Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 9 C. The Administrative Exemption 1. General Overview Like the FLSA, California wage and hour law recognizes an administrative exemption to overtime requirements.35 To qualify for this exemption in the most common circumstances,36 the employer must establish the following four elements: (1) More than 50% the employee’s work time involves the performance of office or non-manual work directly related to the employer’s management policies or general business operations. (2) The employee customarily and regularly exercises discretion and independent judgment in carrying out job duties as to matters of significance to the business.37 (3) The employee performs his or her job only under general supervision and works along specialized or technical lines in work requiring special training, experience, or knowledge. (4) The employee is paid a salary38 equivalent to at least twice the state minimum wage.39 As with the executive exemption, the relevant provisions in the Wage Orders on the administrative exemption have, since 2001, incorporated several FLSA regulations by reference. As a result, decisions interpreting the federal administrative exemption often provide persuasive guidance to California courts interpreting the California administrative exemption.40 Nonetheless, as explained below, California’s interpretation of the administrative exemption departs in some ways from the way the administrative exemption has been interpreted in most other jurisdictions. 2. California Develops a Unique Interpretation of the Administrative/Production Dichotomy A commonly litigated issue under the administrative exemption is whether the employees at issue are working in an “administrative” capacity or in a “production“ capacity. Generally speaking, only employees in the former group 35 See, e.g., Wage Order 7-2001 § 1(A) (2). 36 There are alternative bases to qualify for the administrative exemption such as through regularly and directly assisting a proprietor or performing administrative function in a school system, but those alternative bases rarely lead to class litigation. 37 Some courts mistakenly hold that employees must exercise discretion and independent judgment more than 50 percent of the time. In fact, the term “customarily and regularly“ is defined in the FLSA regulations that are incorporated in the Wage Orders as “more than occasionallybut less than constantly.” It is generally established by showing that a duty is carried out on a recurrent, non-sporadic basis. See Baca v. United States, 29 Fed.Cl. 354 (U.S. Fed. Cl. 1993) (doing exempt duties only one-third of the total work time, but on a regular recurring basis, qualified as performing the task “customarily and regularly”). 38 The Court of Appeal has held that employees compensated solely on commissions do not satisfy the salary basis test for the administrative exemption. Semprini v. Wedbush, 57 Cal. App. 5th 246, 252-253 (2020). 39 Wage Order 7-2001 § 1(A)(2)(f). 40 Combs v. Skyriver Communications, LLC, 159 Cal. App. 4th 1242, 1254-55 (2007) (recognizing that the incorporation of FLSA regulations was intended to make the California exemption “closely parallel the federal regulatory definition of the same exemption”).
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