California’s various overtime exemptions, particularly the administrative exemption, are often difficult to interpret and apply. So when the California Supreme Court granted review several years ago in Harris v. Superior Court (Liberty Mutual Insurance), 12 C.D.O.S. 129 — the first case in which the court agreed to address the administrative exemption — many eagerly anticipated some much needed guidance and clarity. As 2011 came to a close, the court finally issued its ruling in Harris and unanimously reversed an appellate decision that relied on the so-called “administrative/production dichotomy” to find that a class of insurance claims adjusters did not qualify for the administrative exemption under Wage Order 4-2001. Unfortunately, the Supreme Court’s ruling does not provide specific guidance on how the administrative overtime exemption should be applied. On a positive note for employers, however, the decision reverses a narrow interpretation of the administrative exemption.
Wage Order 4-2001 (which, for pertinent purposes, is the same as Wage Order 4-2000, the wage order that was at issue in the case and which took effect Oct. 1, 2000) specifies that to qualify for the administrative exemption, an employee’s duties and responsibilities must involve “the performance of office or nonmanual work directly related to management policies or general business operations of his employer or [the] employer’s customers.” The wage order expressly incorporates certain federal regulations under the Fair Labor Standards Act that provide guidance on the meaning of the phrase “directly related to management policies or general business operations.” In particular, the FLSA regulations distinguish between activities that relate to the “administrative operations of a business” and those which are “‘production’ or, in a retail or service establishment, ‘sales’ work” — the so-called “administrative/production dichotomy.” The FLSA rules also specify that the work must be of “substantial importance to the management or operation of the business of [the] employer or [the] employer’s customers.”
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
