PUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT


                               No. 14-2111


SAMUEL CALDERON, individually and on behalf of other
similarly situated individuals; MICHAEL HEADLEY; AARON
KULSIC; KENNETH MILLER; MICHAEL CREAMER; GEORGE WOOD;
ROBERT DEMARTINO; JOHN HALLIDAY; JAMES L. HANSON; THOMAS F.
BRADY; DANA FERRIN; MAUREEN AYLING; CANDIDO CUBERO; THOMAS
FITZGERALD;   WILLIAM   DOLINSKY;  MARVIN   HOURIGAN;  DAVID
MCCAMLEY; AUGUSTUS STANSBURY, JR.; JOAN BISCHOFF; RANDALL
GIBSON; VINCENT GRECO; TERESA HARTEY-ADAMETZ; THOMAS LOWE;
DAVID MCENRY; JENNIFER RICCA; ANITA SINGH; BRYAN UTTERBACK;
PATRICK WEISE; LEAH HAMILTON; DENNIS FULTON; EBERHARD
GROSSER;   JOSEPH  MILES,   JR.;  RICKY   MCCRACKEN;  THOMAS
STURGIS; CHRISTOPHER SULLIVAN; MICHAEL RUSSELL; RANDALL
STEWART; LAVERNE HOLMES; THOMAS DAVIDSON, JR.; SHANNON
BOYD; ANTHONY DEAN, JR.; FRANCISCO NOGALES; JOHN GHETTI;
GERALD DEXTER; CLAUDE REIHER; STEVEN MCBRIDE; PHILLIP
RONDELLO; ROBERT MERRY,

                 Plaintiffs - Appellees,

          and

MICHAEL BROWN,

                 Plaintiff,

          v.

GEICO   GENERAL  INSURANCE      COMPANY;     GOVERNMENT   EMPLOYEES
INSURANCE COMPANY,

                 Defendants – Appellants,

          and

GEICO CORPORATION; GEICO INDEMNITY COMPANY; GEICO CASUALTY
COMPANY; DOES 1-10,

                 Defendants.
                               No. 14-2114


SAMUEL CALDERON, individually and on behalf of other
similarly situated individuals; MICHAEL HEADLEY; AARON
KULSIC; KENNETH MILLER; MICHAEL CREAMER; GEORGE WOOD;
ROBERT DEMARTINO; JOHN HALLIDAY; JAMES L. HANSON; THOMAS F.
BRADY; DANA FERRIN; MAUREEN AYLING; CANDIDO CUBERO; THOMAS
FITZGERALD;   WILLIAM   DOLINSKY;  MARVIN   HOURIGAN;  DAVID
MCCAMLEY; AUGUSTUS STANSBURY, JR.; JOAN BISCHOFF; RANDALL
GIBSON; VINCENT GRECO; TERESA HARTEY-ADAMETZ; THOMAS LOWE;
DAVID MCENRY; JENNIFER RICCA; ANITA SINGH; BRYAN UTTERBACK;
PATRICK WEISE; LEAH HAMILTON; DENNIS FULTON; EBERHARD
GROSSER;   JOSEPH  MILES,   JR.;  RICKY   MCCRACKEN;  THOMAS
STURGIS; CHRISTOPHER SULLIVAN; MICHAEL RUSSELL; RANDALL
STEWART; LAVERNE HOLMES; THOMAS DAVIDSON, JR.; SHANNON
BOYD; ANTHONY DEAN, JR.; FRANCISCO NOGALES; JOHN GHETTI;
GERALD DEXTER; CLAUDE REIHER; STEVEN MCBRIDE; PHILLIP
RONDELLO; ROBERT MERRY,

                 Plaintiffs - Appellants,

          and

MICHAEL BROWN,

                 Plaintiff,

          v.

GEICO   GENERAL  INSURANCE      COMPANY;     GOVERNMENT   EMPLOYEES
INSURANCE COMPANY,

                 Defendants – Appellees,

          and

GEICO CORPORATION; GEICO INDEMNITY COMPANY; GEICO CASUALTY
COMPANY; DOES 1-10,

                 Defendants.




                                    2
Appeals from the United States District Court for the District
of Maryland, at Greenbelt.    Roger W. Titus, Senior District
Judge. (8:10-cv-01958-RWT)


Argued:   October 28, 2015           Decided:   December 23, 2015


Before TRAXLER, Chief Judge, KING, Circuit Judge, and DAVIS,
Senior Circuit Judge.


Affirmed in part, reversed in part, and remanded by published
opinion. Chief Judge Traxler wrote the opinion, in which Judge
King and Senior Judge Davis concurred.


ARGUED: Pratik A. Shah, AKIN GUMP STRAUSS HAUER & FELD LLP,
Washington, D.C., for Appellants/Cross-Appellees.    Matthew Hale
Morgan, NICHOLS KASTER, PLLP, Minneapolis, Minnesota, for
Appellees/Cross-Appellants.  ON BRIEF: Eric Hemmendinger, SHAWE
& ROSENTHAL, LLP, Baltimore, Maryland; Hyland Hunt, AKIN GUMP
STRAUSS    HAUER   &    FELD   LLP,    Washington,    D.C.,    for
Appellants/Cross-Appellees.     Timothy   C.   Selander,   NICHOLS
KASTER, PLLP, Minneapolis, Minnesota, for Appellees/Cross-
Appellants.




                                3
 TRAXLER, Chief Judge:

     Government      Employees     Insurance         Company      and   GEICO    General

Insurance Company (together, “GEICO”) appeal a district court

order    granting    judgment     against      them    in    an    action     asserting

denial    of   overtime     pay   under       the    Fair   Labor       Standards     Act

(“FLSA”), see 29 U.S.C. §§ 201 et seq., and the New York labor

law (“NYLL”), see N.Y. Lab. Law §§ 650 et seq.; N.Y. Comp. Codes

R. & Regs. tit. 12, § 142–2.2.                      The plaintiffs cross-appeal

several rulings relating to the remedy awarded.                         We reverse the

denial    of   prejudgment     interest       and    remand       for   a   prejudgment

interest award.      Otherwise, we affirm.

                                        I.

        GEICO is in the business of providing insurance for its

customers.        The      plaintiffs     in        this    matter      are     security

investigators       (the    “Investigators”)          who    currently        work,    or

previously worked, for GEICO.             The Investigators work in GEICO’s

Claims     Department      primarily      investigating           claims      that    are

suspected of being fraudulent.            The FLSA requires that employers

pay overtime for each hour their employees work in excess of 40

per week, but it exempts “any employee employed in a bona fide

executive, administrative, or professional capacity.”                         29 U.S.C.

§ 213(a)(1).        GEICO has long classified its Investigators as




                                          4
exempt from the FLSA’s overtime pay protections. 1                           This case

primarily concerns whether that classification is correct.

     Viewing    the     facts     concerning       the    classification          in   the

light most favorable to GEICO, as we must, 2 the record reveals

the following.

     GEICO has employees called Claims Adjusters who work in the

Claims     Department    and      whose     primary       job    it    is    to   adjust

insurance    claims     by   investigating,          assessing,        and    resolving

them.     The Claims Adjusters decide how much, if anything, GEICO

will pay on a claim, and they negotiate any settlements.

     The    Investigators       work   in       GEICO’s   Special      Investigations

Unit (“SIU”), which is part of GEICO’s Claims Department.                              The

Investigators    report      to    Supervisors,          who    in    turn   report     to

Managers, who in turn report to the Assistant Vice-President of

Claims.     The SIU attempts to identify claims that are fraudulent




     1 The sole exception is in the state of California. GEICO
in 2001 reclassified all non-managerial claims employees there
as non-exempt as a result of a California state-court decision
that narrowed the administrative exemption under state law.

     2 The district court granted partial summary judgment to the
plaintiffs on the issue of whether they were improperly
classified. See Emmett v. Johnson, 

, 297 (4th Cir.
2008) (explaining that we review a grant of summary judgment de
novo, “viewing the facts and the reasonable inferences drawn
therefrom in the light most favorable to the nonmoving party”).



                                            5
and that GEICO therefore does not have to pay. 3          An Investigator

generally    becomes   involved   in   a   claim   when    other   Claims

Department personnel refer the claim to him on suspicion that it

is fraudulent, although there are limited circumstances under

which the Investigators initiate investigations themselves.          The

Investigators’ primary responsibility is to investigate whether

such claims are fraudulent, which occupies about 90% of their

time.

     GEICO has procedures that govern an Investigator’s handling

of a claim that has been referred to him, which require:

     1.     A thorough investigation of the referral.

     2.   Identification   and   interviews  of  potential
     witnesses who may provide information on the accuracy
     of the claim and/or application.

     3.   Utilizing industry recognized databases as deemed
     necessary in conducting investigations.

     4.     Preservation of documents and other evidence.

     5.   Writing a concise and complete summary of the
     investigation, including the investigators[’] findings
     regarding the suspected insurance fraud and the basis
     for their findings.

Calderon v. GEICO Gen. Ins. Co., 

, 432 (D.

Md. 2012) (internal quotation marks omitted).

        3
        According   to   the   Insurance  Information   Institute,
approximately 10% of claims payments – about $32 billion per
year for the insurance industry – are for fraudulent claims.
See   Insurance    Information    Institute,   Insurance    Fraud,
http://www.iii.org/issue-update/insurance-fraud    (last   visited
Dec. 22, 2015) (saved as ECF opinion attachment).             Each
Investigator handles approximately 165 investigations per year.


                                   6
     GEICO      requires     Investigators        when    they       receive    a   claim

referral   to    begin      their   work    by    creating       a    plan    of    action

regarding what steps must be taken in order to investigate the

particular claim.           The Investigator then enters this plan of

action into the SIU Case Management System (“SICM”).

     An investigation might entail steps such as interviewing

witnesses,      taking   photographs,       and    reviewing         property      damage.

Some interviews may take the form of face-to-face questioning

wherein the witness is under oath.                     Such interviews serve the

purpose    of    obtaining     information,        providing         the     insured    an

opportunity to provide explanation or further substantiation for

his claim.       They also allow the Investigator to evaluate the

credibility      of   the    witness       and    to     preserve      the     witness’s

testimony.         Although     GEICO       has    procedures          governing       how

Investigators conduct investigations, Investigators still must

use their judgment to determine exactly how to conduct their

investigations and what inferences to draw from the evidence

they uncover, including determining the credibility of insureds

or other witnesses.

     Investigators must submit an initial report within 10 days

of receiving a claim referral and then submit interim reports

every 20 days during the investigation.                      With regard to both

interim and final reports, most Investigators – all but about 40

or 50 out of 250 – are required to submit their reports to their

                                           7
Supervisor for review before the reports are submitted through

the SICM.     This allows the Supervisor to “provide any input he

may feel appropriate because of his expertise” and to ensure

that the reports comply with format requirements.                         J.A. 1372.

     GEICO does not permit speculation in its reports and it

requires     that    Investigators           substantiate      any       conclusions    in

their     reports    with       facts       and    evidence.            However,   Claims

Adjusters     generally         do    not     review     reports        once    they   are

finalized.          Instead,         they    generally       base       their   decisions

regarding whether to pay claims on oral reports or summaries of

the reports that the Investigators provide to them.

     In    addition       to    conducting        investigations,        finding   facts,

and reporting their findings, Investigators also spend a small

percentage     of    their       time       performing       other      duties.        They

sometimes educate adjusters about fraud, often utilizing their

experiences    from       the    field.       Also,     when       an   Investigator     is

preparing to end his work on a case, he has discretion to refer

the claim to the National Insurance Crime Bureau or other state

agencies if he has found significant indications of fraud.                             And

finally,     when    an    investigation           reveals     a    problem     with   the

policyholder, Investigators also may choose to refer a case to

GEICO’s underwriting department so that the insured’s rates may

be adjusted when his policy comes up for review.



                                              8
       GEICO has long classified its Investigators as exempt under

the FLSA.          In 2004, two events prompted GEICO to revisit the

issue.       First, a federal district court ruled that GEICO had

misclassified          its     auto    damage       adjusters            as   exempt.         See

Robinson-Smith         v.    GEICO,     323    F.       Supp.      2d    12   (D.D.C.     2004).

Second, the Labor Department issued new regulations concerning

the    administrative          exemption.           See        Defining       and    Delimiting

Exemptions for Executive, Administrative, Professional, Outside

Sales    and     Computer      Employees,      69       Fed.      Reg.    22,122     (Apr.    23,

2004).

       In light of these events, GEICO Vice President of Claims

John    Geer     asked       GEICO’s    head       of      SIU,    Steven      Rutzebeck,      to

consider       under     the    reasoning        of      the      Robinson-Smith         opinion

whether      the      Investigators       would         be     properly       classified       as

exempt.        Rutzebeck concluded that, assuming that the reasoning

of     the   decision        was      correct,        it     would       apply      to   GEICO’s

Investigators as well.

       Geer,     an     attorney,       questioned           the        correctness      of   the

Robinson-Smith decision and concluded himself the Investigators

were properly classified as exempt.                          Geer discussed the issue

with his boss, Senior Vice President Donald Lyons, as well as

with Senior Vice President of Human Resources David Schindler.

The     group,      which      collectively           had      extensive         knowledge    of

Investigators’ duties, concluded that despite what the reasoning

                                               9
of Robinson-Smith might dictate, the Investigators were properly

classified     as   exempt.          Accordingly,        GEICO      continued        the

Investigators’ exempt status.          GEICO also appealed the Robinson-

Smith decision, which was eventually reversed.                         See Smith v.

GEICO, 

(D.C. Cir. 2010).

     In 2007, GEICO undertook another review of various employee

classifications      under     the     FLSA,         including      that      of     the

Investigators.       After    that    review,        which    lasted    one   or     two

months and which involved different executives than did the 2004

review,     GEICO   again    concluded        that    the     Investigators        were

properly     classified      as      exempt     under         the   administrative

exemption.

     In     2010,   named     plaintiff        Samuel        Calderon      brought     a

collective action under the FLSA in federal district court on

behalf of himself and a proposed class of all persons who were

or had been employed by GEICO as Investigators at any time in

the United States, except for in California, within three years

prior to the filing date of the action through the date of the

disposition of the action.             The complaint alleged that GEICO

improperly classified the Investigator position as exempt from

overtime under the FLSA.          See 29 U.S.C. § 213(a).              The complaint

requested    damages   in     the    amount     of     their     unpaid     overtime,

liquidated damages, interest, and an award of attorneys’ fees

and costs.     See 29 U.S.C. § 216(b).                After the district court

                                        10
conditionally certified the FLSA claim as a collective action,

approximately         48   current     and      former     Investigators        joined    the

suit as opt-in plaintiffs.

         The plaintiffs subsequently amended their complaint to add

an individual and class action claim for unpaid overtime pay

under    NYLL    by     opt-in      plaintiff        Tom   Fitzgerald      on    behalf    of

himself and others who had worked as Investigators for GEICO in

New York.       See N.Y. Lab. Law §§ 650 et seq.; N.Y. Comp. Codes R.

& Regs. tit. 12, § 142–2.2.                In addition to seeking compensatory

damages    in    the       amount    of    the       unpaid   overtime,     the       amended

complaint    sought        liquidated      damages,        and    attorneys’      fees    and

costs in regard to this cause of action.                           The district court

certified the class. 4           See Fed. R. Civ. P. 23.

     Following         discovery,         the    plaintiffs        moved    for       partial

summary judgment, and GEICO moved for summary judgment, on the

issue of liability.              The district court granted the plaintiffs’

motion and denied GEICO’s, rejecting as a matter of law GEICO’s

contention       that      the      Investigators          fell   within        the   FLSA’s




     4   In    its  discretion,  the  district  court   exercised
supplemental jurisdiction over the NYLL claims.    See 28 U.S.C.
§ 1367; see Shahriar v. Smith & Wollensky Rest. Grp., 

, 248 (2d Cir. 2011) (noting that “the Seventh, Ninth, and
District    of   Columbia  Circuits  all  have  determined   that
supplemental jurisdiction is appropriate over state labor law
class claims in an action where the court has federal question
jurisdiction over FLSA claims in a collective action”).


                                                11
“administrative function” exemption.              See Calderon, 

at 441-44.

     The parties later filed cross-motions for summary judgment

on several disputed remedy issues.                Considering these motions,

the court ruled that because GEICO acted in good faith, GEICO

did not act willfully and thus the statute of limitations for

the plaintiffs’ claims extended only for two years.                   For similar

reasons,    the   court   also    ruled    that    the       plaintiffs   were   not

entitled to liquidated damages or prejudgment interest.                          And

finally, the court determined that because the plaintiffs were

paid fixed salaries regardless of the varying number of hours

they worked, the method of overtime described in Overnight Motor

Transportation Co. v. Missel, 

(1942), applied to

the plaintiffs’ claims.

     The    district      court   then     entered       a     “Stipulated    Order

Relating to Remedy” that it described as a “final judgment.”

J.A. 109, 112.      That order “contain[ed] a complete formula for

the computation of backpay” based on the rulings that the court

had made and the parties’ stipulations.                  J.A. 109.        The order

noted that both sides reserved the right to appeal the rulings

of the district court underlying the order and that the order

would “have no effect unless a judgment of liability is entered

and sustained after all judicial review has been exhausted.”

J.A. 109.     The backpay formula adopted by the district court

                                      12
would produce an amount of backpay to which each plaintiff was

entitled depending upon the total pay received and the total

time worked for each two-week pay period within the applicable

limitations      period.         The   order    further      stated      that    “[t]he

backpay calculations will be performed by a mutually acceptable

entity with right of review and confirmation by Defendants’ and

Plaintiffs’ counsel.”            J.A. 112.           It also provided that the

district court “shall have jurisdiction to resolve or supervise

the   resolution    of     any    issue   concerning        the    remedy   that       the

parties   are    unable     to    resolve.”          J.A.   111.       There     was   no

limitation on the right of either party to appeal the district

court’s decisions.

      GEICO     subsequently      appealed      the     district       court’s    order

granting partial summary judgment to the plaintiffs on the issue

of liability, and the plaintiffs cross-appealed several of the

district court’s rulings regarding remedy issues.

      Concluding that the district court had not yet found all of

the   facts   necessary     to    compute      the    amount      of   damages    to    be

awarded, we determined there was no final judgment and that we

therefore     lacked       appellate      jurisdiction;            accordingly,         we

dismissed the appeals.           See Calderon v. GEICO Gen. Ins. Co., 

, 204-07 (4th Cir. 2014).               On remand, the district court

determined the amount of damages to which each plaintiff was

entitled and entered judgment in favor of the plaintiffs.

                                          13
      Now the plaintiffs have once again appealed and GEICO has

cross-appealed,       with   each     party   raising   the   same   issues    it

raised in the prior appeal.           Now that a final judgment is before

us,   we    possess     jurisdiction     to    consider   the     appeals,    see

Hellerstein v. Mr. Steak, Inc., 

, 474 (10th Cir.

1976) (“The general rule is that an interlocutory order from

which no appeal lies is merged into the final judgment and open

to review on appeal from that judgment.”), which we will address

seriatim.

                             II.    GEICO’s appeal

      GEICO    argues    that   the    district   court   erred    in   granting

partial summary judgment against it on the issue of liability.

We disagree.

      We review de novo a district court’s order granting summary

judgment, applying the same standards as the district court.

See Providence Square Assocs., L.L.C. v. G.D.F., Inc., 

, 850 (4th Cir. 2000).             Summary judgment is appropriate “if

the movant shows that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter

of law.”      Fed. R. Civ. P. 56(a).

      In FLSA exemption cases, “[t]he question of how [employees]

spen[d] their working time . . . is a question of fact,” but the

ultimate question of whether the exemption applies is a question

of law.     Icicle Seafoods, Inc. v. Worthington, 

, 714

                                        14
(1986); see also Shockley v. City of Newport News, 

,

26     (4th      Cir.   1993)   (noting    that      the    significance     of    an

employee’s duties can also present questions of fact).                         “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 [the exemptions’]

terms      and    spirit.’”     Desmond    v.     PNGI     Charles   Town   Gaming,

L.L.C., 

, 692 (4th Cir. 2009) (“Desmond I”) (quoting

Arnold v. Ben Kanowsky, Inc., 

, 392 (1960)). 5                        See

also Pugh v. Lindsay, 

, 46 (4th Cir. 1953) (“Since

the Act is remedial in nature, the exemptions contained therein

must       be    strictly   construed,    and   it    is    incumbent   upon      one

asserting an exemption to bring himself clearly and unmistakably

within the spirit and the letter of its terms.”).                           In this

circuit, employers must prove application of the exemptions by

clear and convincing evidence.             See Desmond 

n.3.




       5GEICO points out that the Supreme Court has recently
explained that the rule that exemptions are narrowly construed
against   the   employer  is   “inapposite  where   [courts] are
interpreting a general definition that applies throughout the
FLSA.”    Christopher v. SmithKline Beecham Corp., 

, 2172 n.21 (2012).    However, this case does not concern a
general definition that applies throughout the FLSA. Rather, it
involves interpreting the specific rules the Labor Department
has created regarding the administrative exemption.



                                          15
      The FLSA generally requires that employers pay overtime in

the amount of one-and-a-half times an employee’s “regular rate”

for each hour their employees work in excess of 40 per week.                  29

U.S.C. § 207(a)(1).          That requirement was intended “to spread

employment by placing financial pressure on the employer” and

“to compensate employees for the burden of a workweek in excess

of the hours fixed in the Act.”               Walling v. Helmerich & Payne,

Inc., 

, 40 (1944).             The Act does contain exemptions,

however.        As is relevant here, it exempts “any employee employed

in    a   bona     fide    executive,   administrative,       or   professional

capacity.” 6      29 U.S.C. § 213(a)(1).       Congress did not define this

phrase.     Rather, it delegated authority to the Labor Department

to issue regulations “to define[] and delimit[]” these terms.

  regulations,      which   were   reissued   in   2004,

provide that the administrative exemption covers employees:




      6 Congress exempted employees fitting this description
because “the workers exempted typically earned salaries well
above the minimum wage, and they were presumed to enjoy other
compensatory privileges such as above average fringe benefits
and better opportunities for advancement, setting them apart
from the nonexempt workers entitled to overtime pay.” Defining
and   Delimiting   Exemptions  for   Executive,  Administrative,
Professional, Outside Sales and Computer Employees, 69 Fed. Reg.
22,122, 22,124 (Apr. 23, 2004). Additionally, “the type of work
they performed was difficult to standardize to any time frame
and could not be easily spread to other workers after 40 hours
in a week,” thus “precluding the potential job expansion
intended” by the overtime premium. 

[Who are c]ompensated . . . at a rate of not less
     than $455 per week . . .;

     (2) Whose 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) Whose primary duty includes the exercise                    of
     discretion and independent judgment with respect                to
     matters of significance.

29 C.F.R. § 541.200(a). 7        The applicable New York regulations

incorporate the federal exemption by reference.              See N.Y. Comp.

Codes R. & Regs. tit. 12, § 142-2.2; Gorey v. Manheim Servs.

Corp., 

, 205 (S.D.N.Y. 2011) (“New York law

governing overtime pay is defined and applied in the same manner

as the FLSA.”).

     The     district   court     addressed   all    three     elements    in

resolving    the   summary      judgment   motions   on      the   issue   of

liability.     It is undisputed that the first element, regarding

compensation, is satisfied here. 8            The district court also



     7 The prior version of the regulations had provided for a
long and short test for the exemption. See Darveau v. Detecon,
Inc., 

, 338 (4th Cir. 2008).     The amendments were
not intended to significantly change the exemption criteria.
See Desmond I, 

, 691 n.2 (4th Cir. 2009).

     8 The salary threshold of $455 per week equates to $23,660
per year. The starting annual salary of Samuel Calderon, named
plaintiff in the FLSA claim, was $45,000 in 2009. The starting
annual salary for Tom Fitzgerald, class representative in the
NYLL claim, was $37,000 in 2000.       We note that the Labor
Department has recently proposed increasing the threshold to
$921    per    week    (or   $47,892    per    year).       See
(Continued)
                                     17
concluded     that   the    second   element   (the   “directly    related

element”) was likely met.         See Calderon, 

at 436-

41.   The court ruled, however, that the plaintiffs were entitled

to partial summary judgment on the issue of liability because,

as a matter of law, GEICO failed to establish the third element

(the “discretion-and-independent-judgment element”).            See 

     In our view, the plaintiffs were entitled to summary

judgment on the basis of the directly related element.               It is

therefore that element on which we focus our discussion.

      The applicable Labor Department regulations shed some light

on the meaning of the directly related element.            They explain

that “‘primary duty’ means the principal, main, major or most

important     duty   that   the   employee   performs.”    29     C.F.R.   §

541.700(a).      “Determination of an employee’s primary duty must

be based on all the facts in a particular case, with the major

emphasis on the character of the employee’s job as a whole.” 9

visited Dec. 22, 2015) (saved as ECF opinion attachment).

      9   29 C.F.R. § 541.700(a) also provides:

     Factors to consider when determining the primary duty
     of an employee include, but are not limited to, the
     relative importance of the exempt duties as compared
     with other types of duties; the amount of time spent
     performing  exempt  work;   the  employee’s  relative
(Continued)
                                      18
        Here, the summary judgment record clearly showed that the

Investigators’ primary duty was the investigation of suspected

fraud, including reporting their findings.            Unless the primary

duty qualifies as “exempt work,” the FLSA exemption relied upon

by GEICO does not apply. 10        See 

for exemption

under     this   part,   an   employee’s   ‘primary   duty’   must   be   the

performance of exempt work.”).




     freedom from direct supervision; and the relationship
     between the employee’s salary and the wages paid to
     other employees for the kind of nonexempt work
     performed by the employee.
     10 GEICO notes that the Investigators also must make
decisions regarding whether to make referrals to law enforcement
or to the National Insurance Crime Bureau and whether to make
referrals to GEICO’s underwriting department so that an
insured’s rates may be adjusted when his policy comes up for
review.   GEICO also notes that Investigators sometimes process
claim withdrawals when claimants decide to withdraw their
claims.    And they speak with law enforcement officials to
discuss particular investigations and share information with
other insurers. Even assuming that the administrative exemption
would apply to an employee whose duties were primarily these,
GEICO has pointed to nothing in the record that would support a
conclusion that these responsibilities were any more than a
minor part of the Investigators’ jobs, either in their
importance or in the amount of the Investigators’ time that they
occupy.   See Clark v. J.M. Benson Co., 

, 286 (4th
Cir. 1986) (holding that employer “bears the full burden of
persuasion for the facts requisite to an exemption”); see also
Schaefer v. Indiana Mich. Power Co., 

, 403 (6th Cir.
2004) (holding that even though some of employee’s duties
appeared to satisfy the directly related element, the element
was not satisfied where those duties were not part of his
primary duty).



                                     19
     “The phrase ‘directly related to the management or general

business operations,’” within the context of the second element,

“refers to the type of work performed by the employee.”                        29

C.F.R. § 541.201(a); see Desmond 

(“Both the

FLSA and its regulations make clear that an employee is exempt

based   on     the   type     of    work    performed   by   that   individual.”

(emphasis in original)).            “To meet this requirement, an employee

must perform work directly related to assisting 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) (emphasis added).

     The regulations provide examples of the type of work that

is   directly        related       to     management    or   general    business

operations, explaining that qualifying work

     includes, but is not limited to, work in functional
     areas such as tax; finance; accounting; budgeting;
     auditing;   insurance;   quality   control; purchasing;
     procurement; advertising; marketing; research; safety
     and health; personnel management; human resources;
     employee benefits; labor relations; public relations,
     government relations; computer network, internet and
     database    administration;    legal    and  regulatory
     compliance; and similar activities.




                                            20
29 C.F.R. § 541.201(b) (emphasis added). 11                    And Labor Department

comments    to    the    applicable       regulations          explain    that       “the

administrative operations of the business include the work of

employees     ‘servicing’    the     business,          such     as,   for     example,

‘advising   the    management,      planning,          negotiating,      representing

the company, purchasing, promoting sales, and business research

and control.’”     69 Fed. Reg. at 22,138.

      Because § 541.201(a) specifically identifies working on a

manufacturing production line as an example of work that is not

directly related to assisting with the running or servicing of a

business, courts analyzing whether the directly related element

has been satisfied have often focused their inquiry on whether

the work is “production-type” work or analogous thereto.                             See,

e.g., Desmond 

.                   Our court has explained that

“[a]lthough      the    administrative-production                dichotomy      is     an

imperfect     analytical     tool    in        a     service-oriented        employment

context, it is still a useful construct.”                   

that

the dichotomy is imperfect is that while production-type work is

not   administrative,        not    all            non-production-type        work     is

administrative.        See Martin v. Indiana Mich. Power Co., 

, 582 (6th Cir. 2004) (“The regulations do not set up an


      11
       The regulation notes that “[s]ome of these activities may
be performed by employees who also would qualify for another
exemption.” 29 C.F.R. § 541.201(b).


                                          21
absolute     dichotomy         under    which     all     work    must      either     be

classified as production or administrative.”); Bothell v. Phase

Metrics, Inc., 

, 1127 (9th Cir. 2002) (“Only when

work falls ‘squarely on the “production” side of the line,’ has

the   administration/production            dichotomy       been   determinative.”).

The regulation, after all, provides production work only as an

example    of    work    not    directly       related    to    assisting      with   the

running or servicing of the business.                      Thus, in the end, the

critical     focus      regarding       this     element       remains    whether      an

employee’s duties involve “‘the running of a business,’” Bratt

v. County of Los Angeles, 

, 1070 (9th Cir. 1990),

as    opposed    to     the    mere    “‘day-to-day       carrying       out   of     [the

business’s] affairs,’” Desmond 

(citing 

).

      We applied this test most recently in Desmond I.                          In that

case, the plaintiff-employees worked as racing officials for a

company that staged live horse races.                    Along with some clerical

responsibilities,        the    employees       ensured    that    the    horses      wore

proper equipment and that a trainer or groom was positioned to

saddle the horse and prepare it for the race; verified that the

horses     had   the     proper       papers,    tattoos,       and   test     results;

confirmed each jockey’s presence and licensing; and determined

the races’ final outcomes.             See 

                                           22
      Despite the employer’s contention that the officials were

indispensable to its business, we concluded as a matter of law

that their work was not “directly related to the management or

general business operations of the employer.”                    See 

We    noted        that    the     employees’     indispensability        was    not

dispositive because it was “‘the nature of the work, not its

ultimate consequence’” that was critical.                 

v.

J.M. Benson Co., 

, 287 (4th Cir. 1986)).                     As for the

nature of the work, we reasoned:

      Racing officials have no supervisory responsibility
      and do not develop, review, evaluate, or recommend
      Charles Town Gaming’s business policies or strategies
      with regard to the horse races.        Simply put, the
      [racing    officials’]   work  did   not    entail   the
      administration of–the “running or servicing of”–
      Charles Town Gaming’s business of staging live horse
      races.   The Former Employees were not part of “the
      management” of Charles Town Gaming and did not run or
      service the “general business operations.”         While
      serving as a Placing Judge, Paddock Judge, or
      performing    similar  duties  is   important   to   the
      operation of the racing business of Charles Town
      Gaming, those positions are unrelated to management or
      the general business functions of the company.

      We   concluded    that    the     employees’   duties     were

“similar to those performed ‘on a manufacturing production line

or selling a product in a retail or service establishment,’” 

    C.F.R.      § 541.201(a)),    in     that   their     employer

produces live horse races and the employees’ duties “consist[]

of ‘the day-to-day carrying out of [their employer’s] affairs’




                                         23
to the public, a production-side role,” id. (quoting 

).

     To the extent that the Investigators’ work supports the

claim-adjusting        function,         the     Investigators,            unlike        the

employees in Desmond I, are not production workers per se.                               See

69 Fed. Reg. at 22,145 (“[C]laims adjusters are not production

employees because the insurance company is in the business of

writing and selling automobile insurance, rather than in the

business     of     producing      claims.”          (internal      quotation          marks

omitted)).         But,     like     the     employees         in   Desmond       I,     the

Investigators’      primary       duty     is   too     far    removed     from        their

employer’s management or general business operations to satisfy

the directly related element.

     Their primary duty consists of conducting investigations to

resolve    narrow     factual      questions,         namely    whether     particular

claims    submitted    to    GEICO    were      fraudulent.         Like    the    racing

officials in Desmond I, the Investigators have “no supervisory

responsibility       and     do    not     develop,       review,      evaluate,          or

recommend [GEICO’s] business polices or strategies with regard

to the” claims they investigated.                    Desmond 

.

Although their work is important to GEICO, the Investigators are

in no way “part of ‘the management’ of [GEICO] and d[o] not run

or service the ‘general business operations.’”                       

assisting    the    Claims    Adjusters         in    processing     the     claims      of

                                           24
GEICO’s insureds, the Investigators’ duties simply “consist[] of

‘the    day-to-day     carrying   out    of    [GEICO’s]     affairs’   to   the

public.”     

   regulations       and   Labor   Department   opinion

letters      support    this   interpretation.             Specifically,     they

indicate that employees whose primary duty is to conduct factual

investigations do not satisfy the directly related element, even

when the work is of significant importance to the employer.                  For

example, 29 C.F.R. § 541.3(b)(1) provides:

       The section 13(a)(1) exemptions and the regulations in
       this part . . . do not apply to police officers,
       detectives, deputy sheriffs, state troopers, highway
       patrol      officers,      investigators,      inspectors,
       correctional officers, parole or probation officers,
       park rangers, fire fighters, paramedics, emergency
       medical   technicians,    ambulance    personnel,   rescue
       workers, hazardous materials workers and similar
       employees, . . . who perform work such as preventing,
       controlling or extinguishing fires of any type;
       rescuing fire, crime or accident victims; preventing
       or detecting crimes; conducting investigations or
       inspections    for    violations   of    law;   performing
       surveillance; pursuing, restraining and apprehending
       suspects; detaining or supervising suspected and
       convicted criminals, including those on probation or
       parole;   interviewing    witnesses;   interrogating   and
       fingerprinting     suspects;    preparing    investigative
       reports; or other similar work.

29     C.F.R.      §   541.3(b)(1)   (emphasis        added).       Subsection

541.3(b)(3) explains that “[s]uch employees do not qualify as

exempt administrative employees because their primary duty is

not the performance of work directly related to the management




                                        25
or general business operations of the employer or the employer’s

customers as required under § 541.200.”

      GEICO argues that this regulation, when read in context,

should be interpreted as pertaining only to “public-sector law

enforcement     officers.”            Response     and        Reply     Brief        for

Appellants/Cross-Appellees at 23.              In support of its argument,

which the district court agreed with, see Calderon, 

at 440, GEICO specifically notes that the Labor Department’s

stated purpose for adopting this provision was to clarify that

“police     officers,    fire   fighters,      paramedics,      EMTs     and     other

first responders are entitled to overtime pay.”                     69 Fed. Reg. at

22,129 (emphasis added)); see Foster v. Nationwide Mut. Ins.

Co., 

, 644 (6th Cir. 2013).                    GEICO no doubt has

correctly     identified     the     Labor     Department’s         motivation       for

including    this     clarifying     regulation.        See    69     Fed.    Reg.    at

22,129 (“This new subsection 541.3(b) responds to commenters,

most notably the Fraternal Order of Police, expressing concerns

about the impact of the proposed regulations on . . . first

responders.”).        However, neither the Labor Department’s comments

nor   the   regulation     itself    suggest     that    the   Labor     Department

intended to carve out some sort of special exception for first

responders or otherwise treat workers performing similar work

differently depending on whether they worked in the public or

private     sector.       See   29    C.F.R.     § 541.201(a)         (“The    phrase

                                        26
‘directly       related          to     the    management         or     general       business

operations’         refers       to     the    type       of    work    performed         by     the

employee.” (emphasis added)); see Desmond 

(“Both the FLSA and its regulations make clear that an employee

is    exempt        based       on    the     type    of       work    performed      by       that

individual.” (emphasis in original)).

      In   fact,          the    Labor      Department’s        comments       to    29    C.F.R.

§ 541.3(b)(1) explain that the regulation was merely intended to

reflect results that courts had already reached.                                See 69 Fed.

Reg. at 22,129.              Indeed, one of the three cases cited in the

comments       as     supporting            § 541.3(b)(1)’s           application         of    the

administrative exemption, Bratt, employed analysis very similar

to that which we applied in Desmond I, analysis that seems to

apply    to    the        Investigators        as     well.       In    Bratt,       the       court

considered      whether          the     administrative           exemption         applied      to

employees      of     a     county      probation         department     who    “conduct[ed]

factual investigations of adult offenders or juvenile detainees

and advise[d] the court on their proper sentence or disposition

within the system.”                  

.              Analogizing the

sentencing courts’ work to a business, the court rejected the

notion that the employees could be characterized as “servicing”

the     business       of       the    courts        or    “advising      the       management”

regarding policy determinations such as how the business could

be run more efficiently.                    

(internal quotation marks

                                                27
omitted).       Rather, the court concluded, the service that the

probation       officers     provided        the    courts,       namely,    “providing

information      in   the    course     of    the     customer’s         daily   business

operation[,] . . . d[id] not relate to court policy or overall

operational management but to the courts’ day-to-day production

process.”       

court determined that the probation

officers’    work     did    not   directly        relate    to    the    management    or

general business operations of the employer.

       A strong argument can be made that the Investigators’ work

in this case did not satisfy the directly related element for

similar reasons.         It is of course true that while the primary

duty    of   both      the    probation           officers    in     Bratt       and   the

Investigators before us was to conduct factual investigations

and    report    their      results,    the        information      provided      by   the

probation officers was put to a different use than is that of

the Investigators before us.                 Namely, the information in Bratt

was used by courts to determine defendants’ sentences, while the

information in the present case is used by GEICO to assist the

Claims Adjusters in the processing of insurance claims.                           Nothing

in the regulations demonstrates that this distinction would be

dispositive, however.          As we have stated, the regulations’ focus

is on “the nature of the work, not its ultimate consequence,”

Desmond 

, and the nature of the Investigators’

primary duty was not different in any significant way from that

                                             28
of the probation officers.            In neither case did the employees’

actual    work    duties     relate        to     business    policy        or     overall

operational      management.         Compare       

(holding that because “Ethics and Standards Lieutenant spent all

her    time      accumulating        and        analyzing      data        and      making

recommendations that shaped the police department’s policy with

regard to internal discipline[, her work was] ‘directly related

to management policies.’”), and West v. Anne Arundel Cnty., 

,    764   (4th     Cir.    1998)       (holding     that       EMS     Training

Lieutenants’      position     met    criteria           because    the     Lieutenants

“develop[ed], coordinate[d], implement[ed,] and conduct[ed] EMS

training programs[;] . . . prepare[d] lesson plans and training

aids[;]   supervise[d]        delivery       of    training        and    tests[;]       and

evaluate[d] new equipment”), with 

-29

(holding that Media Relations Sergeants did not meet exemption

criteria when they “spent half their time on the ‘crime line,’

answering the phone, taking tips, and passing them on to the

right department,” and also “screen[ed] calls to the Chief of

Police,     respond[ed]      to     impromptu       questions        by     the    press,

determin[ed] what information should be released to the press

regarding     ongoing   investigations,            and    develop[ed]       an    ongoing

news   broadcast     called       ‘Crime    of     the    Week’”).         Rather,       the

information the Investigators provided was used in GEICO’s day-

to-day processing of their employers’ claims.                             Regardless of

                                           29
whether this was “production work,” it does not appear to be

directly     related         to    GEICO’s         management        or    general        business

operations.

        Further supporting the conclusion that conducting factual

investigations         does       not    constitute            exempt    work   is     29      C.F.R.

§ 541.203(j), which provides that the work of “[p]ublic sector

inspectors       or    investigators            of      various      types,     such      as     fire

prevention       or    safety,          building          or    construction,        health         or

sanitation,       environmental            or      soils        specialists        and      similar

employees . . . typically does not involve work directly related

to   the    management            or     general          business       operations         of    the

employer.” 12          As    with        § 541.3(b)(1),            the    addition        of     this

subsection       was        motivated         by        concerns        relating     to        public

employees.        See       69    Fed.    Reg.       at    22,147.        But   also        as   with

§ 541.3(b)(1),         there       is    no     clear       indication       that    the         Labor

Department, in promulgating the regulation, was doing anything

other     than    applying         generally            applicable       principles         to    the

specifically enumerated jobs.




     12 The regulation also provides that “[s]uch employees also
do not qualify for the administrative exemption because their
work involves the use of skills and technical abilities in
gathering factual information, applying known standards or
prescribed procedures, determining which procedure to follow, or
determining whether prescribed standards or criteria are met.”
29 C.F.R. § 541.203(j).



                                                   30
        Several   Labor       Department         letter      opinions   further      support

the view that conducting factual investigations, regardless of

how important they are to the employer, is not directly related

to    management         or     general          business       operations. 13           Most

prominently,       a     2005    opinion          letter      considered      whether     the

administrative exemption applied to investigators working for a

company that had contracted with the U.S. government to perform

“background       investigations            of    potential      government      employees

being      considered     for        U.S.   Government        Secret    and    Top    Secret

security clearances.”                U.S. Dep’t of Labor, Wage & Hour Div.,

Opinion Letter, FLSA 2005-21, 

(Aug. 19, 2005),

at *1.      Notwithstanding that the employees’ work was critical to

national security, that the investigators possessed significant

discretion in determining how to conduct their investigations,

and     that      they        were     called         upon     to     make     credibility

determinations,          the     Labor       Department        concluded      that      their

primary duty was “diligent and accurate fact-finding, according

to [agency] guidelines, the results of which are turned over to

[the agency,] who then makes a decision as to whether to grant

or deny security clearances.”                    

        The Labor Department

      13
       When a regulation is ambiguous, we defer to the agency’s
interpretation of the regulation in an opinion letter so long as
it is not “‘plainly erroneous or inconsistent with the
regulation.’”    D.L. ex rel. K.L. v. Baltimore Bd. of Sch.
Comm’rs, 

, 259-60 (4th Cir. 2013) (quoting Auer v.
Robbins, 

, 461 (1997)).


                                                 31
determined that those activities “are more related to providing

the    ongoing,         day-to-day     investigative        services,         rather       than

performing administrative functions directly related to managing

[the employer’s] business.”               

letter specifically

noted the fact that “29 C.F.R. § 541.203(j) regard[s] public

sector      inspectors,        investigators         and    similar         employees,       as

employees       whose        duties    have    been       found      not    to     meet    the

requirements           for   the    administrative        exemption        ‘because       their

work typically does not involve work directly related to the

management        or    general     business       operations     of    the      employer.’”

       Thus,    the   Labor    Department         determined        that    the

investigators’           “activities,     while      important,        do    not    directly

relate to the management or general business operations of the

employer within the meaning of the regulations.”                           

       The reasoning in this letter is similar to several other

Labor Department opinion letters applying the pre-2004-amendment

regulations to other investigators.                       See U.S. Dep’t of Labor,

Wage    &   Hour       Div.,   Opinion    Letter,      

     (Apr.    17,

1998), at *2 (concluding that work of journeymen investigators

in     liquor     industry         “involve[d]      the    day-to-day         ‘production’

functions of the employer rather than the management policies or

general business operations of the employer”); U.S. Dep’t of

Labor, Wage & Hour Div., Opinion Letter, 

(Jan.

23, 1998), at *2 (concluding that medical legal investigators

                                              32
were “carrying out the employer’s day-to-day affairs rather than

running the business itself or determining its overall course

and policies”); U.S. Dep’t of Labor, Wage & Hour Div., Opinion

Letter, 

(Sept. 12, 1997), at *3 (concluding that

work of investigators who worked for a company that conducted

background    investigations      of        various      types    of   employees     that

were used to determine the subjects’ fitness for employment did

not satisfy the directly related element because “the specific

investigation activities . . . would appear to be more related

to the ongoing day-to-day production operations of the firm than

to [its] management policies or general business operations”;

noting that the directly related element would not be satisfied

“[e]ven if the investigators were viewed as performing staff

operations of the firm’s customers,” such that the investigators

would not be engaged in production activities, “because their

work does not help shape or define the policies or operations of

[the   customer   businesses]          or    affect       their    operations      to    a

substantial    degree”).          We        see    nothing        plainly     erroneous

concerning    these   interpretations,             and    we     therefore    defer     to

them, as we must.         See D.L. ex rel. K.L. v. Baltimore Bd. of

Sch. Comm’rs, 

, 259-60 (4th Cir. 2013).

       Notwithstanding the similarity between the nature of the

Investigators’    primary       duty    and       that    of     the   many   jobs      the

regulations    identify    as    not        satisfying      the    directly     related

                                            33
element, GEICO maintains that the Investigators are nonetheless

exempt because they perform some of the same duties that claims

adjusters typically perform. 14    In this regard, GEICO points to

§ 541.203(a), which states,

     Insurance claims adjusters generally meet the duties
     requirements for the administrative exemption, whether
     they work for an insurance company or other type of
     company, 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.

29 C.F.R. § 541.203(a) (emphasis added).

     This regulation is of little help to us in our evaluation

of whether the nature of the Investigators’ work is directly

related to management or general business operations.       As the

regulation’s language indicates, even for claims adjusters, 15 the

question of whether they satisfy the directly related element is

determined on a case-by-case basis and depends on their specific

     14The district court’s conclusion that the directly related
element was likely satisfied was based in part on the fact that
Investigators’ work is used to assist GEICO claims adjusters in
adjusting claims.   See Calderon v. GEICO Gen. Ins. Co., 917 F.
Supp. 2d 428, 441 (D. Md. 2012).

     15 “A job title alone is insufficient to establish the
exempt status of an employee. The exempt or nonexempt status of
any particular employee must be determined on the basis of
whether the employee’s salary and duties meet the requirements
of the regulations in this part.” 29 C.F.R. § 541.2.



                                  34
duties.     See 69 Fed. Reg. at 22,144, 22,145 (emphasizing that

the   regulation        “identifies     the    typical    duties      of    an    exempt

claims adjuster” and noting that “there must be a case-by-case

assessment to determine whether the employee’s duties meet the

requirement       for    exemption,”      including       the    directly        related

element);       see    also   U.S.    Dep’t    of   Labor,    Wage    &    Hour       Div.,

Opinion Letter, FLSA 2005-2 (Jan. 7, 2005), at *2 (“[S]ection

541.203(a) simply provides an illustration of the application of

the administrative duties test; it does not provide a blanket

exemption for claims adjusters.”               Rather, “there must be a case-

by-case assessment.”          (internal quotation marks omitted)). 16                  The

duties     of    the    typical      claims    adjuster      that    the    regulation

describes       are     certainly      much    broader       than    those       of    the

Investigators,          and    they     include      some       duties      that        are

unmistakably administrative, such as “negotiating settlements”

and “making recommendations regarding litigation.” 17                      See 69 Fed.


      16The Labor Department over the years has consistently
expressed the view that claims adjusters typically satisfy the
requirements of the administrative exemption. See In re Farmers
Ins. Exch., 

, 1128-29 (9th Cir. 2007) (reviewing
prior regulations and opinion letters).

      17 That the Investigators do not have these duties
distinguishes this case from many of those decisions that GEICO
relies on in its argument that the directly related element is
satisfied here.   See Roe-Midgett v. CC Servs., Inc., 

, 868-73 (7th Cir. 2008) (holding that administrative
exemption covered material-damage appraisers responsible for
“investigating   auto  accident   damage,  making   repair   or
(Continued)
                                          35
Reg. at 22,138 (noting that “the administrative operations of

the   business   include        the    work      of   employees     ‘servicing’   the

business,    such      as,     for    example,        ‘advising     the   management,

planning,    negotiating,           representing       the    company,    purchasing,

promoting sales, and business research and control’” (emphasis

added)).     For this reason, it is hardly surprising that the work

of a claims adjuster with those duties would be considered to be

directly related to management or general business operations.

      Although   GEICO        does    not   dispute     that    the   Investigators’

duties are significantly more narrow than those of the typical

claims      adjuster         that     the        regulation       describes,    GEICO

nevertheless argues that the fact that the Investigators’ work

is used to support the claims-adjusting function demonstrates

that their work satisfies the directly related element.                           See

(holding that although the plaintiffs

had only a subset of the duties listed in § 541.203(a), the

directly related element was satisfied because the employees’



replacement determinations, drafting estimates, and settling
claims of up to $12,000 where liability has been established and
coverage approved”); In re Farmers Ins. 

(holding that administrative exemption covered claims adjusters
who “determine whether the loss is covered, set reserves, decide
who is to blame for the loss and negotiate with the insured or
his lawyer”); Cheatham v. Allstate Ins. Co., 

, 585
(5th Cir. 2006) (per curiam) (holding that exemption covered
adjusters who “advised the management, represented Allstate, and
negotiated on Allstate’s behalf”).



                                            36
“work       remains   integral       to    the       claims    adjusting        function,      is

performed       in    partnership          with       the     [claims     adjusters],         and

involves       making    findings         that    bear       directly      on   the    [claims

adjuster’s]       decisions       to      pay    or     deny    a   claim”).          But    this

argument fails to take into account that it is “the nature of

the work, not its ultimate consequence,” that controls whether

the exemption applies.                 Desmond 

; see 29

C.F.R.       § 541.201(a)       (“The       phrase       ‘directly        related      to     the

management or general business operations’ refers to the type of

work    performed        by    the     employee.”           (emphasis      added)).          Were

GEICO’s reasoning correct, even “run-of-the-mine” jobs such as

secretarial      work     that    supported           the    claims-adjusting          function

could be found to be directly related to management policies or

general      business     operations.             But    in    fact      such   jobs    do    not

generally satisfy this element. 18                    See 

.

       Regardless of how Investigators’ work product is used or

who    the    Investigators          are    assisting,         whether      their      work   is

directly       related    to     management           policies      or    general      business

operations depends on what their primary duty consists of.                                   And,

as we have explained, the primary duty of the Investigators –


       18
       Indeed, if the fact that an employee’s work supported the
claims-adjusting process demonstrated that the directly related
element were satisfied, there would be no need to consider
claims adjusters’ duties on a case-by-case basis in deciding
whether they satisfied that element.


                                                37
conducting factual investigations and reporting the results – is

not analogous to the work in the “functional areas” that the

regulations identify as exempt.           29 C.F.R. § 541.201(b).           It is,

however, directly analogous to the work the regulations identify

as not satisfying the directly related element.                 See 29 C.F.R.

§§ 541.3(b)(1),     541.203(j).         Accordingly,      although    the    issue

presents a very close legal question, we conclude that GEICO has

not shown that the Investigators’ primary duty is, plainly and

unmistakably, directly related to GEICO’s management or general

business operations.         We therefore hold that the district court

correctly granted partial summary judgment to the plaintiffs on

the issue of whether GEICO improperly classified the plaintiffs

as exempt. 19

                   III. The plaintiffs’ cross-appeal

                              A.      Willfulness

     The plaintiffs first argue in their cross-appeal that the

district court erred in granting partial summary judgment to

GEICO on the issue of willfulness under the FLSA.               We disagree.

     Under the Portal-to-Portal Act of 1947 (the “Portal Act”),

29   U.S.C.     §§ 251-62,    the    length    of   the   FLSA’s     statute    of

limitations     depends   upon      whether   the   violation   at    issue    was


     19 In light of our affirmance on the basis of the directly
related element, we do not address the application of the
discretion-and-independent-judgment element.


                                        38
willful.       See 29 U.S.C. § 255(a); Perez v. Mountaire Farms,

Inc., 

, 375 (4th Cir. 2011).                        If it is not willful,

the limitations period is two years, but the period is three

years for willful violations.                  See 29 U.S.C. § 255(a); Desmond

v. PNGI Charles Town Gaming, LLC, 

, 357 (4th Cir.

2011) (“Desmond II”).             “[O]nly those employers who either knew

or    showed   reckless        disregard    for      the      matter    of    whether       its

conduct was prohibited by the [FLSA] have willfully violated the

statute.”      Desmond 

(internal quotation marks

omitted).            And,    negligence        is    insufficient            to     establish

willfulness.         See 

of whether an employer acted

willfully      is    generally     a    question         of   fact.      See       Martin    v.

Deiriggi, 

, 136 (4th Cir. 1993).                             The burden to

establish willfulness rests with the employee.                           See 

.

       Here, the question of whether the Investigators are exempt

was a close and complex one regarding two of the three elements

of the applicable test.               Indeed, the Sixth Circuit in Foster v.

Nationwide          Mutual      Insurance        Company,        faced        with       facts

essentially         identical    to    ours,     concluded       that    the       exemption

applied.       See     

.       As    evidence       of

willfulness,         the     plaintiffs     point        only    to     the       memo    that

Rutzebeck prepared in conjunction with GEICO’s 2004 review of

the    Investigators’           exempt     status.              However,          Rutzebeck’s

                                            39
conclusion that the Investigators were not exempt was based on a

court decision that GEICO’s senior executives disagreed with,

and there is no reasonable basis for any finding that GEICO’s

disagreement        with   that    decision      was    reckless.         In      fact,   the

court decision was eventually reversed.

       In any event, regardless of how GEICO made its exemption

decision in 2004, GEICO reconsidered the issue anew in 2007 over

a    one-    or     two-month     period     and       again    concluded         that    the

Investigators were correctly classified as exempt.                           As was true

of   the     2004    process,     there    is    no    evidence    that      any     of   the

executives involved in the 2007 process made anything other than

their       best    attempts      to   resolve         this     difficult         exemption

question,      and    we   conclude       that     their       decision      to    continue

classifying the Investigators as exempt was a reasonable one.

We therefore agree with the district court that there was no

basis upon which a reasonable factfinder could conclude that

GEICO’s decision to classify its investigators as exempt was

knowingly      incorrect     or    reckless.           Accordingly,       the      district

court properly granted summary judgment on the issue to GEICO.

                                  B.      Regular Rate

       The plaintiffs next challenge the method the district court

used    to   calculate     the    compensation         they     were   due     for   unpaid

overtime.



                                            40
        The FLSA provides that an employer will be liable to its

employees for a violation of the overtime pay requirement “in

the amount of . . . their unpaid overtime compensation.” 20                              29

U.S.C. § 216(b).            The method of calculating compensatory damages

for   lost        overtime      is   established     for    mistaken-FLSA-exemption

cases        in    which     “the     employer     and     employee    had     a     mutual

understanding that the fixed weekly salary was compensation for

all     hours        worked     each    workweek     and     the      salary       provided

compensation at a rate not less than the minimum wage for every

hour worked.”             Desmond 

.             In such a case, “a

court should divide the employees[’] fixed weekly salary by the

total hours worked in the particular workweek,” producing the

“regular          rate”   for   a    given   workweek.       

Motor Transp. Co. v. Missel, 

, 579-80 (1942)).                              The

employee should then receive overtime compensation for each week

in an amount no less than half of the regular rate for that week

multiplied by the number of hours worked in excess of 40.                               See

        In challenging the method the district court employed for

calculating damages, the plaintiffs simply maintain that there

was a genuine factual dispute regarding whether they agreed to




        20
        NYLL also provides such liability.                         See N.Y. Lab. Law
§§ 198(1-a); 663(1).


                                              41
receive       straight-time         pay    for     all    hours       worked     in    a     given

workweek.       We disagree.

       Importantly,          “an    understanding             [that    the     fixed        weekly

salary was compensation for all hours worked] may be ‘based on

the implied terms of one’s employment agreement if it is clear

from    the    employee’s          actions    that       he    or     she     understood       the

payment plan.’”          Mayhew v. Wells, 

, 219 (4th Cir.

1997) (quoting Monahan v. County of Chesterfield, Va., 

,   1281     n.21    (4th       Cir.     1996)).           For    many     years    without

objection, although the plaintiffs did not always work the same

number of hours in a day, they received fixed salaries that did

not fluctuate depending on the number of hours they worked.                                     On

this    basis,     we    conclude         that     the    district           court    correctly

determined      that     a    reasonable         jury    could        only    find     that    the

Investigators          and      GEICO        came        to     understand           that      the

Investigators      were       receiving       straight-time            pay    for     all    hours

worked in a given workweek.                  Although the plaintiffs claim that

GEICO   hired     them       with    the     understanding            that    they     would    be

working only 38.75 hours per week, that does not negate the fact

that    the    record        establishes      that,       over       time,     they    came     to

understand that any fluctuations that occurred in their hours

from week to week would not affect the amount that they would be




                                              42
paid. 21   Accordingly, the district court correctly resolved the

issue against the plaintiffs as a matter of law.

                         C.     Liquidated Damages

      The plaintiffs also contend that the district court abused

its discretion by denying their request for liquidated damages

under the FLSA and NYLL.        We disagree.

      In addition to authorizing unpaid overtime award, the FLSA

provides for an award of liquidated damages equal to the amount

of compensation for unpaid overtime.              See 29 U.S.C. § 216(b).

“Under the Portal Act, however, a district court, in its sound

discretion,     may   refuse    to    award   liquidated    damages   if   ‘the

employer shows to the satisfaction of the court that the act or

omission giving rise to such action was in good faith and that

he had reasonable grounds for believing that his act or omission

was not a violation of the [FLSA].’”              

(quoting   29   U.S.C.   §     260)   (alteration   in     original).      This

provision protects employers who violate the statute but “who


      21Black v. SettlePou, P.C., 

, 498 (5th Cir.
2013), on which the plaintiffs rely, is distinguishable.      In
that case, the court noted that the plaintiff testified that she
objected when she was not paid additional compensation for
working additional hours and that such testimony tended “to show
that she did not agree that her fixed weekly salary was intended
to compensate her for all of the hours she worked each week.”

(distinguishing case in which “the employee accepted
her fixed weekly pay no matter how many hours she worked and
never asked for any additional overtime pay”).    The plaintiffs
point to no such testimony in this case.


                                        43
had reasonable grounds for thinking the law was other than it

turned out to be.”           Thomas v. Howard Univ. Hosp., 

,

373 (D.C. Cir. 1994).            “[G]ood faith” and “reasonable grounds”

are both measured objectively, see 29 C.F.R. § 790.22(c), and

establishing        either     element     is    sufficient      to   satisfy    the

statute.    See 

.

      NYLL regarding the liquidated damages that could be awarded

in addition to compensatory overtime underwent a change during

the limitations period applicable to the state-law violations,

which the parties stipulated was six years beginning on July 19,

2009.       Prior     to     November     24,    2009,   the    law   allowed     for

liquidated damages in the amount of 25 percent of the overtime

underpayments in the event the employee could prove a willful

violation.     See N.Y. Lab. Law §§ 198(1-a), 663(1).                    Effective

November 24, 2009, through April 8, 2011, liquidated damages in

the   amount   of    25    percent   of    the    overtime     underpayments     were

allowed    “unless     the    employer     proves    a   good    faith   basis    for

believing that its underpayment of wages was in compliance with

the law.”      N.Y. Lab. Law § 198(1-a); see N.Y. Lab. Law § 663(1)

(similar).      And effective April 9, 2011, the 25-percent amount

was increased to 100 percent.               See N.Y. Lab. Law §§ 198(1-a),

663(1).

      The district court concluded that GEICO acted in good faith

by reviewing the classification issue multiple times and that,

                                           44
given the closeness of the issue, its decision to treat the

Investigators as exempt was a reasonable one.                         We agree that the

issue was a very close one, and we conclude that the district

court was within its discretion in refusing to award liquidated

damages under either the FLSA or NYLL.

                          D.     Prejudgment Interest

       The plaintiffs finally argue that, in the absence of an

award   of   liquidated        damages,     the        district      court       abused     its

discretion in declining to award prejudgment interest on the

basis    that     GEICO     acted      in    good        faith       in        treating     its

Investigators as exempt.           We agree.

       Although    the      FLSA    does         not     explicitly            provide       for

prejudgment interest, we have noted in the FLSA context that

“[n]ormally,      ‘[p]rejudgment           interest          is   necessary,          in    the

absence of liquidated damages, to make the [plaintiff] whole.’”

Dole v. Shenandoah Baptist Church, 

, 1401 (4th Cir.

1990) (second alteration in original) (quoting Cline v. Roadway

Express, 

, 489 (4th Cir. 1982)); see Pignataro v.

Port Auth. of N.Y. & N.J., 

, 274 (3d Cir. 2010)

(“Prejudgment     interest       [on   a    backpay          award    under       the      FLSA]

attempts to compensate for the delay in receiving the wages as

well    as   offset   the      reduction     in        the    value       of    the   delayed

payments caused by inflation.”).                 See also City of Milwaukee v.

Cement Div., Nat’l Gypsum Co., 

, 195 (1995) (“The

                                            45
essential    rationale       for    awarding      prejudgment         interest    is    to

ensure   that      an    injured    party    is    fully      compensated       for    its

loss.”).     And we have held that “the decision whether to award

interest is within the trial court’s discretion.”                              

; see 

(“[W]e have indicated

that the district court has discretion, based on the equities

involved, in awarding or denying interest” in FLSA cases).

     Nevertheless,         “as   is   always      the    case    when    an    issue    is

committed to judicial discretion, the judge’s decision must be

supported by a circumstance that has relevance to the issue at

hand.”      City    of    

   n.8.      Because

prejudgment interest on an FLSA overtime claim is compensatory

rather than punitive, the fact that the defendant’s decision not

to treat the plaintiffs as exempt was reasonable or in good

faith is not a valid basis for the denial of an award.                           See 

see First Nat’l Bank of Chicago v. Standard Bank &

Trust, 

, 480 (7th Cir. 1999) (“[T]he ‘closeness’ of

a case is not material to the issue of prejudgment interest.”).

Accordingly,       we     reverse     the     district         court’s        denial    of

prejudgment interest under the FLSA.

     On the NYLL claims, we conclude that the plaintiffs were

entitled to prejudgment interest as a matter of right and the

district court thus did not have discretion to deny an award.

“Where     state    law     claims    come     before      a     federal       court    on

                                         46
supplemental jurisdiction,” as they do in this case, “the award

of prejudgment interest rests on state law.”                             Mills v. River

Terminal Ry. Co., 

, 228 (6th Cir. 2002).                                   Accord

Olcott v. Delaware Flood Co., 

, 1126 (10th Cir.

2003) (“Where state law claims are before a federal court on

supplemental jurisdiction, state law governs the court’s award

of prejudgment interest.”); Mallis v. Bankers Trust Co., 

, 692 n.13 (2d Cir. 1983) (“Because the applicability of

state law depends on the nature of the issue before the federal

court   and       not      on   the    basis    for    its   jurisdiction,         state    law

applies     to     questions          of    prejudgment      interest   on     the   pendent

claims in an action predicated upon violations of the federal

securities laws.”); cf. Hitachi Credit Am. Corp. v. Signet Bank,

, 633 (4th Cir. 1999) (“[State] law governs the

award of prejudgment interest in a diversity case.”); Martin v.

Harris, 

, 220 (4th Cir. 2009) (explaining that “the

allowance of prejudgment interest is a substantive provision”).

       On   a     NYLL      wage      claim,    such   as    this    one,     an    award   of

prejudgment interest is mandatory.                     Prior to 2011, the source of

that    statutory          right      was    Section    5001    of   New      York’s   Civil

Practice        Law      and      Rules,       which    provides      that     prejudgment

“[i]nterest shall be recovered upon a sum awarded . . . because

of an act or omission depriving or otherwise interfering with

title       to,       or        possession       or     enjoyment       of,        property.”

                                                47
N.Y.C.P.L.R. § 5001(a) 22; see Santillan v. Henao, 

,    298      (E.D.N.Y.      2011)    (“Section       5001    of    New   York’s   Civil

Practice Law and Rules governs the calculation of prejudgment

interest for violations of the state’s Labor Law.”); see also

(holding that “[i]n light § 5001(a)’s

mandatory nature,” even a failure to request such interest in

the complaint or during trial does not constitute a waiver of

the right to prejudgment interest under the statute).                            Effective

April       9,   2011,    New   York     also    amended      its     statutes   governing

civil actions asserting wage claims to explicitly provide for

awards of prejudgment interest.                      See N.Y. Lab. Law §§ 198(1-a),

663(1).          Accordingly,         with     regard    to     the   NYLL   claims,    the

district         court    did   not     have    discretion       to    decline   to   award

prejudgment interest.

                                               IV.

       In sum, for the foregoing reasons, we reverse the district

court’s decision denying prejudgment interest under the FLSA and

NYLL and remand so that the district court may award prejudgment

interest.         We otherwise affirm.

                         AFFIRMED IN PART, REVERSED IN PART, AND REMANDED




       22
       The rule contains an exception for equitable actions, see
N.Y.C.P.L.R. § 5001(a), but an action seeking damages for unpaid
overtime is legal in nature, see Shannon v. Franklin Simon &
Co., 

, 444 (N.Y. Sup. Ct. 1943).


                                                48