Harris v. Superior Court
| Decision Date | 16 August 2007 |
| Docket Number | No. B195370.,No. B195121.,B195121.,B195370. |
| Citation | 64 Cal.Rptr.3d 547,154 Cal.App.4th 164 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Fiances HARRIS et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; Liberty Mutual Insurance Company et al., Real Parties in Interest. Liberty Mutual Insurance Company et al., Petitioners, v. The Superior Court of Los Angeles County, Respondent; Frances Harris et al., Real Parties in Interest. |
Moss, Barness & Harrison, Dennis F. Moss and Ira Spiro, Los Angeles, for Petitioners and Real Parties in Interest Frances Harris, Dwayne Garner, Marion Brenish-Smith, Steven Brickman, Kelly Gray, Adell Butler-Mitchell and Lisa McCauley.
Sheppard Mullin Richter & Hampton, Douglas R. Hart, Los Angeles, Robert J. Stumpf, San Francisco, and Geoffrey D. DeBoskey, Los Angeles; William V. Whelan and Karin Dougan Vogel, San Diego, for Petitioners and Real Parties in Interest Liberty Mutual Insurance Company, and Golden Eagle Insurance Corporation.
No appearance for Respondent.
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, 105 Cal.Rptr.2d 59 (hereafter Bell II), and, to a more limited extent, Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 9 Cal.Rptr.3d 544 (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.
These petitions arise from four coordinated class actions against Liberty Mutual Insurance Company and Golden Eagle Insurance Corporation. Plaintiffs, claims adjusters employed by defendants, allege that defendants improperly classified them as exempt from the overtime compensation requirements under California law. Plaintiffs seek to recover the unpaid overtime to which they are allegedly entitled.
The trial court initially certified a class defined as "all non-management California employees classified as exempt by Liberty Mutual and Golden Eagle who were employed as claims handlers and/or performed claims-handling activities." Plaintiffs and defendants subsequently filed cross-motions for summary adjudication of defendants' affirmative defense that plaintiffs are exempt from the overtime compensation requirements. Defendants simultaneously moved, in the alternative, to decertify the class, and they later withdrew their motion for summary adjudication. On October 18, 2006, the trial court denied plaintiffs' motion for summary adjudication and partially granted defendants' decertification motion, decertifying the class with respect to all claims arising after October 1, 2000.1
The class certification and summary adjudication proceedings all focused on the administrative/production worker dichotomy and on the relationship between that dichotomy and the administrative exemption from California's overtime compensation requirements. As applicable here, those requirements are set forth in two regulations promulgated by the Industrial Welfare Commission (IWC): Wage Order 4, in effect at all relevant times before October 1, 2000, and Wage Order 4-2001, which succeeded Wage Order 4.2 Both wage orders provide that "persons employed in administrative, executive, or professional capacities" are exempt from the overtime compensation requirements. (Cal.Code Regs., tit. 8, § 11040, subd. (1)(A); Wage Order 4, subd. (1)(A).)
The California regulations were not the only authority guiding the trial court's application of the administrative exemption to claims adjusters. In Bell II, supra, Division One of the First Appellate District held that, under Wage Order 4, the plaintiff claims adjusters were not exempt administrative employees of the defendant insurance exchange. (87 Cal.App.4th at p. 828, 105 Cal.Rptr.2d 59.) In reaching that conclusion, the Court of Appeal based its interpretation of Wage Order 4 on the federal regulations defining the administrative exemption to the wage and hour provisions of the Fair Labor Standards Act (29 U.S.C. § 201 et seq. [hereafter FLSA]). (87 Cal.App.4th at pp. 814-815, 105 Cal.Rptr.2d 59.) The court determined that the federal regulations distinguish "administrative" from "production" work, and that an employee whose work falls squarely on the production side of the distinction cannot be an exempt administrative employee. (Id. at pp. 820-823, 105 Cal.Rptr.2d 59.) Applying this distinction—the administrative/production worker dichotomy—to the undisputed facts concerning the members of the plaintiff class, the court in Bell II concluded that the class members in that case did work falling squarely on the production side and consequently were not exempt. (Id. at pp. 823-828, 105 Cal.Rptr.2d 59.)
In the instant case, plaintiffs likewise contend that all class members do work falling squarely on the production side of the dichotomy. On the basis of that contention and the holding of Bell II, the trial court initially concluded that a common question of law or fact predominated and certified the class. At the same time, the court stated that the dichotomy might turn out not to be dispositive, so the issue of class certification might have to be revisited later.
When the court revisited the issue upon hearing the motions for summary adjudication and class decertification, it concluded that the administrative/production worker dichotomy is not dispositive concerning the administrative exemption with respect to claims arising after October 1, 2000. The court reasoned that those claims are governed by Wage Order 4-2001, which expressly incorporates certain federal regulations in effect when Wage Order 4-2001 was issued.3 Both Bell II and a later appellate decision in the same litigation, Bell III, involved Wage Order 4 alone, so neither case bound the trial court with respect to Wage Order 4-2001. The trial court concluded that the federal regulations expressly incorporated in Wage Order 4-2001 compel the conclusion that claims adjusters can be exempt administrative employees notwithstanding the administrative/production worker dichotomy. Accordingly, the trial court concluded that class certification on the basis of the administrative/production worker dichotomy is inappropriate for claims arising after October 1, 2000. Because the court had based its earlier certification order on the dichotomy, it decertified the class for claims arising after October 1, 2000, stating that further factual inquiry will be necessary in order to determine whether those claims are at all amenable to class treatment, perhaps by means of subclasses.
The trial court recommended interlocutory review of its decision pursuant to Code of Civil Procedure section 166.1. Plaintiffs filed a petition for writ review, seeking reversal of the order partially decertifying the class and denying their motion for summary adjudication. Defendants likewise filed a writ petition, seeking to reverse the partial denial of their motion to decertify the class. We issued an order to show cause and ordered that the petitions be consolidated.
We review the trial court's order denying a motion for summary adjudication de novo. (Buss v. Superior Court (1997) 16 Cal.4th 35, 60, 65 Cal.Rptr.2d 366, 939 P.2d 766.) We review the trial court's rulings on class certification for abuse of discretion, but a ruling based upon a legal error constitutes an abuse of discretion. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326-327, 17 Cal.Rptr.3d 906, 96 P.3d 194; see also Horsford v. Board of Trustees of California State University (2005) 132 Cal. App.4th 359, 393, 33 Cal.Rptr.3d 644 [].) We review the trial court's...
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