In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 06-3195

PAULA M. ROE-MIDGETT, Individually

and as Collective Action and

Class Action Representative, and

PAUL DECKER, Individually and

as Collective Action and

Class Action Representative,

Plaintiffs-Appellants,

v.

CC SERVICES, INCORPORATED,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Southern District of Illinois.

No. 04 C 4051—David R. Herndon, Chief Judge.

____________

ARGUED JANUARY 5, 2007—DECIDED JANUARY 4, 2008

____________

Before FLAUM, MANION, and SYKES, Circuit Judges.

SYKES, Circuit Judge. Plaintiffs Paula Roe-Midgett

and Paul Decker sued their employer CC Services, Inc.

(“CCS”) for overtime wages under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 207(a)(1). CCS contracts

with insurance companies to provide claims processing

services for auto, home, commercial, and farm policies.

Roe-Midgett and Decker were employed as claims adjusters at different levels of CCS’s claims-processing
2 No. 06-3195

hierarchy. Suing individually and on behalf of four

classes of claims adjusters, the plaintiffs contended that

CCS improperly classified them as administrative employees exempt from FLSA overtime requirements under

29 U.S.C. § 213(a)(1).

Applying the Department of Labor’s so-called “short

test” for determining whether employees fall within the

FLSA’s administrative exemption, the district court

concluded that the primary duties of all four claimsprocessing positions involved matters (1) “directly related to management policies or general business operations” and (2) “requiring the exercise of discretion and

independent judgment.” 29 C.F.R. § 541.214 (2003).

Accordingly, the court held the employees were exempt

from the overtime pay requirements of the FLSA and

granted summary judgment for CCS.

On appeal the plaintiffs develop no substantive challenge to the district court’s ruling as it relates to three

of the four classes of employees: CCS’s Field Claims

Representative II, Field Claims Representative III, and

Property Specialist positions. As to these employees, they

argue only that material issues of fact preclude summary judgment for CCS. But they failed to identify

any real factual dispute specific to these employees.

Regarding the final group of employees—those occupying

the position of Material Damage Appraiser II—the plaintiffs contend that the duties of this position do not directly relate to CCS’s management policies or general

business operations and do not require the exercise of

discretion and independent judgment. We disagree.

Material Damage Appraisers provide claims adjustment services for CCS’s insurance company clients up to

a $12,000 limit of claims settlement authority and represent the “face” of CCS to the countless claimants with

whom they interact. They spend much of their time in the
No. 06-3195 3

field without direct supervision. They conduct on-site

investigations of first- and third-party automobile insurance claims; interview claimants, witnesses, and law

enforcement personnel; estimate loss; determine whether

parts should be repaired or replaced; negotiate with

mechanics and body shops and draft final repair estimates;

and settle claims up to the limit of their $12,000 settlement authority. These duties directly relate to CCS’s

business operations and reflect a sufficient degree of

discretion and independent judgment to qualify for the

FLSA’s administrative exemption. Summary judgment

was properly entered for CCS on all four classes of employees.

I. Background

CCS is engaged in the business of processing insurance

claims for auto, home, commercial, and farm insurers.

Headquartered in Bloomington, Illinois, and administered

through 37 field offices, CCS’s Claims Division settled

roughly $600 million in claims in 2004. The claims-processing staff in each field office typically consists of Property

Specialists, Field Claims Representatives, and Material

Damage Appraisers (“MDA”), as well as other positions

not relevant here.

MDAs draw an annual salary of $36,952 to $55,427 and

primarily handle automobile claims. They do not make

coverage or liability determinations, which are typically

made by Field Claims Representatives or other claims

agents. MDAs are responsible for investigating auto

accident damage, making repair or replacement determinations, drafting estimates, and settling claims of up to

$12,000 where liability has been established and coverage
4 No. 06-3195

1 The average MDA payout on auto damage claims is far less

than the $12,000 limit. From January to November 2002, for

example, the average monthly payout ranged from $1750 to

$2400.

approved.1 MDAs spend much of their time in the field

without direct supervision. Moreover, because 70% of

appraisals assigned to MDAs come from the home office

and not the local field office, the field office supervisors

do not exert much direct daily control over MDAs.

Investigating accident damage entails a physical inspection of the vehicle to ensure the actual damage and its

cause correspond to the claimed damage and cause. The

cause of the accident often dictates the applicable policy

(i.e., comprehensive or collision) and deductible. MDAs

may also interview claimants, witnesses, and where

relevant, police personnel. If an MDA notes inconsistencies or otherwise suspects fraud, he relays his

observations to a CCS superior in charge of final liability and coverage determinations.

After documenting and investigating vehicle damage

on a given claim, the MDA prepares an estimate. The

first step in this process is determining if the vehicle is

irreparably damaged (a “structural total loss” in industry

parlance) or if the cost of repair exceeds the vehicle’s

value (an “economic total loss”). The latter calculation

is performed by inputting the vehicle’s identification

number and damage estimate into a software program

that “red flags” potential economic losses. If an MDA

suspects a structural total loss, he will relay that suspicion along with photos of the damage to a claims representative with final say as to whether the vehicle is a

structural total loss.

If the vehicle is not a total loss, the MDA must decide

which parts to repair and which to replace. For repaired
No. 06-3195 5

parts, the MDA estimates the total labor costs based in

part on his estimation of the man hours needed to complete the repair. In some instances body shops disagree

with the MDA’s projection, and the MDA negotiates for

an adjusted hours estimate. MDAs might also adjust a

repair estimate to account for “betterment,” a concept

intended to reflect the fact that parts that were in good

repair cost more to restore to their original preaccident

condition than parts already in disrepair at the time of

the accident.

MDAs also estimate the cost of replacing any parts

they deem beyond repair. They input a description of the

part into a software program, which then generates an

estimate based on labor costs and part price. In estimating

the price for the part, the software detects the availability of used parts and automatically factors in that

discount. The MDA may override the software and allow

for new parts, but only after documenting the reasons

for his deviation on a file summary sheet; all other deviations from CCS’s adjusting guidelines must similarly

be memorialized. “Betterment” adjustments may also

affect replacement part estimates.

After projecting the repair and replacement costs,

MDAs draft a final damage estimate. While they are

responsible for explaining the estimate to the claimant

and answering any questions, MDAs refer dissatisfied

claimants to a CCS adjuster with authority to determine coverage and liability. If, however, the claimant is

satisfied with the estimate and the claims representative

has already determined liability, MDAs may settle claims

of up to their $12,000 limit of authority. Claims representatives need not formally approve the actual amount of

settlement or underlying estimate, though they informally

review an MDA’s work for errors. CCS auditors also

periodically audit MDA estimates to ensure compliance

with the adjusting guidelines and to gauge each MDA’s
6 No. 06-3195

2 Roe-Midgett was an MDA; Decker was a Field Claims Representative and Property Specialist.

“leakage,” that is, the percentage of total claims paid

in error.

In addition to MDAs, CCS’s field offices are also

staffed with Field Claims Representatives II and III and

Property Specialists. Employees with these titles generally receive a higher salary than MDAs and are authorized to make final coverage and liability determinations and settle higher-value and more complicated

claims. For reasons we will explain, further discussion of

the day-to-day duties of these positions is unnecessary

for purposes of this appeal.

CCS classified its MDAs, Field Claims Representatives,

and Property Specialists as “administrative” employees

exempt from overtime wages otherwise mandated by

the FLSA. Two CCS employees2

 took issue with the

classification and brought this “opt-in” collective action

under the FLSA. See 29 U.S.C. § 216(b). CCS moved for

summary judgment with respect to all four positions; the

plaintiffs cross-moved for summary judgment as to the

MDA position. The district court granted CCS’s motion

and the plaintiffs appealed.

II. Analysis

We review de novo the district court’s grant of summary judgment in favor of CCS. Allen v. City of Chicago,

351 F.3d 306, 311 (7th Cir. 2003). We will affirm if,

construing the evidence and all reasonable inferences in

a light most favorable to the plaintiffs, there are no

genuine issues of material fact in dispute and CCS is

entitled to judgment as a matter of law. Id.; FED. R. CIV. P.
No. 06-3195 7

56(c). The burden is on CCS to establish that an employee falls within the FLSA’s administrative exemption.

Corning Glass Works v. Brennan, 417 U.S. 188, 196-97

(1974). Determining the duties encompassed by an employee’s position is a question of fact; determining the

appropriate FLSA classification is a question of law. Icicle

Seafoods, Inc. v. Worthington, 475 U.S. 709, 714 (1986).

The FLSA requires employers to pay overtime wages

(i.e., one and one-half times the regular rate) for any hours

worked in excess of 40 per week. 29 U.S.C. § 207(a)(1)

(2000). Exempt from the overtime requirements, however, are workers “employed in a bona fide . . .

administrative . . . capacity.” 29 U.S.C. § 213(a)(1). Congress has charged the Secretary of Labor with issuing

regulations defining and delimiting the term “bona fide

administrative capacity.” Id. In 1975 the Secretary

issued the so-called “short test” for determining whether

salaried employees engaged in nonmanual work (a description the plaintiffs concede applies to them) are employed in an administrative capacity. 29 C.F.R. § 541.214

(2003) (all regulatory citations will be to the 2003 Code

of Federal Regulations unless otherwise noted). At the

heart of this appeal are the short test’s two “duties”

requirements, that is, that the employee’s primary duties

must (1) directly relate “to management policies or general business operations of the employer or the employer’s customers” and (2) “include[ ] work requiring

the exercise of discretion and independent judgment.” Id.;

Demos v. City of Indianapolis, 302 F.3d 698, 701 (7th Cir.

2002). An employee’s title is not controlling; courts instead must engage in a case-by-case analysis of the employee’s duties and responsibilities. 29 C.F.R.

§ 541.201(b)(1).

In 2004 the Secretary issued a comprehensive set of

new regulations addressing the scope of the overtime
8 No. 06-3195

exemptions. 69 Fed. Reg. 22122, 22260 (Apr. 23, 2004)

(codified at 29 C.F.R. § 541.200). The regulations replaced the short test and the longer test at section 541.2(a)-(e) with a “general rule” for determining

whether an employee works in an administrative

capacity. Id. at 22139. The general rule, however, merely

restates the short test’s two “duties” requirements. Id.;

29 C.F.R. § 541.200(a)(2)-(3) (2006). Indeed, the only

differences between the short test and the new “general

rule” are the salary requirement (at least $250 per

week under the old rule versus $455 per week under the

new rule) and the additional explanation that an administrative employee must exercise discretion or independent judgment “with respect to matters of significance.” 29 C.F.R. § 541.200(a)(1), (3) (2006). While that

qualifying phrase was not explicitly part of the old test,

it was built into the old rule’s definition of “discretion

and independent judgment” found elsewhere in the

applicable regulations. See 69 Fed. Reg at 22143. In other

words, the new “general rule” is essentially a simplified

restatement of the old “short test.”

The 2004 regulations also list examples of jobs that

generally satisfy the “duties requirements” for administrative employees. 29 C.F.R. § 541.203 (2006). Included

in that list are “insurance claims adjusters . . . , 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.” Id.

§ 541.203(a).

Because the 2004 regulations took effect after the

plaintiffs brought this action, the old short test still

determines whether they fall within the administrative
No. 06-3195 9

exemption. See Kennedy v. Commonwealth Edison Co.,

410 F.3d 365, 369 (7th Cir. 2005) (explaining that the

2004 regulations do not apply retroactively). But the

new regulations are nonetheless informative on the

issues before us in this appeal. The Secretary of Labor

has characterized the promulgation of the new rules as

an effort to “consolidate and streamline” the dense and

unwieldy regulatory text of the old regulations. 69 Fed.

Reg. at 22126. As we have noted, the 2004 regulations

did not substantively alter the old short test; to the

contrary, the Secretary undertook the regulatory revision to “streamline[ ] the existing regulations by adopting a single standard duties test for each exemption

category, rather than the existing ‘long’ and ‘short’ duties

test[ ] structure.” Id. The Secretary also described section

541.203, which lists examples of jobs that would be

deemed “administrative” and therefore exempt from

overtime pay, as “consistent with” the old regulations

and case law. Id. at 22144; see also In re Farmers Ins.

Exch., 481 F.3d 1119, 1128 (9th Cir. 2007) (“[Section]

541.203 does not represent a change in the law.”);

Robinson-Smith v. GEICO, 323 F. Supp. 2d 12, 26 (D.D.C.

2004) (same).

A. The MDA Position

1. The “Directly Related” Requirement

For MDAs to fall within the administrative exemption,

CCS must first establish that their primary duties consist of “work directly related to management policies or

general business operations of the employer or the employer’s customers.” 29 C.F.R. § 541.214. This requirement encompasses “those types of activities relating to

the administrative operations of a business as distinguished from ‘production’ or, in a retail or service establishment, ‘sales’ work.” Id. § 541.205(a). “The administra-
10 No. 06-3195

tive operations of the business include the work performed by so-called white-collar employees engaged in

‘servicing’ a business as, for example, advising the management, planning, negotiating, representing the company,

purchasing, promoting sales, and business research and

control.” Id. § 541.205(b). The “directly related” requirement also “limits the [administrative] exemption to

persons who perform work of substantial importance to

the management or operation of the business of his employer or his employer’s customers.” Id. § 541.205(a).

Accordingly, the “directly related” component of the short

test requires that the employee’s duties: (1) involve the

administrative operations of the business, as distinct

from production or sales work; and (2) be “of substantial

importance” to the business or its customers.

CCS is in the business of processing claims brought by

policyholders and other claimants against the insurance

policies of its insurance company clients. MDAs handle

60% of all claims processed by CCS. A large percentage of

those claims involve auto damage totaling less than

$10,000, which MDAs investigate, adjust, and settle

with only minimal oversight. In so doing, MDAs are

required to analyze “data and draw[ ] conclusions which

are important to the determination of . . . [CCS’s] policy.”

29 C.F.R. § 541.205(c)(3). Consequently, MDAs play a

significant role in the claims-adjusting service CCS

provides to its insurance-carrier clients. MDAs are at the

front lines of CCS’s auto claims adjusting operation; they

spend most of their time in the field and represent the

“face” of CCS to the claimants and mechanics with whom

they interact. See id. § 541.205(b). Investigating, estimating, and ultimately settling auto damage claims is obviously “work of substantial importance” to CCS’s business operations and is the core service it provides to
No. 06-3195 11

3 This is not to say all white-collar employees in service industries necessarily perform “work of substantial importance”

sufficient to meet the “directly related” test. The regulations

make clear that “bookkeepers, secretaries, and clerks of various

kinds” do not generally perform such work because “routine

clerical work” is not of substantial importance to the employer’s business operations. 29 C.F.R. § 541.205(c)(1). But

MDAs perform more than routine clerical work; they make

substantive decisions regarding the claims insurance companies pay CCS to process.

its customers.3 Id. § 541.205(a). Indeed, the plaintiffs

have not mounted a serious challenge to CCS’s claim that

an MDA’s duties are of “substantial importance” to its

business. As such, they have essentially conceded the

point. See United States v. Duran, 407 F.3d 828, 844 n.7

(7th Cir. 2005).

The plaintiffs do argue, however, that the duties of

an MDA are not properly characterized as “administrative” for purposes of the first aspect of the “directly related” requirement. They contend MDAs are the postindustrial equivalent of production workers and thus are

not involved in CCS’s administrative operations. The

plaintiffs are correct that the “directly related” test seeks

to distinguish exempt administrative work from nonexempt production or sales work. 29 C.F.R. § 205(a); Kennedy, 410 F.3d at 372. But their attempt to cast MDAs

as service-industry “production” workers founders for

two reasons.

First, the plaintiffs make too much of the fact that CCS

does not actually underwrite or sell insurance policies. The

gist of the plaintiffs’ argument is that CCS “produces”

claims-processing services (though not the underlying

policies) and therefore MDAs are essentially responsible

for “producing” CCS’s “product.” This argument hinges

on a distinction between in-house claims processing by

insurance companies, which the plaintiffs view as ancil-
12 No. 06-3195

lary to the “production” of the policies themselves, and

outsourced claims processing of the type performed by

CCS, which they interpret as a “product” unto itself. Under

the Department of Labor’s interpretive regulations,

however, this distinction is immaterial, as “administrative

operations of a business” may “be those of the employer

or the employer’s customers.” See 29 C.F.R. § 541.205(a),

(d) (emphasis added). CCS’s customers are insurance

companies in the business of selling policies, and employees who process claims against those policies are performing an administrative function for CCS’s customers

(i.e., a task that administers the policies “produced” by

the insurers).

This conclusion is reinforced by a Department of Labor

opinion letter involving a “claims specialist” who processed

claims “on behalf of a contracting insurance company.”

DOL Wage & Hour Div. Op. Ltr. FLSA2005-25, at 4 (Aug.

26, 2005). The administrative exemption turns on how

employees spend their day, not who signs their paycheck. See 29 C.F.R. § 531.205(d). It would be strange to

conclude that a claims-processing employee at a thirdparty service company like CCS is entitled to overtime

while his in-house counterpart at XYZ Insurance Co. is

not. Indeed, the 2004 regulations make it clear 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.” 29 C.F.R. § 541.203(a) (2006) (emphasis added).

Second, the so-called production/administrative dichotomy—a concept that has an industrial age genesis—is only

useful by analogy in the modern service-industry context.

“The typical example of the . . . dichotomy is a factory

setting where the ‘production’ employees work on the line

running machines, while the administrative employees

work in an office communicating with the customers and

doing paperwork.” Shaw v. Prentice Hall Computer Publ’g,

Inc., 151 F.3d 640, 644 (7th Cir. 1998). The analogy is not
No. 06-3195 13

terribly useful here, particularly given that the 2004

regulations suggest a more traditional meaning of “production.” The new regulations state that the “directly related”

test is met by employees who “assist[ ] 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.” 29

C.F.R. § 541.201(a) (2006). MDAs are obviously neither

working on a manufacturing line nor “producing” anything

in the literal sense. They are service providers, and the

service they provide is the administration of insurance

claims. This is the main business of CCS’s Claims Division. See DOL Wage & Hour Div. Op. Ltr. FLSA2005-25,

at 4; see also Haywood v. N. Am. Van Lines, Inc., 121 F.3d

1066, 1072 (7th Cir. 1997) (employee who settled customer

complaints against moving company meets “directly

related” test because her employment activity was ancillary to the employer’s moving business). We have no

difficulty concluding that the duties of MDAs “directly

relate” to CCS’s “administrative operations.”

This conclusion is supported by an interpretive regulation that lists “claim agents and adjusters” as examples

of positions that will generally satisfy the “directly related”

part of the short test. See 29 C.F.R. § 541.205(c)(5).

MDAs may lack some of the responsibilities traditionally

associated with claims adjusting—they do not, for example, make liability and coverage determinations, see id.

§ 541.203(a) (2006)—but inspecting, appraising, and

settling property damage claims are core adjuster functions. See id.

2. The “Discretion and Independent Judgment”

Requirement

The undisputed evidence also leads us to conclude that

MDAs satisfy the short test’s second requirement—the
14 No. 06-3195

“exercise of discretion and independent judgment.”

29 C.F.R. § 541.214(a). The old regulations devote pages

to defining this phrase. They first explain that it involves “the comparison and the evaluation of possible

courses of conduct and acting or making a decision after

the various possibilities have been considered.” Id.

§ 541.207(a). The phrase also “implies that the person

has the authority or power to make an independent

choice, free from immediate direction or supervision and

with respect to matters of significance.” Id. That choice

need not be final or otherwise immune from review; an

exercise of discretion or independent judgment may

“consist of recommendations for action rather than the

actual taking of action.” Id. § 541.207(e). The regulations

also caution against confusing true discretion and independent judgment with the “use of skill in applying

techniques, procedures, or specific standards.” Id.

§ 541.207(b)-(c)(7). Employees who fit the latter description, whom the regulations describe as workers who

grade, classify, or otherwise determine whether specified

standards are met, are not exercising discretion or independent judgment for purposes of the administrative

exemption. Id. § 541.207(c)(1)-(2). The plaintiffs argue

that this description applies to MDAs, whom they characterize as mere “fact finders” whose responsibilities involve only “the most basic component of the claims adjusting process.”

Though the old regulations are silent as to whether

employees who adjust insurance claims exercise discretion

and independent judgment, the Department of Labor

(through agency opinion letters) and the circuits that have

confronted the question generally regard “claims adjusters” as exercising sufficient discretion to trigger the

administrative exemption. DOL Wage & Hour Div. Op.

Ltr. FLSA2002-11, at 2 (Nov. 19, 2002) (“Wage and Hour

has long recognized that claims adjusters typically perform work that is administrative in nature.”); see In
No. 06-3195 15

re Farmers, 481 F.3d at 1119; Cheatham v. Allstate Ins.

Co., 465 F.3d 578, 585-86 (5th Cir. 2006); McAllister v.

Transamerica Occidental Life Ins. Co., 325 F.3d 997, 1001

(8th Cir. 2003). Codifying the Department’s position, the

new regulations explain that “insurance claims adjusters

generally meet the duties requirements for the administrative exemption.” 29 C.F.R. § 541.203(a) (2006). Unlike

the claims adjusters in the opinion letters and cases we

have cited, however, MDAs do not themselves determine

coverage or liability. They also do not negotiate with the

claimant’s attorney or make litigation recommendations.

See id. We conclude these distinctions are not significant

enough to take the MDAs outside the scope of the administrative exemption.

In addition to performing the core duties of a claims

adjuster, MDAs routinely use their discretion and independent judgment to make choices that impact damage

estimates, settlement, and other “matters of significance.”

29 C.F.R. § 541.207(a). When MDAs inspect a vehicle for

damage, they must exercise independent judgment to

verify whether the actual damage is consistent with the

claimed damage. In doing so, the MDA must evaluate

whether the damage is likely preexisting, inconsistent

with the alleged cause, or otherwise suspicious. The

MDA must also be on the lookout for fraud when interviewing the claimant and any witnesses. These are

judgment calls with respect to matters of significance;

MDAs are using their knowledge and experience to

distinguish covered damage from fraudulent or preexisting damage. While MDAs do not make final liability

decisions, their assessment of the damage and its cause

bear directly on the ultimate coverage determination.

For example, at her deposition Roe-Midgett testified that

if she noticed damage indicative of a collision with a

deer as opposed to another vehicle, she would “let the

adjuster . . . know that they may need to look into it
16 No. 06-3195

a littler further” because “there’s a coverage difference.”

Roe-Midgett acknowledged that deer-vehicle collisions

would be covered by the claimant’s “comprehensive” rather

than “collision” policy, which may carry different deductibles. She also explained that if she felt certain

damage was preexisting, she would “let the file handler

know that this damage is not part of this claim” because

“we don’t pay for claims we do not owe.” In other words,

MDAs like Roe-Midgett make coverage recommendations to their superiors. The applicable regulations

explain that “decisions made as a result of the exercise of

discretion and independent judgment may consist of

recommendations for action rather than the actual taking of action.” 29 C.F.R. § 541.207(e)(1).

The balance of an MDA’s day-to-day responsibilities

mirror the duties the new regulations attribute to exempt “claims adjusters,” namely: “interviewing insureds

[and] witnesses . . . ; inspecting property damage; reviewing factual information to prepare damage estimates; evaluating and making recommendations regarding coverage of claims; [and] determining . . . [the]

total value of a claim.” 29 C.F.R. § 541.203(a) (2006).

That MDAs are not engaged in determining liability and

making recommendations regarding litigation does not

mean they are not “claims adjusters” as defined in the

regulations. The Secretary of Labor has explained that

section 541.203 “identifies the typical duties of an exempt

claims adjuster.” 69 Fed. Reg. at 22144 (emphasis added).

As such, the regulation “does not require the adjuster

to perform each and every activity listed.” In re Farmers,

481 F.3d at 1129.

We recognize section 541.203(a) is not meant to confer

a “blanket exemption for claims adjusters.” DOL Wage &

Hour Div. Op. Ltr. FLSA2005-2, at 2 (Jan. 7, 2005). We

are required to conduct “a case-by-case assessment to

determine whether the employee’s duties meet the require-
No. 06-3195 17

ment for exemption.” 69 Fed. Reg. at 22144. Because the

undisputed evidence here establishes that MDAs spend

most of their time in the field investigating, estimating,

and settling auto damage claims—unsupervised and up

to their $12,000 limit of authority—we conclude that

their duties involve the exercise of sufficient discretion

and independent judgment to come within the scope of

the administrative exemption.

The plaintiffs counter that MDAs are so constrained by

CCS’s adjusting manual and estimating software that

there is no room for independent judgment. But independent judgment is not foreclosed by the fact that an

employee’s work is performed in accordance with strict

guidelines. Kennedy, 410 F.3d at 374-75; Cheatham, 465

F.3d at 585. Moreover, MDAs have the leeway to deviate

from the adjusting manual provided they document their

reasons for doing so, authority that itself connotes discretion and independent judgment. Moreover, the use

of computer software does not itself imply a lack of independent judgment or discretion. Kennedy, 410 F.3d at 375;

In re Farmers, 481 F.3d at 1130; Cheatham, 465 F.3d at

585. While MDAs use a software program to guide their

preliminary estimates, they do not use a computer to (1)

detect possible fraud or damage inconsistent with the

claim; (2) communicate with body shops to obtain part and

labor costs below those generated by the software; (3)

determine whether and what parts to repair instead of

replace; (4) explain the estimate to the claimant; or (5)

settle a claim within their prescribed settlement authority.

As with the adjusting manual, MDAs may override the

estimating software in certain instances. The adjusting

manual and the estimating software are most accurately

characterized as tools that channel rather than eliminate

the MDAs’ discretion. See Kennedy, 410 F.3d at 374.

The plaintiffs further contend that MDAs simply draw

on their skill and experience in inspecting damage and
18 No. 06-3195

estimating repair costs. They are correct to the extent

that “appraisers who merely inspect damaged vehicles

to estimate [repair costs] . . . are guided primarily by

their skill and experience” and thus are not exercising

discretion and independent judgment. In re Farmers, 481

F.3d at 1128 (quoting DOL Wage & Hour Div. Op. Ltr.,

at 1-2 (Feb. 18, 1963)); see also 29 C.F.R. § 541.207(c)(1);

DOL Wage & Hour Div. Op. Ltr. FLSA2005-2, at 2-3

(opining that “junior-level claims adjusters” who primarily conduct scripted interviews over the telephone

apply their skills and knowledge rather than exercise

their discretion and independent judgment). But the

MDAs do far more than just appraise damage. They also

investigate the claim, check for fraud, decide whether

to repair or replace parts, negotiate with body shops, and

settle claims up to $12,000. MDAs thus are not mere

appraisers; appraising damage is included among many

duties MDAs perform in the course of adjusting auto

damage claims.

We could find no appellate cases or opinion letters

in which a claims-processing employee with similar

responsibilities to the MDA’s was found to be nonexempt.

All the appellate cases involving claims-processing employees have arrived at the same conclusion we have

reached here. See In re Farmers, 481 F.3d at 1132 (addressing “automobile damage adjusters”); Cheatham,

465 F.3d at 585-86 (addressing “adjusters who handled

liability claims for bodily injury and damage to property”);

McAllister, 325 F.3d at 998, 1001 (addressing a “claims

coordinator”). So have a number of district court cases. See,

e.g., Jastremski v. Safeco Ins. Co., 243 F. Supp. 2d 743,

746, 758 (N.D. Ohio 2003) (addressing a “senior claims

representative”); Palacio v. Progressive Ins. Co., 244 F.

Supp. 2d 1040, 1049 (C.D. Cal. 2002) (addressing a “claims

representative”).
No. 06-3195 19

The plaintiffs cite only three district court cases in

support of their argument that MDAs do not exercise

discretion and independent judgment. The first, In re

Farmers, 336 F. Supp. 2d. 1077 (D. Or. 2004), was overruled on appeal, 481 F.3d 1119. The second relied on the

overruled In re Farmers decision to such an extent that

it too is unpersuasive. Robinson-Smith, 323 F. Supp. 2d

at 25 n.7 (“[T]he Court finds the reasoning of . . . [In re

Farmers] to be persuasive.”). The third case, Reich v.

American International Adjustment Company, involved

“auto damage appraisers” who had no settlement authority and whose sole responsibility was to “determine the

cost of repair.” 902 F. Supp. 321, 324 (D. Conn. 1994). In

contrast, MDAs have settlement authority up to $12,000,

and the record establishes that they routinely exercise this

authority. The average payout is relatively small (RoeMidgett’s average payout was $1724 per claim from

January through November 2002), but “nothing in the

regulation suggests that ‘smaller claims’ . . . should be

treated differently.” In re Farmers, 481 F.3d at 1133. In

sum, the district court properly concluded the MDAs

were exempt administrative employees.

II. The Field Claims Representative and Property

Specialist Positions

The plaintiffs’ only argument on appeal regarding the

Field Claims Representative and Property Specialist

positions is that triable issues of fact preclude summary

judgment for CCS. However, they identify no issues of

material fact specific to either of these positions. At oral

argument we asked plaintiffs’ counsel for an example of

a factual dispute involving either position. Counsel cited

the fact that CCS’s adjusting manual and estimating

software significantly limited the degree of discretion and

judgment exercised by these employees. This is not a
20 No. 06-3195

factual dispute. There is no disagreement about whether

CCS’s adjusting manual and estimating software govern

the claims adjustment process; they do. The parties’

dispute is about the legal consequences of that undisputed fact: that is, whether the manual and software so

limit the employees’ discretion as to make the administrative exemption inapplicable. See Worthington, 475

U.S. at 714 (“The question of how the respondents spent

their [time at work] is a question of fact. The question

whether their particular activities excluded them from the

overtime benefits of the FLSA is a question of law . . . .”).

We have already determined that the manual and

software do not eliminate the discretion and judgment

exercised by an MDA; the plaintiffs have not offered any

additional argument specific to the Field Claims Representative or Property Specialist positions. Accordingly,

the plaintiffs have failed to develop a meaningful challenge to the district court’s order granting summary

judgment to CCS with respect to these two positions. See

Smith v. Ne. Ill. Univ., 388 F.3d 559, 569 (7th Cir. 2004)

(undeveloped argument constitutes waiver).

AFFIRMED.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—1-4-08