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November 09, 2006
Appeals Court Reverses Overtime Ruling

The U.S. Court of Appeals for the 9th Circuit has ruled that 2,000 claims adjusters for Farmers Insurance Exchange are exempt from the overtime requirements under the federal Fair Labor Standards Act (FLSA).

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In a lawsuit, claims adjusters in Colorado, Illinois, Michigan, Minnesota, New Mexico, Oregon, and Washington alleged that the company misclassified them as exempt from the FLSA. A district court ruled that some of the claims adjusters were exempt and some were nonexempt, using a "$3,000 in claims paid per month" rule to determine the workers' status.

The appeals court reversed the district court's ruling that some of claims adjusters are nonexempt, saying the Department of Labor's overtime exemption does not distinguish between adjusters based on the type of value of the claims they handle.

"We hold today that all of the adjusters in this case are exempt," the appeals court wrote. "If the Department of Labor 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."

The court cited 29 CFR §541.203, which states 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."

The court said the claims adjusters in the case met those duties requirements.

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