Chapter 33



Chapter 33

Employment and

Labor Law

Case 33.1

271 Neb. 373, 712 N.W.2d 226, 152 Lab.Cas. P 60,212, 24 IER Cases 836

Rebecca WENDELN, appellee,

v.

THE BEATRICE MANOR, INC., appellant.

No. S-05-188.

April 7, 2006.

, C.J., , , , , and MILLER-LERMAN, JJ., J.

NATURE OF CASE

The primary issue presented in this appeal is whether we should recognize a public policy-based cause of action for retaliatory discharge when an employer discharges an employee for making a report to the Nebraska Department of Health and Human Services (DHHS) as mandated by the Adult Protective Services Act (APSA), to (Reissue 1995 & Cum.Supp.2004).

FACTUAL BACKGROUND

Rebecca Wendeln, a certified nursing assistant, began working at The Beatrice Manor, Inc. (Beatrice Manor), in May 2000 as a staffing coordinator. A particular patient at Beatrice Manor was wheelchair-bound, and it was Wendeln's understanding that any time the patient was lifted or transferred, such transfer needed to be done by two persons and with a gait belt (an ambulatory aid used to transfer or mobilize patients). In December 2001, a “very upset” medical aide approached Wendeln, describing that *376 approximately 2 weeks prior, this patient had been improperly moved and had fallen and bruised herself. The aide reported that she had offered to assist another aide in the transfer of the patient, but that the other aide had refused to let her help. The next thing the aide observed was the patient on the floor with no gait belt in sight. The aide told Wendeln that she had informed the administrator and the acting director of nursing about the incident, but that the aide did not believe that it had been properly reported to DHHS or was otherwise being taken care of.

That same day, a licensed practical nurse at Beatrice Manor also approached Wendeln about the incident, expressing concern that nothing was being done about it. The nurse did not witness the incident, but was a relative of the patient. In response to these reports, Wendeln approached another aide who was working the day of the incident to confirm that it had actually occurred. That aide had been called to help the patient off of the floor and told Wendeln that pain medication had been given to the patient as a result of the fall. Wendeln then called DHHS to make sure that it had been reported. When DHHS indicated that no incident had been reported, Wendeln made a report.

A few days after her report to DHHS, Wendeln was called into her supervisor's office. Wendeln said that her supervisor was very angry with her after having learned that Wendeln had made a report with DHHS without having first spoken to her. Wendeln testified that her supervisor was “very aggressive” and made her feel scared and intimidated. Wendeln, who was 21 years old at the time, asked for some time off work because she “didn't know how [she] was going to face [her supervisor] after the way she had aggressively approached [her].” Her supervisor granted her the time off. Wendeln testified that during this time, she felt very nervous and upset. She explained that she had never before been “attacked” in such a manner by either a peer or a supervisor. Upon Wendeln's return to work on her next scheduled workday, Wendeln found that the locks to her office had been changed. Eventually, her supervisor appeared and told Wendeln to follow her to her office. There, Wendeln was asked to resign, and when she refused, she was told **233 she was fired. Her official termination date was January 2, 2002.

*377 Wendeln testified that after her discharge from employment, even though she had a close family friend as a patient at Beatrice Manor, she never felt comfortable enough to be able to return to visit. She explained that on the one occasion she had returned to the facility to pick up her W-2 form, her former supervisor had come out of the building and stood watching her park her car. Thereafter, the supervisor stood by the nurses' station as Wendeln picked up the W-2 form, making Wendeln feel uncomfortable.

After her discharge from employment at Beatrice Manor, Wendeln was unable to find other employment in Beatrice, where she lived near her mother. She eventually found work in Lincoln.

PROCEDURAL HISTORY

On January 27, 2003, Wendeln filed this action against Beatrice Manor. Her original action sought declaratory, injunctive, and monetary relief under the whistleblower provisions of the Nebraska Fair Employment Practice Act (NFEPA), et seq. (Reissue 1998), as actionable under (Reissue 1997). However, she was allowed to amend her complaint to add the allegation that she suffered from wrongful termination in contravention of the public policy of the State of Nebraska, as articulated in the APSA. On April 5, 2004, Beatrice Manor, pursuant to leave granted by the court, filed an amended answer alleging for the first time that Wendeln's claims were barred by the 300-day statute of limitations period set forth in . The court granted a motion by Wendeln to dismiss her first cause of action which alleged relief under the NFEPA and , reasoning that essentially the same cause of action was pending before the Nebraska Equal Opportunity Commission. The court overruled respective motions for summary judgment by Wendeln and Beatrice Manor, and the case went to trial before a jury on Wendeln's second cause of action alleging retaliatory discharge in contravention of the public policy mandate expressed by the reporting provisions of the APSA.

Prior to trial, the court overruled Beatrice Manor's motion in limine for an order precluding Wendeln from making any reference to damages in the form of pain and suffering, loss of enjoyment of life, or humiliation. Beatrice Manor's motion was *378 based on its argument that Wendeln's claim sounded in contract and that noneconomic damages were not recoverable as a matter of law. The jury was eventually instructed that it “must determine the amount of any noneconomic damages sustained by [Wendeln] such as mental suffering, emotional distress and humiliation.” (Emphasis in original.) Beatrice Manor objected to the instruction on the ground that Wendeln's cause of action sounded in contract and on the alternative ground that “there has been no evidence that [Wendeln] did sustain the mental suffering, emotional distress and humiliation as a result of this incident, as required by law.”

The court also refused Beatrice Manor's proposed jury instruction that Wendeln had the burden to prove that she “acted in good faith and upon reasonable cause in reporting the suspected abuse.” Over Beatrice Manor's objection, the jury was instructed only that it must find that Wendeln “acted upon reasonable cause in reporting the suspected abuse.”

The jury returned a verdict in favor of Wendeln, finding actual damages in the amount of $4,000 and noneconomic damages in the amount of $75,000, for a total **234 of $79,000. Beatrice Manor moved for a new trial and remittitur, which alleged that the noneconomic damages granted Wendeln were clearly excessive and made under the influence of passion or prejudice.

ASSIGNMENTS OF ERROR

Beatrice Manor argues, summarized and restated, that the trial court erred in (1) failing to find that the applicable statute of limitations was the 300-day period set forth in , rather than the general 4-year limitation period found in (Reissue 1995); (2) failing to find as a matter of law that Wendeln's public policy retaliatory discharge claim sounded in contract and, therefore, noneconomic damages were not recoverable; (3) instructing the jury that it was Wendeln's burden to prove that her report to the DHHS was made upon reasonable cause, without also instructing the jury that she must prove the report was made in “good faith”; (4) instructing the jury on noneconomic damages when the evidence was insufficient to show that Wendeln suffered “severe” emotional distress as a result of her discharge; and (5) failing to set aside the jury's verdict of noneconomic damages as excessive.

*379 Beatrice Manor also assigns as error the trial court's failure to grant Beatrice Manor summary judgment on the ground that no material issue of fact existed as to Wendeln's lack of good faith and reasonable cause in reporting the alleged abuse to DHHS. However, the issue of whether a denial of summary judgment should have been granted generally becomes moot after a full trial on the merits. . Moreover, Beatrice Manor did not preserve any issue as to the sufficiency of the evidence regarding whether Wendeln acted upon reasonable cause because it failed to make a motion for directed verdict at the close of the evidence, or any other motion questioning the sufficiency of the evidence in that respect. We do not, therefore, consider this issue. As to good faith, we determine in this opinion that “good faith” is not a requirement in reporting under the APSA.

STANDARD OF REVIEW

Which statute of limitations applies is a question of law that an appellate court must decide independently of the conclusion reached by the trial court. . A jury verdict will not be disturbed on appeal as excessive unless it is so clearly against the weight and reasonableness of the evidence and so disproportionate as to indicate that it was the result of passion, prejudice, mistake, or some means not apparent in the record, or that the jury disregarded the evidence or rules of law. . A motion for new trial is to be granted only when error prejudicial to the rights of the unsuccessful party has occurred. Id.

Whether the jury instructions given by a trial court are correct is a question of law. .

ANALYSIS

Statute of Limitations

We first address Beatrice Manor's assertion that Wendeln's claim is barred by the applicable statute of limitations, which it asserts is the 300-day period stated in the NFEPA. The trial court *380 determined that Wendeln's action was **235 governed by the general 4-year statute of limitations set forth by .

In determining which statute of limitations applies to any given cause of action, we bear in mind that a special statute of limitations controls and takes precedence over a general statute of limitations because the special statute is a specific expression of legislative will concerning a particular subject. Andres v. McNeil Co., supra. Moreover, the essential nature of a proceeding may not be changed, thereby lengthening the statute of limitations, merely by denominating it as something other than what it actually is. . To determine the nature of an action, a court must examine and construe a complaint's essential and factual allegations by which the plaintiff requests relief, rather than the legal terminology utilized in the complaint or the form of a pleading. See . However, just because there may be some overlap between relevant facts, it does not change the conclusion that various causes of action are stated based on separate and distinct factual occurrences. See .

Beatrice Manor asserts that although Wendeln denominates her cause of action as a retaliatory discharge action in contravention of public policy, it remains in essence an employment discrimination case under the NFEPA brought directly for judicial relief against the former employer pursuant to . In , we stated that NFEPA actions brought pursuant to were governed by the 300-day statute of limitations period found in of the NFEPA.

Wendeln asserts that her amended complaint states only a cause of action for retaliatory discharge in violation of public policy, which constitutes a cause of action separate and distinct from a claim based on the NFEPA. Indeed, Wendeln argues that in her case, a careful examination of the essential allegations of her complaint would reveal that she does not state a cause of action under the NFEPA at all.

In Adkins, the plaintiff alleged that the decision of his employer not to hire him for a specific position was substantially *381 motivated by racial or retaliatory animus and that these actions constituted illegal discrimination in violation of the NFEPA. His claims under the NFEPA, however, were not brought pursuant to the NFEPA, which provides administrative relief from employment discrimination. Rather, they were brought pursuant to , which authorizes judicial relief for a deprivation of rights, privileges, or immunities secured by the U.S. Constitution or the Constitution and laws of the State of Nebraska.

We ultimately rejected the plaintiff's argument that since contained no statute of limitations, his claim was governed by the 4-year catchall limitations period set forth in (Reissue 1995). Instead, we held that “ provides the applicable statute of limitations (i.e., within 300 days after the occurrence of the alleged unlawful employment practice) for [N]FEPA claims brought pursuant to .” . We noted that by determining the 300-day statute of limitations under to be controlling, we avoided “using to inadvertently create expanded rights (other than an alternative civil avenue of recovery) not present in an **236 administrative [N]FEPA claim.” . This was important because we had previously held that was “ ‘a procedural statute which does not create any new substantive rights.’ ” (quoting ).

Under the NFEPA, states:

It shall be an unlawful employment practice for an employer to discriminate against any of his or her employees or applicants for employment, for an employment agency to discriminate against any individual, or for a labor organization to discriminate against any member thereof or applicant for membership, because he or she (1) has opposed any practice made an unlawful employment practice by the Nebraska Fair Employment Practice Act, (2) has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under the act, or (3) has opposed any practice or refused to carry out any action unlawful under federal law or the laws of this state.

*382 Section 48-1102(15) defines “[u]nlawful under federal law or the laws of this state shall mean acting contrary to or in defiance of the law or disobeying or disregarding the law.” Wendeln explains that she does not state a claim under the NFEPA insofar as she fails to allege that her discharge from employment was related either to (1) her opposition to any practice made unlawful by the NFEPA; (2) making a charge, testifying, assisting, or participating in any charge, investigation, proceeding, or hearing under the NFEPA; or (3) opposing any practice or refusing to carry out any unlawful action.

Instead, Wendeln asserts that she was discharged in retaliation for reporting a negligent act which was not unlawful. Specifically, she asserts that she was discharged in retaliation for filing a complaint as required by the APSA. makes it a Class III misdemeanor for any person to willfully fail to make any report required by the APSA. provides in part:

When any physician, psychologist, physician assistant, nurse, nursing assistant, other medical, developmental disability, or mental health professional, law enforcement personnel, caregiver or employee of a caregiver, operator or employee of a sheltered workshop, owner, operator, or employee of any facility licensed by the Department of Health and Human Services Regulation and Licensure, or human services professional or paraprofessional not including a member of the clergy has reasonable cause to believe that a vulnerable adult has been subjected to abuse or observes such adult being subjected to conditions or circumstances which reasonably would result in abuse, he or she shall report the incident or cause a report to be made to the appropriate law enforcement agency or to the department.

“Abuse” is defined in § 28-351 as “any knowing, intentional, or negligent act or omission on the part of a caregiver, a vulnerable adult, or any other person which results in physical injury, unreasonable confinement, cruel punishment, sexual abuse, exploitation, or denial of essential services to a vulnerable adult.” “Physical injury” is defined in § 28-363 as “damage to bodily tissue caused by nontherapeutic conduct, including, but not limited to, fractures, bruises, lacerations, internal injuries, or *383 dislocations, and shall include, but not be limited to, physical pain, illness, or impairment of physical function.”

We agree with the trial court's determination that the essential nature of Wendeln's stated cause of action does not lie in the NFEPA, but, rather, lies in the public **237 policy mandate that she alleges is expressed by the APSA. Without making any determination as to the hypothetical complaint which simultaneously states a cause of action under both the civil rights provisions of the NFEPA and under a public policy exception allowing a retaliatory discharge action for an at-will employee, it is clear in this case that not only does the denomination of Wendeln's cause of action accurately reflect its true nature, but that the facts alleged simply do not state a cause of action for a claim under the NFEPA. Wendeln did not allege that she was discharged for opposing any unlawful employment practice, participating in a proceeding under the NFEPA, or opposing or refusing to carry out an unlawful act. Rather, she claimed that her employment was terminated because she did what the law affirmatively required her to do.

As such, , has no bearing to the case at bar. In Adkins, there was no dispute that the employer's conduct violated the NFEPA. The employee in Adkins merely elected the alternative judicial remedy for that conduct claimed to be found in , rather than the administrative remedy found in the NFEPA. Our holding in Adkins narrowly focused on the applicability of the 300-day limitations period to claims under the NFEPA,” and nowhere stated that the 300-day limitations period should apply to any wrongful discharge claim or to any claim cognizable under . Adkins v. Burlington Northern Santa Fe RR. Co., supra. See, also, (statute of limitations for NFEPA claims brought pursuant to is 300 days). Thus, while it may be argued that Wendeln's claim falls under the broad language of , given the strictly procedural nature of the statute, such fact alone is of little significance. We conclude that the 300-day NFEPA statute of limitations is inapplicable to Wendeln's public policy retaliatory discharge claim currently before us.

*384 Yet despite a line of cases allowing limited retaliatory discharge claims for discharge in contravention of a clear mandate of public policy, this court has never clearly expressed exactly what statute of limitations period is applicable to these claims. In , we held that an employee's wrongful discharge claim was governed by the statute of limitations on written contracts. However, the plaintiff's retaliatory discharge action in Poppert was based upon a collective bargaining agreement. An examination of authority from other jurisdictions reveals that generally, when a wrongful discharge claim is based on public policy, and not on an implied or actual employment contract, such claim sounds in tort.

Thus, for example, in , the court found that a public policy retaliatory discharge claim arising out of the employee's filing for workers' compensation benefits sounded in tort and not in contract. The court noted that generally, a breach of contract may be said to be a material failure of performance of a duty arising under or imposed by agreement. A tort, on the other hand, is a violation of a duty imposed by law, a wrong independent of contract. This is not to say, the court further explained, that a tort cannot be committed by parties to a contract. “ ‘The question to be determined ... is whether the actions or omissions complained of constitute a violation of duties imposed by law, or of duties arising by virtue of the alleged expressed agreement between the parties.’ ” .

**238 The court in Murphy thus focused on the fact that the employee's retaliation claim was based upon the public policy implicit in the workers' compensation statute, and the employee did not claim the existence of a contract of employment. His termination of employment did not breach any express or implied contractual obligations, but, rather, it was recognized that he was an employee at will who could be terminated at any time with or without cause. Therefore, the court concluded that the employee's cause of action arose only from a violation of a duty imposed by law, that duty imposed by the public policy of the workers' compensation statute. Accordingly, such action clearly sounded in tort. Id. See, also, e.g., *385; ; ; ; ; ; ; ; ; . But see, e.g., .

We agree that a public policy-based retaliatory discharge claim is based in tort. Accordingly, such a claim is governed by the general 4-year statute of limitations period found in . Wendeln's claim is not barred by the applicable statute of limitations.

Public Policy Exception

The public policy upon which Wendeln relies for her retaliatory discharge claim has not yet been recognized by this court. Beatrice Manor asserts that unlike other retaliatory discharge cases decided by this court, “[t]here is no clear legislative enactment declaring an important public policy with such clarity as to provide a basis for [Wendeln's] civil action for wrongful discharge.” Brief for appellant at 27-28.

The clear rule in Nebraska is that unless constitutionally, statutorily, or contractually prohibited, an employer, without incurring liability, may terminate an at-will employee at any time with or without reason. . We recognize, however, a public policy exception to the at-will employment doctrine. Id. Under the public policy exception, we will allow an employee to claim damages for wrongful discharge when the motivation for the firing contravenes public policy. Id. In , we explained, however, that it was *386 important that abusive discharge claims of employees at will be limited to “manageable and clear standards.” Thus, “[t]he right of an employer to terminate employees at will should be restricted only by exceptions created by statute or to those instances where a very clear mandate of public policy has been violated.” Id.

In Jackson v. Morris Communications Corp., supra, we held that an employee could state a cause of action for retaliatory discharge based upon the allegation that the employee was terminated from her employment because she filed a workers' compensation claim. In so doing, we recognized that Nebraska law neither specifically prohibited an employer from discharging an employee for filing a workers' **239 compensation claim, nor specifically made it a crime for an employer to do so. Nevertheless, we concluded that “the general purpose and unique nature of the Nebraska Workers' Compensation Act itself provides a mandate for public policy.” . We explained that the Nebraska Workers' Compensation Act was meant to create substantive rights for employees and that such beneficent purpose would be undermined by failing to adopt a rule which allows a retaliatory discharge claim for employees discharged for filing a workers' compensation claim. This is because were we not to recognize such a public policy exception to the employment-at-will doctrine, the substantive rights granted by the Nebraska Workers' Compensation Act could simply be circumvented by the employer's threatening to discharge the employee if he or she exercised those rights.

In , the Wisconsin Supreme Court applied similar principles in determining whether nursing home employees could state a claim of retaliatory discharge for reporting the alleged inappropriate care of patients. The bureau in charge of investigating reports of abuse and neglect in nursing home care ultimately concluded the investigation without issuing any citations. The law provided that any person who failed to act through reporting or taking some other form of action with regard to abuse or neglect of a nursing home patient was subject to a punishment ranging from a Class B misdemeanor to a Class D *387 felony, but did not specifically provide for a right of action for discharge in retaliation for such reporting.

The court in Hausman concluded that where the law imposes an affirmative obligation upon an employee to prevent abuse or neglect of nursing home residents, and the employee fulfills that obligation by reporting the abuse, an employer's termination of employment for fulfillment of the legal obligation exposes the employer to a wrongful termination action under the “fundamental and well-defined public policy of protecting nursing home residents from abuse and neglect.” . The court generally abided by the principle that it would not protect an employee from discharge for “merely engaging in praiseworthy conduct consistent with public policy.” . However, it concluded that the mandatory reporting in issue went well beyond “ ‘merely praiseworthy conduct.’ ” . The court explained that “[b]y applying the public policy exception to the situation presented here, employees would be relieved of the onerous burden of choosing between equally destructive alternatives: report and be terminated, or fail to report and be prosecuted.” . See, also, ; .

We agree with the reasoning expressed above and find that the purpose of the APSA would be circumvented if employees mandated by the APSA to report suspected patient abuse could be threatened with discharge for making such a report. The Legislature articulates public policy when it declares certain conduct to be in violation of the criminal law. See, ; ; . The APSA makes a clear public policy statement**240 by utilizing the threat of criminal sanction to ensure the implementation of the reporting provisions set forth to protect the vulnerable adults with which the APSA is concerned. Thus, we determine that a public policy exception to the employment-at-will doctrine applies to allow a *388 cause of action for retaliatory discharge when an employee is fired for making a report of abuse as mandated by the APSA. Having made such a determination, we examine Beatrice Manor's remaining assignments of error regarding “good faith” and noneconomic damages.

Good Faith

Beatrice Manor asserts that pursuant to Schriner v. Meginnis Ford Co., supra, if we recognize a retaliatory discharge claim for reporting abuse under the APSA, then such reporting must be made in “good faith” in order to state a cause of action. In Schriner, we stated that an action for wrongful discharge for reporting an employer's suspected criminal activities will lie only when the employee acts in good faith and upon reasonable cause in reporting his employer's suspected violation of the criminal code. Beatrice Manor asserts that the trial court erred in failing to recognize the good faith requirement when it refused to give the jury Beatrice Manor's proferred instruction that Wendeln had the burden to prove, by the greater weight of the evidence, that she “acted in good faith and upon reasonable cause in reporting the suspected abuse.” The jury was ultimately only charged that it must find that Wendeln “had reasonable cause to believe that a vulnerable adult had been subjected to abuse.”

Whether the jury instructions given by a trial court are correct is a question of law. . To establish reversible error from a court's failure to give a requested jury instruction, an appellant has the burden of showing that (1) the tendered instruction is a correct statement of the law, (2) the tendered instruction was warranted by the evidence, and (3) the appellant was prejudiced by the court's failure to give the requested instruction. . We agree with the trial court that in order for a retaliatory discharge action to lie against an employer for discharging an employee in retaliation for the mandatory filing of a report of patient abuse pursuant to , such report must be based upon reasonable cause. explicitly conditions its mandate to report upon the employee's having “reasonable cause *389 to believe that a vulnerable adult has been subjected to abuse or observes such adult being subjected to conditions or circumstances which reasonably would result in abuse.” (Emphasis supplied.) It would follow that a discharge cannot be in violation of the public policy underlying the mandatory reporting of the APSA unless the APSA requires the reporting in question.

However, in specifying the standard which the employee must meet in order for an employee to fall under the mandatory reporting provisions, the APSA makes no mention of “good faith.” We find no reason to write such an additional requirement into the public policy expressed by the APSA. Rather, under the language of the APSA, the reporting itself is broadly encouraged with the only caveat being that it be based upon a reasonable cause to believe that a vulnerable adult has been subjected to abuse or subjected to conditions or circumstances which reasonably would result in abuse. Such broadly encouraged reporting simply begins a further investigatory process which may or **241 may not ultimately result in a conclusion that the abuse actually occurred. We find that Beatrice Manor's assignment of error as to the failure to instruct the jury as to “good faith” is without merit.

Noneconomic Damages

Finally, Beatrice Manor makes several assignments of error based upon its assertion that noneconomic damages are not recoverable as a matter of law in the type of retaliatory discharge action here presented or, alternatively, that there was insufficient evidence to support any finding of such damages. We first address whether, as a matter of law, noneconomic damages are recoverable in a public policy-based retaliatory discharge claim.

The issue of whether noneconomic damages are recoverable in a public policy-based retaliatory discharge claim presents a question of law, which an appellate court is obligated to reach a conclusion independent of the determination reached by the trial court. See . Beatrice Manor's argument that as a matter of law, noneconomic damages are not recoverable in Wendeln's retaliatory discharge action is predicated on its assertion that “[a]n action for wrongful discharge is in reality an action for *390 breach of contract.” Brief for appellant at 33. Having already resolved this issue to the contrary conclusion that this action is an action in tort, we find Beatrice Manor's argument to be without merit.

In Nebraska, we have allowed plaintiffs in other types of tort actions to attempt to recover damages for mental suffering. See, e.g., ; ; ; . We have not specifically addressed whether such damages are recoverable in actions claiming the tort of retaliatory discharge in contravention of public policy. However, it appears that the majority of other jurisdictions addressing this issue have explicitly recognized that an employee may recover damages for mental suffering in a wrongful discharge case, so long as the action lies in a public policy tort action, and not upon a contract of employment. See, ; ; ; ; ; ; ; ; . Compare, e.g., ; ; ; ; .

The court in , explained that it could think of “no logical reason why a wrongfully discharged employee's damages should be limited to out-of-pocket loss of income, when the employee also suffers causally connected emotional harm.” The court noted *391 that it would not be unusual for a wrongful discharge to not only cause monetary loss, but also **242 mental suffering, elaborating that “ ‘[h]umiliation, wounded pride, and the like may cause very acute mental anguish.’ ” Id. The court thus concluded that the same public policy that justified the underlying retaliatory discharge claim also justified a recovery for the employee's complete injury and that “fairness alone justifies the allowance of a full recovery in this type of a tort.” Id.

We hold that, as a matter of law, damages for mental suffering are recoverable in a retaliatory discharge action brought by a former at-will employee alleging that the discharge violated a clear mandate of public policy. We next consider whether the evidence was sufficient to support the jury's apportionment of such damages in this case.

Beatrice Manor argues that Wendeln failed to sustain her burden of proof of any such damages. Therefore, the trial court erred in submitting the issue of noneconomic damages to the jury and in failing to set aside the jury's verdict either by remittitur or by granting Beatrice Manor's motion for new trial. The amount of damages to be awarded is a determination solely for the fact finder, and its action in this respect will not be disturbed on appeal if it is supported by evidence and bears a reasonable relationship to the elements of the damages proved. .

The crux of Beatrice Manor's argument that there was insufficient evidence of noneconomic damages lies in its legal assumption that in order to be recoverable, Wendeln's mental distress must be “ ‘so severe that no reasonable person could have been expected to endure it’ ” and that “ ‘the emotional anguish or mental harm must be medically diagnosable and must be of sufficient severity that it is medically diagnosable.’ ” Brief for appellant at 38 (quoting ). Beatrice Manor thus emphasizes that Wendeln failed to present evidence of “severe emotional distress,” stating as follows:

For example, she offered no evidence of a change in personality as a result of her termination, erosion of her relationship with her parents or friends, inability to work, inability to obtain employment, inability to participate in activities *392 she previously enjoyed, difficulty sleeping or eating, continuous crying, nightmare, nausea, medical attention or psychological counseling as the result of her alleged mental suffering or emotional distress, etc.

Brief for appellant at 39. The cases upon which Beatrice Manor relies for its assertion that Wendeln was required to show that her mental suffering was medically diagnosable and severe are inapposite to the case at bar because they involve actions for intentional or negligent infliction of emotional distress. Wendeln's action is for retaliatory discharge, and while she claims emotional distress as an element of her damages, she does not attempt to set forth a separate cause of action for negligent or intentional infliction of emotional distress.

In , we recently explained that there is a distinction between proof requirements in an action for negligent or intentional infliction of emotional distress and damages for mental suffering sought “ ‘where other interests have been invaded, and tort liability has arisen apart from the emotional distress.’ ” (Quoting , comment b. (1965).) We thus held that a person suing on a theory of battery need not prove severe emotional distress in order to recover compensatory damages for such an injury, reasoning that “ ‘severe **243 emotional distress' is not an element of the tort of battery.” . Instead, we concluded that the evidence was sufficient to submit damages for mental suffering to the jury where the plaintiff testified that she was ill for 2 days, continued to suffer emotionally, and had a lingering fear resulting from the battery, despite the fact that she had never sought medical treatment or counseling. See, also, ; .

As in the tort of battery considered in Kant v. Altayar, supra, and unlike the torts of negligent or intentional emotional distress, severe emotional distress is not an element of the tort of retaliatory discharge in contravention of public policy. Accordingly, there is no threshold limitation based upon the degree of severity of the mental suffering, nor is it necessary to *393 show that the plaintiff sought medical treatment or counseling for the mental suffering in order for it to be recoverable as past and present damages. We find that mental suffering is simply an aspect of providing full recovery for the wrong, where present, and there is no rational reason to confine such full recovery to those former employees whose mental suffering has been severe. That having been determined, we consider whether the evidence was sufficient to support the damages for mental suffering granted to Wendeln by the jury. In awarding damages for mental suffering, the fact finder must rely upon the totality of the circumstances surrounding the incident; the credibility of the evidence and the witnesses and the weight to be given all of these factors rest in the discretion of the fact finder. See . Accordingly, an appellate court is reluctant to interfere with the judgment of the fact finder in awarding damages for mental anguish, where the law provides no precise measurement. .

In considering whether the trial court erred in failing to grant Beatrice Manor's motions for remittitur and for new trial, we first note that Beatrice Manor asks us to consider the fact that Wendeln's closing argument asked the jury to assess an amount of damages that “sends a message” to Beatrice Manor. Specifically, Wendeln's attorney argued that the jury “must assess the amount of damages that makes [Wendeln] whole, that makes up for the humiliation, the mental suffering, loss of enjoyment of life, the things that went along with this horrible experience.” Counsel then proceeded to state: I encourage you to pick a figure that sends a message to Beatrice Manor that if you do this, we'll make sure [Wendeln] gets made whole. And that figure's up to you. This is a-Beatrice Manor is a corporation, and to make a corporation know that you have to pay what's right and what makes somebody whole, it's a little bit different. Pick a range, and it's your range, but I'd suggest a range somewhere between $25,000 and $125,000. Pick a figure that you think lets this corporation know that this was not right and it cannot be done.

*394 Beatrice Manor acknowledges that it made no objection to these statements, but asks this court to consider them simply as “further evidence that the jury relied on passion and prejudice in support of its verdict.” Brief for appellant at 43.

In order to preserve, as a ground of appeal, an opponent's misconduct during closing argument, the aggrieved party must have objected to the **244 improper remarks no later than at the conclusion of the argument. ; . One may not waive an error, gamble on a favorable verdict, and, upon obtaining an unfavorable result, assert the previously waived error. Wolfe v. Abraham, supra. Beatrice Manor, although attempting to innocently frame this claim into its argument that the jury's verdict was excessive, is still attempting to press consideration of the alleged impropriety and prejudicial nature of statements made during closing argument. Since such statements were not properly objected to, we do not consider them in this review.

In arguing that the jury's verdict was excessive, Beatrice Manor also relies on this court's opinion in , wherein we affirmed the trial court's grant of a new trial on the basis that the damages awarded were so excessive as to indicate that they were the result of passion or prejudice. The underlying claims were for assault and battery and for false imprisonment. The plaintiff was awarded $250,000 and $50,000, respectively, for the two causes of action, despite the fact that there was no evidence of medical bills or evidence of permanent injury or inability to work, and little evidence of emotional distress.

Beatrice Manor specifically focuses on our statement in Holmes as to the false imprisonment action that “[t]he record reflects that [the plaintiff] experienced a demeaning, humiliating, and anxiety-inducing incident and aftermath. However, there was no medical testimony by a physician or any other health professional regarding [the plaintiff's] asserted mental distress.” . Holmes, however, is clearly inapplicable to the case at bar. Most importantly, Holmes involved the review of a trial court's granting of a new trial, which, as we took pains to point out, involves a different *395 analytical framework than that for the review of a jury verdict where no new trial was granted. Here, we give deference to the fact finder in its assessment of these inherently imprecise damages. See, ; .

Wendeln presented evidence of the manner in which she was reprimanded and later fired and how she felt extremely upset, scared, and intimidated as a result. She reported that these feelings lasted not only through her time off before her official discharge, but for a long period of time thereafter. In light of all the evidence presented, we cannot say that the jury's findings were unsupported or bore no reasonable relationship to the evidence. See, e.g., (award of $75,000 in noneconomic damages to former employee, in action for retaliatory discharge, was supported by evidence that employee suffered from embarrassment, depression, and periods of marital discord over financial pressures due to his unemployment). We thus find this assignment of error to likewise be without merit.

CONCLUSION

For the reasons set forth above, we affirm the judgment of the trial court.

Affirmed.

Case 33.2

Slip Copy, 2007 WL 10369 (S.D.Tex.), 153 Lab.Cas. P 35,244, 12 Wage & Hour Cas.2d (BNA) 213

Kathleen MIMS, Kevin Keevican, Bernie Castillo, Cynthia Nerlinger, Michael Terrazas, Chad Knepp, Rolando Chapa, Christina Griffith, Patricia Johnson, and Robin Wright, Plaintiffs,

v.

STARBUCKS CORPORATION and Does 1 through 100, Defendants.

Civil Action No. H-05-0791.

Jan. 2, 2007.

, United States District Judge.

*1 Pending is Defendant Starbucks Corporation's Corrected Motion for Partial Summary Judgment with Respect to the Claims of Kevin Keevican and Michael Terrazas (Document No. 52). After carefully considering the motion, response, reply, and applicable law, the Court concludes the motion should be granted for the reasons that follow.

I. Background

Plaintiffs Kevin Keevican (“Keevican”) and Michael Terrazas (“Terrazas”) (collectively, “Plaintiffs”), who are former Store Managers at Defendant Starbucks Corporation (“Defendant”), claim that they were improperly classified as exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”), . Plaintiffs assert that, despite their “store manager” titles, they were, in reality, “glorified baristas,” and they primarily performed the job duties of these non-exempt, hourly employees. In addition to overtime wages, Plaintiffs seek liquidated damages, injunctive relief, attorneys' fees, and costs.

The Court previously granted an agreed motion to dismiss the claims of Plaintiffs Kathleen Mims and Christina Griffith with prejudice. See Document Nos. 63 & 64. In addition to Plaintiffs Keevican and Terrazas, former Starbucks Store Managers Bernie Castillo, Cynthia Nerlinger, Chad Knepp, Rolando Chapa, Patricia Johnson, and Robin Wright remain as Plaintiffs, but Defendant has not moved for summary judgment as to any except Keevican and Terrazas.

In their complaint, Plaintiffs allege that “barista” duties include activities such as “waiting on customers, making drinks for customers, serving customers, operating the cash register, ensuring that the store remained clean and orderly, and cleaning and maintaining store equipment.” See Document No. 44 ¶ 19.

Defendant operates retail stores that sell coffee and related products. Keevican was hired as an entry-level barista in March, 2000. Document No. 54 ex. A at 13. Keevican, who had prior management experience, was promoted to shift supervisor, assistant store manager, and then, in November, 2001, to store manager. See id. at 13-14, 17-18, 160-63 & ex. A-10. According to Keevican, in his first Starbucks store manager position, he “improved [the] store substantially,” and he won a retail sales award and improved pastry sales by 200 percent. Id. at 31. Keevican was then “solicited” to work as manager for a larger Starbucks store, where he increased annual revenues from $500,000 to $1.4 million in “10 or 11 months” and again won a retail award. Id. at 30-32. As a store manager, Keevican worked an average of 70 hours per week. See Document No. 61 ex. B ¶ 3. His starting base salary as store manager was approximately $650 per week, and it increased to almost $800 per week (not including bonuses). See Document No. 54 ex. A at 22 & ex. C ¶ 3. Keevican reported to a district manager, who supervised from 9 to 13 different stores in the district. See id. ex. A at 258. Keevican resigned from Starbucks in 2004. See id. at 140 & ex. A-9.

Plaintiffs testified in their depositions that baristas earned approximately $240 to $280 per week, and shift supervisors earned approximately $270 to $350 per week. See Document No. 54 ex. A at 263-65; ex. B at 289-90. Plaintiffs received bonuses tied to their stores' customer service and financial performance, as well as for training prospective store managers. See id. ex. A at 22-28; ex. B at 26-29. These bonuses-which were not available to hourly-paid baristas and shift supervisors-comprised between 10 to 20 percent of Plaintiffs' annual income. See id.; ex. C ¶ ¶ 3-4, 7-8. Plaintiffs also received certain fringe benefits, such as life insurance and paid sick leave, which were not available to hourly employees. See id. ex. A at 42; ex. B at 23-24; ex. C ¶ 9.

Terrazas was hired as a Starbucks barista in December 2000, and he was promoted to shift supervisor, assistant store manager, and then to store manager in May, 2002. See id. ex. B at 10, 13-14. Terrazas worked as store manager for two different Starbucks stores, each of which generated between $1.2 and $1.4 million in annual revenue. See id. at 14-15, 36. Prior to October, 2002, Terrazas worked approximately 55 hours per week, and, after October, 2002, he worked an average of 65 hours per week. See Document No. 61 ex. D ¶ 3. Terrazas' s starting base salary as store manager was approximately $615 per week, and it increased to approximately $750 per week. See Document No. 54 ex. C ¶ 4. Terrazas was terminated in 2005. See id. at 15, 279.

*2 It is undisputed that Plaintiffs, as store managers, were the highest-ranking employees in their respective stores, and they “[s]upervised and motivated” staffs of six to 30 Starbucks employees, including entry-level baristas, shift supervisors, and, in certain stores, assistant managers. See Document No. 54 ex. A at 29, 166-67; ex. A-10 at 1; ex. B at 10-14, 36-37, 173; ex. B-10 at 1. Plaintiffs testified that they were responsible for supervising store personnel, “driv[ing] sales” and developing strategies to increase revenues, control costs, and ensure compliance with Starbucks policies. See id. ex. A at 166, 175-76, 221-22, 311-12; ex. B at 155, 163-64, 240, 243. They also oversaw customer service; prepared store reports and communications; processed employee time records, payroll, and inventory counts; ensured the safety of customers and employees; and implemented Starbucks policies and procedures. See, e.g., id. ex. A at 70-71, 177-78, 204, 318-319; ex. B at 217-220, 238-39, 251-52; ex. B-17; ex. B-22. In short, as Terrazas testified during his deposition, Plaintiffs were responsible for “anything that was to go wrong in [their] store[s] and anything that was done correctly.” See id. ex. B at 66.

Defendant now moves for summary judgment, arguing that Plaintiffs were executive employees who were exempt from the FLSA' s overtime provisions as a matter of law.

II. Standard of Review

Rule 56(c) provides that summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” . The moving party must “demonstrate the absence of a genuine issue of material fact.” . Once the movant carries this burden, the burden shifts to the nonmovant to show that summary judgment should not be granted. See A party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials in a pleading, and unsubstantiated assertions that a fact issue exists will not suffice. See (citing ). “[T]he nonmoving party must set forth specific facts showing the existence of a ‘genuine’ issue concerning every essential component of its case.” Id.

In considering a motion for summary judgment, the district court must view the evidence through the prism of the substantive evidentiary burden. See . All justifiable inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. See . “If the record, viewed in this light, could not lead a rational trier of fact to find” for the nonmovant, then summary judgment is proper. (citing On the other hand, if “the factfinder could reasonably find in [the nonmovant's] favor, then summary judgment is improper.” Id. (citing Even if the standards of are met, a court has discretion to deny a motion for summary judgment if it believes that “the better course would be to proceed to a full trial.” .

III. Discussion

A. FLSA Standard

*3 The FLSA requires an employer to pay overtime compensation to any employee who works more than forty hours in a regular workweek. See . The overtime pay requirement, however, does not apply to employees working in a “bona fide executive, administrative, or professional capacity” as defined by regulations promulgated by the Secretary of Labor. See id. § 213(a)(1). As the employer, Defendant has the burden of establishing that Plaintiffs fall within one of these exemptions, all of which are to be narrowly construed against it. See .

New Department of Labor (“DOL”) regulations governing exempt employees became effective in August, 2004. Under the new regulations, an employee qualifies for the executive exemption if: (1) he is paid a salary of not less than $455 per week; (2) he has management as his primary duty; (3) he regularly supervises two or more employees; and (4) he has “the authority to hire or fire other employees or [be someone] whose suggestions and recommendations as to hiring, firing, advancements, [or] promotion ... are given particular weight.” See (revised regulations). The parties are agreed that the only requirement at issue, under both the former and current regulations, is whether Plaintiffs' “primary duty” was one of management.

Plaintiffs worked as store managers both before and after the effective date of the revised regulations. The revised regulations increased the weekly salary requirement and added the fourth requirement. Compare , with id. . The parties are agreed that, under both the former and current regulations, the only issue is whether Plaintiffs' “primary duty” was management.

The regulations define “management” to include activities such as interviewing, selecting, training, and disciplining employees; setting pay rates and hours of work; directing and apportioning employees' work; handling employee grievances; planning and controlling the budget and inventory; ensuring safety of employees or the property; and monitoring legal compliance measures. See . An employee's primary duty is usually “what [the employee] does that is of principal value to the employer, not the collateral tasks that she may also perform, even if they consume more than half her time.” . See also (an employee's “primary duty” means “the principal, main, major or most important duty that the employee performs.”).

Though the “amount of time” spent performing managerial work can be a useful guide in determining an employee's primary duty, time alone is not the sole test. See ; id. § 541.103 (2004). Particularly with managers of retail establishments-who often perform managerial and non-managerial tasks concurrently and perform non-exempt tasks to “teach by example”-the case law is “replete with decisions holding [them] to be exempt, notwithstanding the fact that they spent the majority of their time performing non-exempt tasks or their need to obey corporate policies and/or follow the orders of their corporate superiors.” See (collecting cases). See, e.g., (unpublished) (per curiam) (manager who spent 75 to 80 percent of her time performing basic line-worker tasks held exempt because she “could simultaneously perform many of her management tasks”); (store managers who spent 65 to 90 percent of their time on “routine non-management jobs such as pumping gas, mowing the grass, waiting on customers and stocking shelves” were exempt executives); (granting summary judgment for employer where retail bakery manager spent 90 percent of time on non-exempt tasks).

As Defendant notes, the DOL specifically endorsed this body of case law in issuing the revised regulations. See Final Rule, (noting that “[f]ederal courts have found many employees exempt who spent less than 50 percent of their time performing exempt work,” particularly in restaurant and retail settings, where “an employee can have a primary duty of management while concurrently performing nonexempt duties.”).

*4 Where an employee spends less than 50 percent of his time on management, as both Plaintiffs claim they did, management may still be the employee's primary duty if certain pertinent factors support such a conclusion. The four factors ordinarily considered are: (1) the relative importance of managerial duties compared to other duties; (2) the frequency with which the employee makes discretionary decisions; (3) the employee's relative freedom from supervision; and (4) the relationship between the employee's salary and the wages paid to employees who perform relevant non-exempt work. ; id. § 541.103 (2004). Defendant argues that under these factors, each Plaintiff's primary duty was management, while Plaintiffs argue that the factors and the “sum total of [Plaintiffs'] duties” demonstrate that Plaintiffs' primary duty was “that of a barista, not a manager.”

B. Consideration of the Four Factors

1. Relative Importance of the Managerial Duties

Assessing the importance of Plaintiffs' managerial tasks relative to non-managerial work requires one to consider “the significance of the managerial tasks to the success of the facility.” (quoting ). See also (inquiry hinges on whether employee was “ultimately accountable for the store's success or failure.”). It is uncontroverted that as store managers, Plaintiffs were the highest-ranking employees in their respective stores. See Document No. 54 ex. A at 28 & ex. B at 15-16. Plaintiffs either in their depositions or declarations acknowledged that they performed many management tasks, including: interviewing applicants and deciding whom to hire and promote for certain positions within their authority, training and supervising staff, evaluating staff performance, disciplining some infractions, creating weekly work schedules, assigning staff' s day-to-day tasks, deciding the amount of products to order, overseeing their stores' financial performance, controlling costs, and ensuring compliance with Defendant's policies (ranging from “safety and security policies” to “drink and quality cleanliness standards”). See Document No. 61 ex. B ¶ ¶ 4-6, 8, 10-11 & ex. D ¶ ¶ 4-5, 8, 11-12. See also Document No. 54 ex. A at 166-69, 174-76, 221-222, 311-312 & ex. B at 155, 163-64, 240, 243. In connection with these duties, Plaintiffs attended management meetings away from their stores and were responsible for relaying the information they learned to their numerous subordinates. See id. ex. A at 69-71 & ex. B at 22, 104-05.

Plaintiffs' own testimony underscores the importance of their roles as store managers. Keevican acknowledged that he was “ultimately responsible” for his store's operation, analyzed profit and loss reports, adjusted inventory orders, and monitored labor costs. See id. ex. A at 28, 125, 210-12, 222, 232-33. Keevican testified that he “substantially” improved the first store he ran, and he was later “solicited” to run a larger store, where he increased annual sales from $500,000 to $1.4 million in 10 or 11 months. See id. at 30-31. Keevican started a catering business at his store to increase revenue, and he trained his staff to “treat the people that walk into our café right,” because “making people happy brings in dollars.” See id. at 173-74, 177-79. Terrazas testified that he and “my team” “successfully led the second largest [Starbucks] store in the United States ... to exceed company expectations” in sales, customer service, “promotability,” cash flow, and inventory control. See id. ex. B at 176-77. See also id. ex. B-10 at 1. Terrazas engineered a series of “themed” store promotions to increase sales and involved his store in community events. See id. ex. B at 272-75, 281-82. In sum, Terrazas testified, Plaintiffs were responsible for “anything that was to go wrong in [their] store[s] and anything that was done correctly.” See id. at 66. Cf. (plaintiff's management tasks were comparatively more significant than non-management tasks because “whatever happened at her store, good or bad, she received the praise or blame.”); (same); (although plaintiff store manager spent 95 percent of time on nonexempt tasks, his management tasks were more significant because he was “ultimately accountable for the store's success or failure,” and he testified that he “had a positive impact” on the store and “made a difference”).

The importance of Plaintiffs' managerial tasks is further evidenced by the criteria used to evaluate their job performances. Plaintiffs' Performance Reviews focused on their leadership and overall store performance, not upon their performance of any barista tasks. See Document No. 54 ex. A-8; ex. B at 155-58; ex. B-9. It is also undisputed that Plaintiffs received bonuses tied to their stores' customer service and financial performance, as well as for training prospective store managers. See id. ex. A at 22-28; ex. B at 26-29; ex. C ¶ ¶ 3-4, 7-8.

*5 Plaintiffs in response now maintain that they actually were “glorified baristas,” and they submit two declarations in which they newly contend that they spent 70 to 80 percent of their time performing their “primary dut[ies]” of waiting on customers and making them drinks, covering for absent or tardy baristas, operating the cash register, ensuring the store and restrooms remained clean and orderly, cleaning and maintaining the store equipment, and demonstrating the use of coffee makers and other items sold by Defendant. See Document No. 61 ex. B ¶ 3 & ex. D ¶ ¶ 3, 6. (In Plaintiffs' Collective Action Complaint, First Amended Complaint, Second Amended Complaint, and current Third Amended Complaint, which were successively filed between May, 2005 and February 2006, Plaintiffs each time pled that their managerial duties as store managers required less than “forty percent (40%) of their time.” Plaintiffs' recent declarations make a dramatic further reduction of the time they claim to have spent in management.) Defendant correctly argues that Plaintiffs, in composing post-deposition declarations, “may not create a factual dispute by attempting to recharacterize the nature of [their] position.” (striking plaintiff's affidavit, in which he “attempt[ed] to create a factual question” by newly fashioning himself as a “working foreman” instead of a manager). See also (disregarding affidavit to the extent it conflicted with deposition testimony regarding plaintiff's ability to fire employees).

Nonetheless, and giving full credence to Plaintiffs' declarations, no genuine issue of material fact has been raised regarding the critical importance of their managerial duties relative to their additional barista tasks. Although Plaintiffs now estimate that they spent 70 to 80 percent of their time performing non-exempt barista tasks, the Fifth Circuit has observed that an employee's “primary duty” is not determined “by applying a simple ‘clock’ standard that contrasts the amount of time each day an employee spends on exempt and nonexempt work.” See . Even so, Plaintiffs admittedly spent far larger proportions of their time on managerial tasks than did numerous other retail and restaurant managers who have been found to be exempt as a matter of law. See, e.g., Jackson, 362 F.Supp.2d at 1334 (90 percent of assistant store managers' time spent performing non-managerial duties); (95 percent of store manager's time spent on non-managerial tasks); (90 percent of retail bakery manager's time spent on non-managerial tasks). Moreover, the uncontroverted record establishes that even while performing barista tasks, Plaintiffs simultaneously also performed many of their management tasks. For instance, Terrazas testified that while working on the floor, he served as a “role model” for baristas and observed their performance for purposes of enforcing company standards, completing evaluations, giving feedback, and recommending promotions and terminations. See Document No. 54 ex. B at 64-65, 68-69, 71-72, 180-81, 271-272. Keevican testified that he “led by example” and served as a “role model” by modeling proper customer service while on the floor. He testified that he observed baristas “to make sure the[y] got the job done,” and he gave his subordinates “positive feedback” and “constructive criticism” after observing their performance. See id. ex. A at 49, 177-78, 233-34. Cf. (manager who spent 75 to 80 percent of time on basic line-worker tasks because store was “often short-staffed” held exempt because she “could simultaneously perform many of her management tasks,” such as supervising employees, handling customer complaints, dealing with vendors, and completing daily paperwork); Jackson, 362 F.Supp.2d at 1335 (assistant managers who spent 90 percent of time on nonexempt tasks could simultaneously perform management tasks by “overseeing the other employees in the store and making sure that the store was operating properly.”).

In fact, Terrazas testified that it was part of “effective management style” to work “in the trenches” with his baristas, to the extent that “most of [his] customers didn't know [he] was the manager.” See Document No. 61 ex. C at 68-69.

*6 Plaintiffs also contend that their management duties were relatively insignificant because they shared “key responsibilities” with their “entire teams” and subordinates. However, as the highest-ranking employees in their respective stores, it is uncontroverted that each Plaintiff was “ultimately responsible” for his store's operations. See Document No. 54 ex. A at 28 & ex. B at 15-16, 66-67. It is “irrelevant to the primary duty inquiry” that Plaintiffs, in their discretion, may have chosen to delegate some managerial tasks to their subordinates. See, e.g., Document No. 54 ex. A at 66-67, 111-12, 219; ex. B at 44-45, 88-90, 162. Cf. (finding it “irrelevant to the primary duty inquiry” that store managers delegated some managerial duties and that their subordinates were capable of performing such duties); (restaurant manager who delegated managerial duties was “ultimately responsible” for the performance of these duties). Although Plaintiffs delegated some managerial tasks to their subordinates, “such delegation does not render the duties any less ‘managerial,’ “ nor does it “minimize the importance of the duties or render them non-exempt.” . See also (“That the assistant managers may have performed some managerial tasks does not render the tasks nonexempt.”). In fact, as observed above at page 3, note 3, and pages 12-13, note 6, Plaintiffs' bonuses were based in part on how well they trained prospective store managers, which obviously incentivised Plaintiffs to delegate selected managerial responsibilities to subordinates in order for Plaintiffs to achieve their own successes as managers who could well train others.

The uncontroverted summary judgment record establishes that Plaintiffs' significant managerial functions-such as ordering and controlling inventory; deciding whom to interview and hire for barista positions; training and scheduling employees; special marketing promotions; and monitoring labor costs-were critical to the successes of their respective stores. See, e.g., (“[T]he [retail establishment] could not have operated successfully unless [plaintiff] performed her managerial functions, such as ordering inventory, hiring, training, and scheduling employees, and completing the daily paper-work.”). If Plaintiffs while each managing a store with annual sales exceeding $1 million were able to spend 70 or 80 percent of their time pouring coffee and performing other barista chores that six to 30 subordinates also performed, those activities of the manager quite obviously were of minor importance to Defendant when compared to the significant management responsibilities performed during the other 20 to 30 percent of their time, management responsibilities that directly influenced the ultimate commercial and financial success or failure of the store.

2. and 3. Frequency of Exercise of Discretion and Relative Freedom from Supervision

*7 It is uncontroverted that Plaintiffs, as the highest-ranking employees in their stores, made decisions on matters such as deciding whom to interview and hire as a barista, whom to assign to train new hires, when to discipline employees, whom to deploy in certain positions, what promotions to run, and the amount of product to order for efficient inventory control. Plaintiffs argue, however, that they infre-quently exercised discretion because they worked under the “ultimate managing authority” of their district managers, who had authority to hire more senior employees, approve changes to Plaintiffs' work schedules, set rates of pay for newly-hired employees if the pay exceeded Starbucks's guidelines, and establish guidelines for Plaintiffs when completing performance reviews. See Document No. 61 at 13-14. However, “the manager of a local store in a modern multi-store organization has management as his or her primary duty even though the discretion usually associated with management may be limited by the company's desire for standardization and uniformity.” (quoting ). See also (“[T]he case law is replete with decisions holding managers of retail establishments to be exempt, notwithstanding ... the need to obey corporate policies and/or follow the orders of their corporate superiors.”) (collecting cases). See, e.g., Jackson, 362 F.Supp.2d at 1335 (rejecting assistant managers' contention that they lacked discretionary power because “the fact that Plaintiffs had to adhere to certain guidelines or in certain instances obtain the Store Manager's approval does not diminish Plaintiffs' discretionary powers.”); (discretion factor weighed in favor of employer, notwithstanding store manager's “rigid supervision” by upper management, because store managers are generally vested with enough discretionary power and freedom from supervision to satisfy this factor); (plaintiff was exempt executive although he lacked “final decision-making or supervisory authority in the operation of the bakery department”) (emphasis added). The fact that Plaintiffs' district managers had “veto power” over some of Plaintiffs' discretionary, managerial decisions does not raise a fact issue that Plaintiffs' primary responsibility was not in management. See .

Plaintiffs also contend that they were not relatively free from supervision because their district managers spent “substantial amounts of time” in Plaintiffs' stores. Keevican states in his Declaration that his district manager visited his store “3-4 times per week, staying, on average, a few hours to all day each visit,” and she “issu[ed] directives” by phone and e-mail. See Document No. 61 ex. B ¶ 9. Terrazas avers that his district managers visited the store “almost every day” or “every other day,” and stayed in contact by e-mail and phone when not physically in the store. See id. ex. D ¶ 9. Plaintiffs aver that, during these visits, the district managers checked sales figures, repositioned products, observed and directed employees, and ensured that Starbucks's policies were being followed. See id.; ex. B ¶ 9. Keevican admitted in his deposition that his manager generally supervised from 9 to 13 different urban stores spread over all of downtown Houston, parts of southwest Houston, and the Texas Medical Center, with some stores being located as much as a 30 minutes drive from others. Terrazas recalled that his manager had approximately nine stores to supervise, which were located in a very large district with some stores being “extremely far apart.” On the other hand, it is uncontroverted that each Plaintiff as store manager was the single highest-ranking employee in his particular store and was responsible on site for that store's day-to-day overall operations. See id. ex. A at 28, 258-59; ex. B at 15, 66, 127, 254. See, e.g., (plaintiff was relatively free from supervision although supervisor “called ten to 15 times a day and, initially visited the restaurant everyday” because plaintiff was “answerable for the performance of the [restaurant].”) (internal citation omitted); (granting summary judgment to defendant employer where plaintiff store manager's District Managers “regularly visited his store and retained authority to override certain of his management decisions” because such supervision “did not undermine his day-to-day authority, as the highest ranking manager on job site, or render him non-exempt.”), citing, (“[A]ctive supervision and periodic visits by a regional manager do not eliminate the day-to-day discretion of the on-site store manager.”); (store manager exempt despite her inability to hire or fire without upper management's approval and her rigid supervision and frequent visits by upper management). Indeed, department and assistant managers have been held exempt under the executive exemption even when their superiors worked in close proximity to them at the same location. See, e.g., Jackson, 362 F.Supp.2d at 1327-28; . Viewing the evidence in the light most favorable to Plaintiffs, Plaintiffs still were “vested with enough discretionary power and freedom from supervision to qualify for the executive exemption.” (quoting

4. Comparative Compensation

*8 The final factor is the relationship between Plaintiffs' salary and the wages paid to non-exempt employees. Plaintiffs argue, with no supporting evidence, that their compensation “approximated that received by some assistant store managers.” See Document No. 61 at 15 (emphasis added). It is undisputed, however, that Plaintiffs received nearly twice the total annual compensation received by their highest-paid shift supervisors, see Document No. 54 ex. A at 263 & ex. B at 289-90, and Plaintiffs received bonuses and benefits not available to other employees (including assistant managers). See id. ex. A at 25-28 & ex. B at 23-24. This marked disparity in pay and benefits between Plaintiffs and the non-exempt employees is a hallmark of exempt status. See, e.g., .

Applying the four factors to the uncontroverted evidence viewed in a light most favorable to Plaintiffs, compels the conclusion that each Plaintiff's primary duty was management and, as such, Plaintiffs were properly classified as exempt from the FLSA's overtime provisions as a matter of law. Defendant is therefore entitled to summary judgment on Plaintiffs' claims.

IV. Order

For the reasons set forth, it is hereby

ORDERED that Defendant Starbucks Corporation's Corrected Motion for Partial Summary Judgment with Respect to the Claims of Kevin Keevican and Michael Terrazas (Document No. 52) is GRANTED, and Plaintiffs Kevin Keevican and Michael Terrazas' s claims against Defendant Starbucks Corporation are DISMISSED on the merits.

The Clerk will enter this Order and send copies to all counsel of record.

Case 33.3

123 S.Ct. 1972, 538 U.S. 721, 155 L.Ed.2d 953, 71 USLW 4375, 84 Empl. Prac. Dec. P 41,391, 148 Lab.Cas. P 34,704, 8 Wage & Hour Cas.2d (BNA) 1221, 26 NDLR P 35, 3 Cal. Daily Op. Serv. 4388, 2003 Daily Journal D.A.R. 5569, 16 Fla. L. Weekly Fed. S 291

Supreme Court of the United States

NEVADA DEPARTMENT OF HUMAN RESOURCES, et al., Petitioners,

v.

William HIBBS et al.

No. 01-1368.

Argued Jan. 15, 2003.

Decided May 27, 2003.

Chief Justice delivered the opinion of the Court.

The Family and Medical Leave Act of 1993 (FMLA or Act) entitles eligible employees to take up to 12 work weeks of unpaid leave annually for any of several reasons, including the onset of a "serious health condition" in an employee's spouse, child, or parent. 107 Stat. 9, . The Act creates a private right of action to seek both equitable relief and money damages "against any employer (including a public agency) in any Federal or State court of competent jurisdiction," , should that employer "interfere with, restrain, or deny the exercise of" FMLA rights, . We hold that employees of the State of Nevada may recover money damages in the event of the State's failure to comply with the family-care provision of the Act.

Petitioners include the Nevada Department of Human Resources (Department) and two of its officers. Respondent William Hibbs (hereinafter respondent) worked for the Department's Welfare Division. In April and May 1997, he sought leave under the FMLA to care for his ailing wife, who was recovering from a car accident and neck surgery. The Department granted his request for the full 12 weeks of FMLA leave and authorized him to use the leave intermittently as needed between May and December 1997. Respondent did so until August 5, 1997, after which he did not return to work. In October 1997, the Department informed respondent that he had exhausted his FMLA leave, that no further leave would be granted, and that he must report to work by November 12, 1997. Respondent failed to do so and was terminated.

Respondent sued petitioners in the United States District Court seeking damages and injunctive and declaratory relief for, inter alia, violations of . The District Court awarded petitioners summary judgment on the grounds that the FMLA claim was barred by the Eleventh Amendment and that respondent's Fourteenth Amendment rights had not been violated. Respondent appealed, and the United States intervened under to defend the validity of the FMLA's application to the States. The Ninth Circuit reversed. .

We granted certiorari, , to resolve a split among the Courts of Appeals on the question whether an individual may sue a State for money damages in federal court for violation of . Compare , with (case below).

For over a century now, we have made clear that the Constitution does not provide for federal jurisdiction over suits against nonconsenting States. ; ; ; ; .

Congress may, however, abrogate such immunity in federal court if it makes its intention to abrogate unmistakably clear in the language of the statute and acts pursuant to a valid exercise of its power under of the Fourteenth Amendment. See (citing ). The clarity of Congress' intent here is not fairly debatable. The Act enables employees to seek damages "against any employer (including a public agency) in any Federal or State court of competent jurisdiction," , and Congress has defined "public agency" to include both "the government of a State or political subdivision thereof" and "any agency of ... a State, or a political subdivision of a State," , . We held in that, by using identical language in the Age Discrimination in Employment Act of 1967 (ADEA), 81 Stat. 602, as amended, et seq., Congress satisfied the clear statement rule of This case turns, then, on whether Congress acted within its constitutional authority when it sought to abrogate the States' immunity for purposes of the FMLA's family-leave provision.

In enacting the FMLA, Congress relied on two of the powers vested in it by the Constitution: its Article I commerce power and its power under of the Fourteenth Amendment to enforce that Amendment's guarantees. Congress may not abrogate the States' sovereign immunity pursuant to its Article I power over commerce. Congress may, however, abrogate States' sovereign immunity through a valid exercise of its power, for "the Eleventh Amendment, and the principle of state sovereignty which it embodies, are necessarily limited by the enforcement provisions of of the Fourteenth Amendment." (citation omitted). See also

Compare ("It is the purpose of this Act ... to balance the demands of the workplace with the needs of families, to promote the stability and economic security of families, and to promote national interests in preserving family integrity") with ( "to promote the goal of equal employment opportunity for women and men, pursuant to [the Equal Protection C]lause") and ("to accomplish [the Act's other purposes] in a manner that, consistent with the Equal Protection Clause ..., minimizes the potential for employment discrimination on the basis of sex"). See also (1993), U.S.Code Cong. & Admin.News 1993, pp. 3, 18 (the FMLA "is based not only on the Commerce Clause, but also on the guarantees of equal protection and due process embodied in the 14th Amendment"); (same).

Two provisions of the Fourteenth Amendment are relevant here: grants Congress the power "to enforce" the substantive guarantees of § 1--among them, equal protection of the laws--by enacting "appropriate legislation." Congress may, in the exercise of its power, do more than simply proscribe conduct that we have held unconstitutional. " 'Congress' power "to enforce" the Amendment includes the authority both to remedy and to deter violation of rights guaranteed thereunder by prohibiting a somewhat broader swath of conduct, including that which is not itself forbidden by the Amendment's text.' " (quoting ; . In other words, Congress may enact so-called prophylactic legislation that proscribes facially constitutional conduct, in order to prevent and deter unconstitutional conduct.

also confirmed, however, that it falls to this Court, not Congress, to define the substance of constitutional guarantees. "The ultimate interpretation and determination of the Fourteenth Amendment's substantive meaning remains the province of the Judicial Branch." legislation reaching beyond the scope of § 1's actual guarantees must be an appropriate remedy for identified constitutional violations, not "an attempt to substantively redefine the States' legal obligations." We distinguish appropriate prophylactic legislation from "substantive redefinition of the Fourteenth Amendment right at issue," by applying the test set forth in Valid legislation must exhibit "congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end." The FMLA aims to protect the right to be free from gender-based discrimination in the workplace. We have held that statutory classifications that distinguish between males and females are subject to heightened scrutiny. See, e.g., . For a gender-based classification to withstand such scrutiny, it must "serv[e] important governmental objectives," and "the discriminatory means employed [must be] substantially related to the achievement of those objectives." (citations and internal quotation marks omitted). The State's justification for such a classification "must not rely on overbroad generalizations about the different talents, capacities, or preferences of males and females." We now inquire whether Congress had evidence of a pattern of constitutional violations on the part of the States in this area.

The text of the Act makes this clear. Congress found that, "due to the nature of the roles of men and women in our society, the primary responsibility for family caretaking often falls on women, and such responsibility affects the working lives of women more than it affects the working lives of men." . In response to this finding, Congress sought "to accomplish the [Act's other] purposes ... in a manner that ... minimizes the potential for employment discrimination on the basis of sex by ensuring generally that leave is available ... on a gender-neutral basis[,] and to promote the goal of equal employment opportunity for women and men (4)27" (emphasis added).

The history of the many state laws limiting women's employment opportunities is chronicled in--and, until relatively recently, was sanctioned by--this Court's own opinions. For example, in (Illinois), and (Michigan), the Court upheld state laws prohibiting women from practicing law and tending bar, respectively. State laws frequently subjected women to distinctive restrictions, terms, conditions, and benefits for those jobs they could take. In , for example, this Court approved a state law limiting the hours that women could work for wages, and observed that 19 States had such laws at the time. Such laws were based on the related beliefs that (1) woman is, and should remain, "the center of home and family life," , and (2) "a proper discharge of [a woman's] maternal functions-- having in view not merely her own health, but the well-being of the race-- justif[ies] legislation to protect her from the greed as well as the passion of man," Until our decision in , "it remained the prevailing doctrine that government, both federal and state, could withhold from women opportunities accorded men so long as any 'basis in reason' "--such as the above beliefs--"could be conceived for the discrimination." (quoting

Congress responded to this history of discrimination by abrogating States' sovereign immunity in Title VII of the Civil Rights Act of 1964, 78 Stat. 255, 42 U.S.C. § 2000e2(a), and we sustained this abrogation in But state gender discrimination did not cease. "[I]t can hardly be doubted that ... women still face pervasive, although at times more subtle, discrimination ... in the job market." . According to evidence that was before Congress when it enacted the FMLA, States continue to rely on invalid gender stereotypes in the employment context, specifically in the administration of leave benefits. Reliance on such stereotypes cannot justify the States' gender discrimination in this area. The long and extensive history of sex discrimination prompted us to hold that measures that differentiate on the basis of gender warrant heightened scrutiny; here, as in the persistence of such unconstitutional discrimination by the States justifies Congress' passage of prophylactic legislation.

As the FMLA's legislative record reflects, a 1990 Bureau of Labor Statistics (BLS) survey stated that 37 percent of surveyed private-sector employees were covered by maternity leave policies, while only 18 percent were covered by paternity leave policies. (1993), U.S.Code Cong. & Admin.News 1993, p. 3. The corresponding numbers from a similar BLS survey the previous year were 33 percent and 16 percent, respectively. Ibid. While these data show an increase in the percentage of employees eligible for such leave, they also show a widening of the gender gap during the same period. Thus, stereotype-based beliefs about the allocation of family duties remained firmly rooted, and employers' reliance on them in establishing discriminatory leave policies remained widespread.

While this and other material described leave policies in the private sector, a 50-state survey also before Congress demonstrated that "[t]he proportion and construction of leave policies available to public sector employees differs little from those offered private sector employees." The Parental and Medical Leave Act of 1986: Joint Hearing before the Subcommittee on Labor-Management Relations and the Subcommittee on Labor Standards of the House Committee on Education and Labor, 99th Cong., 2d Sess., 33 (1986) (hereinafter Joint Hearing) (statement of Meryl Frank, Director of the Yale Bush Center Infant Care Leave Project). See also id., at 29-30.

Congress also heard testimony that "[p]arental leave for fathers ... is rare. Even ... [w]here child-care leave policies do exist, men, both in the public and private sectors, receive notoriously discriminatory treatment in their requests for such leave." Id., at 147 (Washington Council of Lawyers) (emphasis added). Many States offered women extended "maternity" leave that far exceeded the typical 4- to 8-week period of physical disability due to pregnancy and childbirth, but very few States granted men a parallel benefit: Fifteen States provided women up to one year of extended maternity leave, while only four provided men with the same. M. Lord & M. King, The State Reference Guide to Work-Family Programs for State Employees 30 (1991). This and other differential leave policies were not attributable to any differential physical needs of men and women, but rather to the pervasive sex-role stereotype that caring for family members is women's work.

See, e.g., id., at 16 (six weeks is the medically recommended pregnancy disability leave period); (referring to Pregnancy Discrimination Act legislative history establishing four to eight weeks as the medical recovery period for a normal childbirth).

For example, state employers' collective-bargaining agreements often granted extended "maternity" leave of six months to a year to women only. Gerald McEntee, President of the American Federation of State, County and Municipal Employees, AFL-CIO testified that "the vast majority of our contracts, even though we look upon them with great pride, really cover essentially maternity leave, and not paternity leave." The Parental and Medical Leave Act of 1987: Hearings before the Subcommittee on Children, Family, Drugs and Alcoholism of the Senate Committee on Labor and Human Resources, 100th Cong., 1st Sess., pt. 1, p. 385 (1987) (hereinafter 1987 Senate Labor Hearings). In addition, state leave laws often specified that catchall leave-without-pay provisions could be used for extended maternity leave, but did not authorize such leave for paternity purposes. See, e.g., Family and Medical Leave Act of 1987: Joint Hearing before the House Committee on Post Office and Civil Service, 100th Cong., 1st Sess., 2-5 (1987) (Rep. Gary Ackerman recounted suffering expressly sex-based denial of unpaid leave of absence where benefit was ostensibly available for "child care leave").

Evidence pertaining to parenting leave is relevant here because state discrimination in the provision of both types of benefits is based on the same gender stereotype: that women's family duties trump those of the workplace. Justice KENNEDY's dissent (hereinafter the dissent) ignores this common foundation that, as Congress found, has historically produced discrimination in the hiring and promotion of women. See post, at 1989. Consideration of such evidence does not, as the dissent contends, expand our inquiry to include "general gender-based stereotypes in employment." Ibid. (emphasis added). To the contrary, because parenting and family leave address very similar situations in which work and family responsibilities conflict, they implicate the same stereotypes.

Finally, Congress had evidence that, even where state laws and policies were not facially discriminatory, they were applied in discriminatory ways. It was aware of the "serious problems with the discretionary nature of family leave," because when "the authority to grant leave and to arrange the length of that leave rests with individual supervisors," it leaves "employees open to discretionary and possibly unequal treatment." . Testimony supported that conclusion, explaining that "[t]he lack of uniform parental and medical leave policies in the work place has created an environment where [sex] discrimination is rampant." 1987 Senate Labor Hearings, pt. 2, at 170 (testimony of Peggy Montes, Mayor's Commission on Women's Affairs, City of Chicago).

In spite of all of the above evidence, Justice KENNEDY argues in dissent that Congress' passage of the FMLA was unnecessary because "the States appear to have been ahead of Congress in providing gender-neutral family leave benefits," post, at 1989, and points to Nevada's leave policies in particular, post, at 1992. However, it was only "[s]ince Federal family leave legislation was first introduced" that the States had even "begun to consider similar family leave initiatives." , at 20, U.S.Code Cong. & Admin.News 1993, pp. 3, 22; see also (minority views of Sen. Durenberger) ("[S]o few states have elected to enact similar legislation at the state level").

Furthermore, the dissent's statement that some States "had adopted some form of family-care leave" before the FMLA's enactment, post, at 1989, glosses over important shortcomings of some state policies. First, seven States had childcare leave provisions that applied to women only. Indeed, Massachusetts required that notice of its leave provisions be posted only in "establishment [s] in which females are employed." These laws reinforced the very stereotypes that Congress sought to remedy through the FMLA. Second, 12 States provided their employees no family leave, beyond an initial childbirth or adoption, to care for a seriously ill child or family member. Third, many States provided no statutorily guaranteed right to family leave, offering instead only voluntary or discretionary leave programs. Three States left the amount of leave time primarily in employers' hands. Congress could reasonably conclude that such discretionary family-leave programs would do little to combat the stereotypes about the roles of male and female employees that Congress sought to eliminate. Finally, four States provided leave only through administrative regulations or personnel policies, which Congress could reasonably conclude offered significantly less firm protection than a federal law. Against the above backdrop of limited state leave policies, no matter how generous petitioner's own may have been, see post, at 1992 (the dissent), Congress was justified in enacting the FMLA as remedial legislation.

(West 1997) (providing leave to "female employee[s]" for childbirth or adoption); see also (pregnancy disability leave only); Iowa Code § 216.6(2) (2000) (former § 601A.6(2)) (same); Kan. Regs. 21-32-6(d) (2003) ("a reasonable period" of maternity leave for female employees only); (pregnancy disability leave only); (repealed 1997) (4-month maternity leave for female employees only); (same).

The dissent asserts that four of these schemes--those of Colorado, Iowa, Louisiana, and New Hampshire--concern "pregnancy disability leave only." Post, at 1990. But Louisiana provided women with four months of such leave, which far exceeds the medically recommended pregnancy disability leave period of six weeks. See n. 4 supra. This gender-discriminatory policy is not attributable to any different physical needs of men and women, but rather to the invalid stereotypes that Congress sought to counter through the FMLA. See supra, at 1990.

See ; ; ; Kan. Regs. 21-32-6 (2003); (Michie 2001); ; (West 1997); ; ; (West 2002); ; U.S. Dept. of Labor, Women's Bureau, State Maternity/Family Leave Law, p. 12 (June 1993) (citing a Virginia personnel policy).

See ; Kan. Regs. 21-32-6 (2003); . Oklahoma offered only a system by which employees could voluntarily donate leave time for colleagues' family emergencies. (historical note) (West 2002).

See ; Kan. Regs. 21-32-6 (2003); Wis. Admin. Code ch. DWD 225 (1997) (former ch. ILHR 225); State Maternity/Family Leave Law, supra, at 12 (Virginia).

Contrary to the dissent's belief, we do not hold that Congress may "abrogat[e] state immunity from private suits whenever the State's social benefits program is not enshrined in the statutory code and provides employers with discretion," post, at 1991, or when a State does not confer social benefits "as generous or extensive as Congress would later deem appropriate," ibid. The dissent misunderstands the purpose of the FMLA's family leave provision. The FMLA is not a "substantive entitlement program," post, at 1992; Congress did not create a particular leave policy for its own sake. See infra, at 1993. Rather, Congress sought to adjust family leave policies in order to eliminate their reliance on and perpetuation of invalid stereotypes, and thereby dismantle persisting gender-based barriers to the hiring, retention, and promotion of women in the workplace. In pursuing that goal, for the reasons discussed above, supra, at 1991, Congress reasonably concluded that state leave laws and practices should be brought within the Act.

In sum, the States' record of unconstitutional participation in, and fostering of, gender-based discrimination in the administration of leave benefits is weighty enough to justify the enactment of prophylactic legislation.

Given the extent and specificity of the above record of unconstitutional state conduct, it is difficult to understand the dissent's accusation that we rely on "a simple recitation of a general history of employment discrimination against women." Post, at 1987. As we stated above, our holding rests on congressional findings that, at the time the FMLA was enacted, States "rel[ied] on invalid gender stereotypes in the employment context, specifically in the administration of leave benefits." Supra, at 1979 (emphasis added). See supra, at 1979- 1980.

We reached the opposite conclusion in and In those cases, the legislation under review responded to a purported tendency of state officials to make age- or disability-based distinctions. Under our equal protection case law, discrimination on the basis of such characteristics is not judged under a heightened review standard, and passes muster if there is "a rational basis for doing so at a class-based level, even if it 'is probably not true' that those reasons are valid in the majority of cases." (quoting ). See also ("States are not required by the Fourteenth Amendment to make special accommodations for the disabled, so long as their actions toward such individuals are rational"). Thus, in order to impugn the constitutionality of state discrimination against the disabled or the elderly, Congress must identify, not just the existence of age- or disability-based state decisions, but a "widespread pattern" of irrational reliance on such criteria. We found no such showing with respect to the ADEA and Title I of the Americans with Disabilities Act of 1990(ADA).

Here, however, Congress directed its attention to state gender discrimination, which triggers a heightened level of scrutiny. See, e.g., Because the standard for demonstrating the constitutionality of a gender-based classification is more difficult to meet than our rational-basis test--it must "serv[e] important governmental objectives" and be "substantially related to the achievement of those objectives," --it was easier for Congress to show a pattern of state constitutional violations. Congress was similarly successful in , where we upheld the Voting Rights Act of 1965: Because racial classifications are presumptively invalid, most of the States' acts of race discrimination violated the Fourteenth Amendment.

The impact of the discrimination targeted by the FMLA is significant. Congress determined:

"Historically, denial or curtailment of women's employment opportunities has been traceable directly to the pervasive presumption that women are mothers first, and workers second. This prevailing ideology about women's roles has in turn justified discrimination against women when they are mothers or mothers-to-be." Joint Hearing 100.

Stereotypes about women's domestic roles are reinforced by parallel stereotypes presuming a lack of domestic responsibilities for men. Because employers continued to regard the family as the woman's domain, they often denied men similar accommodations or discouraged them from taking leave. These mutually reinforcing stereotypes created a self-fulfilling cycle of discrimination that forced women to continue to assume the role of primary family caregiver, and fostered employers' stereotypical views about women's commitment to work and their value as employees. Those perceptions, in turn, Congress reasoned, lead to subtle discrimination that may be difficult to detect on a case-by-case basis.

We believe that Congress' chosen remedy, the family-care leave provision of the FMLA, is "congruent and proportional to the targeted violation," Congress had already tried unsuccessfully to address this problem through Title VII and the amendment of Title VII by the Pregnancy Discrimination Act, . Here, as in Congress again confronted a " difficult and intractable proble[m]," where previous legislative attempts had failed. See (upholding the Voting Rights Act). Such problems may justify added prophylactic measures in response.

By creating an across-the-board, routine employment benefit for all eligible employees, Congress sought to ensure that family-care leave would no longer be stigmatized as an inordinate drain on the workplace caused by female employees, and that employers could not evade leave obligations simply by hiring men. By setting a minimum standard of family leave for all eligible employees, irrespective of gender, the FMLA attacks the formerly state-sanctioned stereotype that only women are responsible for family caregiving, thereby reducing employers' incentives to engage in discrimination by basing hiring and promotion decisions on stereotypes.

The dissent characterizes the FMLA as a "substantive entitlement program" rather than a remedial statute because it establishes a floor of 12 weeks' leave. Post, at 1992. In the dissent's view, in the face of evidence of gender-based discrimination by the States in the provision of leave benefits, Congress could do no more in exercising its power than simply proscribe such discrimination. But this position cannot be squared with our recognition that Congress "is not confined to the enactment of legislation that merely parrots the precise wording of the Fourteenth Amendment," but may prohibit "a somewhat broader swath of conduct, including that which is not itself forbidden by the Amendment's text." For example, this Court has upheld certain prophylactic provisions of the Voting Rights Act as valid exercises of Congress' power, including the literacy test ban and preclearance requirements for changes in States' voting procedures. See, e.g., ; ;

Indeed, in light of the evidence before Congress, a statute mirroring Title VII, that simply mandated gender equality in the administration of leave benefits, would not have achieved Congress' remedial object. Such a law would allow States to provide for no family leave at all. Where "[t]wo-thirds of the nonprofessional caregivers for older, chronically ill, or disabled persons are working women," ; , at 7, U.S.Code Cong. & Admin.News 1993, pp. 3, 9, and state practices continue to reinforce the stereotype of women as caregivers, such a policy would exclude far more women than men from the workplace.

Unlike the statutes at issue in , , and which applied broadly to every aspect of state employers' operations, the FMLA is narrowly targeted at the fault line between work and family--precisely where sex-based overgeneralization has been and remains strongest--and affects only one aspect of the employment relationship. Compare (discussing the "important limitations of the [FMLA's] remedial scheme"), with (the "[s]weeping coverage" of the Religious Freedom Restoration Act of 1993); ("the indiscriminate scope of the [ADEA's] substantive requirements"); and (the ADA prohibits disability discrimination "in regard to [any] terms, conditions, and privileges of employment" (internal quotation marks omitted)).

We also find significant the many other limitations that Congress placed on the scope of this measure. See ("[W]here 'a congressional enactment pervasively prohibits constitutional state action in an effort to remedy or to prevent unconstitutional state action, limitations of this kind tend to ensure Congress' means are proportionate to ends legitimate under ' " (quoting ). The FMLA requires only unpaid leave, , and applies only to employees who have worked for the employer for at least one year and provided 1,250 hours of service within the last 12 months, . Employees in high-ranking or sensitive positions are simply ineligible for FMLA leave; of particular importance to the States, the FMLA expressly excludes from coverage state elected officials, their staffs, and appointed policymakers. , . Employees must give advance notice of foreseeable leave, , and employers may require certification by a health care provider of the need for leave, § 2613. In choosing 12 weeks as the appropriate leave floor, Congress chose "a middle ground, a period long enough to serve 'the needs of families' but not so long that it would upset 'the legitimate interests of employers.' " (quoting ). Moreover, the cause of action under the FMLA is a restricted one: The damages recoverable are strictly defined and measured by actual monetary losses, , and the accrual period for backpay is limited by the Act's 2-year statute of limitations (extended to three years only for willful violations), .

Congress established 12 weeks as a floor, thus leaving States free to provide their employees with more family leave time if they so choose. See ("Nothing in this Act or any amendment made by this Act shall be construed to supersede any provision of any State or local law that provides greater family or medical leave rights than the rights established under this Act or any amendment made by this Act"). The dissent faults Congress for giving States this choice, arguing that the FMLA's terms do not bar States from granting more family leave time to women than to men. Post, at 1992. But Justice KENNEDY effectively counters his own argument in his very next breath, recognizing that such gender-based discrimination would "run afoul of the Equal Protection Clause or Title VII." Post, at 1992. In crafting new legislation to remedy unconstitutional State conduct, Congress may certainly rely on and take account of existing laws. Indeed, Congress expressly did so here. See ("Nothing in this Act or any amendment made by this Act shall be construed to modify or affect any Federal or State law prohibiting discrimination on the basis of ... sex ...").

For the above reasons, we conclude that is congruent and proportional to its remedial object, and can "be understood as responsive to, or designed to prevent, unconstitutional behavior."

The judgment of the Court of Appeals is therefore

Affirmed.

Supplemental Case Printout for: Emerging Trends

481 F.3d 1119, 12 Wage & Hour Cas. (BNA) 774, 154 Lab.Cas. P 35,273, 07 Cal. Daily Op. Serv. 3367, 2007 Daily Journal D.A.R. 4429

Briefs and Other Related Documents


United States Court of Appeals,

Ninth Circuit.

In re FARMERS INSURANCE EXCHANGE, CLAIMS REPRESENTATIVES' OVERTIME PAY LITIGATION,

Dave Miller, on behalf of himself and the class members in MDL Case No. 1439, Plaintiffs-Appellants,

v.

Farmers Insurance Exchange, Defendant-Appellee, and Farmers Group, Inc.; Plan Administrator of the Farmers Group, Inc. Profit Sharing Savings Plan Trust; Plan Administrator of the Farmers Group, Inc. Employees' Pension Plan, Defendants.

In re Farmers Insurance Exchange, Claims Representatives' Overtime Pay Litigation, Dave Miller, on behalf of himself and the class members in MDL Case No. 1439, Plaintiffs-Appellees,

v.

Farmers Insurance Exchange, Defendant-Appellant, and Farmers Group, Inc.; Plan Administrator of the Farmers Group, Inc. Profit Sharing Savings Plan Trust; Plan Administrator of the Farmers Group, Inc. Employees' Pension Plan, Defendants.

In re Farmers Insurance Exchange, Claims Representatives' Overtime Pay Litigation, Jesse Corralez, on behalf of himself and the class members in MDL Case No. 1439, Plaintiffs-Appellants,

v.

Farmers Insurance Exchange, Defendant-Appellee, and Farmers Group, Inc.; Plan Administrator of the Farmers Group, Inc. Profit Sharing Savings Plan Trust; Plan Administrator of the Farmers Group, Inc. Employees' Pension Plan, Defendants.

In re Farmers Insurance Exchange, Claims Representatives' Overtime Pay Litigation, Jesse Corralez, on behalf of himself and the class members in MDL Case No. 1439, Plaintiffs-Appellees,

v.

Farmers Insurance Exchange, Defendant-Appellant, and Farmers Group, Inc.; Plan Administrator of the Farmers Group, Inc. Profit Sharing Savings Plan Trust; Plan Administrator of the Farmers Group, Inc. Employees' Pension Plan, Defendants.

Nos. 05-35080, 05-35082, 05-35145, 05-35146, 05-35501, 05-35509.

Argued and Submitted Sept. 14, 2006.

Filed Oct. 26, 2006.

Amended March 30, 2007.


SILVERMAN, Circuit Judge.

For more than 50 years, the Department of Labor has considered claims adjusters exempt from the Fair Labor Standard Act's overtime requirement. In 2004, the DOL promulgated 29 C.F.R. § 541.203, which it viewed as “consistent with” existing law. Section 541.203 exempts claims adjusters if they perform activities such as interviewing witnesses, making recommendations regarding coverage and value of claims, determining fault and negotiating settlements.

In this case, the plaintiffs are nearly 2,000 former and current claims adjusters who handle, respectively, automobile damage claims, non-automobile property damage claims, personal injury claims and various combinations of these. They assert that their employer improperly classified them as exempt from the FLSA. The district court ruled that some of them are exempt, and some of them are not. In doing so, the district court promulgated a “$3,000 in claims paid per month” rule, a rule that all parties to this appeal agree is neither workable nor supported by the evidence.

We hold today that all of the adjusters in this case are exempt. The district court's factual findings establish that, regardless of the type (personal injury v. property ) or size (large v. small ) of the claims they handle, the adjusters are required to do virtually all of the very things that § 541.203 contemplates: use discretion to determine whether the loss is covered, set reserves, decide who is to blame for the loss and negotiate with the insured or his lawyer. If the DOL should choose to distinguish between adjusters based on the type or value of the claims they handle, it is free to amend the regulations and tell employers how to do that. Unless and until that happens, we are obligated to follow § 541.203. We affirm in part and reverse in part.

BACKGROUND

A. Farmers' business and the role of adjusters

Farmers Insurance Exchange (“FIE”) is a reciprocal or inter-insurance exchange providing insurance throughout the country.FN1 As a reciprocal exchange company, FIE is owned by its policyholders, or “subscribers,” who exchange contracts with one another and, by pooling their resources, insure one another against certain losses. FIE, whether on its own or through its related companies, performs all the functions of a typical insurance company, including selling policies, contracting with individual agents who sell and service policies, procuring reinsurance and adjusting claims made on its policies.FN2

FN1. Our summary of the facts is taken from the district court's findings of fact, which are set forth in its published decision. See 336 F.Supp.2d 1077 (D.Or.2004). Neither party has shown that any of those findings were clearly erroneous. See Cleveland v. City of Los Angeles, 420 F.3d 981, 988 (9th Cir.2005) (district court's factual findings in FLSA case are reviewed for clear error).

FN2. For example, subscribers of FIE appoint Farmers Group, Inc., as their exclusive “attorney in fact.” Farmers Group then acts as FIE's agent in performing or securing certain services and facilities that FIE uses in its operations, including accounting, marketing, developing and pricing of insurance products, financial and regulatory auditing, underwriting and actuarial functions.

Around 50 percent of FIE's 10,000 employees are claims adjusters. Most claims adjusters work out of their homes, and FIE provides them with company cars, phone lines, computer support, printers and fax machines. Claims adjusters spend significant time on the road, driving to locations where a loss or accident occurred. Branch managers in FIE's 120 to 160 branch offices nationwide supervise the claims adjusters. Claims adjusters do not supervise other employees.

FIE employs five types of claims adjusters in its personal lines business: those who handle automobile property damage claims (“automobile damage adjusters”), those who handle homeowners' claims for property and contents damage (“property adjusters”), those who handle personal injury claims (“liability adjusters”), those who handle unique physical damage claims ( e.g., RVs, mobile homes) and personal injury claims (“Foremost adjusters”) and another sort of hybrid claims adjuster who handles two or more types of claims (“multi-line adjusters”).

FIE puts significant emphasis on paying exactly what it owes under the policy, “nothing more, nothing less.” To that end, FIE provides each adjuster with written guidelines and training materials to aid them in the claims handling process. Some procedures are mandatory, while others are merely recommendations. Adjusters are subject to quality assurance audits at any time, but most are performed after the claim is closed. The primary goal of the audits is to determine “lost economic opportunity,” a subjective assessment of the difference between what was paid and what could have been paid if the adjuster had correctly handled the claim. The audits ensure that adjusters are following FIE's “best practices,” which are any actions that can be implemented to prevent lost economic opportunity. FIE's goal is to limit overpayment to two percent for automobile damage and liability claims, and slightly more than two percent for other property losses.

Claims adjusters use computer software to help them estimate the damage or loss; indeed, FIE expects its adjusters to use estimating software “whenever possible or appropriate.” Estimating software “acts as a price database,” much like parts catalogs, vendor quotes, and jury verdicts, and its usefulness largely is dependent, in many cases, on the quality of the information the adjuster develops before turning to the estimating software.

FIE's claims adjusters are classified at one of three levels, depending on experience and performance: claims adjuster, senior claims adjuster and special claims adjuster. Within any particular line of insurance, the duties of all three are mostly the same. One difference, however, is their settlement authority. The branch manager has discretion to set each adjuster's settlement authority, and generally, less experienced adjusters have lower authority levels. On any given claim, an adjuster's settlement authority can be raised with supervisor approval. On average, each adjuster pays approximately $1 million in claims per year, ranging from $2,800 to $8,000 per claim.

During all times relevant to this appeal, FIE paid its claims adjusters on a salary basis, not an hourly basis.FN3 Many adjusters worked more than 40 hours per week during the class period, but FIE did not pay them overtime.

FN3. An adjuster's salary increases with seniority. For instance, between 1998 and 2002, the average salary of an adjuster ranged from $36,000 to $43,000, with new adjusters earning in the mid-20s and veteran adjusters earning in the mid-60s.

B. The lawsuits

In late 2001 and early 2002, a group of current and former claims adjusters filed a series of FLSA actions against FIE on behalf of themselves and similarly-situated adjusters, seeking overtime pay for the weeks in which they worked more than 40 hours. In March 2002, the Panel on Multidistrict Litigation transferred the various actions to the district court below for consolidated pretrial proceedings. The district court certified a FLSA collective action, which, under the Act, required any unnamed former or current claims adjusters to formally “op-tin” if they wanted to participate. See 29 U.S.C. § 216(b). Of the 6,100 notices sent to current and former claims adjusters, approximately 1,170 opted in.

The parties later stipulated to certification of seven state law classes, comprised of individuals from Colorado, Illinois, Michigan, Minnesota, New Mexico, Oregon and Washington. In addressing whether “common questions predominate,” as required by Fed.R.Civ.P. 23(b)(3), the district court concluded that “the administrative exemption test under the laws of the seven states at issue ... is substantially similar to (if not identical to in some instances) the federal test.”

Each of the state law classes was an “opt-out” class, that is, individuals were automatically included in the state law action unless they filed the appropriate notice with the district court. Some adjusters sought relief under state law only; they did not opt-in to the FLSA collective action, nor did they opt-out of their respective state law class.

On the parties' stipulation, the district court retained jurisdiction after class certification. The parties waived their right to a jury trial, and agreed to bifurcate the bench trial into a liability phase and, if necessary, a damages phase. The sole issue at the liability phase was whether FIE properly classified its adjusters as exempt from federal and state overtime laws, and if not, whether FIE could assert any defenses to liability or damages.

The district court conducted a three-week bench trial, and then issued its Findings of Fact and Conclusions of Law. In its order, the district court concluded that: (i) automobile damage adjusters are non-exempt; (ii) property adjusters are non-exempt if more than 50 percent of their pay-outs in any one month are less than $3,000; (iii) Foremost adjusters are non-exempt if they spend more than 38-3/4 hours per week handling residential property claims on which the pay-out averages, on a monthly basis, less than $3,000; (iv) multi-line adjusters are non-exempt if they spend more than 38-3/4 hours per week handling automobile damage claims in any amount and/or residential property claims on which the pay-out averages, on a monthly basis, less than $3,000; (v) all other adjusters, including liability adjusters, are exempt and (vi) Michigan's overtime law applied to FIE.FN4 The district court awarded nearly $52.5 million to the 1,039 former and current adjusters who filed the necessary claims paperwork. These appeals followed.

FN4. Later, the district court wrote a letter to the parties in which it acknowledged that the $3,000 rule “does permit debate over the appropriate interpretation.” The letter went on to say that “in determining the dollar amount of a claim, I intend the dollar amount to be the amount paid, not the amount originally requested.”

The district court also concluded that FIE's violations of the FLSA were “willful” after September 12, 2001, entitling plaintiffs to a three-year (instead of a two-year) statute of limitations as to those violations. The district court went on to conclude that FIE failed to prove it acted in good faith after September 12, 2001, precluding any defense to FLSA liability and permitting liquidated damages for violations after that date. Because we conclude that all of the claims adjusters in this case are exempt under the FLSA, we do not reach the issues of willfulness or FIE's good faith defenses to liability and liquidated damages under the statute.

ANALYSIS

I. FLSA Claim

Under the FLSA, certain employers must pay their employees time and a half for work in excess of 40 hours per week:

Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce ... 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). Some employees, however, are not covered by the Act. At issue in this case is the exemption for persons “employed in a bona fide ... administrative ... capacity.” 29 U.S.C. § 213(a)(1).

[1] The FLSA delegates to the Secretary of Labor broad authority to “define [ ] and delimit[ ]” the scope of the administrative exemption. Id. In accordance with that authority, the Secretary has formulated a test, known as the “short duties test,” to determine whether employees who earn at least $250 per week FN5-as the claims adjusters in this case do-qualify for the administrative exemption. Specifically, the employee's “primary duty” must (i) consist of “[t]he performance of office or nonmanual work directly related to management policies or general business operations of his employer,” and (ii) include the exercise of “discretion and independent judgment.” 29 C.F.R. § 541.2 (2004). As to whether the duties test is satisfied, we must independently review the record, without deference to the district court's conclusions. See Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1124 (9th Cir.2002) (whether an employee's activities exclude him from the overtime benefits of the FLSA is a question of law, and the district court's decision is reviewed de novo).

FN5. That amount was increased to $455 per week in 2004. See 29 C.F.R. § 541.200(a)(1). Unless otherwise indicated, cites to the DOL's regulations are to the current version of Title 29 of the C.F.R.

There is no dispute that the claims adjusters in this case performed “office or nonmanual work.” The dispute centers around the remaining requirements of the duties test.

A. The DOL regulation

29 C.F.R. § 541.203 provides that:

Insurance claims adjusters generally meet the duties requirements 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, witnesses 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 litigation.

29 C.F.R. § 541.203(a). The district court did not rely on this regulation, presumably because it was not in effect at the time the plaintiffs filed these actions. Nevertheless, § 541.203 bears directly on our analysis. See Bratt v. County of Los Angeles, 912 F.2d 1066, 1070 (9th Cir.1990) (FLSA case; “[w]e must give due deference to the interpretation of statutes and regulations by the agency charged with their administration.” (internal quotations and ellipsis omitted)).

For starters, § 541.203 does not represent a change in the law. When the DOL promulgated § 541.203, it said that the new regulation “is consistent with existing section 541.205(c)(5).” 69 Fed.Reg. 22122, 22144 (April 23, 2004). The former 29 C.F.R. § 541.205(c)(5) provided that the test of “directly related to management policies or general business operations” is met by, among other persons, “claim agents and adjusters.” The parties agree that § 541.205(c)(5)'s reference to “claim adjusters” originated in a 1940 DOL Report that created the administrative exemption. Plaintiffs argue, however, that the 1940 Report was not referring to insurance claims adjusters generally, but only a “claim agent” who, unlike the adjusters in this case, was a “higher-level employee” with independent authority to settle all types of sizeable damage claims. The record shows otherwise. In a 2002 Opinion Letter addressing insurance claims adjusters, the DOL specifically referenced that 1940 Report in concluding that “Wage and Hour has long recognized that claims adjusters typically perform work that is administrative in nature.” DOL Wage & Hour Div. Op. Ltr., at 2 (Nov. 19, 2002) (emphasis added).

That same Opinion Letter concluded that, within their established authority, claims adjusters exercise the requisite discretion and independent judgment if they: (i) make all decisions regarding coverage and liability, (ii) negotiate with full authority to attempt to achieve a settlement, (iii) make recommendations to their supervisors on the appropriate value of “much larger” claims, which are “frequently accepted” and (iv) work with counsel to represent the company in any litigation that ensues. Id. at 4. Essential to the DOL's opinion was the fact that the adjusters “are not merely pursuing a standardized format for resolving claims, but rather are using their own judgment about what the facts show, who is liable, what a claim is worth, and how to handle the negotiations with either a policyholder or a third-party.” Id. at 4-5.

Plaintiffs dispute the relevancy of the 2002 Opinion Letter, arguing that it represents an “about-face” on the issue of whether claims adjusters are exempt. But earlier guidance from the DOL is consistent with the 2002 Opinion Letter. In 1985, for example, the DOL concluded that an insurer's “field service representative” is exempt to the extent he “investigates the claims, determines the extent of the damages, negotiates the settlements within the parameters of the established monetary limits, and makes recommendations with respect to larger case settlements.” DOL Wage & Hour Div. Op. Ltr., at 2 (Oct. 29, 1985). In a 1963 Opinion Letter, the DOL distinguished appraisers from adjusters:

Appraisers who merely inspect damaged vehicles to estimate the cost of labor and materials and to reach an agreed price for repairs with the repair shop have not been considered as the type of employees who customarily and regularly exercise discretion and independent judgment.... In making their estimates, they are guided primarily by their skill and experience and by written manuals of established labor and material costs....

DOL Wage & Hour Div. Op. Ltr., at 1-2 (Feb. 18, 1963). In contrast, an adjuster “investigates the validity and the extent of liability of a claim and negotiates settlement ... irrespective of whether the claim is one for property damage or for personal injury.” Id. at 2. And in 1957, the DOL opined that if adjusters are given “reasonable latitude in carrying on negotiations with the insured, the results of which form the basis of their recommendations, they may be [exempt].” DOL Wage & Hour Div. Op. Ltr., at 2 (Oct. 24, 1957). If those adjusters had authority to make settlements, that would be “stronger evidence of their exercise of discretion and independent judgment.” Id.

[2] We must give deference to the DOL's interpretation of its own regulations through, for example, Opinion Letters. Webster v. Pub. Sch. Employees of Washington, 247 F.3d 910, 914 n. 2 (9th Cir.2001) (citing Auer v. Robbins, 519 U.S. 452, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997)). The DOL's position on claims adjusters-as articulated in § 541.203-has been consistent over the years, see Alvarez v. IBP, Inc., 339 F.3d 894, 905 n. 9 (9th Cir.2003) (“an agency interpretation ... which conflicts with the agency's earlier interpretation is entitled to considerably less deference than a consistently held agency view” (internal quotations and alteration omitted)), and we are persuaded by its reasoning, see Christensen v. Harris County, 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) (“interpretations ... such as opinion letters are entitled to respect ... to the extent that those interpretations have the power to persuade” (internal quotations and citation omitted)); see also Auer, 519 U.S. at 461, 117 S.Ct. 905 (DOL's interpretation of its own regulations is controlling unless “plainly erroneous or inconsistent with the regulation” (internal quotations omitted)).

B. The district court's findings

[3] The district court found that all claims adjusters in this case: (i) determine whether the policy covers the loss, (ii) recommend a reserve upon estimating FIE's exposure on the claim, in accordance with state law requirements, (iii) interview the insured and assess his (or others') credibility, (iv) advise FIE regarding any fraud indicators or the potential for subrogation and underwriting risk, (v) negotiate settlements, (vi) seek additional authority from their supervisors, which is granted “75-100 percent of the time,” FN6 when the recommended settlement exceeds their established authority and (vii) communicate with opposing counsel and FIE's counsel.

FN6. See DOL Wage & Hour Div. Op. Ltr., at 4 (Nov. 19, 2002) (adjusters are exempt where they make recommendations to their supervisors on the appropriate value of claims beyond their authority, which are “frequently accepted”).

As far as we are concerned, that says it all. The district court's findings almost track word for word the language in § 541.203, and thus establish that FIE's claims adjusters are exempt from the FLSA. The lone exception appears to be that only liability adjusters make recommendations regarding litigation. The regulation, however, does not require the adjuster to perform each and every activity listed. See 69 Fed.Reg. at 22144 (“[541.203] identifies the typical duties of an exempt claims adjuster” (emphasis added)). And the Fifth Circuit has just held that claims adjusters for Allstate Insurance are exempt where they, like FIE's adjusters, “exercised discretion in determining coverage, conducting investigations, determining liability and assigning percentages of fault to parties, ... negotiating a final settlement [and] setting and adjusting reserves based upon a preliminary evaluation of the case.” Cheatham v. Allstate Ins. Co., 465 F.3d 578, 586 (5th Cir.2006) (per curiam).

Unlike the district court, we make no exceptions for those adjusters who handle “smaller” claims. Even for claims on the lower end of his established settlement authority, the adjuster must first determine whether the claim is covered. Once he determines that the loss is covered, the adjuster can settle it without supervisor approval. And while supervisor approval is necessary before FIE denies a claim, in such cases the adjuster often prepares a draft denial letter with the recommendation to deny coverage. Discretion and independent judgment do not necessarily imply that the decisions made by the employee have a “finality that goes with unlimited authority and a complete absence of review.” § 541.202(c).

Moreover, an adjuster must estimate FIE's exposure on a claim before his investigation into the loss-and thus his initial settlement offer-is completed. Generally, reserves are set without supervisor approval; while automobile damage adjusters do not set the reserves, they do recommend an amount. See id. Adjusters also conduct their own investigations, and often decide whether to obtain the assistance of experts in determining the cause of the loss. Given the authority that FIE's adjusters have, this case is distinguishable from a recent DOL Opinion Letter, cited by plaintiffs, in which the adjuster had to “frequently seek approval” before settling a claim, could not conduct additional investigation without supervisor approval and was “so closely supervised” that he “d[id] not have the authority to make independent choices.” DOL Wage & Hour Div. Op. Ltr., at 2, 6 (Aug. 26, 2005).

In separating out certain property adjusters, the district court went on to say that, in major losses (i.e., those resulting in settlements of over $3,000), erroneous coverage decisions can impact FIE's bottom line or result in bad faith claims. But the same is true of claims that cost FIE less than $3,000: the district court found that “an erroneous denial of coverage, even on claims of relatively low value, may expose FIE to legal action and extra-contractual damages in many jurisdictions.” (Quoting DOL Wage & Hour Div. Op. Ltr., at 3 (Nov. 19, 2002) (“If an adjuster erroneously recommends that coverage should be denied, even on a claim of relatively low value, the insurance company may be liable for significant extra contractual damages for bad faith denial of the claim.”).) Also, that coverage decisions can be more “complicated” because some residential losses are “major” is no basis to differentiate among FIE's property adjusters. Again, the adjuster must decide if the loss is covered, which, according to the district court, requires him to make credibility determinations, evaluate the insured's lifestyle and possibly use outside experts. That FIE ultimately denies the bulk of the coverage and pays only $500, based in no small part on the adjuster's recommendations, should not render his work-which otherwise qualifies for the exemption-non-exempt. In any event, we see no reason (nor did the district court provide one) why the insured's lifestyle could not be just as relevant for losses less than $3,000; indeed, even small claims require scrutiny: FIE's stated philosophy is “we pay what we owe, nothing more, nothing less.”

[4] Finally, the use of computer software to estimate claims does not eliminate the need for discretion and judgment any more than does resort to other reference works or to the opinions of appraisers and other experts. See Cheatham, 465 F.3d at 585 (rejecting argument that adjusters “are limited in their ability to negotiate by having to adhere to computer software”; that they must consult with manuals or guidelines “does not preclude their exercise of discretion and independent judgment”). For instance, with respect to antique or specialty automobiles, an automobile damage adjuster cannot use computer software; instead, he must generate an estimate manually. Also, while software exists for estimating the value of totaled vehicles, an automobile damage adjuster “must use good judgment” in deciding whether it is the “best tool” for a total loss, which accounts for 30 to 50 percent of his file. Total loss claims that reach or exceed policy limits are “often difficult to negotiate and settle, and require a very detailed evaluation.” For those reasons, we disagree with the district court's legal conclusion, quoting the language of the regulations, that an automobile damage adjuster's primary duties “require the use of skill in applying techniques, procedures and specific standards, not the use of discretion and independent judgment.” (Quoting 29 C.F.R. § 541.207(b) (2004).)

Plaintiffs argue that § 541.203 provides “illustrative examples” of how some adjusters may meet the duties test, and that we have applied the regulation to “an overly-simplified version of the facts of this case.” They instead characterize the district court's findings as establishing that they satisfy neither prong of the duties test-first, plaintiffs argue, because they deliver FIE's “product” (i.e., insurance coverage) to its customers, they are merely engaged in the “day-to-day carrying out of the business' affairs rather than running the business itself,” Bratt, 912 F.2d at 1070 (concluding that court probation officers do not engage in activities “primarily related to management policies or general business operations” and are therefore non-exempt), and second, they argue that decisions delegated to them are limited to the “routine and unimportant.” The district court's findings support no such conclusion.

An employee “whose responsibility it is to execute or carry ... out” policy may satisfy the “directly related” prong if his work is otherwise of “substantial importance” to the management or operation of the business. 29 C.F.R. § 541.205(c) (2004). The regulations also require that the employee's exercise of discretion and independent judgment be “real and substantial,” § 541.207(d)(1) (2004), or as plaintiffs phrase it, “comprise[ ] a substantial element of[his primary] duties.” That is, the employee must exercise discretion and independent judgment in “matters of significance.” § 541.200(a)(3).

[5] In addition to finding that FIE could be subject to state fines if reserves are set too low, the district court found that an adjuster's coverage decisions-which, as we have pointed out, are typically made without supervisor involvement-“are important to FIE's reputation with the insurance-buying public,” and that an adjuster “represent[s] FIE to policyholders, claimants, and others involved in the claim's resolution (e.g., witnesses, vendors, body shops, outside experts, police, fire personnel, attorneys, claims representatives from other companies, judges, arbitrators).” See § 541.205(b) (2004) (“The administrative operations of the business include the work performed by so-called white-collar employees engaged in ‘servicing’ a business as, for example, ... negotiating [and] representing the company.”). In Cheatham, the Fifth Circuit concluded that the duties of the adjusters were directly related to Allstate's management policies or general business operations because they “advised the management, represented Allstate, and negotiated on Allstate's behalf,” all of which “required [their] exercise of discretion and independent judgment.” Cheatham, 465 F.3d at 585.

On a related point, the district court found that FIE's business is not limited to claims adjusting; it also sells insurance products. Thus, the decisions made by claims adjusters affect FIE's customer base ( e.g., the policyholders) in that “their eligibility for continued coverage may be affected and their premium level may be affected.” DOL Wage & Hour Div. Op. Ltr., at 3 (Nov. 19, 2002.) This point was somehow overlooked in Bell v. Farmers Ins. Exch., 87 Cal.App.4th 805, 105 Cal.Rptr.2d 59 (2001) (decided under California law), in which the state court characterized FIE's business as “perform[ing] a specialized function ... having delegated activities normally associated with an insurance business to other related companies.” Id. at 823, 105 Cal.Rptr.2d 59. That FIE's adjusters represent the “claims handling arm of the Farmers Insurance Group of Companies,” id. (internal quotations omitted), does not mean they fall on the production side of the “administrative/production worker dichotomy.” To place them there would elevate form-corporate form, to be precise-over substance. What matters is that, because they represent FIE to the public through their handling of claims and directly impact FIE's customer base, the adjusters' work “affects business operations to a substantial degree, even though their assignments are tasks related to the operation of a particular segment of the business.” § 541.202(b).

In summary, the district court's factual findings confirm that FIE's liability, automobile damage and property adjusters satisfy both prongs of the duties test. They are therefore exempt from the FLSA's requirements. It necessarily follows, then, that Foremost adjusters are, too. The district court found that Foremost adjusters, to the extent they handle property damage to “mobile homes, RVs, and the like,” rely on “specialized knowledge and discretion.” In that respect, Foremost adjusters are akin to property adjusters; indeed, Foremost adjusters use the same computer software as property adjusters, with additions tailored to the unique structures that Foremost adjusters handle. And it naturally follows that multi-line adjusters are exempt under the FLSA, since they handle a mix of liability, property and automobile damage claims.

C. The $3,000 rule

We make one additional point. In addition to lacking support in the record, the district court's “$3,000 rule” is, as both parties agree, simply unworkable in practice. As FIE points out, many states require employers to pay wages, including overtime, to nonexempt employees more frequently than once a month. Under the $3,000 rule, FIE would not know whether a particular employee is due overtime until months or years down the road when the claim is finally resolved, because only then would FIE be able to calculate the average value of the claims on the adjuster's desk during any given pay period. And from pay period to pay period, an adjuster's status could change from exempt to nonexempt, even though his core duties stayed the same. Thus, to ensure it complied with payroll laws, FIE would have to track the daily activities of each adjuster, creating a significant administrative burden while denying it the flexibility the short test promises. See Counts v. S.C. Elec. & Gas Co., 317 F.3d 453, 457 (4th Cir.2003) (proposal requiring regular periodic reevaluation of an employee's exemption status is “untenable”). Even more problematic is the fact that the $3,000 rule runs afoul of public policy: an adjuster's right to overtime is tied to his ability to keep low his settlements with insured parties.

Moreover, § 541.203 says that adjusters are exempt if they, like the adjusters in this case, determine coverage and liability, prepare estimates and negotiate settlements. Nothing in the regulation suggests that “smaller” claims-however that term would be defined-should be treated differently. If the DOL changes its view, it is, of course, free to amend the regulations.

II. State Law Claims

A. Michigan law

[6] FIE argues that it is not subject to Michigan's overtime law, and that as a result, the district court's award of damages under that law was error. We agree.

Under Michigan Compiled Laws 408.394, an employee cannot sue his employer under Michigan's minimum wage law ( see Mich. Comp. Laws § 408.381 et seq.) unless application of the FLSA's minimum wage provisions results in a lower “minimum wage.” Like the FLSA, Michigan's minimum wage law requires employers to, among other things, pay employees time and one-half for any hours that the employee works over 40 in a workweek, unless one of the exemptions in the statute apply. See Mich. Comp. Laws § 408.384a.

Plaintiffs do not dispute that Michigan's minimum wage rate is equal to the FLSA's. Plaintiffs, though, argue that they may sue for overtime pay under Michigan's minimum wage law because its exemption for administrative employees is more narrowly defined than the FLSA exemption, resulting in a greater entitlement to wages under state law. That, plaintiffs argue, is the equivalent of a greater “minimum wage” for purposes of Mich. Comp. Laws § 408.394.

In Alexander v. Perfection Bakeries, Inc., 267 Mich.App. 161, 705 N.W.2d 31 (2005), the Michigan Court of Appeals held that the term “minimum wage” in MCL 408.394 does not include overtime pay. Id. at 165, 705 N.W.2d 31 (MCL 408.394 precluded employees' state law claims for overtime when minimum wage rates in federal and state law were equal). And in Allen v. MGM Grand Detroit, LLC, 260 Mich.App. 90, 675 N.W.2d 907 (2003) (per curiam), the Michigan Court of Appeals held that merely because the statute of limitations for overtime claims under Michigan's minimum wage law is longer than its federal counterpart does not mean that the FLSA provides for a lower “minimum wage” during a period when the FLSA's limitations period has expired. Id. at 908. Contrary to plaintiffs' argument, Allen did not validate the view, originally espoused by a federal district court in Michigan,FN7 that the term “minimum wage” encompasses the total sum which may be owing to the employee. In fact, Allen did just the opposite: after noting that the trial court had relied on the federal district court decision, the Michigan Court of Appeals concluded that “the trial court erroneously interpreted MCL 408.394.” Id. at 909-10.FN8

FN7. See Zimmer v. Bergstrom, Quinn & Oole, No. G88-506-CA1, 1989 WL 223111, at *3 (W.D.Mich. Oct.16, 1989) (unpublished order) (“minimum wage” in MCL 408.394 encompasses overtime pay). Zimmer was decided before Alexander, and thus is of little, if any, persuasive value.

FN8. Another panel of this Court, see Veliz v. Cintas Corp., No. 04-16843, 2006 U.S.App. LEXIS 11997, at *7 n. 2 (May 3, 2006), had certified the same issue to the Michigan Supreme Court, which denied review. The panel went on to hold, consistent with Alexander, that the term “minimum wage” does not include overtime pay. Id. at *7-8 (“There is no evidence that the Michigan Supreme Court would decide the issue differently from Alexander. We are, therefore, obligated to defer to the Michigan Court of Appeals' interpretation of ‘minimum wage’ ... in [MCL] 408.394.”). Since Veliz was unpublished, we are not bound by its ruling. Nevertheless, we agree with its analysis.

Alexander is indistinguishable from this case, and plaintiffs cite no authority that undermines its rationale. Accordingly, the district court erred by not dismissing plaintiffs' claims under Michigan law.

B. The remaining states

The district court said that its conclusions regarding whether FIE's adjusters are exempt under the FLSA apply with equal force to their state law overtime claims. If that were true, we would have to vacate the judgment below to the extent it awarded relief under state law, since we have already determined that all adjusters are exempt under the FLSA. Surprisingly, the parties dedicated little more than a few lines to this issue in the six briefs between them.

Plaintiffs assert that FIE did not satisfy certain requirements for the administrative exemption under state law, requirements that go above and beyond what is required by the FLSA. At least on their face, the authorities that plaintiffs cite support their argument. For example, in Colorado, Minnesota and Oregon, exempt employees must regularly exercise discretion and independent judgment, see Minn. R. 5200.0200, Subp. 1.C; Or. Admin. R. § 839-020-0005(2)(b); 7 Colo.Code Regs. § 1103-1(5)(a), while the FLSA requires that their work “ include the exercise of discretion and independent judgment,” 29 C.F.R. § 541.200(a)(3) (emphasis added). Colorado and Oregon even impose somewhat unique requirements for exempt status. See Or.Rev.Stat. § 653.020(3)(a) (employee must “[p]erform[ ] predominantly intellectual, managerial or creative tasks”); 7 Colo.Code Regs. § 1103-1(5)(a) (employee must “directly serve[ ] the executive, and regularly perform[ ] duties important to the decision-making process of the executive”).

If the administrative exemption in Colorado, Minnesota and Oregon is truly narrower than the FLSA's administrative exemption, our decision today would not necessarily bar claims adjusters in those states from obtaining relief. See Pac. Merch. Shipping Assoc. v. Aubry, 918 F.2d 1409, 1425 (9th Cir.1990) ( “There is no indication that Congress, in enacting the FLSA[ ], intended to preempt states from according more generous protection to [its] employees. [T]he purpose behind the FLSA is to establish a national floor under which wage protections cannot drop, not to establish absolute uniformity in minimum wage and overtime standards nationwide at levels established in the FLSA.” (emphasis omitted)). The record, however, is not sufficiently developed for us to tackle-in the first instance-the nuances of state law. Most importantly, it is unclear whether a requirement that the employee “regularly” exercise discretion and independent judgment entails something more than what the district court found in this case, or is simply another way of articulating the FLSA exemption. Cf. Becker v. F & H Restaurant Group, Inc., 413 N.W.2d 202, 205 (Minn.Ct.App.1987) (describing state's administrative exemption as containing “similar provisions of analogous federal law”). And the answer to that question may very well necessitate an in-depth look at opinion letters and other guidance released by the respective state agencies. Before we tell the parties what state law requires in this area, we believe it is prudent to have the district court take another swipe at this, after the parties fully brief the scope of the administrative exemption under Colorado, Minnesota and Oregon law, as well as Illinois, New Mexico and Washington law.

CONCLUSION

As to plaintiffs' FLSA claim, as well as their claims under Michigan law, we AFFIRM the district court's judgment as to the adjusters whom it ruled are exempt. We REVERSE the district court's judgment as to the remaining adjusters, with instructions to enter judgment in FIE's favor consistent with this opinion.

We REVERSE the judgment as to all claims under Colorado, Illinois, Minnesota, New Mexico, Oregon and Washington law, and REMAND them to the district court for further proceedings consistent with this opinion.

AFFIRMED IN PART, REVERSED IN PART AND REMANDED. EACH PARTY TO BEAR ITS OWN COSTS ON APPEAL.

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