If you’ve attended any of our seminars revolving around wage and hour issues over the past year, you will undoubtedly remember our discussions of Harris v. Superior Court (Liberty Mutual), and the so-called “administrative/production worker dichotomy.” You may also remember an earlier post discussing the California Supreme Court’s ruling last January (which can be found here – https://www.thelelawblog.com/2012/01/articles/wage-and-hour/misclassfied-as-a-matter-of-law-not-so-fast-say-the-supremes/).
For those of you who need a refresher, Harris is one of the few recent employer-favoring opinions issued by the California Supreme Court. It stemmed from four coordinated class action lawsuits contending that claims adjusters employed by Liberty Mutual Insurance Company and Golden Eagle Insurance Corporation were erroneously classified as exempt “administrative” employees. After originally certifying a class of “all non-management California employees as exempt by Liberty Mutual and Golden Eagle who were employed as claims handlers and/or performed claims-handling activities,” the trial court rejected a motion for summary adjudication brought by Plaintiffs and granted (in part) a motion by the defendants to decertify the class.
On appeal, the Court of Appeal reversed the trial court’s decision, determining that the employees could not be considered exempt employees under the administrative exemption. Rather, the Court of Appeal reasoned that where claims adjusters largely deal with individual claims (as opposed to general business operations), they are essentially production workers and, as a result, unable to qualify under the administrative exemption as a matter of law.
Ultimately, the California Supreme Court reversed the Court of Appeal’s opinion as too simplistic and held that the “administrative/production worker dichotomy” should not be considered dispositive. In making its ruling, the Supreme Court remanded the matter to the Court of Appeal to reconsider the trial court’s decision; with instructions to apply the legal standards set forth in the opinion.
Over the past summer, the Court of Appeal issued its new decision, finding once again that the trial court erred in granting the defendants’ motion to decertify the class and in denying the plaintiffs’ motion for summary judgment on the administrative exemption defense. The Court again found that where the adjusters’ primary work duties are the day-to-day tasks of adjusting individual claims, rather than directly relating to management policies or general business operations, they are unable to qualify under the administrative exemption.
On October 24, 2012, the Supreme Court denied a request to review the Court of Appeal’s decision, but granted a request by the California Employment Law Council to depublish the decision, leaving the "administrative/production worker dichotomy” as uncertain as has ever been.
What are employers to do in the wake of this latest decision and the ongoing uncertainty over the state of the administrative exemption? The line of Harris decisions makes one thing very clear – when determining the application of the administrative exemption to a particular class of employees, a fact-specific analysis of the application of the exemption is key. In making the analysis, focus on the duties actually being performed, as opposed to simply looking at what the job description says and/or the title of the position. Finally, it’s never a bad idea to seek the advice of legal counsel when dealing with the complicated world of exemptions. The attorneys in Weintraub Tobin’s Labor and Employment Department frequently advise clients on exemption issues and are only a phone call away.