Sharon Isett, individually and on behalf of all other similarly situated individuals, Plaintiff-Appellant,
v.
Aetna Life Insurance Company, Defendant-Appellee, Aetna, Inc., Aetna Health of California, Inc., Aetna Medicaid Administrators, LLC, American Health Holding, Inc. Defendants.
Argued: October 31, 2019
On
Appeal from the United States District Court for the District
of Connecticut
Plaintiff-Appellant
Sharon Isett ("Isett") appeals from an award of
summary judgment entered in the United States District Court
for the District of Connecticut (Robert N. Chatigny,
Judge) in favor of her employer, Defendant-Appellee
Aetna Life Insurance Company ("Aetna"). The
question presented in this case is whether Isett, a
registered nurse who does not work in a clinical setting, but
who reviews Aetna's denials of claims for insurance
coverage of medical services; determines whether the
requested services are in fact medically necessary; and, if
so, approves such claims without further review from a
physician, is a professional employee exempt from the Fair
Labor Standards Act's ("FLSA") overtime-pay
requirement or a non-professional employee entitled to
overtime compensation. Therefore, in this appeal, we address
the applicability of the FLSA's professional exemption to
an employee who acts in a manner consistent with the central
characteristics of the profession at issue but does so
outside of that profession's traditional employment
setting.
On
de novo review, we conclude, as the District Court
did, that Isett is an FLSA-exempt professional and,
therefore, the judgment in favor of Aetna is
AFFIRMED.
Adam
W. Hansen, Apollo Law, LLC (Eleanor E. Frisch, Apollo Law,
LLC; Rachhana T. Srey, Nichols Kaster, PLLP, on the brief),
Minneapolis, MN, for Plaintiff- Appellant.
Matthew W. Lampe (Wendy C. Butler, on the brief) Jones Day,
New York, NY, for Defendant-Appellee.
Before: Cabranes, Raggi, Circuit Judges, and Korman, Judge.
[*]
José A. Cabranes, Circuit Judge.
Plaintiff-Appellant
Sharon Isett ("Isett") is a registered nurse who
sued her employer, Defendant-Appellee Aetna Life Insurance
Company ("Aetna") for unpaid overtime compensation
under the Fair Labor Standards Act
("FLSA").[1] Isett now appeals from a judgment entered
on September 30, 2018, in the United States District Court
for the District of Connecticut (Robert N. Chatigny,
Judge) in favor of Aetna, on the grounds that Isett
is a professional who is not entitled to overtime
compensation under the FLSA. On appeal, Isett challenges the
District Court's conclusion that her duties qualify for
the professional exemption.
Under
the FLSA, employees who work more than forty hours per week
generally are entitled to additional compensation for those
excess hours.[2] There are certain employees, however, who
are not eligible to receive this additional compensation.
Among these exempt employees are "professionals,"
those who work in a bona fide professional
capacity.[3] Professionals are those workers who use
specialized knowledge in a field of science or learning,
which is typically obtained through intellectual instruction
that generally results in an academic degree.[4]
Ordinarily,
registered nurses are classified properly as
professionals.[5] The question presented in this case is
whether a registered nurse who does not work in a clinical
setting, but who reviews denials of claims for insurance
coverage of medical services; makes determinations of whether
the requested services are in fact medically necessary; and,
if so, approves such claims where appropriate without further
review from a physician, is a professional employee exempt
from the FLSA's overtime-pay requirement or a
non-professional employee entitled to overtime compensation.
Therefore, in this appeal, we address the applicability of
the FLSA's professional exemption to an employee who acts
in a manner consistent with the central characteristics of
the profession at issue but does so outside of that
profession's traditional employment setting.
On
de novo review, we conclude, much for the same
reasons stated in the District Court's careful and
well-reasoned decision, that the professional exemption
applies. Accordingly, the September 30, 2018 judgment in
favor of Aetna is AFFIRMED.
I.
BACKGROUND
We draw
the facts, which are undisputed, from the District
Court's recitation and the record before
us.[6]
A.
The Parties' Relationship
Isett
worked as an appeals nurse consultant in Aetna's National
Clinical Appeals Unit from 2011 to 2016.
Most employees in the National Clinical Appeals Unit fall
under one of three job categories: (1) appeals nurse
associates ("nurse associates"), who must hold a
certificate as licensed practical nurses and are paid on an
hourly basis, including overtime premiums; (2) appeals nurse
consultants ("nurse consultants"), like Isett, who
must hold a license as registered nurses, are paid on a
salary basis, and are classified as exempt from the
FLSA's overtime protections; and (3) medical directors,
who are physicians.
Nurse
associates and nurse consultants, jointly, "appeals
nurses," are responsible for reviewing claims for health
insurance benefits that one of Aetna's departments
initially denied. More specifically, appeals nurses review
appeals seeking authorization for medical services not yet
rendered which are transmitted to the Appeals Unit when a
clinical determination of medical necessity is required. This
process is known as "utilization review."
On any
given appeal where utilization review is conducted, appeals
nurses must review the patient's file, which typically
includes the patient's clinical information and the
documentation from the initial review resulting in the
claim's denial. The appeals nurses then locate the
relevant criteria in Aetna's clinical guidelines and
apply the criteria to the information in the file to analyze
whether the requested services are medically necessary. Any
conclusions must be documented in a template form provided by
Aetna.
If the
request for coverage does not meet the relevant criteria, the
appeals nurses must forward the appeal to a medical director
for further review and a final decision. Similarly, if the
appeals nurses conclude that it is unclear whether the
request meets the relevant criteria, the appeal is forwarded
to a medical director. Only medical directors are authorized
to deny insurance coverage for medical reasons.
Despite
all these similarities in the work of the appeals nurses,
only nurse consultants can authorize insurance coverage.
Subject to some minor exceptions depending on, for example,
the subject matter of the requested benefit, whenever a nurse
consultant concludes that a request satisfies the relevant
criteria in Aetna's clinical guidelines, the nurse
consultant also will approve the request for coverage without
further review. By contrast, if a nurse associate reaches the
same conclusion, Aetna requires the nurse associate to
forward the appeal to a nurse consultant or a medical
director to review the work and make the final decision
regarding coverage. In short, nurse consultants, unlike nurse
associates, are authorized to make a final
affirmative determination of medical necessity,
thereby approving coverage for a patient's requested
service and binding Aetna to pay for the service.
Isett
worked remotely from home without much day-to-day oversight.
On average, she would speak to her supervisor over the phone
approximately less than once a week and never met her
supervisor in person. In performing her work, Isett relied on
her knowledge and experience as a registered nurse, as well
as Aetna's in- house training.
B.
Procedural History
Isett
filed the complaint in this case on behalf of herself and all
other similarly situated individuals, alleging that Aetna
unlawfully misclassified her as exempt from the FLSA's
overtime protections. Twenty-eight employees joined the
action as opt-in plaintiffs. Aetna answered, arguing that
Isett was classified properly as exempt under the FLSA's
professional and administrative exemptions.[7] At the direction
of the District Court, Isett and Aetna filed cross-motions
for summary judgment addressing only the application of both
exemptions to Isett's individual claim.
On
September 30, 2018, the District Court granted Aetna's
motion for summary judgment and denied Isett's
cross-motion for partial summary judgment. The District Court
held that the professional exemption applies to Isett's
job and thus declined to address the applicability of the
administrative exemption; it thereupon entered final judgment
in favor of Aetna and dismissed the case. By stipulation of
the parties, the 28 opt-in plaintiffs were dismissed without
prejudice. This appeal followed.
II.
DISCUSSION
On
appeal, Isett challenges the District Court's conclusion
that the FLSA's professional exemption applies to her job
as a nurse consultant and argues that Aetna failed to prove,
in the alternative, that her job qualified for the
administrative exemption. We affirm the District Court's
judgment that Isett was classified properly as exempt under
the professional exemption, and likewise, decline to address
Aetna's alternative argument regarding the administrative
exemption's applicability.
A.
The FLSA and the Professional Exemption
Congress
enacted the FLSA to protect "the minimum standard of
living necessary for health, efficiency, and general
well-being of workers."[8] The FLSA seeks to accomplish this
broad purpose, in part, by requiring that employees who work
more than forty hours per week be compensated for those
excess hours at a higher rate.[9] The FLSA, however, also excludes
certain classes of employees from its overtime-pay
requirement. One of those exempted classes consists of any
"employee employed in a bona fide . . . professional
capacity."[10]
Although
the FLSA does not define the term "professional
capacity," Congress authorized the Secretary of Labor
("Secretary") to "defin[e] and delimi[t]"
the scope of the professional exemption.[11] The
Secretary's regulations provide, in relevant part, that a
"professional" is any employee whose primary job
duty requires "knowledge of an advanced type in a field
of science or learning customarily acquired by a prolonged
course of specialized intellectual
instruction."[12] Accordingly, to qualify for the
exemption, the employee must satisfy a "primary duty
test" consisting of three factors or prongs: (1) the
work requires "advanced knowledge," (2)"in a
field of science or learning," (3) "customarily
acquired by a prolonged course of specialized intellectual
instruction."[13]
Regarding
the professional exemption's application to nurses, the
Secretary's regulations provide that "[r]egistered
nurses who are registered by the appropriate State examining
board generally meet the duties requirements for the learned
professional exemption."[14] By contrast, "licensed
practical nurses or other similar health care employees . . .
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."[15]
"All
three prongs" of the primary duty test "must be
satisfied for the learned professional exemption to
apply."[16] Moreover, the employer bears the burden
of proving that the employee qualifies for the
exemption.[17] In interpreting the scope of the FLSA
exemptions, we stated as recently as 2014 that the "FLSA
exemptions are to be 'narrowly construed against the
employers seeking to assert them and their application
limited to those establishments plainly and unmistakably
within their terms and spirit.'"[18] Thereafter,
however, the Supreme Court characterized this
"narrow-construction principle" as
"flawed," as it mistakenly presumes "that the
FLSA pursues its remedial purpose at all costs,"
notwithstanding that the FLSA "exemptions are as much a
part of the FLSA's purpose as the overtime- pay
requirement."[19] As a result, the Supreme Court
instructed that we "have no license to give the
[professional] exemption anything but a fair
reading."[20] We do so here.[21]
Isett
does not dispute the fact that her work as an appeals nurse
consultant is "in a field of science or learning,"
as required by the second prong of the primary duty
test.[22] She does argue, however, that Aetna
failed to prove that her job as a nurse consultant satisfies
the first and third prongs. Therefore, Isett asks us to
decide whether a nurse consultant uses "knowledge of an
advanced type" that is "customarily acquired by a
prolonged course of specialized intellectual
instruction."[23]
With
respect to the first prong, Isett contends that nurse
consultants do not perform work requiring advanced knowledge
because they are not practicing registered nurses and do not
perform the clinical duties that give nursing its
professional character. Isett characterizes utilization
review as "more routine mental work than predominantly
intellectual in character."[24] Aetna, in response,
asserts that Isett mischaracterizes her job. It contends that
nurse consultants use the advanced knowledge typical of other
registered nurses in approving insurance coverage for
medically necessary services.
As to
the third prong, Isett contends that her job did not require
specialized academic instruction and could be performed by
anyone with proper training. Isett states that nurse
associates, who are licensed practical nurses and possess
only a year of technical education, can-and do-perform
utilization review. Aetna responds that nurse associates do
not perform the same job as nurse consultants.
B.
Standard of Review
We
review Isett's challenge to the District Court's
"grant of summary judgment de novo, resolving
all ambiguities and drawing all reasonable inferences"
in her favor.[25] We will affirm a summary judgment
"only if there is no genuine dispute as to any material
fact and . . . the movant is entitled to judgment as a matter
of law."[26]
The
question of whether the professional exemption applies in
particular circumstances "is a mixed question of law and
fact."[27]Specifically, the question of how an
employee spends her "working time is a question of
fact" and the question of whether an employee's
primary duty excluded her "from the overtime benefits of
the FLSA is a question of law."[28] Because the parties agree
that the relevant, material facts are not
disputed-particularly, how Isett spent her working time-we
turn to the legal question of whether her primary duty as a
nurse consultant placed her beyond the FLSA's overtime
protections.
C.
First Prong of the Primary Duty Test
1.
The Advanced-Knowledge Requirement
We take
up first Isett's argument that her primary duty as a
nurse consultant does not require advanced knowledge for
purposes of the professional exemption.
The
Secretary of Labor's regulations define "work
requiring advanced knowledge" as "work which is
predominantly intellectual in character, and which includes
work requiring the consistent exercise of discretion and
judgment, as distinguished from performance of routine
mental, manual, mechanical or physical
work."[29] The regulations further explain that an
employee performing such work "generally uses the
advanced knowledge to analyze, interpret, or make deductions
from varying facts or circumstances."[30]
In
Pippins v. KPMG, LLP, in 2014, we first addressed
the meaning of the "advanced knowledge" prong and
explored its contours by interpreting the phrase
"discretion and judgment," which "does not
receive further elaboration in the
regulations."[31] We noted that there is a similar
term-"discretion and independent judgment"-in the
Secretary's regulations defining the administrative
exemption.[32] The term "discretion and
independent judgment" in the context of administrative
work is manifested by, among other things, the
"authority to commit the employer in matters that have
significant financial impact . . . to waive or deviate from
established policies and procedures without prior
approval," or "to negotiate and bind the company on
significant matters."[33]
We
declined to import that definition into the professional
exemption because professional "discretion and
judgment" is "of a different character"
altogether, as it is based on expertise, special knowledge,
or talents characteristic of the profession at
issue.[34] We agreed with the Secretary's 2004
interpretation of her own regulations that "the
discretion and judgment standard for the professional
exemption is 'less stringent' than the discretion and
independent judgment standard of the administrative
exemption."[35]
With
this background in mind, Pippins held that junior
audit associates who perform "entry-level accounting
tasks" under close supervision and who "are
automatically promoted to a more senior accounting position
after two years of satisfactory employment" use
"advanced knowledge" in their work and are properly
classified under the professional exemption.[36]
As
relevant here, the principal lessons of Pippins are
two-fold. First, the burden of satisfying the
professional exemption's advanced- knowledge requirement
by application of the "discretion and judgment"
standard is not particularly stringent, at least when
compared to the "discretion and independent
judgment" standard applicable to administrative
employees. Second, the advanced- knowledge inquiry
does not take place in a vacuum. In conducting the inquiry,
we do not necessarily look to the freedom of an employee to
deviate from the employer's policies. Rather, "the
professional exemption requires the exercise of [discretion
and] judgment characteristic of the learned profession at
issue."[37]
We have
not yet had occasion to apply the analytical framework of
Pippins, or to elaborate on its scope, in the
context of professional work performed in non-traditional
settings (e.g., a registered nurse conducting
utilization review for an insurance company). Accordingly, we
take this opportunity to clarify that, with respect to the
first prong of the primary duty test, the rule of
Pippins is best understood as follows: an employee
uses "advanced knowledge" for purposes of the
professional exemption under the FLSA if the employee acts in
a manner that requires the discretion and judgment
characteristic of an employee practicing the profession at
issue.
Therefore,
in applying the advanced-knowledge requirement, we conduct a
two-step inquiry: (1) we identify what qualities or skills
are characteristic of the profession at issue (in this
instance, registered nursing); and (2) we determine whether
these distinctive qualities or skills are manifested in the
performance of the employee's primary duty (here,
conducting utilization review and approving insurance
coverage for medically necessary services).
2.
Step One: The Advanced-Knowledge Requirement as Applied to
Registered Nurses
There
is no dispute that registered nurses typically use advanced
knowledge in the exercise of their profession.[38] Indeed, the
work of registered nurses is predominantly intellectual in
character, as they use their special knowledge and skills to
analyze, interpret, or make deductions from varying
circumstances relating to each individual
patient.[39] For that reason, the Secretary's
regulations provide that "[r]egistered nurses who are
registered by the ...