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California Supreme Court sets hearing in exemption case

September 29, 2011

The California Supreme Court has finally got around to setting a date for oral argument in a long-pending wage and hour case. No, not that one. In Harris v. Superior Court, the court will be looking at the administrative exemption under California law, and especially whether the “administrative/production worker dichotomy” has any continuing vitality under California law.

The specific question presented in Harris is whether insurance claims adjusters are exempt from overtime requirements under the administrative exemption. The administrative exemption generally applies to employees who perform “non-manual work directly related to management policies or general business operations” of the employer or the employer’s customers. The court of appeal held that that claims adjusters did not perform “general business operations,” but instead did the “production” work involved in running an insurance company:

[W]ork performed at the level of policy or general operations can qualify as “directly related to management policies or general business operations.” In contrast, work that merely carries out the particular, day-to-day operations of the business is production, not administrative, work. That is the administrative/production worker dichotomy, properly understood. . . .

The undisputed facts show that plaintiffs are primarily engaged in work that falls on the production side of the dichotomy, namely, the day-to-day tasks involved in adjusting individual claims. They investigate and estimate claims, make coverage determinations, set reserves, negotiate settlements, make settlement recommendations for claims beyond their settlement authority, identify potential fraud, and so forth. None of that work is carried on at the level of management policy or general operations. Rather, it is  all part of the day-to-day operation of defendants’ business.

Since the Supreme Court granted review of that decision, there have been additional cases addressing the administrative exemption, and the administrative/production worker dichotomy. Some of these cases stepped back from the rigid position the court of appeal took in Harris.

Oral argument in Harris is going forward on October 3. So soon, after a four year wait, we will know at last what the Supreme Court’s take on the subject is — and perhaps where the emerging Cantil-Sakauye Supreme Court stands on employment issues. (See here and here for other thoughts on where the Court seems to be going with employment cases.)

Hey, it’s not Brinker, but at least it’s something!


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