Sylvester Talbert, et al v. American Risk Ins. Co., et al

Filing

UNPUBLISHED OPINION FILED. [10-20355 Affirmed] Judge: EGJ , Judge: EMG , Judge: CES. Mandate pull date is 01/10/2011 [10-20355]

Sylvester Talbert, et Case: 10-20355 Ins. Co., et al 00511326977 al v. American Risk Document:

Page: 1 Date Filed: 12/20/2010

Doc. 0

IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
December 20, 2010 N o . 10-20355 S u m m a r y Calendar Lyle W. Cayce Clerk

S Y L V E S T E R TALBERT, Individually and on Behalf of All Others Similarly S it u a te d ; SHERYL WANT, Individually and On Behalf of All Others S im ila r ly Situated, P la in t iffs - Appellants v. A M E R I C A N RISK INSURANCE COMPANY, INC.; SAFEER HASSAN; S A R O S H AHMED, D e fe n d a n t s - Appellees

A p p e a l from the United States District Court fo r the Southern District of Texas U S D C No. 4:09-CV-1023

B e fo r e JOLLY, GARZA, and STEWART, Circuit Judges. P E R CURIAM:* S y lv e s t e r Talbert and Sheryl Want ("the plaintiffs") appeal the summary ju d g m e n t in favor of American Risk Insurance Company, Inc., Safeer Hassan, a n d Sarosh Ahmed (collectively, "ARI"), denying relief on their claims for

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

*

Dockets.Justia.com

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No. 10-20355 o v e r t im e compensation under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216(b). We AFFIRM. I. T a lb e r t was employed by ARI as an assistant claims adjuster from S e p t e m b e r 29, 2008, until February 3, 2009. His duties included handling c la im s made against insurance policies underwritten by ARI. Most of the claims t h a t he handled related to property damage sustained by homeowners as a r e s u lt of Hurricane Ike. ARI classified Talbert as an administrative employee w h o was exempt from the overtime requirements of the FLSA. W a n t worked for ARI as a claims adjuster from October 21, 2008, through J a n u a r y 5, 2009. She also handled claims against policies underwritten by ARI, a n d most of the claims that she handled related to property damage sustained b y homeowners as a result of Hurricane Ike. in d e p e n d e n t contractor. T a lb e r t filed suit against ARI under section 216(b) of the FLSA, alleging t h a t ARI failed to pay him overtime compensation. Want consented to become a party to the action. ARI filed an answer denying the allegations of the ARI classified Want as an

c o m p la in t . After the discovery deadline had passed, ARI moved for summary ju d g m e n t , asserting that Talbert was an administrative employee who was e x e m p t from the FLSA's overtime requirements and that Want was not entitled t o overtime compensation because she was an independent contractor. In their r e s p o n s e in opposition to the summary judgment motion, the plaintiffs argued t h a t ARI's affirmative defenses had been waived because they had not been s p e c i fic a lly pleaded, as required by Rule 8(c) of the Federal Rules of Civil P roced u re. ARI filed a motion to amend its answer to assert the affirmative defense t h a t Talbert is an exempt administrative employee. In the motion, ARI argued t h a t the amendment should be allowed because the plaintiffs were clearly aware 2

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No. 10-20355 t h a t ARI was relying on the defense, inasmuch as it was discussed in the written s e t t le m e n t offer made prior to filing the answer and was subsequently disclosed in ARI's responses to the plaintiffs' interrogatories. The motion was referred to a magistrate judge for resolution. The plaintiffs opposed the amendment,

a r g u in g that ARI had waived the affirmative defense and that leave to amend s h o u ld be denied because the request was untimely. The magistrate judge w e ig h e d ARI's delay in seeking to amend the answer against the lack of p r e ju d ic e to the plaintiffs, and granted leave to amend. The plaintiffs did not s e e k district court review of the magistrate judge's order and did not move for a continuance to conduct discovery on the affirmative defense. T h e district court granted summary judgment for ARI. It held that the p la in t iffs ' argument that ARI waived the affirmative defense that Talbert was s u b je c t to the administrative employee exemption under the FLSA was u n a v a ilin g because ARI had amended its answer to assert that defense. The c o u r t further held that Talbert was exempt from the FLSA's overtime r e q u ir e m e n t s because he was an administrative employee; and that Want was a n independent contractor and not entitled to overtime compensation. The p la in t iffs timely appealed. II. T h e plaintiffs first argue that the district court abused its discretion by p e r m it t in g ARI to amend its answer to add the affirmative defense that Talbert w a s exempt from the overtime requirements of the FLSA after the deadline to file motions for leave to amend pleadings had passed and after ARI had filed a m o t io n for summary judgment on the defense that it failed to plead. They t h e r e fo r e contend that the district court erred by holding that ARI had not w a iv e d the defense that Talbert is an exempt administrative employee. They c o n t e n d further that, even if ARI did not waive that affirmative defense, the d is t r ic t court erred in granting summary judgment because there are genuine 3

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No. 10-20355 is s u e s of material facts as to whether Talbert qualified for the administrative e x e m p t io n and whether Want was an independent contractor. We address the a m e n d m e n t /w a iv e r issue first, and then turn to consider the FLSA status of T a lb e r t and Want. A. R u le 8(c)(1) of the Federal Rules of Civil Procedure requires a litigant to " a ffir m a t iv e ly state any avoidance or affirmative defense." FED. R. CIV. P.

8 (c )(1 ). "Generally, a party's failure to raise an affirmative defense in its first r e s p o n s iv e pleading results in waiver." Bayou Fleet, Inc. v. Alexander, 234 F.3d 8 5 2 , 860 (5th Cir. 2000). "However, where the matter is raised by the trial court [o r the litigants and] does not result in unfair surprise, technical failure to c o m p ly precisely with Rule 8(c) is not fatal, and in such a situation a court may h o ld that the defense is not waived." Id. (internal quotation marks and citations o m it t e d ). "An affirmative defense is not waived if it is raised at a pragmatically s u ffic ie n t time, and the plaintiff was not prejudiced in its ability to respond." Id. (in t e r n a l quotation marks and citation omitted). An exemption must be asserted as an affirmative defense to a claim under t h e FLSA. See Corning Glass Works v. Brennan, 417 U.S. 188, 196-97 (1974). As the plaintiffs concede, this court has never held that independent contractor s t a t u s is an affirmative defense to a claim for overtime compensation under the F L S A , but they urge us to so hold in this case. T h e plaintiffs argue that ARI waived its affirmative defenses by failing to a s s e r t them in its original answer and, therefore, the district court abused its d is c r e t io n by permitting ARI to amend its answer. However, as we have noted, A R I 's motion for leave to amend was referred to a magistrate judge for r e s o lu t io n . The plaintiffs did not seek district court review of the magistrate ju d g e 's order granting leave to amend, as required by Federal Rule of Civil P r o c e d u r e 72(a). See FED. R. CIV. P. 72(a) ("A party may not assign as error a 4

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No. 10-20355 d e fe c t in [a magistrate judge's order on a nondispositive pretrial matter] not t im e ly objected to."). Accordingly, their argument that it was an abuse of

d is c r e t io n to grant ARI leave to amend its answer is not properly before us. See L e h m a n n v. GE Global Ins. Holding Corp., 524 F.3d 621, 624 n.4 (5th Cir. 2008) (s t a tin g that if appellant's briefing were construed as a challenge to the m a g is tr a t e judge's denial of leave to amend the complaint, that argument was n o t properly before the court because appellant "failed to appeal the magistrate ju d g e 's order to the district court"). Further, because the magistrate judge g r a n t e d ARI leave to amend its answer, and the plaintiffs did not file objections t o that order, the district court did not err by holding that ARI had not waived it s defense that Talbert is an administrative employee who is exempt from the F L S A 's overtime compensation requirements. W e need not address the plaintiffs' contention that independent contractor s t a t u s is an affirmative defense to a claim for overtime compensation under the F L S A because, even if we assume that it is, ARI did not waive the defense. ARI asserted, in both its original and amended answers, that Want was an in d e p e n d e n t contractor and thus was not entitled to payment of overtime c o m p e n s a tio n under the FLSA. W e now turn to consider whether the district court properly granted s u m m a r y judgment for ARI on the plaintiffs' claims for overtime compensation u n d e r the FLSA. B. T h e FLSA generally requires payment of overtime compensation for work in excess of forty hours per week. 29 U.S.C. § 207(a)(1). However, there are e x c e p t io n s to that general requirement. At issue in this case is the exemption fo r employees "employed in a bona fide executive, administrative, or professional c a p a c it y ." 29 U.S.C. § 213(a)(1). "The decision whether an employee is exempt fr o m the FLSA's overtime compensation provisions under 29 U.S.C. § 213(a)(1), 5

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No. 10-20355 is primarily a question of fact . . . ." Lott v. Howard Wilson Chrysler-Plymouth, I n c ., 203 F.3d 326, 330 (5th Cir. 2000). "However, the ultimate decision whether t h e employee is exempt from the FLSA's overtime compensation provisions is a q u e s t io n [] of law." Id. "We construe FLSA exemptions narrowly; and the burden o f proof lies with the employer." . Cheatham v. Allstate Ins. Co., 465 F.3d 578, 5 8 4 (5th Cir. 2006). We review the grant of a summary judgment motion de n o v o , applying the same standard as the district court. Id. at 582. T h e Secretary of Labor has promulgated regulations which define the term " e m p lo y e e employed in a bona fide administrative capacity" as an employee who is : (1 ) Compensated on a salary or fee basis at a rate of not less t h a n $455 per week . . .; ( 2 ) Whose primary duty is the performance of office or nonm a n u a l work directly related to the management or general b u s in e s s operations of the employer or the employer's customers; and (3 ) Whose primary duty includes the exercise of discretion a n d independent judgment with respect to matters of significance. 2 9 C.F.R. § 541.200. 1. I t is undisputed that Talbert was paid a salary in excess of $450 per week -- his salary was $32,000 per year. Talbert argues that ARI treated him as an h o u r ly employee because he earned compensatory time off when he worked more t h a n forty hours per week, and was required to use compensatory time when he w o r k e d less than forty hours a week. He contends that the use of compensatory t im e is clear evidence that ARI did not intend to pay him on a salary basis, and t h a t compensatory time off is only permitted for use by public agencies, citing 29 U .S .C . § 207(o). He therefore contends that ARI's use of compensatory time c a u s e d ARI to lose the exemption, citing 29 C.F.R. § 541.602(a) ("an exempt 6

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No. 10-20355 e m p lo y e e must receive the full salary for any week in which the employee p e r fo r m s any work without regard to the number of days or hours worked"); and 2 9 C.F.R. § 541.603(a) ("An employer who makes improper deductions from s a la r y shall lose the exemption if the facts demonstrate that the employer did n o t intend to pay employees on a salary basis"). T a lb e r t 's arguments are without merit. He cites no authority for his c o n t e n t io n that Section 207(o), which authorizes governmental employers to p r o v id e compensatory time off in lieu of the payment of overtime compensation t o non-exempt employees, prohibits private employers from using compensatory t i m e for exempt, salaried employees. There is no evidence submitted that

T a lb e r t was not always paid his full salary. Further, he presented no evidence t h a t ARI's use of compensatory time resulted in any improper deductions from h is salary. 2. W it h respect to the second element, it is undisputed that all of Talbert's work was in the office and was directly related to the general business o p e r a t io n s of ARI. 3. T h e primary focus of the dispute is whether Talbert's "primary duty in c lu d e [d ] the exercise of discretion and independent judgment with respect to m a t t e r s of significance." 29 C.F.R. § 541.200(3). "In general, the exercise of d is c r e t io n and independent judgment involves the comparison and the e v a lu a tio n of possible courses of conduct, and acting or making a decision after t h e various possibilities have been considered." 29 C.F.R. § 541.202(a). "The t e r m `matters of significance' refers to the level of importance or consequence of t h e work performed." Id. T h e regulations, which contain examples of jobs that fall within the a d m in is t r a t iv e exemption, provide that insurance claims adjusters "generally 7

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No. 10-20355 m e e t the duties requirements for the administrative exemption, whether they w o r k for an insurance company or other type of company, if their duties include a c t iv it ie s such as interviewing insureds, witnesses and physicians; inspecting p r o p e r t y damage; reviewing factual information to prepare damage estimates; e v a lu a tin g and making recommendations regarding coverage of claims; d e t e r m in in g liability and total value of a claim; negotiating settlements; and m a k in g recommendations regarding litigation." 29 C.F.R. § 541.203(a) I n support of its motion for summary judgment, ARI submitted an a ffid a v it of Kyle La Croix, its Vice President of Commercial Lines, in which he d e s c r ib e d Talbert's duties as follows: A s an in-house claims adjuster, Talbert's duties included: in t e r v ie w in g the insureds, reviewing the factual information from c o n t r a c t o r s and field adjusters to prepare damage estimates, m a k in g recommendations regarding the coverage of the claims, m o d ify in g reserves (subject to review). Talbert would also negotiate s e t t le m e n t s and make recommendations to the claims manager r e g a r d in g the claim. If litigation ensued, Talbert as an assistant c la im s adjuster would be expected to participate and make r e c o m m e n d a tio n s regarding the litigation; however, Talbert was t e r m in a t e d less than six months after he was hired and therefore he w a s never required to participate in litigation. T h e affidavit stated further that A R I depended on Talbert, as a licensed insurance adjuster, to use h is independent judgment and discretion to make recommendations c o n c e r n in g ARI's response to their insured's claims. In the vast m a jo r it y of cases, the recommendations of ARI's assistant claims a d ju s t e r s are approved by the claims manager. I n opposition to the motion for summary judgment, Talbert argued that h e was not required to exercise discretion or independent judgment. In his a ffid a v it , Talbert stated: 5. I n handling these claims, coverage was typically a foregone c o n c lu s io n .

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No. 10-20355 6. I rarely interviewed the insured when processing claims. In fa c t, appraisers hired by Defendants would typically interview t h e insured, take pictures of the property damage, and take w h a t e v e r measurements were necessary. I usually only r e v ie w e d the statements and pictures taken by the appraisers a n d determined whether the measurements complied with the a p p lic a b le standards. I had no independent authority to settle claims. Every claim h a n d le d by me during my employment with Defendants was s u b je c t to review by Fred Behzadi who had the authority to s e t tle the claim. I was prohibited from speaking to any attorney retained by a p o lic y holder. In fact, if an attorney became involved, I was in s t r u c t e d to forward the claim to Fred Behzadi who would r e v ie w it and take over further handling of the claim. I f a policyholder sued my employer over a claim, I was not in v o lv e d in developing or approving litigation strategy, hiring e x p e r t s or negotiating settlement. T h r o u g h o u t my employment with Defendants, I spent very lit t le time interacting with policyholders and was, at all t im e s , closely supervised by my employer. When I did in t e r a c t with policyholders, it was only because they were u p s e t that they had not been paid for their losses.

7.

8.

9.

10.

A lt h o u g h Talbert asserts that "coverage was typically a foregone c o n c lu s io n " for the claims that he handled during his brief employment with A R I , he does not deny that it was part of his job to make recommendations r e g a r d in g coverage if coverage was at issue. The fact that Talbert was not able t o settle claims on his own, but had to seek approval from his supervisor, does n o t preclude his classification as an exempt administrative employee. See 29 C .F .R . § 541.202(c) ("The decisions made as a result of the exercise of discretion a n d independent judgment may consist of recommendations for action rather t h a n the actual taking of action."); see also Cheatham, 465 F.3d at 585 (stating

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No. 10-20355 t h a t "the requirement that Allstate adjusters must consult with manuals or g u id e lin e s does not preclude their exercise of discretion and independent ju d g m e n t " ). Although Talbert asserts that he rarely interviewed policyholders, h e does not dispute ARI's evidence that interviewing policyholders was part of h is job. And, although Talbert was instructed not to talk to policyholders' a t t o r n e y s , he does not challenge ARI's evidence that he would have been e x p e c t e d to assist in litigation of claims if that had become necessary during the t im e that he was employed by ARI. B a s e d on our consideration of all of the summary judgment evidence, we a g r e e with the district court that Talbert's duties involved the exercise of d is c r e t io n and independent judgment. Accordingly, the district court did not err b y holding that, as a matter of law, Talbert is subject to the administrative e x e m p t io n and therefore not entitled to overtime compensation. C. H a v in g determined that Talbert was exempt from the overtime c o m p e n s a tio n requirements of the FLSA, we now turn to consider whether Want w a s an employee of ARI within the meaning of the FLSA, or an independent c o n t r a c to r and thus not subject to the FLSA's overtime compensation r e q u ir e m e n ts . " T o determine if a worker qualifies as an employee [under the FLSA], we fo c u s on whether, as a matter of economic reality, the worker is economically d e p e n d e n t upon the alleged employer or is instead in business for himself." Hopkins v. Cornerstone America, 545 F.3d 338, 343 (5th Cir. 2008). "The

c o n t r a c tu a l designation of the worker as an independent contractor is not n e c e s s a r ily controlling." Thibault v. Bellsouth Telecommunications, Inc., 612 F .3 d 843, 845-46 (5th Cir. 2010). T o aid us in this inquiry, we consider five non-exhaustive factors: (1) the degree of control exercised by the alleged employer; (2) the

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No. 10-20355 e x t e n t of the relative investments of the worker and the alleged e m p lo y e r ; (3) the degree to which the worker's opportunity for profit o r loss is determined by the alleged employer; (4) the skill and in it ia t iv e required in performing the job; and (5) the permanency of t h e relationship. No single factor is determinative. Rather, each fa c t o r is a tool used to gauge the economic dependence of the alleged e m p lo y e e , and each must be applied with this ultimate concept in m in d . H o p k in s , 545 F.3d at 343 (citations omitted). I n his affidavit submitted in support of ARI's motion for summary ju d g m e n t , La Croix stated: 4 . ARI hired Sheryl Want as a contract claims adjuster. She w o r k e d for ARI for approximately 12 weeks during which time she w a s paid an hourly rate of $18.00 /hour. 5 . In Texas, claims adjusters are licensed by the Texas Board o f Insurance. ARI did not pay for the licensing. Any independent c o n t r a c t o r would have to provide proof of their current license in o r d e r to be engaged. The claims adjusters hired by ARI as in d e p e n d e n t contractors, such as Want, were expected to do their jo b with little or no day to day supervision by ARI personnel. ARI e x p e c t e d Want to handle the files assigned to her and to make a r e c o m m e n d a t io n to the ARI claims manager with regard to coverage a n d the amount of the claim, with little or no day to day supervision. 6 . Although ARI preferred that its independent contractors w o r k during normal working hours, the independent contractors, as o p p o s e d to employees were allowed to set their own hours. Moreover, Want and the other independent contractors were free to w o r k for other insurance companies at the same time the[y] p e r fo r m e d services for ARI. Want represented to ARI that she had p r e v io u s ly worked as an independent contract adjuster for a number o f years working for various insurance companies. . . . 7 . Want often came in later than ARI employees, took long or la t e lunches and set her own hours. Want was not required to work in the ARI offices; however, because she was required to update the in fo r m a t io n related to a claims file into the Simple Insure program

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No. 10-20355 o n the ARI computers, as a practical matter she spent much of her t im e in the ARI offices. 8 . The position of claims adjuster did not require any s p e c ia liz e d tools. It did, however, require that Want enter in fo r m a t io n concerning the claims she [was] handling into the c o m p u t e r program contained on ARI's computer. 9 . ARI paid the independent contractors that worked for t h e m , like Sheryl Want, on an hourly basis. ARI did not dictate the n u m b e r of hours Want was required to work, did not set her s c h e d u le , nor did it prohibit her from working for other insurance c o m p a n ie s . Based on the resume that Want provided ARI, Want h a d worked as an independent contractor for multiple companies in t h e past. Want completely controlled the number of hours she w o r k e d for ARI or any other insurance company. 1 0 . From the beginning of her relationship with ARI, Want w a s aware that her position was temporary and that ARI considered h e r to be an independent contractor. The Personnel Change Notice s ig n e d by Want states that her employment is as a "contractor." . . . As indicated on the Change Notice, Want's job title was "Contract C la i m s Adjuster" and under the comments it clearly states, " C o n t r a c t o r for temporary position. Compensation @ $18/hr. Contract may be terminated by either party. Will receive a 1099 fr o m [ARI] for Compensation in 2008." Want performed services for A R I for less than three months. A lt h o u g h not specifically disputing the above statements, in her affidavit s u b m it t e d in support of her opposition to the motion for summary judgment, W a n t stated that she was required to sign and comply with a confidentiality a g r e e m e n t; that she was required to comply with an employee code of conduct a n d was subject to discipline; that she was expected to be at work from 9:00 a.m. u n t i l 6:00 p.m., at a minimum, and was required to sign in and out on time s h e e t s provided by ARI; that, because of the number of hours she worked and b e c a u s e of the confidentiality agreement, she was not effectively permitted to w o r k for another insurance company while working for ARI; and that she was

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No. 10-20355 s o closely supervised by ARI that she exercised very little, if any, independent s k ill and initiative in performing her job. " T h e determination of whether an individual is an employee or in d e p e n d e n t contractor is highly dependent on the particular situation p r e s e n t e d ." Thibault, 612 F.3d at 848. The particular circumstances of Want's b rief relationship with ARI following Hurricane Ike, considered in their entirety, d o not reflect, as a matter of economic reality, the degree of economic dependence o n ARI that constitutes employee status. Want's resume, submitted by ARI in s u p p o r t of its motion for summary judgment, reflects that Want had worked as a n independent contract adjuster for multiple companies prior to working for A R I for twelve weeks. Want was a licensed professional, and she, not ARI, bore t h e cost of licensing. She was expected to handle the files assigned to her with lit t le or no day-to-day supervision. Want argues that the confidentiality

a g r e e m e n t that she was required to sign as a condition of working for ARI, and t h e number of hours that she worked for ARI, precluded her from working for o t h e r insurance companies. However, she does not dispute that she, and not A R I , ultimately controlled the number of hours she worked for ARI. Further, t h e r e is nothing in the confidentiality agreement that would have precluded her fr o m working for other insurance companies so long as she did not violate the t e r m s of the agreement. Finally, it is undisputed that, from the beginning of her r e la t io n s h ip with ARI, Want was aware that her position was expressly tem p ora ry . T a k in g into account all of the summary judgment evidence, we conclude t h a t the district court did not err in holding that, as a matter of law, Want was a n independent contractor, and not an employee of ARI. III. F o r the foregoing reasons, the summary judgment is A F F IR M E D . 13