Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour and Labor Code Class Actions (22nd Edition) 11 While the administrative exemption analysis depends on multiple factors, Harris focused on only one—whether the employees’ work qualified as administrative. Harris broke this analysis down into two components, one “qualitative” (i.e., whether the work is administrative in nature) and the other “quantitative” (i.e. whether it is of “substantial importance” to the employer’s management policies or general business operations). In reversing the Court of Appeal, Harris distinguished Bell. First, Harris noted that the Bell opinions limited their holding to the specific facts of that case (including defendants’ stipulation that the work performed by all plaintiffs was ‘routine and unimportant’). Second, Harris noted that the analysis in Bell relied on the then-applicable version of the relevant Wage Order (Wage Order 4-1998). That order did not provide a sufficient definition of the administrative exemption, thereby requiring the Bell court to look beyond the Wage Order’s language. In contrast, Wage Order 4-2001 (the current Wage Order, applied in Harris) incorporates specific federal regulations and contains “detailed guidance” concerning the administrative exemption. The Court of Appeal in Harris had erred by focusing too heavily on the administrative/production dichotomy rather than applying the language of the relevant Wage Order and regulations. Harris ultimately declined to adopt a rule precluding the use of the dichotomy as an analytical tool. Instead, Harris held that courts, in determining whether work is administrative, must consider the particular facts and apply the language of the statutes and Wage Orders at issue.55 If the statutes and Wage Orders fail to provide adequate guidance, Harris held, then it would be appropriate to consider other sources, including, presumably, the administrative/production dichotomy. The only concrete guidance from Harris is that the administrative/production dichotomy is not a dispositive test for applying the administrative exemption. Harris left open the possibility that the dichotomy may still matter in future cases. Employers who hoped for more specific guidance were disappointed, as, even after Harris, determining whether an employee satisfies the administrative exemption remains a highly fact-specific venture. 4. The Ninth Circuit Makes a Mountain out of the Administrative/Production Dichotomy Molehill In 2017, in McKeen-Chaplin v. Provident Bank,56 the Ninth Circuit applied the administrative/production dichotomy to find that a bank’s mortgage loan underwriters were not administratively exempt. The dichotomy’s purpose, Provident Bank explained, “is to distinguish between the goods and services which constitute the business’ marketplace offerings” (so-called non-exempt production work), “and work which contributes to ‘running the business itself’” (so-called exempt administrative work).57 In examining the dichotomy, Provident Bank applied a “not so distinct from production” standard, explaining that the mortgage underwriters were not administratively exempt because their duties “are not so distinct” from a loan officer’s role in the “mortgage production process” so “as to be lifted from the production side [of the dichotomy] to the ranks of administrators.”58 Provident Bank then ratcheted the standard up by explaining that “the question is 55 The Supreme Court specifically noted that to properly interpret California’s administrative exemption, courts should only consider the FLSA regulations effective as of 2001. See also Heffelfinger v. Elec. Data Sys. Corp., 492 Fed. App’x 710 (9th Cir. 2012) (applying Harris rule in determining administrative exemption for computer professionals). 56 862 F.3d 847 (9th Cir. 2017). 57 Id. at 851. 58 Id. at 853.
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