Cynthia McAllister v. Transamerica ( 2003 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 01-3282
___________
Cynthia McAllister, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the Western
* District of Missouri.
Transamerica Occidental Life *
Insurance Company, *
*
Appellee. *
___________
Submitted: November 8, 2002
Filed: April 15, 2003
___________
Before RILEY, BEAM, and SMITH, Circuit Judges.
___________
RILEY, Circuit Judge.
Cynthia McAllister (McAllister) sued her employer, Transamerica Occidental
Life Insurance Company (Transamerica), for failing to pay overtime wages in
violation of the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. §§ 201-219(2000). Finding McAllister exempt from the FLSA’s overtime requirements, the
district court1 granted summary judgment in Transamerica’s favor. We affirm.
1
By consent of the parties, the dispute was referred for final disposition to the
Honorable Robert E. Larsen, United States Magistrate Judge for the Western District
I. BACKGROUND
Transamerica is an insurance company selling life insurance, disability and
annuity policies. In 1985, McAllister began working for Transamerica as a claims
examiner processing death and disability claims. In 1989, she was promoted to senior
claims examiner, and, in 1997, was promoted to claims coordinator, the position she
held until she resigned in 2000. Since 1989, McAllister had the authority to approve
contestable claims up to $150,000, incontestable claims up to $250,000, and to
disburse up to $50,000.
The job description for a claims coordinator, which McAllister confirmed
during her deposition, requires a coordinator, as an essential job function, to
“[i]ndependently handle the most complex life claims.” McAllister’s job description
also stated she was required to use her “professional knowledge and experience to act
independently to achieve objectives.” She had to train and coach other examiners.
Finally, her position required she be “[a]ble to process independently the most
complex and large dollar amount claims, i.e., contestable, fraud, disappearances,
rescissions and reformations,” and be “[a]ble to handle difficult claims
correspondence . . . with minimal supervision.”
When applying for a research coordinator position in June 1996, McAllister
made the following representation:
In my eight years experience in processing contestable claims, I have
earned approval to clear contestable claims up to $150,000. This
approval is granted only upon a foundational knowledge and experience
in processing all types of claims and the proven ability to work
independently with minimal direction and supervision. Processing
claims of various types has allowed me to become effective in
interpreting contract law and insurance statutes. Claim processing has
also strengthen [sic] my analytical and problem solving skills especially
of Missouri. 28 U.S.C. § 636(c).
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in the analyzing of the medical information received during the handling
of contestable claims.
During her deposition, McAllister acknowledged this description is an accurate
portrayal of what she had been doing as a senior claims examiner.
McAllister was skilled in following detailed claims manuals. The Foreword
to the Incontestable Claims Manual for life claims processing contains the following
language: “No guide can be written in sufficient detail to cover all facets of claims
handling. A large percentage of our work cannot be guided by a rule book; it has to
be learned on the job. A Claims Examiner becomes a professional through continued
education, training, and experience. Nothing is more important than good common
sense judgment.” The Foreword to the Contestable Claims Manual contains nearly
identical language, but also makes the following statement: “The claims philosophy
of the Company is to do more than the law requires with respect to fair claims
handling practices. Our policy is to bend over backward to give the rights of our
insureds as much importance as those of the Company. We seek to find ways to pay,
not ways to decline to pay, all valid claims, promptly and courteously.”
McAllister had responsibilities relating to the investigation of claims, such as
the ability to direct claims handling and to expedite investigations. She was required
to thoroughly review investigation reports when they arrived to determine if further
handling was necessary. For example, whenever it appeared an insured may not have
disclosed material medical history, McAllister had to determine whether to ask the
investigator to do more work or to refer the claim to the medical department.
McAllister was also required to be on the lookout for fraudulent claims. When
discussing “Accident Investigations,” the manual states: “If the possibility of a
misrepresentation is learned during the investigation, consider whether or not it
should be pursued for additional documentation.”
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In 1999, McAllister’s annual salary exceeded $40,000. During some
workweeks, Transamerica required McAllister to work more than forty hours.
McAllister sued Transamerica for failing to pay her $5378.91 in overtime wages for
overtime work performed in 1999. Transamerica claimed McAllister was an exempt
administrative employee not entitled to overtime compensation. The district court
agreed and granted summary judgment to Transamerica.
On appeal, McAllister claims the district court erred in concluding she was an
exempt employee for the following reasons: (1) she was not paid on a salary basis;
(2) she exercised no discretion or independent judgment, but simply adhered to policy
manuals and state law; (3) the court failed to consider pertinent Department of Labor
(DOL) regulations, see 29 C.F.R. § 541.207(c)(1), (3) (2000); and (4) the court failed
to determine the percentage of McAllister’s time spent on discretionary activities.
She also claims the district court abused its discretion by denying her post-judgment
motion to file additional evidence.
The district court’s grant of summary judgment to Transamerica must be
reviewed de novo. Mayer v. Nextel West Corp., 318 F.3d 803, 806 (8th Cir. 2003).
Summary judgment for Transamerica is proper if the evidence, viewed in the light
most favorable to McAllister and giving her the benefit of all reasonable inferences,
shows there are no genuine issues of material fact and Transamerica is entitled to
judgment as a matter of law. Id.; Fed. R. Civ. P. 56(c).
II. DISCUSSION
A. Administrative Exemption
The FLSA was enacted to eliminate “labor conditions detrimental to the
maintenance of the minimum standard of living necessary for health, efficiency, and
general well-being of workers.” 29 U.S.C. § 202(a). To further that goal, the FLSA
requires employers to pay employees overtime pay for working more than forty hours
in a workweek. § 207(a)(1). However, an employee is exempt from the overtime
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requirements if she is employed in an administrative capacity, as defined by the
Secretary of Labor. § 213(a)(1). Transamerica has the burden to prove McAllister
is exempt from overtime compensation. Fife v. Harmon, 171 F.3d 1173, 1174 (8th
Cir. 1999).
In its implementing regulations, the DOL created a long test and a short test to
determine whether an employee is employed in an administrative capacity. See 29
C.F.R. § 541.2. As the district court properly recognized, McAllister’s position must
be analyzed under the short test. See §§ 541.2(e)(2), 541.214(a). Under the short
test, Transamerica must prove the following: (1) McAllister was paid on a salary
basis of at least $250 per week; (2) McAllister’s primary duty consisted of the
performance of office work “directly related to management policies or general
business operations of the employer or the employer’s customers”; and (3)
McAllister’s performance of such primary duty included “work requiring the exercise
of discretion and independent judgment.” § 541.214(a).
1. Salary Basis
Transamerica must first prove it paid McAllister on a salary basis of at least
$250 per week. §§ 541.2(e)(2), 541.214(a). McAllister was paid on a salary basis if
she regularly received a predetermined amount of pay, which constituted all or part
of her compensation, and was not subject to reduction based on the quality or quantity
of the work she performed. §§ 541.118(a), 541.212. In 1999, McAllister’s annual
salary exceeded $40,000, which was paid in semimonthly payments of $1873.18 and
was all or part of her compensation.
On appeal, McAllister argues she was not paid on a salary basis because she
was required to work “overtime.” But Transamerica never disciplined her or docked
her pay for missing work, or even threatened her with a dock in pay for missing work.
See Auer v. Robbins, 519 U.S. 452, 461 (1997) (salary basis test denies exempt status
only when employer’s actual practice involves making deductions from pay or a
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policy creates a significant likelihood of such deductions); see generally Boykin v.
Boeing Co., 128 F.3d 1279, 1282 (9th Cir. 1997) (“[T]he focus of the regulations is
to prohibit employers from claiming that their employees are compensated on a salary
basis when the employees are subject to deductions in pay.”); Haywood v. N. Am.
Van Lines, Inc., 121 F.3d 1066, 1070 (7th Cir. 1997) (“The [DOL] regulations
prohibit monetary discipline of exempt employees.”); cf. Fife, 171 F.3d at 1175(employees receiving predetermined amounts of pay each pay period which were not
subject to reduction did not lose exempt status just because they were paid extra for
overtime work). Nothing in the record shows McAllister’s salary was in jeopardy of
being reduced based on the quality or quantity of the work she performed. Thus, we
agree with the district court that Transamerica has satisfied the first element.
2. Primary Duty
Transamerica must also prove McAllister’s primary duty consisted of the
performance of office work “directly related to management policies or general
business operations of [Transamerica or its] customers.” 29 C.F.R. §§ 541.2(a),
541.214(a). McAllister does not contest Transamerica’s proof on this element, and
the district court properly concluded Transamerica had met its burden.
3. Discretion and Independent Judgment
Finally, Transamerica must prove McAllister’s performance of her primary
duty included “work requiring the exercise of discretion and independent judgment.”
§§ 541.2(a), 541.2(e)(2), 541.214(a). McAllister’s case rests on Transamerica’s
inability to prove this element. McAllister argues she did not exercise any discretion
or independent judgment, but simply was skilled in following detailed claims
manuals.
“In general, the exercise of discretion and independent judgment involves the
comparison and the evaluation of possible courses of conduct and acting or making
a decision after the various possibilities have been considered.” § 541.207(a). The
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term discretion and independent judgment “implies that the person has the authority
or power to make an independent choice, free from immediate direction or
supervision and with respect to matters of significance.” Id. However, it “does not
necessarily imply that the decisions made by the employee must have a finality that
goes with unlimited authority and a complete absence of review. The decisions made
as a result of the exercise of discretion and independent judgment may consist of
recommendations for action rather than the actual taking of action.” § 541.207(e)(1).
Employees make decisions as to matters of significance when they “exercise authority
within a wide range to commit their employer in substantial respects financially or
otherwise.” § 541.207(d)(2).
McAllister claims she had no discretion to disregard state law or the claims
manuals, but she focuses on the wrong issue. See Murray v. Stuckey’s, Inc., 50 F.3d
564, 570 (8th Cir. 1995) (recognizing companies have standardized procedures and
policies and actively supervise managers, which may circumscribe, but not eliminate,
discretion). The issue is not whether she had discretion to disregard state law or the
claims manuals, but whether her primary duty included the exercise of discretion and
independent judgment.
Just because McAllister was required to follow detailed manuals does not mean
she did not exercise discretion and independent judgment. See Dymond v. United
States Postal Serv., 670 F.2d 93, 95-96 (8th Cir. 1982) (holding postal inspectors
were exempt administrative employees, even though they were required to follow
procedures, standards and policies of a detailed field manual, because they still
exercised discretion and independent judgment). The claims manuals themselves
emphasized that a rule book could not guide most of the claims work, and employees
must use “good common sense judgment.” See, e.g., Haywood, 121 F.3d at 1073 &
n.8 (stating employee’s job description and deposition testimony showed she
exercised discretion and independent judgment, even though the employee’s
supervisors reviewed her work and she was subject to guidelines, which told
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employees to “just use [their] common sense” when dealing with certain problems).
One Transamerica manual also directed employees to “bend over backward” to assist
insureds and to seek ways to pay claims. McAllister also directed investigations of
claims, and the claims manual gave McAllister discretion on whether to pursue a
fraudulent claim investigation. McAllister clearly had the authority to approve
contestable claims up to $150,000 and incontestable claims up to $250,000, and had
disbursement authority up to $50,000, which are matters of significance as defined
by the regulations. McAllister claimed she was effective in interpreting contract law
and insurance statutes, which involved exercising her independent judgment.2
McAllister independently had to compare and evaluate possible courses of action, and
her decisions or recommendations went to matters of significance for the insurance
company. We agree with the district court that McAllister’s primary duties included
the exercise of discretion and independent judgment.
McAllister claims the district court erroneously failed to consider certain DOL
regulations when analyzing whether McAllister exercised discretion and independent
judgment. We disagree, but recognize the DOL regulations caution against
misapplying the term discretion and independent judgment by failing to distinguish
it from simply using skills. 29 C.F.R. § 541.207(c)(1). For instance, “[a]n employee
who merely applies his knowledge in following prescribed procedures or determining
which procedure to follow . . . is not exercising discretion and independent judgment,
. . . even if there is some leeway in reaching a conclusion.” Id. “[O]rdinary
inspection work” is a typical example. § 541.207(c)(2).
The regulations also caution against classifying an examiner or grader as
exercising discretion and independent judgment because, “after continued reference
to the written standards, or through experience, the employee acquires sufficient
2
See, e.g., Olander v. State Farm Mut. Auto. Ins. Co., 317 F.3d 807 (8th Cir.
2003) (en banc) (where our own court is divided over how to interpret a contract).
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knowledge so that reference to written standards is unnecessary. The substitution of
the employee’s memory for the manual of standards does not convert the character
of the work performed to work requiring the exercise of discretion and independent
judgment.” § 541.207(c)(3). For examples of these types of employees, the
regulations list graders of lumber, § 541.207(c)(4), personnel clerks who screen
applications, § 541.207(c)(5), and comparison shoppers of retail stores who report to
buyers, § 541.207(c)(6).
These regulations apply to employees who develop skills based on specific
guidance and then simply apply those skills based on memory, without exercising any
discretion or independent judgment. See Haywood, 121 F.3d at 1073 (“Many of these
examples involve an employee who must apply a well-established, specific and
constraining standard in assessing the situations he faces in his daily work.”).
McAllister did not simply apply specific and constrained standards, but exercised her
discretion and made independent decisions based on what confronted her.
Finally, McAllister claims the district court failed to determine the percentage
of time McAllister spent on discretionary activities. The short test for administrative
employees does not require such a finding. See Dymond, 670 F.2d at 95 (employees
“qualify for the administrative employee exemption if they meet the more liberal
standard requiring that their duties merely ‘include’ work requiring the exercise of
discretion and independent judgment.”).3
3
If McAllister had contested the second element (i.e., whether McAllister’s
primary duty consisted of the performance of office work “directly related to
management policies or general business operations of [Transamerica or its]
customers”), the percentage of McAllister’s time devoted to administrative duties
may have been relevant. See Spinden v. GS Roofing Prods. Co., 94 F.3d 421, 427
(8th Cir. 1996) (concluding employee’s primary duty satisfied second element, even
though the district court, after a trial, found that eighty to ninety percent of the
employee’s tasks were routine and nondiscretionary); 29 C.F.R. §§ 541.103 (rule of
thumb is that primary duty constitutes over fifty percent of an employee’s time),
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B. Post-Judgment Motion
In opposing Transamerica’s summary judgment motion, McAllister submitted
forty pages of e-mail evidence to the district court. The district court, in a detailed,
114-page opinion, considered all of McAllister’s evidence and then granted summary
judgment to Transamerica. McAllister then moved to file seven additional pages of
e-mail evidence inadvertently omitted from her prior forty-page e-mail submission.
The district court denied her motion, and we review this denial for an abuse of
discretion. Peters v. Gen. Serv. Bureau, Inc., 277 F.3d 1051, 1057 (8th Cir. 2002).
The district court stated the omitted e-mail was not admissible, and would not have
changed the court’s summary judgment ruling. On appeal, McAllister cites no
authority to support her contention the district court abused its discretion. Based on
the record, we find no abuse of discretion.4
III. CONCLUSION
Because McAllister was an administrative employee exempt from the FLSA’s
overtime requirements, we affirm the district court’s entry of summary judgment in
Transamerica’s favor. We also affirm the district court’s denial of McAllister’s post-
judgment motion.
541.206 (primary duty). Similarly, the percentage of McAllister’s time devoted to the
exercise of discretion and independent judgment may have been relevant if we had
been called upon to apply the long test. § 541.2(b) (long test covers employee who
“customarily and regularly exercises discretion and independent judgment”).
4
McAllister’s motion appears to be a Rule 59(e) motion to alter or amend the
judgment, which does not allow arguments or evidence to be presented after judgment
when the argument or evidence could have been presented earlier. Fed. R. Civ. P.
59(e); Peters, 277 F.3d at 1057; Garner v. Arvin Indus., Inc., 77 F.3d 255, 258-59 (8th
Cir. 1996) (affidavits not in record when district court made summary judgment
ruling not allowed under Rule 59(e)). Regardless of the type of motion, nothing
indicates the district court abused its discretion in denying McAllister’s post-
judgment motion.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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