Court Opinion

ID: 4018209
Source: CourtListenerOpinion
Date Created: 2016-07-22 18:00:54.590023+00
Date Added: 2024-06-11T14:34:40.594098
License: Public Domain

Case: 15-50606      Document: 00513604453         Page: 1    Date Filed: 07/22/2016

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT     United States Court of Appeals
                                                       Fifth Circuit

                                                                                    FILED
                                                                                 July 22, 2016
                                      No. 15-50606
                                                                                 Lyle W. Cayce
                                                                                      Clerk
KATHY CLARK, on behalf of herself and all others similarly situated; AMY
ENDSLEY, on behalf of herself and all others similarly situated; SUSAN
GRIMMETT, on behalf of herself and all others similarly situated;
MARGUERIETTE SCHMOLL, on behalf of herself and all others similarly
situated; KEVIN ULRICH, on behalf of himself and all others similarly
situated, et al,

                                                 Plaintiffs - Appellees
v.

CENTENE COMPANY OF TEXAS, L.P.,

                                                 Defendant - Appellant

                   Appeal from the United States District Court
                        for the Western District of Texas
                             USDC No. 1:12-CV-174

Before REAVLEY, HAYNES, and HIGGINSON, Circuit Judges.
PER CURIAM:*
       In this case for unpaid overtime compensation under the Fair Labor
Standards Act, (“FLSA”), 29 U.S.C. §§ 201–219, defendant Centene Company
of Texas, L.P. (“Centene”) appeals the district court’s grant of summary
judgment in favor of plaintiffs, a group of former Case Managers employed by
Centene. Centene argues that the district court erred when it determined that

       * 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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                                      No. 15-50606
Case Managers did not fall within the “administrative” or “professional”
exemptions of the FLSA’s overtime requirements. We AFFIRM.
                                    I. Background
       Centene is a managed care company that helps coordinate health care
coverage. It manages and makes coverage determinations for its affiliate,
Superior HealthPlan, Inc., an insurance company that contracts with the State
of Texas to provide health insurance through government-sponsored
programs. 1 In managing Superior HealthPlan, Centene uses a process called
“utilization review.” To perform this process, Centene hired Case Managers,
who review medical authorization requests submitted by health care providers
in order to verify the “medical necessity” and “appropriateness” of the request
for insurance coverage and payment purposes.
       In conducting utilization review, Case Managers were primarily
expected to gather and examine admissions or health provider requests
through on-site, telephonic, or internet review of medical information, and
compare this information to guidelines made up of “nationally recognized
criteria[ 2] to determine medical necessity of services requested.”                  Their
responsibilities also included making referrals to their superiors (physicians
known as Medical Directors), providing patient and provider education, and
entering data related to assessments, authorizations, and reviews into
Centene’s systems.
       Centene required Case Managers to: (1) hold a license as a registered
nurse, practical nurse, or vocational nurse, and (2) have at least two years of

       1 Both Centene and Superior HealthPlan, Inc. are subsidiaries of Centene
Corporation.
       2  Case Managers were instructed to use Centene’s internal guidelines in performing
utilization review, but if no applicable Centene guidelines existed, they were instructed to
use industry standard guidelines.
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clinical experience. To become a registered nurse in Texas, one must complete
an educational program between two and four years in length and pass a
licensing examination. See 22 TEX. ADMIN. CODE § 215.9(a)(1). To become a
vocational nurse, 3 one must complete a minimum of 558 hours of classroom
instruction and 840 hours of clinical practice. See id. § 214.9(a)(1). Case
Managers in plaintiffs’ position generally earned between $934 and $1,335 per
week, and Centene classified them as exempt from overtime requirements.
       On February 22, 2012, five current and former Case Managers filed a
claim against Centene in the Western District of Texas for recovery of overtime
wages under the FLSA. After the district court certified an opt-in class, other
Case Managers employed by Centene between 2009 and 2012 joined the
action. 4
       Both parties moved for summary judgment. The district court denied
Centene’s motion and granted summary judgment in favor of plaintiff Case
Managers, concluding that Case Managers were employees eligible for
overtime pay. The district court first resolved that Case Managers did not fall
under the administrative exemption of the FLSA. It determined that Case
Managers did not perform work “directly related to the business operations” of
Centene or its customer, the State of Texas and rejected Centene’s claim that
Case Managers were similar to insurance adjusters, who are exempt from
FLSA overtime requirements.

       3The terms “practical nurse” and “vocational nurse” are used interchangeably; Texas
uses the term vocational nurse. See generally 22 TEX. ADMIN. CODE § 214.1–.13.
       4The specific job titles of the plaintiffs varied, but the basic requirements for each are
the same. The job titles used for employees performing utilization review included: Case
Manager I (Concurrent Review), Case Manager I (Pre-Certification Nurse), Case Manager I
(Prior-Authorization Nurse), and Case Manager.
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       The district court also held that Case Managers were not exempt under
the professional exemption. The district court relied on a regulation
promulgated by the Department of Labor (“DOL”), which states that vocational
nurses “generally do not qualify as exempt learned professionals because
possession of a specialized advanced academic degree is not a standard
prerequisite for entry into such occupations.” 29 C.F.R. § 541.301(e)(2). It
rejected Centene’s argument that Case Managers nonetheless meet the
exemption because they are required to have two or three years of clinical
experience in addition to a vocational nurse’s license.
       The district court then held a bench trial regarding damages and entered
final judgment for plaintiffs. Centene timely appealed.
                                     II. Discussion
       Under the FLSA, employers must pay their employees overtime wages if
employees work more than forty hours a week.                   See 29 U.S.C. § 207(a).
However, the FLSA exempts from these overtime requirements “any employee
employed in a bona fide . . . administrative[] or professional capacity.” Id.
§ 213(a)(1).   The DOL is authorized to promulgate rules interpreting and
clarifying the FLSA’s administrative and professional exemption. 5 See id.; see
also Montano v. Montrose Rest. Assocs., 800 F.3d 186, 190 (5th Cir. 2015).
       Centene contends the district court erred in granting summary judgment
in favor of plaintiffs, arguing that plaintiffs are exempt from the FLSA’s
overtime requirement as both administrative employees and learned
professionals. We review a district court’s ruling on summary judgment de
novo, applying the same standard as the district court. Martin v. Spring Break
’83 Prods., L.L.C., 688 F.3d 247, 250 (5th Cir. 2012). FLSA exemptions are

       5 We defer to the DOL regulations if “they are ‘based on a permissible construction of
the statute.’” Vela v. City of Houston, 276 F.3d 659, 667 (5th Cir. 2001) (quoting Chevron,
U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984)).
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construed narrowly, and the burden of proof lies with the employer. Cheatham
v. Allstate Ins. Co., 465 F.3d 578, 584 (5th Cir. 2006).
      A. The Administrative Exemption
      Centene argues that the district court erred in concluding that Case
Managers do not fall within the administrative exemption of the FLSA. The
DOL’s regulations define an administrative employee as an individual (1) who
is “[c]ompensated on a salary or fee basis at a rate of not less than $455 per
week”; 6 (2) “[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”; and (3) “[w]hose primary duty includes
the exercise of discretion and independent judgment with respect to matters of
significance.” 29 C.F.R. § 541.200(a).
      The DOL regulations include specific examples of jobs that qualify for
the administrative exemption. See id. § 541.203. For example, “insurance
claims adjusters” generally fall within the administrative exemption and are
thus not eligible for overtime pay. Id. § 541.203(a). By contrast, “[o]rdinary
inspection work” generally does not fall within the administrative exemption
because “[i]nspectors normally perform specialized work along standardized
lines involving well-established techniques and procedures[,] which may have
been catalogued and described in manuals or other sources.” Id. § 541.203(g).
“Such inspectors rely on techniques and skills acquired by special training or
experience. They have some leeway in the performance of their work but only
within closely prescribed limits.” Id.

      6  The Department recently announced the finalization of a new overtime rule that
changes the minimum salary to $913 per week, effective December 1, 2016. See generally
Defining and Delimiting the Exemptions for Executive, Administrative, Professional,
Outside Sales and Computer Employees, 81 Fed. Reg. 32,391 (May 23, 2016) (to be codified
at 29 C.F.R. § 541.600(a)).
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                                     No. 15-50606
      The DOL regulations also lay out several factors to consider when
determining whether a job primarily includes the exercise of “discretion and
independent judgment.” 29 C.F.R. § 541.202(b). Centene argues that these
factors favor the exemption of Case Managers. We disagree and conclude that
Case Managers’ primary duties do not include “the exercise of discretion and
independent judgment with respect to matters of significance,” id.
§ 541.200(a), and thus they do not meet the third prong of the administrative
exemption. 7
      In support of its argument that Case Managers do meet the “discretion
and independent judgment” prong of the administrative employee exemption,
Centene points to our holding in Cheatham, contending that Case Managers’
duties closely resemble the duties of insurance claims adjusters. In Cheatham,
we considered many of the factors listed in the DOL regulations and concluded
insurance claims adjusters qualify for the administrative exemption because
they exercise discretion by
               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.
465 F.3d at 586.

      7  It is undisputed that Case Managers, in earning between $934 and $1,335 per week,
exceed earnings of $455 per week and thus satisfy the first prong of the administrative
employee exemption. Because we conclude that Case Managers do not meet the third prong
of the administrative employee exemption, we need not address the second prong: whether
their primary duties were the performance of office or non-manual work directly related to
the management or general business operations of Centene or Centene’s customers.
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      Case Managers employed by Centene exercise significantly less
discretion than the insurance claims adjusters we described in Cheatham. For
example, the first responsibility listed in Case Managers’ various job
descriptions is the duty of reviewing admissions or health provider requests
for medical necessity and appropriateness, i.e. utilization review.           This
involves collecting and reviewing medical information and comparing the
information to established guidelines to determine whether the request should
be approved.    If the request does not meet the established criteria, Case
Managers did not have the authority to deny the request, but were instructed
to refer the case to a Medical Director. This is a far cry from the discretion
insurance claims adjusters exercised in Cheatham: Case Managers do not
“advise[]” Centene, “represent[]” Centene in a significant way (other than
possibly through in-office visits to collect medical information), or “negotiate[]”
on Centene’s behalf.    See Cheatham, 465 F.3d at 585; see also 29 C.F.R.
§ 541.202(b).
      Additionally, Centene’s corporate representative testified that in
performing utilization review, Case Managers used “clear guidelines to mak[e]
a determination” and agreed that the job entailed “strictly applying the facts
to the guidelines.” Centene’s policy stated that the purpose of the utilization
review process was to promote “impartial and consistent utilization decisions.”
If Case Managers uncovered a request that had to be elevated to a Medical
Director, Centene provided a checklist of items that were required to be
included with the request. Centene also provided detailed steps for Case
Managers to follow in conducting utilization reviews, and Case Managers were
annually tested on their ability to “apply the medical necessity criteria to the
clinical information that they review.” In fact, Centene’s entire utilization
review process seems designed to minimize the amount of discretion and
independent judgment employed by Case Managers.
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                                  No. 15-50606
      Rather than acting analogously to insurance claims adjusters, Centene’s
Case Managers have responsibilities that more closely resemble “[o]rdinary
inspection work,” 29 C.F.R. § 541.203(g), a job that the regulations explicitly
exclude from the administrative exemption. Case Managers, by examining
medical information and applying it to utilization review guidelines, carry out
inspector-type duties by performing “specialized work along standardized lines
involving well-established techniques and procedures[,] which may have been
catalogued and described in manuals or other sources.” Id. § 541.203(g). In
performing their duties, Case Managers must become familiar with medical
documents, patient information, and health-related terminology, similar to the
way inspectors “rely on techniques and skills acquired by special training or
experience.” Id. Moreover, the comprehensive guidelines that Case Managers
must follow indicate that “[t]hey have some leeway in the performance of their
work but only within closely prescribed limits.” Id. § 541.203(g).
      We conclude that Centene has failed to establish (or raise a material fact
issue) that Case Managers’ “primary duty . . . include[s] the exercise of
discretion and independent judgment with respect to matters of significance.”
29 C.F.R. § 541.202(a). Accordingly, the district court did not err in its holding
on this point.
      B. The Professional Exemption
      In the alternative, Centene contends that the district court erred in
finding that Case Managers do not fall within the professional exemption of
the FLSA. The professional exemption applies when an employee’s primary
duty satisfies three elements: “(1) The employee must perform work requiring
advanced knowledge; (2) The advanced knowledge must be in a field of science
or learning; and (3) The advanced knowledge must be customarily acquired by
a prolonged course of specialized intellectual instruction.”           29 C.F.R.
§ 541.301(a). The regulations reference nurses specifically, stipulating that
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registered nurses typically fall within the professional exemption, but licensed
practical nurses “generally do not qualify as exempt learned professionals
because possession of a specialized advanced academic degree is not a standard
prerequisite for entry into such occupations.” Id. § 541.301(e)(2).
      We conclude that Case Managers do not meet the third element of the
professional exemption, because their advanced knowledge is not customarily
acquired by a prolonged course of specialized intellectual instruction.
Accordingly, we do not address the first or second elements of the learned
professional exemption.
      To satisfy the third element of the professional exemption, “specialized
academic training [must be] a standard prerequisite for entrance into the
profession.” Id. § 541.301(d). Additionally, “[t]he best prima facie evidence
that an employee meets this requirement is possession of the appropriate
academic degree.” Id. Thus, the regulations distinguish between professions
requiring high levels of education and instruction and “occupations in which
most employees have acquired their skill by experience.” Id.
      As previously noted, the regulations are clear that licensed vocational
nurses do not receive sufficient academic instruction to qualify as exempt
learned professionals. Id. § 541.301(e)(2). Centene nevertheless contends that
the additional two years of experience required of Case Managers
distinguishes them from vocational nurses. However, in its most recent update
of the regulations, the DOL explicitly rejected the relevance of experience to
the analysis: “LPNs and other similar health care employees generally do not
qualify as exempt learned professionals, regardless of work experience and
training.”    Defining and Delimiting the Exemptions for Executive,
Administrative, Professional, Outside Sales, and Computer Employees, 69
Fed. Reg. 22,122, 22,153 (2004) (codified at 29 C.F.R. § 541) (emphasis added).

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This commentary indicates that the two or three years of additional experience
required to become a Case Manager are immaterial.
      This conclusion is consistent with our prior case law addressing the
professional exemption’s applicability to positions in the medical field. See
Vela v. City of Houston, 276 F.3d 659, 675 (5th Cir. 2001) (concluding that
paramedics did not qualify for the professional exemption because they were
only required to complete 880 hours of training, clinical experience, and field
internships); Owsley v. San Antonio Indep. Sch. Dist., 187 F.3d 521, 524–25
(5th Cir. 1999) (holding that athletic trainers satisfied the education
requirement of the professional exemption because they were required to
obtain (1) a bachelor’s degree in any field; (2) 1800 hours of apprenticeship over
a three-year period; (3) complete five 3-hour credit college courses in human
health, anatomy, and physiology; and (4) pass a C.P.R. test). Qualification as
a Case Manager requires, at a minimum, 558 hours of classroom instruction,
840 hours of clinical practice, and two to three years of additional clinical
experience.   These requirements more closely resemble those of the non-
exempt paramedic in Vela than the exempt athletic trainer in Owsley.
      Centene has failed to establish (or raise a material fact issue) that Case
Managers meet the third element of the professional exemption. We therefore
hold that the district court did not err in concluding that Case Managers fall
outside of the professional exemption.
                                III. Conclusion
      FLSA exemptions are construed narrowly, and the burden lies with
Centene to show that Case Managers are exempt from the FLSA’s overtime
requirement. See Cheatham, 465 F.3d at 584. Because Centene has failed to
meet this burden, we AFFIRM.

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