Daniel Smith v. Ochsner Health System ( 2020 )

Case: 18-31264 Document: 00515385910 Page: 1 Date Filed: 04/17/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 18-31264
Fifth Circuit
FILED
April 17, 2020
DANIEL G. SMITH, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
OCHSNER HEALTH SYSTEM; OCHSNER CLINIC FOUNDATION,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Louisiana
Before SOUTHWICK, GRAVES, and ENGELHARDT, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
The plaintiff sued his former employer for unpaid overtime wages under
the Fair Labor Standards Act. The defendants claimed the plaintiff was not
entitled to any additional pay because he was exempt as a highly compensated
administrative employee. The district court granted the defendants’ motion
for summary judgment. We AFFIRM.
FACTUAL AND PROCEDURAL BACKGROUND
In April 2001, Daniel Smith was hired as an organ procurement
coordinator at Ochsner Health System, a nonprofit health care provider in
Louisiana. Smith never graduated from high school. He has no advanced
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degrees, licenses, or certifications. As a procurement coordinator, Smith acted
as the first line of communication between the hospital and the Louisiana
Organ Procurement Agency when organs became available. His job duties
included responding to calls at any time of the day or night regarding organs
being offered to the hospital for transplant purposes, evaluating the medical
charts and medical history of the donors, verifying the donors’ consent,
communicating pertinent information about the donors to the surgeons and
obtaining the surgeons’ acceptance of the organs, preserving and arranging for
the organs’ transportation, and completing any associated reports for filing.
When relaying organ information to surgeons, an organ procurement
coordinator provides basic information about potential recipients. When an
organ is first offered, the coordinator has the authority to enter a “provisional
yes” into the online system to accept the organ for a patient, before talking to
a surgeon. Organ procurement coordinators also organize the transportation
of the organs. The coordinator gathers all needed supplies and drives the team
to the airport, then goes into the operating room where the organ recovery
takes place. Afterward, the coordinator records pertinent information related
to the procedure and travels back to Ochsner with the organ. As a group, the
organ procurement coordinators are responsible for taking their own inventory
and ordering supplies based on expected need.
Smith testified in a deposition that when he started at Ochsner, he was
paid a salary, a set hourly rate for the on-call time, and his regular hourly rate
for hours worked above 40 per week as opposed to time and a half. In 2012,
Smith’s base salary was significantly raised, and the method for computing his
payments changed as well. Smith did not receive overtime or on-call pay, but
the result was that he received about the same amount of pay as before. From
2014 until he resigned in 2017, his annual salary surpassed $120,000. Smith
alleges that “[t]he physical demands and stress caused by the abusive
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workloads and intolerable conditions caused Mr. Smith to seek medical
attention, be put on short and long-term leave, and eventually forced
Mr. Smith to resign his employment.”
Smith’s complaint asserts that in mid-September 2017, he sent Ochsner
a letter that demanded “all of his owed wages and overtime,” but Ochsner did
not respond. On September 29, 2017, Smith filed suit in the United States
District Court for the Eastern District of Louisiana, claiming violations of the
Fair Labor Standards Act. See 29 U.S.C. § 207. The complaint does not
identify a specific time period covered by his claims.
On September 26, 2018, Ochsner moved for summary judgment on its
affirmative defense that it was not required to pay Smith overtime because
Smith was statutorily exempt as a “highly compensated” and “administrative”
employee. The district court concluded that Ochsner did not carry its burden
to establish Smith was an “administrative” employee, but the court determined
Smith was a “highly compensated” employee. Consequently, it granted
summary judgment in favor of Ochsner. Smith timely appealed.
DISCUSSION
We review a summary judgment de novo, applying the same standards
as the district court. United States v. Lawrence, 276 F.3d 193, 195 (5th Cir.
2001). To succeed on summary judgment in reliance on an affirmative defense,
the moving party “must establish beyond peradventure all of the essential
elements of the claim or defense to warrant judgment in his favor.” Fontenot
v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986).
The outcome of this appeal turns on whether the district court properly
held that Smith was exempt from the statutory mandate that employers
provide overtime compensation for employees. 29 U.S.C. § 207(a)(1). The
exemptions to that mandate are listed in 29 U.S.C. § 213. Courts are to
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interpret them by giving a “fair reading,” neither a broad nor a narrow one.
Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018).
Whether an employee is within an exemption is a question of law, but
how an employee spends his working time is a question of fact. Icicle Seafoods,
Inc. v. Worthington, 475 U.S. 709, 714 (1986). Inferences about the nature of
an employee’s work are also treated as questions of fact. Dalheim v. KDFW-
TV, 918 F.2d 1220, 1226 (5th Cir. 1990). The employer has the burden of proof
on a claimed exemption. Owsley v. San Antonio Indep. Sch. Dist., 187 F.3d
521, 523 (5th Cir. 1999).
I. The administrative capacity exemptions
An individual “employed in a bona fide executive, administrative, or
professional capacity” is exempt. § 213(a)(1). Ochsner argues for application
of the exemption for employment in an administrative capacity. There are two
forms of that exemption. First, the standalone administrative exemption was
created by statute and defined by regulation. Id.; 29 C.F.R. § 541.200(a). The
second is the “highly compensated employee” (“HCE”) exemption, which was
created by regulation in 2004. § 541.601; Defining and Delimiting the
Exemptions, 69 Fed. Reg. 22,122, 22,172 (Apr. 23, 2004). In this case, the
district court denied summary judgment on the standalone exemption but
granted summary judgment on the HCE exemption. Therefore, that is the
exemption we analyze. For clarity, though, we explain both exemptions.
An employee is exempt under the highly compensated category if he or
she (1) is annually compensated at least $100,000; 1 (2) “customarily and
1 The compensation requirements under 29 C.F.R. § 541.601 have gone through
multiple changes over the past few years, the most recent of which went into effect on
January 1, 2020. Overtime Eligibility for White Collar Employees, 84 Fed. Reg. 51,230,
51,249–50, 51,307 (Sept. 27, 2019). This element of the exemption, however, is not contested
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regularly performs any one or more of the exempt duties or responsibilities of
an executive, administrative or professional employee,” § 541.601(a); and
(3) has within his or her primary duties the performing of office or non-manual
work, § 541.601(d). The applicable regulation states that the “high level of
compensation” that the HCE exemption requires is itself “a strong indicator of
an employee’s exempt status, thus eliminating the need for a detailed analysis
of the employee’s job duties.” § 541.601(c).
In contrast to the HCE exemption, the standalone administrative
exemption depends only on the employee’s primary duty rather than the
employee’s customary duties. § 541.200(a). The standalone exemption applies
when an employee’s “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,” and the “primary duty includes the
exercise of discretion and independent judgment with respect to matters of
significance.” Id.
Smith grounds his argument for error in the burden of proof and the
summary judgment standard. He argues that the district court impermissibly
weighed the evidence and drew inferences from the facts in favor of movant
Ochsner. Smith claims there were three specific errors in the district court’s
decision. First, there is a genuine factual dispute over whether he customarily
and regularly performed exempt duties. Second, there is a genuine factual
dispute over whether he primarily performed non-manual labor. Third, there
is a genuine factual dispute over whether his work was directly related to
Ochsner’s general business operations. We will address all of those as we go
through our analysis.
in this case, and Smith’s salary met the compensation standards in the relevant period and
would meet the newest standard.
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Ochsner emphasizes that the HCE exemption does not require the same
level of job-duty scrutinizing as the standalone exemption, § 541.601(c).
Ochsner also does not concede the inapplicability of the standalone exemption,
and it urges us to affirm on that alternative basis if we are unconvinced on the
HCE exemption. See Mangaroo v. Nelson, 864 F.2d 1202, 1204 n.2 (5th Cir.
1989) (stating that we may affirm on any basis supported by the record). In
addition to defending the legal and factual basis of the district court’s ruling,
Ochsner argues that Smith waived any argument about primarily performing
manual labor.
II. The Highly Compensated Employee exemption
A. Performance of an exempt administrative employee duty – generally
To qualify for the HCE exemption, Smith must have performed “any one
or more of the exempt duties or responsibilities of an . . . administrative . . .
employee.” 29 C.F.R. § 541.601(c). Section 541.601(a)(1), in defining the HCE
exemption, sends us to Subpart C to find the exempt duties and responsibilities
of administrative employees. §§ 541.200–541.204. Section 541.200 lays out
two types of exempt duties. The first type 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 the second type
is duties involving “the exercise of discretion and independent judgment with
respect to matters of significance.” § 541.200(a)(2)–(3). As to the first type, the
regulations define work “directly related to management or general business
operations” as a type of work in which the employee “perform[s] work directly
related to assisting with the running or servicing of the business.”
§ 541.201(a). Of the nonexhaustive list of examples of exempt duties directly
related to the management or general business operations, the most relevant
here are those that Smith allegedly engaged in: “quality control; purchasing;
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procurement; . . . legal and regulatory compliance; and similar activities.”
§ 541.201(b).
The breadth of the HCE exemption is shown by the statement that an
employee may be exempt even if “the employee does not meet all of the other
requirements” for the underlying administrative, executive, or professional
exemption. § 541.601(c). The regulation includes an example of an exempt
executive HCE, who can be an “employee [who] customarily and regularly
directs the work of two or more other employees.” Id. Notably, this
hypothetical employee meets only one of the elements in the standalone
executive exemption. § 541.100. The standalone executive exemption mirrors
the standalone administrative exemption: they both have conjunctive elements
laying out an employee’s duties. Compare id., with § 541.200. While the
elements are conjunctive in the standalone exemptions, they are disjunctive
when paired with a high salary. § 541.601(c). Analogously, then, employees
may be exempt as administrative HCEs even if they do not meet all the
elements in the standalone administrative exemption. So an employee could
be an administrative HCE if the employee customarily and regularly
performed “office or non-manual work directly related to the management or
general business operations of the employer,” § 541.200(a)(2), even if the
employee’s duties did not “include[] the exercise of discretion and independent
judgment with respect to matters of significance,” § 541.200(a)(3).
We examine the record here to determine if there is any genuine dispute
of material fact as to whether Smith performed one exempt duty. We later will
analyze whether that performance was customary and regular, then whether
it was the proper form of office or non-manual work.
The question before us is narrower than the one we often face, which is
the primary-duties question for these overtime exemptions. E.g., Dewan v. M-
I, L.L.C., 858 F.3d 331, 335 (5th Cir. 2017). Indeed, little caselaw has
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addressed exempt duties in the HCE context. Although the two contexts are
distinguishable in key respects, we draw from our standalone-exemption
precedents where the exemptions overlap.
Ochsner argues the facts are undisputed that Smith regularly performed
several administrative duties that were “directly related to management or
general business operations.” § 541.201(b). For brevity, we refer to these as
the “directly related” duties. Duties that are directly related involve “work
directly related to the assisting with the running or servicing of the business”
as opposed to production-focused work. § 541.201(a).
For context, Section 201(b) provides in its entirety:
(b) Work directly related to management or general business
operations includes, but is not limited to, work in functional areas
such as tax; finance; accounting; budgeting; auditing; insurance;
quality control; purchasing; procurement; advertising; marketing;
research; safety and health; personnel management; human
resources; employee benefits; labor relations; public relations,
government relations; computer network, internet and database
administration; legal and regulatory compliance; and similar
activities. Some of these activities may be performed by employees
who also would qualify for another exemption.
§ 541.201(b) (emphasis added). Here, we begin and end with procurement.
Ochsner argues that Smith, as an organ procurement coordinator,
engaged in literal procurement for the company. We recognize, though, that
job titles are “insufficient to establish the exempt status of an employee.”
§ 541.2. Smith argues that his involvement with procurement was trivial. He
cites testimony indicating that he was “strictly confined to following [certain]
exact procedures” for organ procurement. This argument, though, mistakenly
assumes that procurement is only an exempt duty if the procurement included
the exercise of discretion and independent judgment with respect to matters of
significance (i.e., the last part of the standalone exemption, § 541.200(a)(3)).
Whether Smith was confined to certain procedures is not material to whether
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he performed an exempt, directly-related duty. This fact would cut against
finding that Smith exercised discretion and independent judgment, see
§ 541.202(e), but to define directly-related duties as necessarily including
significant discretion would render Section 541.200(a)(3) surplusage.
Only a nonprecedential opinion of this court has analyzed whether an
employee performed exempt duties in the context of the HCE exemption. See
Zannikos v. Oil Inspections (U.S.A.), Inc., 605 F. App’x 349 (5th Cir. 2015). We
examine the opinion for its ability to persuade. The Zannikos plaintiffs were
marine superintendents who oversaw oil transfers, “monitored the loading and
unloading of cargo,” and reported on the transfers’ compliance with company
policies and national safety standards. Id. at 351. The plaintiffs also oversaw
independent inspectors and the “line blending” process in which oil and gas
“are combined and moved onto a ship based on specifications.” Id. We held
that the plaintiffs were not administratively exempt because their “primary
duties did not include the exercise of discretion and independent judgment
with respect to matters of significance.” Id. at 359. Nevertheless, we held that
the plaintiffs’ primary duties were directly related to the business’s customers,
and therefore, that element of the administrative exemption was established.
Id. at 354. Because the plaintiffs primarily performed work directly related to
the business’s customers, we concluded the employees also “customarily and
regularly perform[ed] any one or more of the exempt duties or responsibilities”
of an administrative employee. Id. at 359 (quoting § 541.601(a)). We agree
with the Zannikos court’s analysis, but that opinion leaves us with some
analytical work to do.
In Dewan, we considered only the standalone administrative exemption,
reviewing whether summary judgment for the defendants was appropriate.
858 F.3d at 335–40. The plaintiffs, a group of “mud engineers,” argued that
they did not perform non-manual work for the business or its customers. Id.
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at 336. We recognized the distinction between producing a commodity,
whether it be a good or service, and administering business affairs. Id.
Applying that principle, we held that material facts were in dispute over
whether the mud engineers’ primary duties were directly related to
management, business operations, or customers. Id. at 336–37. Unlike the
employees in Zannikos, the mud engineers in Dewan did not oversee “work
performed by the customers’ employees, contractors, and equipment.” Id. at
338. Additionally, the mud engineers’ jobs did not involve “compliance with
health and safety standards,” and the mud engineers did not “engage[] in tasks
likely to qualify as the general administrative work applicable to the running
of any business.” Id. (quotation marks omitted).
It is undisputed that Smith spent substantial time in the donor
coordinator role. It is also undisputed that a regular part of his job was
receiving calls about potential donations, intaking information, and presenting
the information to the surgeon, although the parties dispute how much Smith
curated the information he shared with surgeons. This was the first step in
the organ procurement process.
In another one of Smith’s main roles, he managed the literal
procurement of the organs by transporting them. Smith agrees that his “job
was to retrieve organs to sell to transplant customers.” Smith testified that
based on the organ’s location, a procurement coordinator would decide whether
to use ground or air transportation. Smith did not play a role in negotiating
the contracts with the transport companies to set prices, but when it was time
to transport an organ, it was the coordinator’s role “to make [the transport]
happen.” This included calling the transport company to see if a limousine or
airplane was available. Relatedly, Smith spent literal procurement time on
the ground, taking the team to the airport, going into the operating room, and
reporting back to the coordinator and surgeon in Louisiana.
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Both the donor coordinator and transportation job duties were directly
related to Ochsner’s business operations. By that, we mean the duties were
“directly related to assisting with the running or servicing of the business.”
§ 541.201(a). Smith was not engaged in either manufacturing or sales. See id.
He worked in the “functional area[]” of procurement for the business,
facilitating the acquisition of organs for Ochsner’s transplant services. See
§ 541.201(b). We do not attempt to define all the boundaries of procurement,
only those relevant in this case. One definition is “the acquisition of goods or
services at the best possible price, in appropriate quantity, at the right time
and place, etc.” Procurement, OXFORD ENGLISH DICTIONARY (3d ed. 2007).
Procurement in the context of obtaining the right organs efficiently would not
be described in quite those terms, but Smith was certainly involved in the
acquisition of something critical for Ochsner’s services.
In crafting the highly compensated employee exemption, the
Department of Labor made it easier on both employers and courts.
§ 541.601(c). We need not conduct a particularly “detailed analysis of the
employee’s job duties.” Id. Smith’s level of compensation is the principal
consideration. See id. In addition, like in Zannikos and unlike in Dewan, the
plaintiff here performed one of the specifically enumerated exempt duties.
§ 541.201(b); Zannikos, 605 F. App’x at 353.
B. Customarily and regularly performs the duties
“Customarily and regularly” is defined by regulation and “means a
frequency that must be greater than occasional but which, of course, may be
less than constant. Tasks or work performed ‘customarily and regularly’
includes work normally and recurrently performed every workweek; it does not
include isolated or one-time tasks.” § 541.701.
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A review of Smith’s appellate brief reveals that Smith concedes he
customarily and regularly took calls about organ donations, relayed the
information to surgeons, and planned for the transport of those organs. As
discussed, Smith focuses his argument on whether those are exempt duties
rather than whether he performed them with sufficient regularity. Smith does
argue that he did not customarily and regularly perform other relevant job
duties such as interviewing job candidates and ordering supplies. We need not
examine other job duties, though, because just one exempt duty suffices.
§ 541.601(a). Smith does not present any evidence that he did not customarily
and regularly engage in procurement. That leaves no dispute that Smith
meets this element of the exemption.
C. Office or non-manual work
To fall under either the standalone or HCE exemption, an employee’s
primary duty must include office or non-manual work. § 541.200(a)(2)
(standalone); § 541.601(d) (HCE). The district court determined there was no
dispute that Smith’s primary duty involved the performance of office or non-
manual work directly related to the management or general business
operations. Smith argues on appeal that the facts are in dispute. In particular,
Smith cites to parts of the record showing that he had to perform physical,
manual tasks.
Ochsner argues that Smith waived this argument by not presenting it to
the district court. Smith replies that there was no waiver because the burden
of proof was on Ochsner to establish this element of the administrative
exemptions. Smith declares it would be “absurd” to find that he waived an
element of Ochsner’s affirmative defense “where Ochsner itself made no
competent argument, and where Ochsner pointed to no undisputed evidence to
rebut, regarding a required, essential element of its affirmative defense.”
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In examining a waiver argument, we start with the rule that “the scope
of appellate review on a summary judgment order is limited to matters
presented to the district court.” Keelan v. Majesco Software, Inc., 407 F.3d 332,
339 (5th Cir. 2005). Therefore, “if a party fails to assert a legal reason why
summary judgment should not be granted, that ground is waived and cannot
be considered or raised on appeal.” 2 Keenan v. Tejeda, 290 F.3d 252, 262 (5th
Cir. 2002) (quotation marks and citation omitted).
Although Smith is correct that the burden to prove exempt status is on
Ochsner, Smith never made the argument before the district court that his
work was primarily manual. In fact, he seems to have admitted that much of
his work is non-manual in his briefing to the lower court. Arguing that he
engaged in non-exempt production work, he stated, “Production work covers
much non-manual work.” Smith argued to the district court that his work was
not directly related to management or to general business operations. That
argument concerned whether Smith met the qualifications in Section
541.601(a). The office or non-manual work element, though, is set out
separately in Subsection (d). § 541.601(d). Smith did not make this argument
in his district court brief. The argument that he primarily performed manual
labor is therefore not properly before us.
As a matter of law, Smith was an exempt highly compensated employee.
AFFIRMED.
2 Caselaw does not consistently distinguish between “waiver” and “forfeiture,”
although the terms are analytically distinct. “Whereas forfeiture is the failure to make the
timely assertion of a right, waiver is the intentional relinquishment or abandonment of a
known right.” United States v. Olano, 507 U.S. 725, 733 (1993) (quotation marks omitted).
We have labeled an issue unintentionally ignored in district court “waived,” Keenan, 290 F.3d
at 262, and elsewhere, “forfeited,” McManaway v. KBR, Inc., 852 F.3d 444, 455 (5th Cir.
2017). The parties here say “waiver.” Whatever the term, we will discuss whether to decide
an issue not presented to the district court.
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