Appellate Court Emphasizes Narrow Nature of Administrative Exemption
Posted by Brent Giddens
On August 16, 2007, the California Court of Appeal issued Harris v. Superior Court, another in a series of California cases emphasizing the narrow scope of the administrative exemption under California law. In Harris, a class of insurance claims adjusters alleged that they were improperly classified as exempt from California's overtime compensation requirements. The defendant insurance companies contended the adjusters were properly classified as exempt pursuant to the administrative exemption. The Court explored the "administrative/production worker dichotomy." The administrative/production worker dichotomy is a concept which explores the extent to which the employees' performed work generally related to the ongoing operation of the business (administrative), or the day-to-day tasks necessary to operate the employers' business (production work).
While acknowledging the line between exempt administrative and non-exempt production work is not clear, the Harris decision is yet another that narrowly interprets the exemption. In particular, the Court found that exempt administrative work must be carried out at the general operational or policy making level, and that producing the employer's product is not necessarily a condition for doing production work. That is, day-to-day systematic activities necessary for the employer's business operations may well be non-exempt work even if such activities are not producing the employers' product. Employers are advised to carefully evaluate those classified as exempt administrators, as the availability of this exemption continues to narrow. To read a copy of Harris v. Superior Court, click here.