Washington, DC

U.S. Office of Personnel Management
Fair Labor Standards Act Decision
Under section 204(f) of title 29, United States Code

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Linda Kazinetz
Classification Appeals and FLSA Claims
Program Manager
Agency Compliance and Evaluation
Merit System Accountability and Compliance


08/16/2017

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Date

Introduction

On June 4, 2012, the U.S. Office of Personnel Management (OPM) received a letter dated June 4, 2012, from the Law Offices of Bernstein & Lipsett, P.C. (B & L), the claimant’s duly appointed representative, concerning a Fair Labor Standards Act (FLSA) claim they had initially filed on the claimant’s behalf with the General Accounting Office (GAO), now the U.S. Government Accountability Office, on April 11, 1990, and subsequently with OPM on or about September 9, 1999, challenging his exemption status under the FLSA when he was employed as a Criminal Investigator, GS-1811-13, with the Criminal Investigation Division, Group III-Columbus, Cincinnati District Office, Internal Revenue Service (IRS),  Department of the Treasury, in Columbus, Ohio.  The claimant was a plaintiff in a lawsuit filed in the U.S. Court of Federal Claims at approximately the same time the administrative claim was filed with GAO.  Based on information provided by B & L, the claimant was awarded back pay under a settlement agreement for the pay period ending April 23, 1988, to the pay period ending October 29, 1994, subject to the two-year statute of limitations for FLSA claims under 29 United States Code (U.S.C.) 255(a).

B & L has requested OPM adjudicate the administrative claim filed with OPM and asserts that, because the claimant served in the military during the Gulf War, the statute of limitations applicable to this claim is the five-year statute of limitations under 31 U.S.C. 3702(b)(2) rather than the two-year statute of limitations (three years for willful violations) applicable to FLSA administrative claims filed under the Barring Act.  See 73 Comp. Gen 157 (May 23, 1994); 31 U.S.C. 3702(b); 29 U.S.C. 255(a).  B & L states the claimant was called to active duty with the United States Army Reserve “from approximately May 15, 1991 to July 11, 1991”[1] in connection with Operation Desert Shield/Storm and, citing the provisions of 31 U.S.C. 3702(b)(2), asserts: “[H]e is entitled to retroactive back pay and interest … for the period he was employed prior to the commencement of the Gulf War on August 2, 1990, up to the date he recovered under previous FLSA settlements.  This period includes August 2, 1985 to April 9, 1988, less Mr. DeVries’s active duty military service time, for which he does not seek recovery.”

In reaching our FLSA claim decision, we have carefully reviewed all information furnished by the claimant’s representative and the agency, including information obtained from a telephonic interview with the claimant, who retired from Federal civilian service on July 31, 2000.  We also interviewed by telephone a former coworker (now retired) who worked with the claimant during the claim period.

Background

We previously accepted and decided six similar claims under section 4(f) of the FLSA, as amended, codified at section 204(f) of title 29, U.S.C., which we denied as time barred. Subsequently, the claimant’s representative brought suit under the Administrative Procedure Act (5 U.S.C. 551 et seq., and 701 et seq.) in the United States District Court for the District of Columbia, alleging that OPM wrongfully applied a two-year statute of limitations in denying their administrative claims for unpaid FLSA overtime pay.  Armstrong v. Archuleta, 77 F.Supp.3d 9 (December 30, 2014).  In relevant part, the court stated in its opinion:

All Plaintiffs are deemed to have timely filed their claims as of the date of their filings with the Claims Court.  As a result, Plaintiffs can recover for the entire claim period under the five-year statute of limitations—that is, for all claims that accrued within five years before the Gulf War commenced on August 2, 1990—minus monies paid under their DOJ Settlements.

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[T]he case is remanded to OPM to adjudicate and process damages in accordance with FLSA and other applicable laws, and Plaintiffs’ respective employing agencies are directed to compensate them in accordance with OPM’s determinations.

Consistent with the holding in the Armstrong case, we will apply the five-year statute of limitations and corrective methodology (subtracting monies already received under prior settlements or judgments) to the claims of similarly-situated claimants we find to be FLSA nonexempt and potentially due FLSA overtime pay.

Analysis

Under the provisions of 5 CFR 551.706, OPM determines the facts necessary to adjudicate a claim.  Applying the court’s mandate to determine whether the claimant is owed overtime pay under the FLSA, we must first determine whether the work he performed is exempt or nonexempt from the overtime pay provisions of the FLSA.  On October 6, 2015, in response to the aforementioned court decision, OPM requested an agency administrative report (AAR) from IRS regarding this FLSA claim.  By letter dated June 14, 2017, the agency advised OPM that:

The [official personnel folder] for Jon C. DeVries contains [Standard Form (SF)] 50’s reflecting how he was coded as pertains to FLSA, during the claim period of August 1985 to April 9, 1988.  During this period, he served as a Criminal Investigator Inspector,[2] Special Agent in the 1811 series at a Grade 13 and was coded as FLSA exempt.

Regarding the exemption status of the claimant’s GS-13 criminal investigator position, the agency states they “believe IRS considered Criminal Investigators as administrative employees and therefore, applied the administrative exemption making them FLSA exempt” and that “IRS properly coded this employee as FLSA exempt during the entire claim period,”  additionally citing:

29 U.S.C. § 213 (a) (1) – FLSA overtime pay requirements do not apply to any employee who is a “bona fide executive, administrative, or professional capacity”.

Given the agency’s conclusion and the need to identify the actual duties performed by GS-13 criminal investigators like the claimant, our analysis will address the exemption status when he served as a GS-13 criminal investigator.

GS-1811-13 position occupied from August 2, 1985, to April 9, 1988

Position information

During the claim period, the claimant was a Criminal Investigator, GS-1811-13, working within the geographic area of the IRS’s Cincinnati District Office, Group III-Columbus, covering the city of Columbus to southeast Ohio.  He performed criminal tax evasion investigations covered under the provisions of title 26, U.S. Criminal Code, including those dealing with income tax evasion, false income tax returns, failure to file tax returns, and other tax-related illegal activities committed in attempt to defraud the Federal government by not paying or under-paying individual or business income taxes.  Occasionally, depending on the findings of the investigation, his cases could extend to dealing with conspiracy and money laundering activities covered under the provisions of title 18, U.S. Criminal Code.

During the interview, the claimant described the types of investigations he performed during the claim period.  One investigation involved a “tax shelter promoter” who designed a tax scheme to promote, market, and sell purported valuable paintings to create a fraudulent tax shelter.  The subject sold paintings to individuals promising to make and sell lithograph prints, for which purchase prices reported on the individual’s income tax returns would result in a tax benefit.  The subject coordinated with another individual to prepare bogus business income tax returns using asset information that was grossly inflated.  The taxpayers would then improperly claim investment tax credits and depreciation deductions and fraudulently received very large tax refunds.  To identify and assess the scope of the illegal activity, the claimant interviewed victims and witnesses, subpoenaed financial institutions to obtain and review bank records (i.e., over two hundred accounts), and reviewed personal expenditures and financial transactions.  He obtained leads from victims and other records to find the “artists” of the paintings and determine actual purchase prices paid by the subject and what the monies were used for.  The claimant learned the scheme involved over one hundred taxpayers, the sale prices of the paintings were extremely inflated (e.g., painting worth $150 but victim paid $20,000), and in many cases lithographs were never made or sold.  Additionally, he learned that after the victims received tax refunds, the subject would attempt to involve the individuals in other tax schemes to try to take more money from them.  Ultimately, the case was prosecuted by the Assistant U.S. Attorney (AUSA) in a grand jury trial.  The subject faced several charges including tax evasion and assisting in the preparation of fraudulent tax returns.  The claimant, as the investigator of the case, was called upon to testify in Federal court regarding the gathering of evidence and findings of his investigation.  In another case, the claimant investigated an individual involved in a fraudulent investment operation (i.e., “Ponzi” scheme) involving a group of people enticed to invest in the purchase of silver with the promise of a high percentage (i.e., twenty percent) return on their investment.  The subject led investors to believe their funds were being used for a “worthy cause” of supporting politicians (of the same political party as the investors) and that their investments were “safe” since they would receive matching funds from the Federal Government.  The claimant established the subject had collected about seven to ten million dollars of investor funds from hundreds of individuals, diverting investor monies for his own use and benefit.  Investigators from the Federal Bureau of Investigation (FBI) were also involved in the investigation concerning aspects involving theft of property, mail fraud, and other fraudulent activities.  The case was prosecuted by the AUSA jointly with FBI violations, and the subject faced multiple charges.  The claimant worked closely with the AUSA in preparing evidence for prosecution and testified in grand jury indictment as to the tax related aspects of the case.  The claimant described another fraudulent investment operation investigation involving the sale of oil and other tax-related “spin-off” investigations performed during the claim period. 

In performing investigations, the claimant independently applied the full scope of criminal investigative knowledge and techniques including requesting summonses and subpoenas; interviewing witnesses and suspects; securing and serving court-issued search warrants if necessary to review bank, business, and personal financial records; making arrests; piecing together lead information from a variety of sources; performing liaison with other Federal and local law enforcement agencies; and developing evidence for presentation to the AUSA and testifying at grand juries or trials of suspects in Federal court.  Knowledge required by the position included that of the laws, statutes, and regulations on which U.S. Treasury enforcement authorities are based, and specific case law regarding arrests, seizures, civil rights, and rules of evidence.  The claimant worked under the general direction and guidance of his group manager who periodically reviewed the status and progress of his cases and checked his work plan and special agent’s report for completeness (including exhibits and attachments) and whether they fully established and supported the violation.

Evaluation of FLSA Coverage

Sections 551.201 and 551.202 of title 5, CFR, require an employing agency to designate an employee FLSA exempt only when the agency correctly determines that the employee meets one or more of the exemption criteria.  In all exemption determinations, the agency must observe the following principles:  (a) Each employee is presumed to be FLSA nonexempt.  (b) Exemption criteria must be narrowly construed to apply only to those employees who are clearly within the terms and spirit of the exemption.  (c) The burden of proof rests with the agency that asserts the exemption.  (d) If there is a reasonable doubt as to whether an employee meets the criteria for exemption, the employee should be designated FLSA nonexempt. (e) The designation of a position’s FLSA status ultimately rests on the duties actually performed by the employee.

Because the claim period covers 1985 to 1988, we must apply the FLSA regulations of 5 CFR part 551 (1984) in effect during the period of the claim.  However, in response to a court decision, OPM amended these regulations in 1988 by eliminating the presumption that employees in positions classified at GS-11 and above were exempt from the overtime pay provisions of the FLSA, and changed the criteria for determining whether a Federal employee was an executive under the FLSA.  See 53 Federal Register 1739-01 (January 22, 1988).  The claimant believes his position should have been designated as nonexempt from the overtime pay provisions of the FLSA and thus not covered by the executive, administrative, or professional exemptions as detailed in 5 CFR 551.204, 5 CFR 551.205, and 5 CFR 551.206 of those regulations.

The agency was also unable to provide organizational charts, mission and function statements, or copies of the position description (PD) to which the claimant was officially assigned during the claim period.  The claimant’s SF-50s documenting his employment history show he was assigned to PD number R490336003 when he occupied the GS-13 position.  By email dated June 28, 2017, the agency provided multiple standardized PDs from “that time period.”  None of the PDs provided a match to the PD number to which the claimant was officially assigned.

Based on careful review of the record and the claimant’s assigned duties and responsibilities during the claim period, we conclude the claimant’s position did not meet the professional or executive exemption criteria and neither the claimant nor the agency disagrees.  Therefore, we have evaluated the position solely against the administrative exemption criteria.

Administrative Exemption Criteria

The regulation under 5 CFR 551.205 describes the administrative exemption criteria as follows:

An administrative employee is an advisor, assistant, or representative of management, or a specialist in a management or general business function or supporting service who meets all of the following criteria:

(a) The employee’s primary duty consists of work that:  (1) significantly affects the formulation or execution of management policies or programs; or (2) involves general management or business functions or supporting services of substantial importance to the organization serviced; or (3) involves substantial participation in the executive or administrative functions of a management official.

(b) The employee performs office or other predominantly non-manual work which is:  (1) intellectual and varied in nature; or (2) of a specialized or technical nature that requires considerable special training, experience, and knowledge.

(c) The employee must frequently exercise discretion and independent judgment, under only general supervision, in performing the normal day-to-day work.

Although no longer in effect, the definitions of terms used in the FLSA exemption criteria as contained in the Attachment to Federal Personnel Manual (FPM) Letter 551-7, dated July 1, 1975, provide useful guidance in applying the administrative exemption criteria in 5 CFR 551.205 discussed above.  The meaning of terms relevant to the criteria follows.

(a) Primary duty.  As a general rule, the primary duty is that which constitutes the major part (over 50%) of the employee’s work.

(b) Formulation or execution of management policies or programs.  Management policies and programs range from broad national goals that are expressed in statutes or Executive Orders to specific objectives of a small field office.  Employees may actually make policy decisions or participate indirectly, through developing proposals that are acted on by others.  Employees who significantly affect the execution of management policies or programs typically are those whose work involves obtaining compliance with such policies by other individuals or organizations, within or outside of the Federal Government, or making significant determinations in furtherance of the operation of programs and accomplishment of program objectives.  Administrative employees engaged in formulation or execution of management policies or programs typically perform one or more phases of program management (i.e., planning, developing, promoting, coordinating, controlling, or evaluating operating programs of the employing organization or of other organizations subject to regulation or other controls).  Some of these employees are classified in occupations that reflect these functions (e.g., program analyst) but many are classified in subject matter occupations.

(c)  General management, business, or supporting services.  This element brings into the administrative category a wide variety of specialists who provide general management, business, or other supporting services as distinguished from production functions.  Administrative employees in this category provide support to line managers by:  (1) providing expert advice in specialized subject matter fields, such as that provided by management consultants or systems analysts; (2) assuming facets of the overall management function, such as safety management, personnel management, or budgeting and financial management; (3) representing management in such business functions as negotiating and administering contracts, determining acceptability of goods or services, or authorizing payments; or (4) providing supporting services, such as automated data processing, communications, or procurement and distribution of supplies.  To warrant exemption, each employee’s work must involve substantial discretion on matters of enough importance that the employee’s actions and decisions have a noticeable impact on the effectiveness of the organization advised, represented, or serviced.

(d) Participation in the functions of a management official.  This element includes those employees (variously identified as secretaries, administrative or executive assistants, aids, etc.) who participate in portions of the managerial or administrative functions of a supervisor whose scope of responsibility precludes personally attending to all aspects of the work.  To support exemption, such assistants must be delegated and exercise substantial authority to act for the supervisor in the absence of specific instructions or procedures.  Typically these employees do not have technical knowledge of the substantive work under the supervisor’s jurisdiction.  Their primary knowledge is of administrative procedures, organizational relationships, and the policies, plans, interests and views of the supervisor.

(e) Work of an intellectual nature.  Work requiring general intellectual abilities, such as perceptiveness, analytical reasoning, perspective, and judgment applied to a variety of subject matter fields, or work involving mental processes which involve substantial judgment based on considering, selecting, adapting, and applying principles to numerous variables.  The employee cannot rely on standardized application of established procedures or precedents, but must recognize and evaluate the effect of a continual variety of conditions or requirements in selecting, adapting, or innovating techniques and procedures, interpreting findings, and selecting and recommending the “best” alternative from among a broad range of possible actions.

(f) Work of a specialized or technical nature.  Work which requires substantial specialized knowledge of a complex subject matter and of the principles, techniques, practices, and procedures associated with that subject matter field. This knowledge characteristically is acquired through considerable on-the-job training and experience in the specialized subject matter field, as distinguished from professional knowledge characteristically acquired through specialized academic education.

(g) Discretion and independent judgment.  The exercise of discretion and independent judgment involves:  (1) comparing and evaluating possible courses of conduct, and (2) interpreting results or implications, and independently taking action or making a decision after considering the various possibilities.  However, firm commitments or final decisions are not necessary to support exemption.  The “decisions” made as a result of the exercise of independent judgment may consist of recommendations for action rather than the actual taking of action.  The fact that an employee’s decisions are subject to review, and that on occasion the decisions are revised or reversed after review, does not mean that the employee is not exercising discretion and independent judgment of the level required for exemption.

The FPM letter lists three elements involved in the evaluation of discretion and independent judgment:  (1) The work must involve sufficient variables as to regularly require discretion and judgment in determining the approaches and techniques to be used, and in evaluating results.  This precludes exempting employees who perform work primarily requiring skill and applying standardized techniques or knowledge of established procedures, precedents, or other guidelines which specifically govern the employee’s action.  (2) The employee must have authority to make such considerations during the course of assignment.  This precludes exempting trainees who are in a line of work which requires discretion but who have not been given authority to decide discretionary matters independently.  (3) The decisions made independently must be significant.  Although this term is not so restrictive as to include only the kinds of decisions made by employees who formulate policies or exercise broad commitment authority, it does not extend to the kinds of decisions that affect only the procedural details of the employee’s own work, or to such matters as deciding whether a situation does or does not conform to clearly applicable criteria.

The claimant’s work in doing criminal investigations did not meet paragraph (a) of the administrative exemption criteria.  His primary duty was not to serve as an advisor, assistant, or representative of agency management, or as a specialist in a management or general business function or supporting service.  As a criminal investigator, the claimant spent all of his time investigating criminal violations of various laws governing income tax evasion.

The claimant did not meet the requirements of paragraph (a)(1) of the administrative exemption criteria as his duties did not significantly affect the formulation or execution of management policies or programs.  As a field office employee assigned cases from counties within the Cincinnati District Office, he performed the line investigative work of the IRS’s Criminal Investigations Division.  As such, he did not make policy decisions or participate indirectly through developing proposals that were acted on by others.  In addition, unlike administrative employees he did not perform any phases of program management such as planning, controlling, or evaluating operating programs.

The claimant did not meet the requirements of paragraph (a)(2) of the administrative exemption criteria.  The claimant’s primary duties did not involve general management or business functions or supporting services of substantial importance to the organization serviced.  Rather, the claimant performed the line law enforcement investigative work of the IRS.  His tasks did not include providing general management, business, or other supporting services to line managers.  He was not involved in systems analysis or general management support functions, e.g., safety management, personnel management, or budgeting and financial management.  The claimant did not represent agency management in negotiating and administering contracts for goods or services, and did not provide support services, e.g., automated data processing, communications, procurement and distribution of supplies.

The claimant did not meet the requirements of paragraph (a)(3) of the administrative exemption criteria.  His assignments did not involve substantial participation in the executive or administrative functions of a management official.  He did not act as a secretary or administrative assistant participating in portions of the managerial or administrative functions of a supervisor, with no requirement for technical knowledge of the substantive work under the supervisor’s jurisdiction.  Unlike such employees, the claimant independently performed the line work of the IRS’s Criminal Investigations Division in a field office requiring technical knowledge of substantive law enforcement and criminal investigative work relating to income tax evasion.

Under paragraph (b)(1) of the administrative exemption criteria, the claimant performed office non-manual work which was intellectual and varied in nature.  In carrying out a variety of criminal investigations concerning violations of numerous tax laws and regulations administered by IRS, the claimant applied perceptiveness, analytical reasoning, and judgment based on considering, selecting, adapting, and applying criminal investigative principles to numerous variables.  In doing so, he determined the best approach to each case and the investigative techniques needed to substantiate it.  These included interviews of subjects and witnesses, and reviews of business and bank records, to develop and gather supportable evidence for presentation to an AUSA to identify the violation and assess the scope of the illegal activity.  While as a law enforcement agent he was required to abide by specific laws and IRS procedures governing the methods and collection of evidence and circumstances supporting seizures and arrests, in developing criminal cases he considered the effect of alternative investigative methods, adapting techniques and procedures as appropriate to the nature and extent of the violation.

Under paragraph (b)(2) of the administrative exemption criteria, the claimant’s work as a GS-13 criminal investigator was highly specialized and technical in nature, requiring considerable special training, experience, and knowledge.  He possessed and regularly applied specialized knowledge of the complex subject-matter field of Federal criminal investigation, including the laws, principles, techniques, practices, and investigative procedures associated with that field.  This knowledge was acquired through regular and extensive formal IRS in-service training, including attending IRS Special Agent, Criminal Investigator, and Basic Tax Law training.  He would also receive quarterly weapons, arrest, and search warrant techniques training and yearly refresher and/or recurring on-the-job training on different income tax topics.

Under paragraph (c) of the administrative exemption criteria, the claimant frequently exercised discretion and independent judgment in performing investigations under only general supervision in carrying out his normal day-to-day work.  In doing so, he developed and expanded investigations, comparing and evaluating possible courses of action and necessary investigative techniques to efficiently utilize resources and achieve the goals of each investigation in proving that the elements of a crime had been committed.  He interpreted results gathered from investigative lead information (e.g., suspects, witnesses, informants, bank, and business records) and made decisions on subsequent investigative steps after considering the various possibilities.  Since many of his cases involved numerous variables in terms of the investigative procedures needed because of the scope and complexity of the violation, he regularly applied discretion and judgment in determining approaches, techniques, and in evaluating results.  As a GS-13 criminal investigator, the claimant had full authority to make such determinations during the course of investigations, consulting with his group manager on the status of cases and additional resources needed.  His investigative decisions were more significant than just making decisions on procedural details, or deciding whether a situation conformed to clearly applicable criteria.  Although he had to follow specific legal requirements for gathering and admitting evidence, requesting the issuance of summons, and subpoenas, and worked closely with the AUSA in preparing evidence for prosecution or presentation before a Federal grand jury, he independently made decisions on significant matters affecting case development.  This included identifying the most effective investigative techniques and processes to build a thorough and comprehensive investigation supportable before a Federal court.

Although the claimant’s position met paragraphs (b) and (c) of the administrative exemption criteria, it failed to meet all of the required exemption criteria because it did not meet paragraph (a) of the criteria.  Therefore, we conclude the claimant did not meet the administrative exemption.

Decision

The claimant’s work was nonexempt (i.e., covered by the overtime pay provisions of the FLSA), and he is entitled to compensation for all overtime hours worked at the FLSA overtime rate for the period of the claim he was improperly designated as FLSA exempt (i.e., from August 2, 1985, to April 9, 1988).  Since both the claimant’s active duty military service and his previous FLSA settlement cover time periods subsequent to April 9, 1988, they are not germane to the overtime pay calculations for the period of the claim covered by this decision.  The agency must follow the compliance requirements on page ii of this decision.

The claimant must submit evidence showing the amount and extent of overtime that was performed as provided for in 5 CFR 551.706(a).  The agency will have the opportunity to review this evidence using any other sources of information available, including witnesses, before a determination is made as to whether the claimant is entitled to any back pay under the FLSA and any interest as required under 5 CFR part 550, subpart H.[3]  Any petition for attorney’s fees and expenses must be submitted to the agency out of which this claim arose.  Should the claimant be determined to be entitled to back pay which the claimant believes to be incorrectly computed, the claimant may file a new FLSA claim with this office. 

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