Seyfarth Synopsis: By resurrecting reliance on the administrative/production dichotomy in FLSA administrative exemption cases, the Ninth Circuit is at odds with the California Supreme Court's application of the state's administrative exemption. California employers thus find themselves in a strange new world where the state construct is easier to understand and perhaps even provides a more favorable environment for California employers, particularly those with a service-oriented workforce.
Readers of the blog know that the Ninth Circuit recently exalted the status of the administrative/production dichotomy as an analytical tool for assessing whether employees satisfy the FLSA's administrative exemption test. In doing so, the Ninth Circuit has created a peculiar situation in which California employees may satisfy the state's administrative exemption—which the California Division of Labor Standards Enforcement says "shall be construed in the same manner as ... under the Fair Labor Standards Act"—but be found nonexempt under the FLSA. Strange days indeed.
As we recently discussed, in McKeen-Chaplin v. Provident Bank, the Ninth Circuit applied the administrative/production dichotomy to invalidate the bank's determination of exempt status. In doing so, the court stretched the definition of production work to encompass anyone whose job is "not so distinct from production" and concluded that the salient "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."
In addition to setting up a circuit split begging for Supreme Court clarification, Provident Bank also stands in contrast to the California Supreme Court's unanimous 2011 decision in Harris v. Superior Court and creates an intrastate conflict for California employers.
In Harris, the California Supreme Court considered the exempt status of insurance claim adjusters and, to the delight of many an employer, downplayed the administrative/production dichotomy as an analytical tool. Taking a more enlightened view, the Harris Court acknowledged that the dichotomy was outdated and not particularly useful in the context of a modern-day, post-industrial, service-oriented workplace. The case was ultimately remanded to the trial court for further proceedings in which the exempt status of the claims adjuster role was assessed in the context of the statutory language and appropriate federal regulations and with an understanding that "the [administrative/production] dichotomy is a judicially created creature of the common law which has been effectively superseded in this context by the more specific and detailed statutory and regulatory enactments."
And while Harris left open the possibility that the administrative/production dichotomy could have some limited utility in the certain circumstances, Harris emphasized the dichotomy is "not a dispositive test" and should only be considered after the language of the statutes and regulations are assessed and compared to the specific duties and responsibilities at issue. But any state-gained peace of mind from Harris's deemphasizing of the administrative/production dichotomy now appears short-lived as it stands in stark contrast to the murky federal fortification of the dichotomy in Provident. California employers now find themselves in a curious and frustrating position with no clear guidance on how to reconcile the divergent views of the state and federal courts.
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