California Court of Appeal Limits Administrative Exemption
Insurance claims adjusters were ruled "non-exempt" under the administrative exemption in what is known as the Bell cases. See Bell v. Farmers Ins. Exchange (2001) 87 Cal.App.4th 805; Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715. So, in Harris v. Superior Court, the Court of Appeal found that Liberty Mutual claims adjusters likewise were non-exempt.
The headline here, though, is that the Court thoroughly analyzed the administrative test, and explained the limited applicability of the administrative test in California (although the court claimed it was relying on federal regulations). The two key points are these:
- exempt administrative work must involve policy making, higher level, office work. The court sets a high bar here, rendering lower level employees in traditionally administrative
- "production" work - by definition not administrative - does not have to involve actually producing the product or service that the employer sells. Rather, even office work is "production" when it is simply carrying out policies.
This decision should be closely examined when classifying employees in back-office departments such as MIS, accounting, and maybe even HR. The exemption may be tougher to prove for lower-level administrative jobs in the more vertical, larger organizations.
DGV
The headline here, though, is that the Court thoroughly analyzed the administrative test, and explained the limited applicability of the administrative test in California (although the court claimed it was relying on federal regulations). The two key points are these:
- exempt administrative work must involve policy making, higher level, office work. The court sets a high bar here, rendering lower level employees in traditionally administrative
- "production" work - by definition not administrative - does not have to involve actually producing the product or service that the employer sells. Rather, even office work is "production" when it is simply carrying out policies.
This decision should be closely examined when classifying employees in back-office departments such as MIS, accounting, and maybe even HR. The exemption may be tougher to prove for lower-level administrative jobs in the more vertical, larger organizations.
DGV
Labels: Wage and Hour
posted by Greg at 9:54 PM
1 Comments:
I think the "production" worker (i.e, the people who produce the business' product/services) analysis applied here regarding the administrative exemption is a somewhat parallel reflection of the contractor/employee analysis used in the recent FedEx Ground drivers' case.
Basically, I think it shows the law presumes companies do what the companies are in business to do with (1) non-exempt (2) employees.
So, (1) if your business is adjusting claims, your claims adjusters are probably non-exempt (not exempt administrators); and (2) if you're a delivery company, your delivery drivers are probably employees (not ICs).
In another circumstance, a New Jersey chiropractor consultant was an "employee" (despite an IC contract) under the NJ whistleblower law since his professional services were "integral" to the employer's business; D’Annunzio v. Prudential Insurance Co. (NJ Supreme Court A-119-2005 Decided July 25, 2007).
So, if your workers do what you're in business to do, consider them non-exempt employees.
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