Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 13 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,57 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).58 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.”59 Provident Bank then ratcheted the standard up by explaining that “the question is not whether an employee is essential to the business, but rather whether her primary duty goes to the heart of internal administration—rather than marketplace offerings.”60 This “not so distinct from production” standard highlights the limitations of the administrative/production dichotomy and runs afoul of its intended purpose. For example, the Department of Labor’s 2004 regulations have made clear that this “dichotomy has always been illustrative—but not dispositive—of exempt status.” The dichotomy “is only determinative if the work ‘falls squarely’ on the production side of the line.”61 Certainly, work that “is not so distinct” from the production side of the line is a far cry from work that “falls squarely” on the productionside of the line. But a finding that work is not so distinct from production, though virtually meaningless, is all that Provident Bank seems to require. Provident Bank’s finding that underwriting work “is not so distinct from production” work has little to do with the test for administrative exemption or the Department of Labor’s explanation of the limitations of the administrative/production dichotomy. Yet Provident Bank threatens to flip the dichotomy on its head, as Provident Bank could be read to require an employer to show that that the work “falls squarely” off “the production side of the line” rather than establishing merely what the FLSA requires: that the employee performed office or non-manual work related to the management or general operations of the employer. Provident Bank creates more uncertainty for employers seeking to classify their workforce, and calls out for Supreme Court review or Department of Labor clarification on how courts should apply the administrative/production dichotomy. 57 862 F.3d 847 (9th Cir. 2017). 58 Id. at 851. 59 Id. at 853. 60 Id. at 855 (emphasis added). 61 69 Fed. Reg. 22122, 22141 (Apr. 23, 2004).
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