Wednesday, January 6, 2010
Berkshire Hathaway’s Geico insurance unit does not have to pay overtime to auto adjusters, an appeals court ruled, reversing a lower court’s decision.
The U.S. Court of Appeals for the District of Columbia said Tuesday that the adjusters can be classified as “administrative employees” who are exempt from federal rules requiring time and a half for hours worked beyond 40 per week.
“The primary duty of Geico’s auto-damage adjusters includes the exercise of discretion and independent judgment, and thus they come in within the administrative employee exemption” of the federal Fair Labor Standards Act, Circuit Judge Karen L. Henderson wrote for the three-judge panel.
The decision may help chief executive Warren Buffett contain costs at Chevy Chase-based Geico, one of more than 70 Berkshire subsidiaries that sell products that include Fruit of the Loom underwear and Dairy Queen ice cream. Company executives have cut jobs and closed plants at some Berkshire businesses as demand slowed in the recession. Berkshire is based in Omaha. (Buffett is a director of The Washington Post Co. and the largest non-family shareholder.)
Hundreds of auto-damage adjusters in New York and other states sued Geico, claiming the company improperly denied them overtime benefits. A district judge sided with the employees in December 2008, saying they lacked the decision-making authority to qualify as administrative employees.
The workers, one of at least three categories of employees who may service an auto claim, each handle more than 1,000 claims a year, totaling more than $2.5 million, on average, court records show. Geico supervisors initial each estimate and review some claims, though not until the claim is paid.
The amount of discretion the adjusters have in determining the payouts without direct supervision qualifies these jobs for the exemption to the overtime rule, Henderson said in her opinion, reversing the lower court.
“The district court had no occasion to decide whether the job of a Geico auto damage adjuster is so easy a caveman could do it,” Henderson wrote in a footnote, referring to the company’s ubiquitous advertising campaign.
The case is Robinson-Smith v. Government Employees Insurance Co., 08-7146.
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