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Liberty Mutual Claims Adjusters Are Non-Exempt, Says Court of Appeal

Wage Order 4-2001 continues to provide the same protection to misclassified production workers, such as insurance claims adjusters, that was provided under earlier wage orders adjudicated in the Bell v. Farmers Ins. Exchange series of cases, according to the Second District Court of Appeal in an opinion published yesterday in Harris v. Superior Court. The holding is stated as follows:

In these original proceedings we hold that plaintiffs are not exempt from the overtime compensation requirements imposed by California law. Defendants are insurance companies. Plaintiffs are the companies’ claims adjusters, who seek damages based on overtime work for which they allege they were not properly paid. Plaintiffs’ claims are governed by two different California regulations: Wage Order 4 applies to claims arising before October 1, 2000, and Wage Order 4-2001 applies to claims arising thereafter. The matter is before us on the parties’ cross-petitions for writ review. Defendants claim that the administrative exemption to the overtime compensation requirements covers the adjusters. Plaintiffs claim that they are not covered by that exemption. Their dispute turns on the relationship between the administrative exemption and a legal distinction known in the case law as the “administrative/production worker dichotomy.” The meaning of that phrase will become clear in due course. For now, it suffices to say that the trial court originally certified plaintiffs’ proposed class on the ground that application of the administrative/production worker dichotomy was a predominant issue and could well be dispositive with respect to the administrative exemption. Later, however, the court revisited the issue and decertified the class for all claims arising after October 1, 2000, on the ground that under Wage Order 4-2001, but not under Wage Order 4, the administrative/production worker dichotomy is neither dispositive nor a predominant issue that would justify class treatment of plaintiffs’ claims.

As the trial court recognized, the only cases interpreting the administrative exemption under Wage Order 4 are Bell v. Farmers Ins. Exchange (2001) 87 Cal.App.4th 805 (hereafter Bell II), and, to a more limited extent, Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715 (hereafter Bell III). There is no case law interpreting the administrative exemption under Wage Order 4-2001. Under Wage Order 4 as interpreted by the Bell cases, the administrative/production worker dichotomy would indeed be predominant and dispositive in cases like the one before us.

We agree with the Bell cases concerning the role of the dichotomy under Wage Order 4, and we hold that the dichotomy plays the same role under Wage Order 4-2001. On that basis, we grant plaintiffs’ petition and deny defendants’ petition.

The case is full of language useful for any plaintiff seeking to recovery overtime after being misclassified as an administratively exempt employee. You can read the full test of Harris v. Superior Court here in pdf or word format.


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