©2024 Seyfarth Shaw LLP www.seyfarth.com 2024 Cal-Peculiarities | 217 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.180 7.6.4 Administrative exemption A California exempt administrative employee must be primarily engaged in (1) customarily and regularly exercising discretion and independent judgment181 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.182 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,183 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.”184 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.185 Bell held that work of insurance claims adjusters was inherently production work, rendering them ineligible for the administrative exemption.186 But the FLSA regulations provide that an administratively exempt employee can provide administrative support to the employer or the employer’s customers.187 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.”188 Bell placed California law at odds with analogous federal law. Federal decisions have refused to apply Bell’s reasoning in FLSA insurance adjuster cases,189 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.”190 Several federal decisions have concluded that insurance adjusters are exempt under the FLSA.191 A further indication that Bell had limited effect was a 2007 Ninth Circuit decision,192 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.”193 California peculiarity reasserted itself, however, in 2007, when the Court of Appeal decided Harris v. Superior Court (Liberty Mutual).194 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.”195 Harris thus departed significantly from traditional analysis of the administrative exemption, rejecting many federal decisions that interpret the administrative / production dichotomy much differently.196 A strong dissent in Harris challenged the majority’s conclusions. The California Supreme Court granted review of Harris in 2007, and finally issued its decision in 2011.197 The Supreme Court unanimously reversed the Court of Appeal and remanded for further proceedings.198 The high court distinguished Bell as involving a stipulation that
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