Williаm Cormier, Sr., Plaintiff-Cross Appellant v. OIL INSPECTIONS (U.S.A.), INCORPORATED; Stephen Taylor, Defendants-Appellants-Cross Appellees.
No. 14-20253.
United States Court of Appeals, Fifth Circuit.
March 27, 2015.
The Andertons argue they are entitled to pursue declaratory relief against the Department officials in their official capacity to “establish that Plaintiffs should have been issued a permit for possessing the breeder deer in 2010 and 2011 ... and that they remain qualified persons entitled to a permit....” The state is the real party in interest as a decision in thе Andertons’ favor would compel the Department itself to act. See id.;
AFFIRMED.
Vasilios ZANNIKOS, Individually and On Behalf of Others Similarly Situated, James Cormier, Plaintiffs-Appellees-Cross Appellants
Galvin Bernard Kennedy, Beatriz Adriana Sosa-Morris, Kennedy Hodges, L.L.P., Houston, TX, for Plaintiff-Cross Appellant/Plaintiffs-Appellees-Cross Appellants.
Andrew S. Golub, Stephanie Anne Hamm, Dow Golub Remels & Beverly, L.L.P., Houston, TX, for Defendants-Appellants-Cross Appellees.
Before BARKSDALE, SOUTHWICK, and HIGGINSON, Circuit Judges.
PER CURIAM:*
The plaintiffs sued Oil Inspections (U.S.A.), Inc., their former employer, for alleged violations of the Fair Labor Standards Act‘s (“FLSA“) overtime provisions. On cross-motions for summary judgment, the district court held that the plaintiffs did not fall within thе administrative exemption to the FLSA, but that the “highly compensated employee” exemption applied to Plaintiff Vasilios Zannikos. It also held that all of the plaintiffs’ claims were subject to the FLSA‘s two-year statute of limitations for non-willful violations. Both parties appealed. We AFFIRM.
FACTS AND PROCEDURAL BACKGROUND
Oil Inspections specializes in loss-control operations in connection with oil cargo transfers. It oversees and monitors transfers of oil between trading partners to ensure that the oil is transferred in accordance with industry standards and customer specifications. Because the failure to monitor these transfers adequately can result in product losses, accurate monitoring is a matter of financial significance to the trading partners.
Oil Inspections employed Zannikos, James Cormier, and William Cormier (“plaintiffs“) as marine superintendents until January 2012, May 2011, and Febru-
The plaintiffs also oversaw the work of independent inspectors during the transfer process and inspected certain elements of transfers themselves. Their responsibilities included inspecting cargo tanks prior to and during transfers to ensure the absence of contaminants and proper minimization of sediment; overseeing the sampling of cargo by independent inspectors prior to transfers to ensure that they used properly calibrated gear and properly assessed cargo temperatures; inspecting onshore tank placement to ensure that it was in the “critical zone” (i.e., the gap above the tank met customer specifications); and examining “line displacement,” or fluid flow through the line, to ensure that no oil was lost during the transfer.
Finally, the marine superintendents oversaw “line blending,” during which a number of onshore components, such as oil and gas, are combined and moved onto a ship based on specifications relevant to overseas markets. They assured that tanks were prepared properly for such transfers and that components were blended according to the proper ratios.
In August 2012, Zannikos brought suit against Oil Inspections and its president, Stephen Taylor, alleging violations of the FLSA‘s overtime provisions. In March 2013, James and William Cormier consented to join the suit pending collective or class action certification. In May 2013, the district court, pursuant to
All parties moved for summary judgment on various issues. The district court held, inter alia, that: (1) the plaintiffs were not subject to the administrative exemption to the FLSA‘s overtime provisions, (2) Plaintiff Zannikos was subject to the “highly compensated employee” exemption to the overtime provisions beginning in January 2011, and (3) the plaintiffs’ claims were subject to the FLSA‘s two-year statute of limitations for non-willful violations.
Following the summary-judgment ruling, Oil Inspections filed a motion for reconsideration, which the court denied. The parties then settled the remaining claims while reserving their right to appeal. The district court entered a final judgment recognizing the settlement. The parties timely appealed.
DISCUSSION
We review a grant of summary judgment de novo, applying the same standards as the district court. Sossamon v. Lone Star State of Tex., 560 F.3d 316, 326 (5th Cir. 2009). Summary judgment is proper “when the pleadings and evidence demonstrate that no genuine [dispute] of material fact exists and the movant is entitled to judgment as a matter of law.” Id. (citation and quotations omitted). The movant bears the initial burden of demonstrating that no genuine dispute of materi-
The FLSA states that “no employer shall employ any of his employees ... for а 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.”
Oil Inspections claims that the district court erred by concluding that the plaintiffs did not fall within the administrative exemption to the FLSA‘s overtime requirements. The plaintiffs find error in the district court‘s conclusion that Zannikos fell within the “highly compensated employee” exemption to the FLSA‘s overtime requirements and its application of the two-year statute of limitations for non-willful violations to Oil Inspections’ violations rather than the three-year statute of limitations for willful violations.
We examine each of these arguments.
I. Administrative Exemption to the FLSA‘s Overtime Provisions
The FLSA‘s overtime provisions “shall not apply with respect to ... any employee employed in a bona fide executive, administrative, or professional capacity....”
- Compensated on a salary or fee basis at a rate of not less than $455 per week ... ;
- Whose primary duty1 is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer‘s customers; and
- Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
The plaintiffs concede that Oil Inspections paid them more than $455 per week but claim the district court erred in concluding that their primary duties satisfied the second element of the exemption. Oil Inspections, in contrast, argues that the court correctly determined that the plaintiffs satisfied the second element but erred in holding that they did not satisfy the third.
To qualify for the administrative exemption, “an employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment.”
The plaintiffs argue that the district court erred in concluding that they performed non-manual work that directly related tо the general business operations of Oil Inspections’ customers. They claim that their work was “more in line with someone working in a production line for [Oil Inspections‘] customers rather than that of one implementing, creating, or administering policies.” The clearest example they offer in support of their argument is their supervision of the “line blending” process, which involves producing gas/oil blends for sale overseas. The plaintiffs assert that, since line blending results in the production of a “new petroleum product,” their role in that process constituted production rather than administration.
These arguments are unconvincing. The plaintiffs’ work, including that relating to line blending, primarily included supervision, quality control, and ensuring cоmpliance with applicable standards. They did not transfer oil, blend oil, or manufacture or sell petroleum products themselves. Instead, they oversaw these functions and provided Oil Inspections’ customers with inspection and operational support services. Such services are not considered production. See
The plaintiffs also argue that employees who produce the precise service offered to customers by their employer are engaged in production, citing Cotten v. HFS-USA, Inc., 620 F.Supp.2d 1342 (M.D.Fla.2009). Thus, because they “were hired to produce the very product Oil [Inspections] sells and markets,” which is “oversight,” they claim that their functions necessarily constitute production. This argument is analytically distinct from the plaintiffs’ claim that they effectively produced petroleum products for customers. In effect, the plaintiffs are arguing that, even if their services do not constitute production in relation to Oil Inspections’ customers, it is sufficient that they constitute production in relation to Oil Inspections. The district court disagreed, noting that, in Cotten, “the court only considered whether [the employee‘s] duties were related to the management of thе employer, not the customer.” The court concluded that this approach “necessarily conflict[s] with
The second element of the administrative exemption applies to employees “[w]hose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer‘s customers....”
Other regulatory provisions designed to clarify the second element of the administrative exemption support this conclusion. In particular,
Moreover, the plaintiffs’ interpretation would render the administrative exemption largely meaningless. Many — perhaps most — employees whose primary duties directly relate to the management of customers perform the precise services offered by their employers. For example, tax experts, financial consultants, and management consultants perform the precise services offered to customers by the accounting and consulting firms for which they work. Thus, under the plaintiffs’ interpretation, these employees should not fall under the administrative exemption. This result, however, conflicts with
We conclude that the district court correctly categorized the plaintiffs’ work as office or non-manual work directly related to the management or general business operations of Oil Inspections or its customers under the second element of the administrative exemption.
b. Third Element: Exercise of Discretion and Independent Judgment
The administrative exemption also requires that an employee exercise discretion and independent judgmеnt with respect to matters of significance, which “involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.”
Oil Inspections argues that the district court erred in concluding that the plaintiffs did not exercise independent judgment. In support of this argument, Oil Inspections analyzes ten non-exhaustive factors that courts often consider when determining whether an employee exercises the requisite discretion. See
We note at the outset that there are striking similarities between the plaintiffs’ work and that of inspectors, examiners, and graders, who are generally non-exempt employees. See
Despite these similarities, Oil Inspections argues that certain features of the plaintiffs’ duties, when analyzed in the con-
text of the
The first factor concerns the employee‘s “authority to formulate, affect, interpret, or implement management policies or operating practices.”
Oil Inspections argues that the plaintiffs satisfied the second factor, which asks “whether the employee carries out major assignments in conducting the operations of the business,”
against such a conclusion. See
For essentially the same reasons it advances with regard to the second factor, Oil Inspections argues that the plaintiffs performed work affecting customers’ business operations to a substantial degree, thereby satisfying the third factor. See
According to Oil Inspections, the plaintiffs had the “authority to commit the employer in matters that have significant financial impact,” which is the fourth factor. See
Next, Oil Inspections argues that the plaintiffs had “authority to waive or deviate from established policies and procedures without prior approval,” which is the fifth factor. See id. The only example of this authority Oil Inspections offers is the plaintiffs’ ability to permit independent cargo inspectors to use ship equipment to conduct their inspections rather than using their own equipment. As the district court noted, though, Oil Inspections did not point to any policy or manual demonstrating that cargo inspectors were required to use their own equipment. In fact, Oil Inspections’ policies seem to stipulate only that inspectors must use properly calibrated equipment, whatever its source. Accordingly, Oil Inspections has not shown that the plaintiffs had the authority to deviate from its established procedures.
Oil Inspections does not argue that the plaintiffs satisfied the sixth factor, which concerns an employee‘s authority to negotiate and bind the company. See id. The seventh factor involves providing consultation or expert advice to management. See id. In support of this factor, Oil Inspections states that one of its customer‘s descriptions of marine superintendents’ responsibilities included the use of “experience and expertise.” Job descriptions alone, though, may not suffice to establish that employees render consultation or expert advice. Cf.
Oil Inspections does not address the eighth factor, which addresses an employee‘s role in planning business objectives. See
Finally, Oil Inspections argues that the plaintiffs met the tenth factor, which looks to whether the employee represents the company in resolving customers’ complaints, disputes, and grievances. See
The district court correctly concluded that the work performed by marine superintendents did not extend beyond the application of skill in applying specified standards and thus did not satisfy the “independent judgment” element of the administrative exemption. An analysis of the
Finally, in addition to the
As to O‘Dell, the Ninth Circuit concluded in a later opinion that it “ignored the [FLSA] regulations’ distinction between the use of discretion and the application of skill, reasoning that such regulations are simply guides that do not bind the court or limit its discretion.... That view has since been rejected by both the Supreme Court and the Ninth Circuit.” Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1129 (9th Cir. 2002) (citations omitted).
Additionally, the marine superintendents are not analogous to the employees in Cheatham and Bondy. In Bondy, we held that event coordinators met the third element of the administrative exemption. See 77 Fed.Appx. at 733. For support, we relied on event coordinators’ ability to plan most aspects of convention-center events,
In Cheatham, we noted that “consult[ation] with manuals or guidelines does not preclude the[.] exercise of discretion and independent judgment.” 465 F.3d at 585 (citation omitted). We then enumerated the ways in which the insurance adjusters we were considering exercised discretion despite consulting claims manuals, including “determining coverage, conducting investigations, determining liability and assigning percentages of fault to parties, evaluating bodily injuries, negotiating a final settlement, setting and adjusting reserves based upon a preliminary evaluation of the case, investigating issues that relate to coverage and determining the steps necessary to complete a coverage investigation, and determining whether coverage should be approved or denied.” Id. at 586; see also id. at 585 n. 7. Such investigatory and evaluative functions clearly extend beyond the observation of processes, enforcement of standards, and reporting of noncompliance. Indeed, while claims manuals may inform assignments of fault, injury evaluations, settlement negotiations, and other asрects of the claims process, they seldom dictate the results in absolute terms or obviate the
need to evaluate possible courses of action. See McAllister v. Transamerica Occidental Life Ins. Co., 325 F.3d 997, 1001 (8th Cir. 2003). The plaintiffs’ primary duties, in contrast, did not entail making discretionary decisions based on guidelines but rather strictly applying guidelines and reporting noncompliance. Accordingly, Oil Inspections has not shown that the plaintiffs exercised discretion comparable to the insurance adjusters in Cheatham.
The district court correctly concluded that the plaintiffs’ primary duties did not include the exercise of discretion and independent judgment with respect to matters of significance.
II. “Highly Compensated Employee” Exemption to the FLSA
The FLSA provides that “[a]n employee with total annual compensation of at least $100,000 is deemed exempt ... if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee....”
The plaintiffs concede that Zannikos’ compensation in 2011 was $100,000.08,5 but maintain that his primary
III. FLSA‘s Two-Year Statute of Limitations for Non-Willful Violations
FLSA claims are subject to a two-year statute of limitations for ordinary violations and a three-year period for willful violations.
the matter of whether its conduct was prohibited by the statute....” McLaughlin, 486 U.S. at 133, 108 S.Ct. 1677.
The plaintiffs argue that Oil Inspections recklessly disregarded whether marine superintendents were exempt from the FLSA. They allege that Oil Inspections knew of the FLSA‘s potential applicability, as demonstrated by its employee handbook; failed adequately to research the statute‘s applicability; and failed to consult with attorneys or the DOL on the matter. These allegations do not suffice to demonstrate willfulness.6
An employer who “act[s] without a reasonable basis for believing that it was complying with the [FLSA]” is merely negligent. Id. at 134-35, 108 S.Ct. 1677. So too is an employer who fails to seek legal advice regarding its payment practices. See id.; Mireles, 899 F.2d at 1416. Willfulness has been found when the evidence demonstrated that an employer actually knew its pay structure violated the FLSA or ignored complaints that were brought to its attention. See Ikossi-Anastasiou v. Bd. of Supervisors of La. State Univ., 579 F.3d 546, 553 n. 24 (5th Cir. 2009). The plaintiffs have failed to put forth evidence that Oil Inspections knew that it was violating the FLSA or recklessly disregarded a potential violation. Accordingly, Oil Inspections did not willfully violate the FLSA and the two-year statute
AFFIRMED.