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©2012 Littler Mendelson , P.C. All rights re served.
A S A P ®
A Timely Analysis of Legal Developments
In the waning days of 2011, a unanimous California Supreme Court gave California employers
a holiday present in its long-awaited opinion that diminishes the importance of the outmoded
analytical tool known as “the administrative/production worker dichotomy” for determining
whether employees are properly classied as exempt “administrative” employees for the
purposes of wage and hour law. In its decision in
Harris v. Superior Court
(
Liberty Mutual
), the
court re-establishes the necessity of analyzing all aspects of the administrative exemption and
emphasizes the relevance of federal law in interpreting the exemption. As a result, the decision
could help California employers relying upon the administrative exemption.
At issue in
Harris v. Superior Court
was the exempt status of a certied class of Liberty Mutual
insurance claims adjusters, who the lower appellate court found were not exempt as a matter of
law under the administrative exemption. If employees fall within the “administrative exemption”
under California law, they are exempt from California laws requiring payment of overtime,
minimum wage, and from meal/rest break obligations.1
As explained by the California Supreme Court, the administrative exemption applies to employees
who: (1) are paid at least twice the minimum wage; (2) perform administrative work, dened
as ofce or non-manual work “directly related to management policies or general business
operations of his/her employer or his/her employer’s customers;” (3) have primary duties that
involve that administrative work; and (4) discharge those primary duties by “customarily and
regularly exercising discretion and independent judgment.”2 Wage Order 4-2001 directs that
whether work is considered exempt “shall be construed in the same manner as such terms are
construed in [certain] regulations under the Fair Labor Standards Act . . . .” Since Wage Order
4-2001 incorporates certain federal regulations, at issue was whether those regulations affected
the interpretation of California’s exemption.
The “Administrative/Production Worker Dichotomy:”
Dispositive Or Outmoded Analytical Tool?
The scope of California’s administrative exemption has been one of the most hotly-contested
and litigated of California’s overtime exemptions, particularly since the exemption is not dened
identically to the federal administrative exemption. Employers were hoping that this decision
January 2012 California Supreme Court Applies Administrative
Exemption to Claims Adjusters
By Alison Hightower
