment de novo, applying the same
standards as the district court. Sossamon v. Lone Star State of Tex., 560 F.3d
316, 326 (5th Cir. 2009). Summary judgment is proper “when the pleadings
and evidence demonstrate that no genuine [dispute] of material fact exists and
the movant is entitled to judgment as a matter of law.” Id. (citation and
quotations omitted). The movant bears the initial burden of demonstrating
that no genuine dispute of material fact exists. Id. The burden then shifts to
the non-movant, who must demonstrate the existence of such a dispute. Id.
We construe all evidence in the light most favorable to the non-movant. Id.
The FLSA states that “no employer shall employ any of his employees . .
. for a workweek longer than forty hours unless such employee receives
compensation for his employment in excess of the hours above specified at a
rate not less than one and one-half times the regular rate at which he is
employed.” 29 U.S.C. § 207(a)(1). Section 216(b) of the statute creates a cause
of action for employees who claim their employers violated these provisions.
Certain employees, however, are exempt from the overtime requirements.
Whether an employee falls within an exemption is a question of law; the
amount of time the employee devotes to particular duties, as well as the
significance of those duties, are questions of fact. See Icicle Seafoods, Inc. v.
Worthington, 475 U.S. 709, 714 (1986).
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Oil Inspections claims that the district court erred by concluding that the
plaintiffs did not fall within the administrative exemption to the FLSA’s
overtime requirements. The plaintiffs find error in the district court’s
conclusion that Zannikos fell within the “highly compensated employee”
exemption to the FLSA’s overtime requirements and its application of the two-
year statute of limitations for non-willful violations to Oil Inspections’
violations rather than the three-year statute of limitations for willful
violations.
We examine each of these arguments.
I. Administrative Exemption to the FLSA’s Overtime Provisions
The FLSA’s overtime provisions “shall not apply with respect to . . . any
employee employed in a bona fide executive, administrative, or professional
capacity . . . .” 29 U.S.C. § 213(a)(1). Employees fall within the administrative
exemption if they meet the following criteria:
(1) Compensated on a salary or fee basis at a rate of not less than
$455 per week . . . ;
(2) Whose primary duty[1] is 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
(3) Whose primary duty includes the exercise of discretion and
independent judgment with respect to matters of significance.
29 C.F.R. § 541.200(a).
1An employee’s “primary duty” is defined as the “principal, main, major or most
important duty that the employee performs.” 29 C.F.R. § 541.700(a). A non-exhaustive list
of factors courts consider when determining an employee’s primary duty include: (1) “the
relative importance of the exempt duties as compared with other types of duties,” (2) “the
amount of time spent performing exempt work,” (3) “the employee’s relative freedom from
direct supervision,” and (4) “the relationship between the employee’s salary and the wages
paid to other employees for the kind of nonexempt work performed by the employee.” Id.
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The plaintiffs concede that Oil Inspections paid them more than $455
per week but claim the district court erred in concluding that their primary
duties satisfied the second element of the exemption. Oil Inspections, in
contrast, argues that the court correctly determined that the plaintiffs satisfied
the second element but erred in holding that they did not satisfy the third.
a. Second Element: Performance of Office or Non-Manual Work
To qualify for the administrative exemption, “an employee must perform
work directly related to assisting with the running or servicing of the business,
as distinguished, for example, from working on a manufacturing production
line or selling a product in a retail or service establishment.” § 541.201(a). The
former category includes “work in functional areas such as . . . quality control;
. . . safety and health; . . . [and] legal and regulatory compliance . . . .” §
541.201(b). It also includes “work directly related to the management or
general business operations of the employer’s customers.” § 541.201(c).
The plaintiffs argue that the district court erred in concluding that they
performed non-manual work that directly related to the general business
operations of Oil Inspections’ customers. They claim that their work was “more
in line with someone working in a production line for [Oil Inspections’]
customers rather than that of one implementing, creating, or administering
policies.” The clearest example they offer in support of their argument is their
supervision of the “line blending” process, which involves producing gas/oil
blends for sale overseas. The plaintiffs assert that, since line blending results
in the production of a “new petroleum product,” their role in that process
constituted production rather than administration.
These arguments are unconvincing. The plaintiffs’ work, including that
relating to line blending, primarily included supervision, quality control, and
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ensuring compliance with applicable standards. They did not transfer oil,
blend oil, or manufacture or sell petroleum products themselves. Instead, they
oversaw these functions and provided Oil Inspections’ customers with
inspection and operational support services. Such services are not considered
production. See § 541.201(c). Moreover, the plaintiffs’ primary duties included
work in several functional areas explicitly listed as administrative in Section
541.201(b), including quality control, safety, and legal and regulatory
compliance. Accordingly, the district court did not err in concluding that their
work constituted administration rather than production.
The plaintiffs also argue that employees who produce the precise service
offered to customers by their employer are engaged in production, citing Cotten
v. HFS-USA, Inc., 620 F. Supp. 2d 1342 (M.D. Fla. 2009). Thus, because they
“were hired to produce the very product Oil [Inspections] sells and markets,”
which is “oversight,” they claim that their functions necessarily constitute
production. This argument is analytically distinct from the plaintiffs’ claim
that they effectively produced petroleum products for customers. In effect, the
plaintiffs are arguing that, even if their services do not constitute production
in relation to Oil Inspections’ customers, it is sufficient that they constitute
production in relation to Oil Inspections. The district court disagreed, noting
that, in Cotten, “the court only considered whether [the employee’s] duties were
related to the management of the employer, not the customer.” The court
concluded that this approach “necessarily conflict[s] with 29 C.F.R. §
541.201(c)” and leads to an incomplete analysis. We agree.
The second element of the administrative exemption applies to
employees “[w]hose primary duty is 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 . . . .” 29 C.F.R. § 541.200(a)(2)
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(emphasis added); see also § 541.201(a). Accordingly, employees satisfy the
second element if their work directly relates to the management of either their
employer or their employer’s customers. Thus, because we have concluded that
the plaintiffs performed non-manual work directly related to the management
of Oil Inspections’ customers, whether their work directly related to the
management of Oil Inspections is inconsequential.
Other regulatory provisions designed to clarify the second element of the
administrative exemption support this conclusion. In particular, Section
541.201(c) states that “[a]n employee may qualify for the administrative
exemption if the employee’s primary duty is the performance of work directly
related to the management or general business operations of the employer’s
customers.” That provision demonstrates that the performance of functions
directly related to the management of an employer’s customers is sufficient,
rather than merely necessary, to satisfy the second element of the exemption.
Moreover, the plaintiffs’ interpretation would render the administrative
exemption largely meaningless. Many — perhaps most — employees whose
primary duties directly relate to the management of customers perform the
precise services offered by their employers. For example, tax experts, financial
consultants, and management consultants perform the precise services offered
to customers by the accounting and consulting firms for which they work.
Thus, under the plaintiffs’ interpretation, these employees should not fall
under the administrative exemption. This result, however, conflicts with
Section 541.201(c), which explicitly states that such employees satisfy the
second element of the exemption. Likewise, the plaintiffs’ interpretation would
insulate employees who perform work in the “functional areas” described in
Section 541.201(b) from the exemption so long as the employer is in the
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business of providing those services. This result is also contrary to the
regulatory text.
We conclude that the district court correctly categorized the plaintiffs’
work as office or non-manual work directly related to the management or
general business operations of Oil Inspections or its customers under the
second element of the administrative exemption.
b. Third Element: Exercise of Discretion and Independent Judgment
The administrative exemption also requires that an employee exercise
discretion and independent judgment with respect to matters of significance,
which “involves the comparison and the evaluation of possible courses of
conduct, and acting or making a decision after the various possibilities have
been considered.” § 541.202(a). An employee need not exercise final decision-
making authority to meet this standard. See § 541.202(c); Lott v. Howard
Wilson Chrysler-Plymouth, Inc., 203 F.3d 326, 331 (5th Cir. 2000).
Nevertheless, the exercise of discretion requires “more than the use of skill in
applying well-established techniques, procedures or specific standards
described in manuals or other sources.” 29 C.F.R. § 541.202(e).
Oil Inspections argues that the district court erred in concluding that the
plaintiffs did not exercise independent judgment. In support of this argument,
Oil Inspections analyzes ten non-exhaustive factors that courts often consider
when determining whether an employee exercises the requisite discretion. See
§ 541.202(b). It concludes that the plaintiffs met eight of the factors, and that
this is more than sufficient to demonstrate independent judgment. 2 In the
2 Oil Inspections claims that satisfying two factors is sufficient to demonstrate
independent judgment, citing 69 Fed. Reg. 22,143-44 (Apr. 23, 2004). The authority for that
argument is weak. Both Fifth Circuit opinions cited in the Federal Register commentary
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alternative, it claims there was not enough evidence to decide the issue at the
summary judgment stage.
We note at the outset that there are striking similarities between the
plaintiffs’ work and that of inspectors, examiners, and graders, who are
generally non-exempt employees. See § 541.203(g)-(j). “Such employees
usually perform work involving the comparison of products with established
standards which are frequently catalogued.” § 541.203(h); see also §
541.203(g). They “gather[] factual information, apply[] known standards or
prescribed procedures, determin[e] which procedure to follow, [and]
determin[e] whether the prescribed standards or criteria are met.” §
541.203(j). As we have discussed, the plaintiffs’ primary duties included
observing and inspecting oil transfers to determine whether they complied
with relevant standards and specifications set forth by Oil Inspections and its
customers. In carrying out these duties, they utilized extensive checklists,
which catalogued the procedures they followed. Such functions overlap
significantly with those characterized as generally non-administrative in
Section 541.203.
upon which Oil Inspections relies predate the compilation of all these factors into Section
541.202(b), which occurred in August 2004. See Cowart v. Ingalls Shipbuilding, Inc., 213
F.3d 261 (5th Cir. 2000); Bondy v. City of Dal., 77 F. App’x 731 (5th Cir. 2003). Additionally,
in both opinions we detailed the employees’ duties and identified many areas of discretion —
not just two — before concluding that the employees exercised independent judgment. See
Cowart, 213 F.3d at 267; Bondy, 77 F. App’x at 733. The factors were meant to facilitate
evaluations of discretion in “light of all the facts involved . . . .” 29 C.F.R. § 541.202(b).
Placing dispositive weight on only two factors would hinder a broader assessment. Moreover,
we have often declined to make an individual evaluation of the factors, which suggests that
they are meant to guide our analysis but not to dictate its result. See Cheatham v. Allstate
Ins. Co., 465 F.3d 578, 585-86 (5th Cir. 2006); McKee v. CBF Corp., 299 F. App’x 426, 429-31
(5th Cir. 2008). We make no holding, though, as to whether there is a minimum number of
factors that need to be met, as even the suggested minimum is not satisfied.
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Despite these similarities, Oil Inspections argues that certain features
of the plaintiffs’ duties, when analyzed in the context of the Section 541.202(b)
factors, are distinguishable from those of inspectors. According to Oil
Inspections, those distinctions are sufficient to demonstrate independent
judgment. Because “[t]he phrase ‘discretion and independent judgment’ must
be applied in the light of all the facts involved in the particular employment
situation in which the question arises,” § 541.202(b), we will examine the
Section 541.202(b) factors that Oil Inspections relied upon in its summary
judgment motion and motion for reconsideration.
The first factor concerns the employee’s “authority to formulate, affect,
interpret, or implement management policies or operating practices.” §
541.202(b). Oil Inspections does not argue that the plaintiffs “formulated” or
“affected” management policies. Instead, it argues that they “interpreted” and
“implemented” policies by determining whether transfers complied with the
proper specifications and informing Oil Inspections, its customers, and
independent inspectors of any deficiencies. This argument is unconvincing, for
two reasons. First, the functions identified by Oil Inspections, such as
analyzing whether pump cleanliness, pump calibration, and critical-zone size
met applicable standards, simply constitute the “appl[ication of] . . . specific
standards described in manuals or other sources.” § 541.202(e). They do not
entail evaluating alternative courses of action after considering various
possibilities. See § 541.202(a). Second, the plaintiffs’ job descriptions,
questionnaires, and depositions suggest that they were typically required to
confer with Oil Inspections before making recommendations in the event of
noncompliance. Regardless, any advisory power they possessed was based
solely on “the development of the facts as to whether there [was] conformity
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with the prescribed standards.” § 541.207(c)(2). 3 Accordingly, the plaintiffs
did not formulate, affect, interpret, or implement management policies or
operating practices.
Oil Inspections argues that the plaintiffs satisfied the second factor,
which asks “whether the employee carries out major assignments in
conducting the operations of the business,” § 541.202(b), because their work
was “significant” to customers and “very important” to their financial interests.
It is unclear whether, as Oil Inspections implies, all activities carrying
financial import constitute “major assignments.” Moreover, while the
plaintiffs’ services may relate to business operations, see § 541.201(b)-(c), Oil
Inspections has not demonstrated that mere observation and inspection
constitutes carrying out operations. Indeed, it would seem strange to conclude
that an employee who meets the second element of the administrative
exemption necessarily meets portions of the third element. In fact, the
regulations generally counsel against such a conclusion. See §§ 541.202(a), (e);
541.203(g). But whatever the exact contours of the second Section 541.202(b)
factor, the regulations and our case law make clear that employees do not
exercise discretion and independent judgment merely because their work bears
financial significance. See § 541.202(f); Dalheim v. KDFW-TV, 918 F.2d 1220,
1231 (5th Cir. 1990). Accordingly, Oil Inspections’ claims regarding the
3 The Department of Labor (“DOL”) revised the FLSA overtime exemption regulations
in August 2004. As a result, Section 541.202 superseded Section 541.207. But, as the DOL
explained, the revisions were meant to “consolidate and streamline” the former regulations
and to be “consistent with” the former regulations and case law relating to the administrative
exemption. See 69 Fed. Reg. 22,122, 22,126, 22,139, 22,144-45 (Apr. 23, 2004). As a result,
this court and other circuits have cited from both sets of regulations, including Section
541.207, when doing so proves informative for purposes of the case. See, e.g., Cheatham, 465
F.3d at 585; Robinson-Smith v. Gov’t Emps. Ins. Co., 590 F.3d 886, 892 n.6, 893-95 (D.C. Cir.
2010); Roe-Midgett v. CC Servs., Inc., 512 F.3d 865, 869-70, 873-75 (7th Cir. 2008).
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importance of the plaintiffs’ work, without more, do not suffice to satisfy the
third element of the administrative exemption.
For essentially the same reasons it advances with regard to the second
factor, Oil Inspections argues that the plaintiffs performed work affecting
customers’ business operations to a substantial degree, thereby satisfying the
third factor. See 29 C.F.R. § 541.202(b). The district court concluded that the
plaintiffs satisfied this factor but noted that it addresses only whether an
employee’s primary duty relates to matters of significance, not whether that
duty entails the exercise of discretion and independent judgment. Indeed, the
regulations note that “[a]n employee does not exercise discretion and
independent judgment with respect to matters of significance merely because
the employer will experience financial losses if the employee fails to perform
the job properly.” § 541.202(f); see also Dalheim, 918 F.2d at 1231. Thus, as
we have already noted, the financial import of the plaintiffs’ work does not
suffice to satisfy the third element of the administrative exemption.
According to Oil Inspections, the plaintiffs had the “authority to commit
the employer in matters that have significant financial impact,” which is the
fourth factor. See 29 C.F.R. § 541.202(b). In support of this contention, Oil
Inspections claims that the plaintiffs could instruct customers to delay the
commencement of oil transfers, alter the line-blending process, and engage in
additional crude-oil washing. We are not convinced. The plaintiffs’ evidence,
at most, suggests that marine superintendents could issue recommendations
regarding delaying, blending, and washing. It does not suggest that they could
commit customers to certain actions. In fact, the evidence indicates that the
plaintiffs lacked this authority. More importantly, the relevant inquiry is
whether an employee could commit the employer in ways that had a significant
financial impact. Oil Inspections only addresses the plaintiffs’ ability to
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commit customers in the matters it mentions. The plaintiffs did not have the
authority to commit Oil Inspections in matters of significance; they simply had
the authority to ensure compliance with standards Oil Inspections had
previously developed or agreed to enforce.
Next, Oil Inspections argues that the plaintiffs had “authority to waive
or deviate from established policies and procedures without prior approval,”
which is the fifth factor. See id. The only example of this authority Oil
Inspections offers is the plaintiffs’ ability to permit independent cargo
inspectors to use ship equipment to conduct their inspections rather than using
their own equipment. As the district court noted, though, Oil Inspections did
not point to any policy or manual demonstrating that cargo inspectors were
required to use their own equipment. In fact, Oil Inspections’ policies seem to
stipulate only that inspectors must use properly calibrated equipment,
whatever its source. Accordingly, Oil Inspections has not shown that the
plaintiffs had the authority to deviate from its established procedures.
Oil Inspections does not argue that the plaintiffs satisfied the sixth
factor, which concerns an employee’s authority to negotiate and bind the
company. See id. The seventh factor involves providing consultation or expert
advice to management. See id. In support of this factor, Oil Inspections states
that one of its customer’s descriptions of marine superintendents’
responsibilities included the use of “experience and expertise.” Job
descriptions alone, though, may not suffice to establish that employees render
consultation or expert advice. Cf. § 541.2; Hodgson v. Brookhaven Gen. Hosp.,
436 F.2d 719, 724 (5th Cir. 1970). More importantly, the seventh factor
requires the employee to provide expert advice, not merely to utilize expertise.
The expertise to which Oil Inspections refers relates to the inspection of cargo
measurement and handling. Such functions do not amount to offering expert
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advice, but rather to “the use of skill in applying well-established techniques,
procedures or specific standards . . . .” 29 C.F.R. § 541.202(e). Any advice
offered in conjunction with these functions was necessarily based on “whether
there [was] conformity with the prescribed standards.” § 541.207(c)(2). As a
result, Oil Inspections has not shown that the plaintiffs provided expert advice
to its customers.
Oil Inspections does not address the eighth factor, which addresses an
employee’s role in planning business objectives. See § 541.202(b). The ninth
factor asks whether an employee investigates and resolves significant matters
on behalf of management. See id. Oil Inspections argues that the plaintiffs
satisfied this factor because they resolved disputes over how much “free water”
to leave in oil storage tanks. But the plaintiffs did not investigate matters
relating to free water; they merely observed independent inspectors’
measurements to determine whether errors were made. Moreover, the
plaintiffs’ ability to resolve disputes seems to have been limited to informing
Oil Inspections or the inspectors of errors based on specified standards and
requesting that inspectors re-gauge the free water. The ability to act or report
based on specified standards does not constitute the discretionary ability to
resolve matters of significance. See §§ 541.202; 541.203(g).
Finally, Oil Inspections argues that the plaintiffs met the tenth factor,
which looks to whether the employee represents the company in resolving
customers’ complaints, disputes, and grievances. See § 541.202(b). Oil
Inspections claims that the plaintiffs provided assistance when disagreements
arose over pumping logs, the amount of free water in oil storage tanks, and the
amount of oil left onboard ships. The plaintiffs’ role in disputes over free water
and oil left onboard ships has already been discussed. Their role in disputes
over pumping logs was not markedly different. As in other areas, their
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responsibilities involved ensuring compliance with applicable standards and
reporting events of noncompliance. Again, the ability to express disagreements
based on specified standards does not constitute the discretionary ability to
resolve disputes. See §§ 541.202; 541.203(g).
The district court correctly concluded that the work performed by marine
superintendents did not extend beyond the application of skill in applying
specified standards and thus did not satisfy the “independent judgment”
element of the administrative exemption. An analysis of the Section 541.202(b)
factors only reinforces this conclusion.
Finally, in addition to the Section 541.202(b) factors, Oil Inspections
argues more generally that precedent from this circuit and the Ninth Circuit
supports its argument that marine superintendents exercised the requisite
independent judgment to satisfy the third element of the administrative
exemption. See Cheatham, 465 F.3d at 585-86; Bondy, 77 F. App’x at 733;
O’Dell v. Alyeska Pipeline Serv. Co., 856 F.2d 1452, 1453-54 (9th Cir. 1988).
As to O’Dell, the Ninth Circuit concluded in a later opinion that it
“ignored the [FLSA] regulations’ distinction between the use of discretion and
the application of skill, reasoning that such regulations are simply guides that
do not bind the court or limit its discretion. . . . That view has since been
rejected by both the Supreme Court and the Ninth Circuit.” 4 Bothell v. Phase
Metrics, Inc., 299 F.3d 1120, 1129 (9th Cir. 2002) (citations omitted).
4 To the extent that O’Dell has not been completely overruled, it is nevertheless
distinguishable from this case. The employees in O’Dell exercised discretion by, among other
things, “making recommendations for waivers of specifications” and “help[ing] develop
guidelines for inspection procedures.” O’Dell, 856 F.2d at 1453. Oil Inspections has not
claimed that the plaintiffs assisted in developing its guidelines. Moreover, we have rejected
Oil Inspections’ claim that the plaintiffs were permitted to waive specifications because they
allowed independent cargo inspectors to use ship equipment to conduct their inspections
rather than their own equipment.
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Additionally, the marine superintendents are not analogous to the
employees in Cheatham and Bondy. In Bondy, we held that event coordinators
met the third element of the administrative exemption. See 77 F. App’x at 733.
For support, we relied on event coordinators’ ability to plan most aspects of
convention-center events, negotiate with clients on behalf of their employer,
address clients’ requests and problems during events, recommend excusing
noncompliance with policies, recommend cancelling events, and help their
employer revise its policies. See id. We agree with the reasoning in Bondy.
Nevertheless, Oil Inspections has not demonstrated that the plaintiffs planned
oil transfers, negotiated with clients, excused noncompliant action,
recommended canceling transfers, or helped Oil Inspections reformulate its
policies. Thus, Bondy is readily distinguishable.
In Cheatham, we noted that “consult[ation] with manuals or guidelines
does not preclude the[] exercise of discretion and independent judgment.” 465
F.3d at 585 (citation omitted). We then enumerated the ways in which the
insurance adjusters we were considering exercised discretion despite
consulting claims manuals, including “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.” Id. at 586; see also id. at 585 n.7.
Such investigatory and evaluative functions clearly extend beyond the
observation of processes, enforcement of standards, and reporting of
noncompliance. Indeed, while claims manuals may inform assignments of
fault, injury evaluations, settlement negotiations, and other aspects of the
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claims process, they seldom dictate the results in absolute terms or obviate the
need to evaluate possible courses of action. See McAllister v. Transamerica
Occidental Life Ins. Co., 325 F.3d 997, 1001 (8th Cir. 2003). The plaintiffs’
primary duties, in contrast, did not entail making discretionary decisions
based on guidelines but rather strictly applying guidelines and reporting
noncompliance. Accordingly, Oil Inspections has not shown that the plaintiffs
exercised discretion comparable to the insurance adjusters in Cheatham.
The district court correctly concluded that the plaintiffs’ primary duties
did not include the exercise of discretion and independent judgment with
respect to matters of significance.
II. “Highly Compensated Employee” Exemption to the FLSA
The FLSA provides that “[a]n employee with total annual compensation
of at least $100,000 is deemed exempt . . . if the employee customarily and
regularly performs any one or more of the exempt duties or responsibilities of
an executive, administrative or professional employee . . . .” 29 C.F.R. §
541.601(a). To qualify for this exemption, the employee’s primary duties must
include performing office or non-manual work. § 541.601(d). The employee
need not meet all of the requirements of executive, administrative, or
professional employees, however. See § 541.601(c). Moreover, “[a] high level
of compensation is a strong indicator of an employee’s exempt status, thus
eliminating the need for a detailed analysis of the employee’s job duties.” Id.
The plaintiffs concede that Zannikos’ compensation in 2011 was
$100,000.08, 5 but maintain that his primary duties did not include performing
In the district court the plaintiffs argued that Oil Inspections effectively paid
5
Zannikos less than this amount because he incurred uncompensated job-related expenses,
which must be subtracted from the employee’s wages for purposes of the FLSA. See § 531.35.
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office or non-manual work directly related to the management or general
business operations of the employer or the employer’s customers. In discussing
the administrative exemption above, we concluded that Zannikos primarily
performed non-manual work directly related to the management or general
business operations of Oil Inspections’ customers. Thus, the district court
correctly concluded that Zannikos fell within the “highly compensated
employee” exemption to the FLSA’s overtime requirements.
III. FLSA’s Two-Year Statute of Limitations for Non-Willful Violations
FLSA claims are subject to a two-year statute of limitations for ordinary
violations and a three-year period for willful violations. 29 U.S.C. § 255(a).
The plaintiff bears the burden of demonstrating willfulness. Cox v. Brookshire
Grocery Co., 919 F.2d 354, 356 (5th Cir. 1990). Mere knowledge of the FLSA
and its potential applicability does not suffice, nor does conduct that is merely
negligent or unreasonable. See McLaughlin v. Richard Shoe Co., 486 U.S. 128,
132-33 (1988); Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 127-28
(1985); Mireles v. Frio Foods, Inc., 899 F.2d 1407, 1416 (5th Cir. 1990). Rather,
an employer’s violation is willful only if it “knew or showed reckless disregard
for the matter of whether its conduct was prohibited by the statute . . . .”
McLaughlin, 486 U.S. at 133.
The plaintiffs argue that Oil Inspections recklessly disregarded whether
marine superintendents were exempt from the FLSA. They allege that Oil
Inspections knew of the FLSA’s potential applicability, as demonstrated by its
employee handbook; failed adequately to research the statute’s applicability;
The plaintiffs do not re-argue that point on appeal; it is therefore waived. See Brinkmann v.
Dallas Cnty. Deputy Sheriff Abner, 813 F.2d 744, 748 (5th Cir. 1987).
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and failed to consult with attorneys or the DOL on the matter. These
allegations do not suffice to demonstrate willfulness.
An employer who “act[s] without a reasonable basis for believing that it
was complying with the [FLSA]” is merely negligent. Id. at 134-35. So too is
an employer who fails to seek legal advice regarding its payment practices. See
id.; Mireles, 899 F.2d at 1416. Willfulness has been found when the evidence
demonstrated that an employer actually knew its pay structure violated the
FLSA or ignored complaints that were brought to its attention. 6 See Ikossi-
Anastasiou v. Bd. of Supervisors of La. State Univ., 579 F.3d 546, 553 n.24 (5th
Cir. 2009). The plaintiffs have failed to put forth evidence that Oil Inspections
knew that it was violating the FLSA or recklessly disregarded a potential
violation. Accordingly, Oil Inspections did not willfully violate the FLSA and
the two-year statute of limitations applies to the plaintiffs’ claims.
AFFIRMED.
6 The plaintiffs rely on an opinion from the Eastern District of Arkansas for the
proposition that the failure to research in a meaningful way the applicability of the FLSA or
to consult on the FLSA may constitute willfulness. See Brown v. L & P Indus. LLC, No.
5:04CV0379JLH, 2005 WL 3503637, at *10-11 (E.D. Ark. Dec. 21, 2005). The Brown court,
though, found that the employer willfully violated the FLSA by failing to take such measures
after having been informed that its employees were owed overtime. See id. at *10. That is
not the case here. Moreover, to the extent that Brown or the other authorities cited by the
plaintiffs to the same effect conflict with McLaughlin and our decisions interpreting it
(discussed above), McLaughlin and our decisions control.
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