218 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com Under the narrow limits of California’s professional exemption, pharmacists and registered nurses, who are exempt professionals under federal law and in many states, generally cannot qualify as exempt professionals in California.175 7.6.4 Administrative exemption A California exempt administrative employee must be primarily engaged in (1) customarily and regularly exercising discretion and independent judgment176 in the performance of intellectual work (office or non-manual work of substantial importance directly related to management policies or the general business operation of the employer or its customers; not production or sales work), or (2) directly assisting an exempt executive or administrator, with only general supervision, or work along specialized or technical lines requiring special training, experience, or knowledge; or execute special assignments.177 Exempt administrative employee activities include servicing the business by, for example, advising management on policy determinations, planning, negotiating, representing the company, purchasing, and business research, and also by engaging in work that is directly and closely related to those activities, or properly viewed as a means of carrying them out. In Bell v. Farmers Ins. Exchange,178 the Court of Appeal considered whether insurance claims adjusters were administrative employees. Bell construed the Wage Orders to add a “role” test to the traditional “duties” test: Bell would not even reach the issue of whether the job satisfies the duties test unless the employee serves in an “administrative capacity.”179 Bell distinguished administrative work from “production” work, the latter being work needed to create whatever product or service the business sells, as opposed to administrative work necessary to support the production.180 Bell held that work of insurance claims adjusters was inherently production work, rendering them ineligible for the administrative exemption.181 But the FLSA regulations provide that an administratively exempt employee can provide administrative support to the employer or the employer’s customers.182 Thus, Bell conceded “that the administrative / production worker dichotomy is a somewhat gross distinction that may not be dispositive in many cases. ... For example, some businesses, such as management consulting firms, may provide services that clearly pertain to business administration, even though they are activities that the businesses exist to produce and market.”183 Bell placed California law at odds with analogous federal law. Federal decisions have refused to apply Bell’s reasoning in FLSA insurance adjuster cases,184 and the 2004 FLSA regulation amendments clarify that insurance adjusters can be covered by the administrative exemption “whether they work for an insurance company or another type of company.”185 Several federal decisions have concluded that insurance adjusters are exempt under the FLSA.186 A further indication that Bell had limited effect was a 2007 Ninth Circuit decision,187 which held that insurance adjusters, as a rule, qualify for the administrative exemption, and which criticized Bell for its overbroad construction of the meaning of “production work.”188 California peculiarity reasserted itself, however, in 2007, when the Court of Appeal decided Harris v. Superior Court (Liberty Mutual).189 Despite the opportunity to move away from Bell and toward the federal view of the administrative exemption, Harris went the other way, taking an even narrower view than Bell concerning what jobs qualify as “administrative.” Harris concluded that “only work performed at the level of policy or general operations (emphasis in original) can qualify as ‘directly related to management policies or general business operations,” and that “work that merely carries out the particular, day-to-day operations of the business is production, not administrative, work.”190 Harris thus departed significantly from traditional analysis of the administrative exemption, rejecting many federal decisions that interpret the administrative / production dichotomy much differently.191
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