On Tuesday, we discussed Congress’s passage of the Consolidated and Further Continuing Appropriations Act, 2015, nicknamed CRomnibus in the waning days of the 2014 legislative session. The omnibus spending bill avoided another government shutdown and funded most federal agencies (save for the Department of Homeland Security) through the end of the federal government's fiscal year on September 30, 2015. As we discussed, the DOL—which earned funding increases across the board—and the trucking industry—which earned a temporary reprieve from maximum hours-of-service regulations—both came out big winners. However, we note that the insurance industry also benefitted from a provision tucked into the DOL appropriations in CRomnibus.
Congress's omnibus spending bill effectively created a new exemption to the FLSA's overtime rules for insurance adjusters during the two-year period after a major disaster. Section 111 of the appropriations bill for the DOL directs the agency that the FLSA "shall be applied as if" there is an overtime exclusion for certain workers who are employed to adjust or evaluate claims resulting from or relating to a major disaster. The law defines a "major disaster" as "any disaster or catastrophe declared or designated by any State or Federal agency or department."
During that two-year period, the FLSA's overtime requirements would not apply to any person employed to adjust or evaluate claims if:
- The employer is not an insurance company itself ("engaged, directly or through an affiliate, in underwriting, selling, or marketing property, casualty, or liability insurance policies or contracts");
- The employer maintains all legally required workers' compensation coverage and withholds taxes from the employee's wages;
- The employee receives average weekly compensation during the relevant period of at least $591.00 per week (or any higher amount established by the DOL, such as in the upcoming FLSA regulation rewrite we have covered recently);
- The employee has all necessary licenses to perform the work; and
- The employee's duties include "any" of a range of insurance adjusting activities outlined in Section 111, including interviewing parties, inspecting property, evaluating claims, negotiating settlements; or making litigation recommendations.
Similar provisions have appeared in prior bipartisan House legislation, but were never enacted into law. Section 111 helps clarify the application of the FLSA to insurance adjusters. In recent years, federal courts have been split on whether to apply the FLSA’s administrative exemption to insurance adjusters. Importantly, Congress did not amend the FLSA directly, opting instead to simply add the "shall be applied as if" language instead. Accordingly, the interpretation could be temporary if similar language is not included in a future appropriations bill or other law.
Another side effect of not enacting a change to the FLSA is that Congress did not expressly or impliedly preempt contrary state and local laws. Accordingly, as a California court did this year, state courts may reach different conclusions about whether insurance adjusters would be exempt under state or local laws. Particularly given the lack of preemption, the interpretation should have only a narrow impact on the insurance industry in 2015.