Labor & Employment Law Daily RN who performed utilization reviews for health insurer was exempt ‘learned professional’ under FLSA
Thursday, January 16, 2020

RN who performed utilization reviews for health insurer was exempt ‘learned professional’ under FLSA

By Marjorie Johnson, J.D.

At issue was whether the professional exemption applied to an employee who acted in a manner consistent with the central characteristics of her profession, but did so outside of that profession’s traditional employment setting.

A registered nurse who worked for Aetna as an appeals nurse consultant, and in that position approved health insurance coverage as medically necessary after reviewing a patient’s file and applying the insurer’s criteria, was properly classified as exempt under the FLSA’s professional exemption. Affirming dismissal of her overtime suit on summary judgment, the Second Circuit held that the plaintiff satisfied the “advanced knowledge” prong of the “primary duty test” for the exemption since her position required the discretion and judgment characteristic of registered nursing. She also satisfied the third prong since her primary duty called on advanced nursing knowledge that was at the core of the prolonged course of study that RNs receive before entering their profession (Isett v. Aetna Life Insurance Co., January 14, 2020, Cabranes, J.).

Utilization review process. Aetna employed both nurse consultants (who were RNs) and nurse associates (who were LPNs) in its national clinical appeals unit. The nurse associates were paid on an hourly basis and received overtime while the nurse consultants were paid on a salary basis and were classified as exempt. Both types of nurses conducted utilization reviews of previously denied benefits claims, which entailed reviewing the patient’s file and applying the relevant criteria in Aetna’s clinical guidelines to determine if the requested services were medically necessary.

RNs authorized coverage, LPNs didn’t. While any denial of benefits based on lack of medical necessity had to be forwarded to a medical director for a final decision, nurse consultants, like the plaintiff, were authorized to make a final determination of medical necessity, which meant approving coverage and binding Aetna to pay for the service. However, nursing associates lacked such authority and were required to forward the appeal to a nursing consultant or a medical director.

Learned professionals. To qualify for the learned professional exemption pursuant to the applicable regulations, an employee must satisfy the three-part “primary duty test” by engaging in work that (1) requires “advanced knowledge,” (2) “in a field of science or learning,” (3) “customarily acquired by a prolonged course of specialized intellectual instruction.” The FLSA regulations also provide that RNs generally meet these requirements while LPNs generally don’t.

“Advanced knowledge.” The applicable regulations define “work requiring advanced knowledge” as “work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment, as distinguished from performance of routine mental, manual, mechanical or physical work.” Clarifying its prior decision in Pippins v. KPMG, LLP, the Second Circuit explained that in applying the advanced-knowledge requirement, courts must first identify the qualities or skills characteristic of the profession at issue, and then determine if the employee’s primary duty reflects those qualities or skills.

Skills characteristic of RNs. The court rejected the plaintiff’s contention that RNs obtain “professional” status only through the performance of traditional clinical duties such as bedside nursing, guiding medical treatment, administering medications, performing diagnostic tests, and analyzing results. The regulation relating to nurses does not include such a limitation and many RNs who do not work directly with patients or perform clinical duties (i.e., nurse educators and researchers) clearly rely on advanced knowledge in the performance of their occupational duties. The court concluded that “[c]entral to the profession of registered nursing is the ability to act independently, or under limited supervision, on the basis of collected clinical data.”

Independent, professional discretion. Moreover, the plaintiff’s job required her to use her advanced nursing knowledge since she acted independently—or under limited supervision—on the basis of collected clinical information when she approved insurance coverage of medical services. It was not merely a “formal” distinction that nurse consultants could approve coverage while nurse associates could not; rather, her ability to decide whether to approve a medical service herself reflected the professional discretion and judgment of registered nurses.

Job required “specialized academic instruction.” The court also rejected the plaintiff’s contention that the third prong of the primary duty test—which is satisfied when the employee’s primary duty calls on advanced knowledge that is acquired in a specialized course of study—was not met since her job could be performed by anyone with proper training. This argument rested on the “flawed premise” that nurse consultants and nurse associates perform the same primary job duty, which they do not.

The advanced knowledge of nurse consultants—how to visualize a sick patient to decide, under minimal supervision, whether the patient should be admitted to a hospital, whether the correct level of care was provided, and whether the length of the hospital stay was appropriate—was derived from specialized academic instruction and comparable unsupervised clinical experience, as opposed to mere on-the-job training.

“Far from being a ‘distinction without a difference,’ the ability to make a final decision about patient care under minimal supervision is precisely what distinguished registered nurses, whose advanced knowledge is obtained in a prolonged course of specialized study, from licensed practical nurses,” the appeals court explained. Moreover, Aetna required nurse consultants to hold an advanced academic degree in registered nursing, and the plaintiff’s primary duty was consistent with this requirement.

Concluding that the undisputed facts demonstrate that the plaintiff was properly classified as an exempt learned professional, the Second Circuit affirmed the district court’s grant of summary judgment in Aetna’s favor on her FLSA overtime claim.

Interested in submitting an article?

Submit your information to us today!

Learn More

Labor & Employment Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on labor and employment legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.