(Whether it was successful is another matter entirely.) After spending the majority of December out sick, I have a good deal of case commentary to cover before I'm current here. In no particular oder, I begin with the California Supreme Court's opinion in Harris v. Superior Court (December 29, 2011). Harris stems 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. The trial court certified a class of "all non-management California employees classified as exempt by Liberty Mutual and Golden Eagle who were employed as claims handlers and/or performed claims-handling activities." Plaintiffs moved for summary adjudication of defendants' affirmative defense that plaintiffs were exempt under IWC wage order No. 4. (Cal. Code Regs., tit. 8, § 11040 (Wage Order 4).) Defendants opposed the motion and moved to decertify the class. The trial court then decertified a portion of the class, depending upon whether the earlier, less specific version of Wage Order 4, or the later, more detailed version of Wage Order 4, applied to the class members.
On appeal, the Court of Appeal majority concluded that, under the terms of that wage order, plaintiffs could not be considered exempt employees, either before or after the amendment to Wage Order 4. In a nutshell, the Supreme Court reveresed that ruling to the extent it set a bright line rule, holding, instead:
[I]n resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue. Only if those sources fail to provide adequate guidance, as was the case in Bell II, is it appropriate to reach out to other sources.
Slip op., at 22.
Between that summary of its holidng, and the explanation of the facts and procedural history, is a long and painful journey through the federal regulations incorporated into the current version of Wage Order 4. In case you were wondering, the regulations incorporated as they existed in 2001 are: 29 C.F.R. Sections 541.201-205, 541.207-208, 541.210, and 541.215. Next, in parsing the regulations, the Court's analysis turned on assessing when work is "directly related" to management policies or general business operations. As the Court explained:
Work qualifies as "directly related" if it satisfies two components. First, it must be qualitatively administrative. Second, quantitatively, it must be of substantial importance to the management or operations of the business. Both components must be satisfied before work can be considered "directly related" to management policies or general business operations in order to meet the test of the exemption.
Slip op., at 10. The Court then explained that the plaintiffs in the trial court below moved for summary adjudication of the affirmative defense of exemption by challenging defendants' ability to show one part of the conjunctive test for "directly related." The plaintiffs argued that the defendants could not show that the work of the adjusters in that case was administrative in nature, the "qualitative" element. The Supreme Court focused its analysis on that argument only, explicitly declining to review the record for triable issues on any other element of the exemption defense, including the "quantitative" element of the "directly related" regulatory language.
Turning to the administrative/production worker dichotomy discussed in Bell v. Farmers Ins. Exchange, 87 Cal. App. 4th 805 (2001) (Bell II) and the other Bell decisions, the Court explained that the Bell II decision was predicated on the older Wage Order 4 that lacked the detailed definitions included in the current version. The Court also noted that the Bell II based its analysis on an undisputed record that the work of the employees at issues was "routine and unimportant." One key fact from the Bell II analysis noted by the Supreme Court here was the limited settlement authorizations provided to the adjusters in that case. It is important to note, however, that the Court did not invalidate the administrative/production worker dichotomy. Rather, it stated that the dichotomy could not stand as a dispostive test in lieu of the Wage Order language. Instead, the dichotomy is an analytical tool available when the language of the Wage Order and incorporated federal regulations is insufficient to resolve the classification question.
Turning to the current case, the Court criticized the creation of a rigid rule defining any employee carrying out day-to-day business as a production worker. Instead, the Court cautioned against examining the duties of employees in one business to determine the correct classification of employees in another. In other words, the administrative exemption is fact-specific test for which the Court offers no guidance in its application.
The Court reversed the Court of Appeal but directed it to re-consider the denial of summary adjudication while applying the correct legal standard.
Disclosure: Spiro Moss represented one of the named plaintiffs, though other firms handled the appellate activities.