California Court of Appeal Significantly Narrows Administrative Exemption

On July 23, 2012, in Harris v. Superior Court (Liberty Mutual Ins. Co.), a case that the California Supreme Court previously had reversed and remanded, the California Court of Appeal stuck by its prior conclusion and held that insurance claims adjusters do not qualify for the administrative exemption from overtime pay requirements.

The Harris case involved claims for unpaid overtime by a class of Liberty Mutual insurance claims adjusters.  The claims adjusters argued that they were misclassified as administratively exempt.  After class certification, the claims adjusters moved for dismiss Liberty Mutual’s affirmative defense that they were exempt employees.  The trial court denied the motion.  On appeal, the California Court of Appeal reversed, applying the “administrative/production worker dichotomy” test set forth in two Bell v. Farmers Insurance Exchange cases—(collectively “Bell”)—and found that, because claims adjusters did not perform administrative work, they could not qualify for the administrative exemption.  The California Supreme Court granted review of the decision.

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