The opinion of the court was delivered by: Herndon, District Judge
I. Introduction and Procedural Background
Now before the Court are three motions for summary judgment: two filed by Defendant CC Services, Inc. (Docs. 63 & 67) and a cross motion for summary judgment filed by Plaintiffs (Doc. 78). CC Services, Inc., moves for summary judgment arguing that it is entitled to summary judgment on Plaintiffs' claims as it has appropriately categorized the Material Damage Appraiser II, the Field Claim Representative II, Field Claim Representative III and Property Specialist I positions as exempt from overtime wages under the Fair Labor Standards Act. Specifically, CC Services, Inc. argues that these positions fall within the administrative exemption of the Fair Labor Standards Act. Plaintiffs oppose summary judgment as to these four positions maintaining that they are not exempt under the administrative exemption and filed a cross motion for summary judgment as to the Material Damage Appraiser II position. Based on the record, the applicable case law and the following, the Court grants Defendant's motions for summary judgment and denies Plaintiffs' cross motion for summary judgment.
On January 30, 2004, Roe, on behalf of herself and all similarly situated individuals, filed a two-count complaint against Illinois Agricultural Association and CC Services, Inc. ("CC Services") in the Williamson County, Illinois Circuit Court alleging violations of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., ("FLSA") (Count I) and the Illinois Minimum Wage Law ("IMWL") (Count 2) (Doc. 2).*fn1 Specifically, Roe's complaint alleges that CC Services unlawfully classified her as exempt from overtime payments under Federal and State laws and failed and refuses to pay her and the putative class members overtime pay for overtime work. Count I is a putative collective action under the FLSA and Count II is a putative class action under the IMWL. On March 2, 2004, Defendants removed the case to this Court based on federal question jurisdiction, 28 U.S.C. § 1331, and supplemental jurisdiction, 28 U.S.C. 1367 (Doc. 1).
On July 16, 2004, the Court denied Defendant's motion to dismiss (Doc. 39). On August 10, 2004, Magistrate Judge Proud allowed Roe leave to file a First Amended Complaint which Roe filed on August 16, 2004 (Doc. 43). The First Amended Complaint added Paul Decker as a named Plaintiff against CC Services (Doc. 43). Count I alleges violations of the FLSA and Count II alleges violations of the IMWL. On October 2, 2004, Plaintiffs filed a motion to certify a collective action of persons pursuant to the FLSA (Doc. 45). On November 16, 2004, CC Services and Plaintiffs filed a joint stipulated certification of a collective action with respect to four classes: Material Damage Appraiser II ("MDA"), Field Claim Rep II (FCR II), Field Claim Rep III (FRC III) and Property Specialist I (PS I) (Doc. 49). On July 18, 2005, Plaintiffs moved to amend their complaint to bring collective and class-action claims for three new named Plaintiffs and three new employee classifications (Doc. 59). On August 10, 2005, the Court denied the motion to amend (Doc. 69). On March 16, 2006, the Court pursuant to 28 U.S.C. § 1367(c), granted Plaintiffs' motion to sever and remand (Doc. 89) and remanded Count II of the First Amended Complaint to the Circuit Court of Williamson County, Illinois (Doc. 94).
CC Services is a company which contracts with several insurance companies to provide personnel services, including all services in the insurance claims area. CC Services' insurance company customers include, among others, Country Preferred Insurance Company, Country Life Insurance Company, Country Mutual Insurance Company, and Country Casualty Insurance Company. CC Services does adjusting work for County Mutual Insurance Company and affiliates but does not produce insurance policies. CC Services' insurance company customers provide a wide variety of insurance policies including auto, home, commercial, and farm policies. MDAs, FCRs, and PSs work with several types of policies including Farm, Home, Commercial and Auto policies.
As part of the service contract between CC Services and its customer insurers, CC Services employs a Claims Division. Claims Division employees were responsible for paying out $606,300,333.00 in claims for the year 2004. The Claims Division is composed of the Corporate Claims Office, which is located in Bloomington, Illinois and 37 Field Offices. Each Field Office generally has employees in the following positions: MDAs, FCRs, PSs, Material Damage Specialists, Liability Specialists, a Field Claims Supervisor and several Claims Support Representatives.
Each of the positions within the Claims Division, with the exception of clerical staff, has an authority within which he or she may settle a claim and write a check to the claimant without authorization from another employee. This settlement authority level applies per indemnity. When an employee is hired in, he or she may start with a lower settlement authority, but after some training the new employee would be moved up to the authority level for that position. In 2002, 94.22% of claims settled for less than $10,000.
There is a Field Claims Supervisor staffed in each Field Office. All employees in a Field Office report to the Field Claims Supervisor. The Field Claims Supervisor conducts yearly performance reviews. Some Field Claims Supervisors also hold monthly staff meetings for all employees in their office. On claims from the Corporate Claims Office, a MDA's supervisor will never see the completed evaluation because the evaluation will be returned to the Corporate Claims Office. Field Supervisors do not exert as much supervision over MDAs as they do over FCRs.
The Field Claims Supervisor is responsible for examining files at periodic intervals if the file is open. In this open file review, the Field Claims Supervisor does not make substantive changes in the payment amounts or decisions by his employees. The Field Claims Supervisor tries to observe whether an employee is adhering to the Best Practice standards. Best Practice standards refer to the timeliness in which the contact is made with the insured and in which the investigation is completed. The Field Claims Supervisor also tries to monitor that claims are appropriately documented and timely completed in accordance with state law and regulations by the Department of Insurance. The review is directed at compliance with Best Practices and compliance with state law to determine that sufficient documentation is present.
After a file is completed, a Field Claims Supervisor conducts a closed file review. This review is conducted to ensure compliance with CC Services' Best Practice guidelines and the Department of Insurance regulations. Closed file audits are conducted on only a random sampling of files, not on all of the files. A closed file audit is performed by the Internal Audit Team for purposes of determining leakage. Leakage, which refers to the identification of a claim overpayment, is measured by a closed file audit. From the closed file audit, leakage is determined if the file does not contain complete and accurate documentation supporting the payment made on the claim. MDAs are only held to a 5% leakage standard. The closed file review and the closed file audit results are not used to go back and change the decision made on the closed files, but rather are used to train adjusters for their work on future files. Both of these audits are conducted after the files are closed. No changes are made to the FCR or PS's decisions as a result of findings in audits.
Best Practices are four guidelines with which all claims employees are expected to comply. The Best Practices guidelines are contained in the Claims Manual. The four Best Practice Guidelines are:
(1) Make a Meaningful First Contact with the insured as soon as possible on all same business day losses reported prior to 3:00 P.M. (caller's time). After 3 P.M. the Meaningful First Contact must be made prior to the end of the next business day MORNING.
(2) Contact Claimant within 24 hours and all other known relevant parties per applicable guidelines within 2 working days of when a loss is reported.
(3) Complete investigation per applicable guidelines within 4 working days of when loss is reported.
(4) Complete MD and Property Inspections within 3 working days of date reported, or at time requested by client.
Best Practices do not tell an adjuster how to investigate, evaluate and resolve a complaint. The Claims Manual and other information given to Claims Division employees do not explain how to resolve any particular claim because all claims are different and must be resolved individually.
Department of Insurance regulations and state law mandate that claims be investigated and resolved within a certain amount of time and that they contain very specific documentation. Department of Insurance regulations are contained in the Claims Manual, a guide to which all Claims Division employees have access. The Best Practice guidelines are also in place so that CC Services complies with Department of Insurance regulations. FCRs, PSs, and MDAs utilize checklists and the Claims Manual. The check lists provided to FCRs, PSs and MDAs detail the tasks, sequencing and documentation requirements for particular adjusting tasks. Plaintiffs
Paula Roe-Midgett ("Roe-Midgett") was a MDA since at least January 1, 2001, until her employment ended. She was employed by CC Services since at least January 1, 2001. During her tenure as a MDA, Roe-Midgett worked in a Model Office operated by CC Services in Harrisburg, Illinois. Roe-Midgett's leakage percentage was .89%. Roe-Midgett's individual appraisal amounts for repairables for the period January through November 2002 consisted of an average appraisal dollar amount of $1,724.01.
Paul Decker ("Decker") has held the positions of FCR III and PS I since at least January 1, 2001, until his employment ended. Decker was employed by CC Services since at least January 1, 2001.
The pay range for the MDA II position is $36,952.00 to $55,427.00. MDAs are paid a set predetermined salary on a bi-weekly basis. MDAs are not docked pay for partial day absences or violations of rules. The work of a MDA is non-manual, except occasional manual work that is ancillary to the MDA's primary duties. The MDAs' duties include inspecting, appraising and settling first and third party physical damage vehicle claims within a prescribed authority level. A MDA is expected to verify facts and prepare photographic and written documentation of loss through interviews with involved parties, witnesses, police personnel and others as required. The inspection and estimation of the MDA's job relates to vehicle damage as opposed to real property damage. They receive some standardize training from CC Services on completion of job tasks and on the use of software systems.
In June 2003, the MDA average appraisal dollar amount for repairables was $1,884.78. The average monthly damage pay-outs ranged between $1,750 to $2,400 and with respect to MDAs, the payout amount of repairables was consistent with the estimate amount.
MDAs are responsible for writing estimates on damaged vehicles. A MDA represents CC Services and its insurance company customers by negotiating with body shops, with insureds and with claimants. Also, a MDA may negotiate with body shops by asking them to repair a part instead of replacing it. A MDA may negotiate with the body shops regarding their hourly rate and/or the number of hours required to make repairs or replacements. The ability to effectively discuss repairs with auto body repair shops is directly related to the skill and experience of MDAs with repair costs and estimates. The decision to repair or replace a part is a function of skill and knowledge rather than judgment. Because knowledge and skill related to auto repair is the primary basis for effective negotiation by MDAs with repair shops; CC Services gives preference to persons with body shop experience in hiring MDAs.
When MDAs write an estimate, initially they will document only what is seen by them. If an auto body shop later determines that additional damages exist or there is an increase in the price of parts, the MDA will write a "supplement." A MDA must speak to the insureds and explain his decisions regarding repair estimates. A MDA must also speak to claimants involved in accidents to explain his decisions regarding repair estimates. Forming good customer relationships is an important part of the claims adjustment process. When customers have a complaint about or regarding MDAs, MDAs refer them to someone else.
Employees in the MDA position customarily have $12,000 authority on each indemnity. All MDAs currently employed by CC Services have an authority to settle claims up to $12,000 authority level. MDAs only have draft authority after an investigation is completed, a determination of clear liability is made and the MDA is given approval to issue a draft. MDAs evaluate and prepare damage estimates in approximately 60% of all claims handled by CC Services' Claims Division.
A MDA receives his assignment from a file handler. A file handler could be a Field Claims Representative located in the Field Office, or the assignment could come from a Claims Representative located in the Corporate Claims Office. Approximately 70% of all assignments MDAs receive come from the Corporate Claims Office in Bloomington, Illinois and are handled through the Corporate Claims Office. MDAs with lower levels of authority may be assigned the same cases as those with higher authorities. Assignment of claims largely is left to the discretion of the Claims Office or Field Claims Supervisor, who assigns claims based on a variety of criteria, including geographic location. Geographic location is the most important factor affecting assignment of MDAs. The information regarding the vehicle includes: the Vehicle Identification Number ("VIN"), location of ...