Bell v. Farmers Ins. Exchange

• Decision Date: 05 March 2001
• Docket Number: No. A091134.,A091134.
• Court: California Court of Appeals Court of Appeals
• Parties: Rose M. BELL et al., Plaintiffs and Respondents, v. FARMERS INSURANCE EXCHANGE, Defendant and Appellant.

105 Cal.Rptr.2d 59

87 Cal.App.4th 805

Rose M. BELL et al., Plaintiffs and Respondents, v. FARMERS INSURANCE EXCHANGE, Defendant and Appellant.

No. A091134.

Court of Appeal, First District, Division 1.

March 5, 2001.

Rehearing Denied March 29, 2001.

Review Denied June 20, 2001.^*

Horvitz & Levy LLP, Ellis J. Horvitz, Barry R. Levy, Encino, Jon B. Eisenberg, Oakland, Winston & Strawn, Lee T. Paterson,

Laura R. Petroff, Jessie A. Kohler, Los Angeles, for Defendant and Appellant.

Rudy, Exelrod, Zieff & True, LLP, Steven G. Zieff, Marcie E. Berman, Michael Rubin, San Francisco, Altshuler, Berzon, Nussbaum, Rubin & Demain, for Plaintiffs and Respondents.

SWAGER, J.

In this class action lawsuit to recover for nonpayment of overtime compensation, the defendant, Farmers Insurance Exchange (hereafter FIE), appeals an interim order awarding attorney fees, which was entered following an order granting summary adjudication in favor of plaintiffs on defendant's fourth affirmative defense. We find no error in the decisional underpinning of the award but reverse it on statutory grounds.

PROCEDURAL BACKGROUND

FIE is one of a group of affiliated insurance companies doing business under the service name of Farmers Insurance Group of Companies. The Personal Lines Division of the company issues automobile insurance policies and homeowner policies to private individuals in California. Claims arising in California from these policies, as well as from similar policies issued by other affiliated companies, are normally processed by claims representatives working in some 70 branch claims offices in the state. Employees in these branch claims offices, including clerical and supervisory employees as well as claims representatives, constitute the majority of FIE's workforce in California. Though claims representatives regularly work over 40 hours a week, FIE does not pay overtime on the ground that these employees are exempt from the wage and hour laws.

Plaintiffs are former and current FIE claims representatives who worked in the California branch claims offices of the "Personal Lines Division" from October 1, 1993, to the present. They brought this class action on behalf of themselves and other California claims representatives, seeking damages for unpaid overtime compensation and other relief. Accepting their request for class certification, the trial court certified three subclasses of employees who worked for FIE during the relevant period and were assigned to handle property, automobile physical damage and liability claims.

Following completion of discovery, the plaintiffs filed a motion for summary adjudication of FIE's fourth affirmative defense to the first amended complaint. That motion sought a ruling on the plaintiffs' exempt status under California wage and hour law. In an order entered April 21, 1999, the trial court granted the motion for summary adjudication, which it described as presenting the issue whether personal lines claims representatives are "administrators" exempt from overtime pay. The court found: "that there is no triable controversy and that claims adjusting is a product or service which FIE's operation exists to provide. It is further found that the Personal Lines Claims Representatives devote their time to carrying out FIE's claims adjusting product/service as opposed to its `administrative' functions. Therefore, as a matter of law, these Personal Lines Claims representatives ... do not fall within the ambit of the `administrative' exemption from overtime...."

Plaintiffs subsequently moved for an interim award of attorney fees and costs pursuant to Labor Code sections 218.5 and 1194, subdivision (a). Granting the plaintiffs' motion, the trial court awarded interim attorney fees of $1,238,116.50, finding that the plaintiffs "prevailed on liability issues." FIE now appeals from the order awarding attorney fees as a collateral final order (In re Marriage of Skelley (1976) 18 Cal.3d 365, 369, 134 Cal.Rptr. 197, 556 P.2d 297) and asks us to review the summary adjudication order pursuant to Code of Civil Procedure section 906.

DISCUSSION

A. Administrative Employee Exemption

FIE first attacks the interim order awarding attorney fees on the ground that its decisional underpinning—the order of summary adjudication on its fourth affirmative defense—was erroneous. The affirmative defense was predicated on the claim that plaintiffs come within an exemption from the overtime compensation requirements of the Industrial Welfare Commission (IWC) applying to "persons employed in administrative ... capacities." As applied to the insurance industry, the pertinent exemption appears in subdivision 1(A) of the IWC's wage order No. 4, codified in California Code of Regulations,¹ title 8, section 11040, subdivision 1(A). We will first consider issues relating to the statutory context of subdivision 1(A) and then examine the relevance of federal law in its interpretation.

1. Statutory Context of Term "Administrative Capacities"

The IWC has promulgated 15 wage orders, applying to separate industries, which each follow a similar format. Wage order No. 4 applies broadly to "Professional, Technical, Clerical, Mechanical, and Similar Occupations." As in the case of other wage orders, subdivision 1 addresses the coverage of the wage order and sets forth the exemption at issue here in subdivision 1(A):

"1. Applicability of Order. This Order shall apply to all persons employed in professional, technical, clerical, mechanical, and similar occupations whether paid on a time, piece rate, commission, or other basis, unless such occupation is performed in an industry covered by an industry order of this Commission, except that:

"(A) Provisions of sections 3 through 12 shall not apply to persons employed in administrative, executive, or professional capacities. No person shall be considered to be employed in an administrative, executive, or professional capacity unless one of the following conditions prevails:

"(1) The employee is engaged in work which is primarily intellectual, managerial, or creative, and which requires exercise of discretion and independent judgment, and for which the remuneration is not less than $1150.00 per month; or

"(2) The employee is licensed or certified by the State of California and is engaged in [the practice of a profession such as law or medicine]."

We begin by noting that wage order No. 4 is a quasi-legislative regulation subject to normal principles of statutory interpretation. It was promulgated by the IWC under the authority of 1913 legislation directing it to provide for a "minimum wage" for women and children. (Stats. 1913, ch. 324, § 6, pp. 632-635; Cal. Const., art. XX, former § 17½.) In the early 1970's, the federal courts invalidated a substantial portion of IWC regulations on the ground that the limited application to adult women workers violated the prohibition on sex discrimination in title VII of the federal Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.).² In response, the Legislature enacted new enabling legislation in 1973. (See Labor Code §§ 1173 and 1178.) The constitutionality of this legislation was confirmed by enactment of California Constitution, article XIV, section 1. Our high court observed that "the 1973 legislation did not alter the basic nature of the IWC's decision-making authority...." (Industrial Welfare Com. v. Superior Court, supra, 27 Cal.3d at p. 701, 166 Cal.Rptr. 331, 613 P.2d 579.) In particular, "[j]udicial authorities have repeatedly emphasized that in fulfilling its broad statutory mandate, the IWC engages in a quasi-legislative endeavor, a task which necessarily and properly requires the commission's exercise of a considerable degree of policy-making judgment and discretion." (Id. at p. 702, 166 Cal.Rptr. 331, 613 P.2d 579.)

FIE maintains that our analysis of the administrative exemption should be governed by the rule that, "`if statutory language is "clear and unambiguous there is no need for construction, and courts should not indulge in it." [Citation.]' [Citation.]" (Birbrower, Montalbano, Condon & Frank v Superior Court (1998) 17 Cal.4th 119, 131-132, 70 Cal.Rptr.2d 304, 949 P.2d 1.) In its view, the scope of the administrative exemption in title 8, section 11040, subdivision 1(A) is clearly and comprehensively defined in subparts (1) and (2). Only subpart (1) applies to the present case. Focusing on the word "unless" in subdivision 1(A), FIE argues that the interpretation of subpart (1) is governed by the principle of expressio unius est exclusio alterius. (See People v. Anzalone (1999) 19 Cal.4th 1074, 1078, 81 Cal.Rptr.2d 315, 969 P.2d 160.) Under this principle of statutory interpretation, it reasons that, if the conditions of subpart (1) are necessary conditions to subdivision 1(A) (as the word "unless" implies), it may be inferred that they are the only conditions to the exemption. We disagree.

The substantive import of title 8, section 11040, subdivision 1(A) does not suggest that it is intended to provide the sole criteria for determining if an employee is in an administrative, executive, or professional capacity. The very brief description of duties ["primarily intellectual, managerial, or creative, and which requires exercise of discretion and independent judgment"] and the standard of remuneration ["not less than $1150.00 per month"] cannot reasonably be considered to be an adequate definition of the phrase "administrative, executive, or professional capacities." But they do make sense as establishing particular limitations on the scope of the phrase. Thus, the standard of remuneration does not contribute meaningfully to a definition of "administrative, executive, or professional capacities," but does serve as an outside parameter; an employee earning less than this amount, despite whatever other job duties he/she may have, will not qualify as an exempt employee. Also, the terms "intellectual, managerial, or creative"...