The administrative exemption has been a hot area of litigation for a long time in California with all sorts of twists and turns in the California Supreme Court and Courts of Appeal over the last several years. Unfortunately, the courts are still struggling with this exemption and have failed to provide clear guidance or clarity in this area. As a result, plaintiffs’ lawyers continue to target the administrative exemption in individual wage hour actions as well as class actions.
So you have to ask yourself this: Are you confident that you would be able to withstand an attack as to the exempt status of your employees who are classified as administratively exempt?
Even employers who carefully designate job classifications as exempt are subject to attack. Employees may claim that, upon closer inspection, their work doesn’t meet the test for the exemption and that they are owed overtime and penalties for missed meal and rest breaks – a costly battle for employers to fight.
Employers, however, can implement some basic safeguards that will help proactively protect their exempt classifications in the event of a lawsuit. Here are a few suggested steps that employers can put in place now that may help prevent a lawsuit or provide a solid defense in the event of a lawsuit:
1. Require Self-Evaluations: During your company’s review process, solicit employees’ self-evaluations in categories related to the exemption test. Employers should consider including the following types of categories for employee self-evaluations:
a. Describe how your work has supported the company’s business or the company’s customer’s business;
b. Detail how you have customarily and regularly exercised discretion and independent judgment (and use those actual magic words, which come directly from the wage order);
c. Provide examples of how you have performed under only general supervision;
d. Describe your major work-place accomplishments for the period.
Rationale: Not likely to describe their work in unflattering terms, chances are employees will boast about their independent judgment, their contributions to the business’ operation and their ability to function without supervision. These self-evaluations can later be used to rebut a claim that the employee was not performing work that met the administrative exemption test.
2. Measure Employee Performance On Exemption Criteria: During the review process do not solely measure an employee’s performance based on productivity in any given area. Employers should also include feedback sections where managers evaluate employees on criteria related to the administrative exemption, by answering questions such as:
a. Exactly how did the employee’s administrative work advance the company’s general business operations or the company’s customer’s business?
b. How well and how often did the employee customarily and regularly exercise their own discretion and judgment in performing their job?
c. How well did the employee perform their duties without supervision? Provide examples.
d. How well did the employee focus on administrative-type activities they were expected to do, as opposed to production-type activities.
Rationale: Contemporaneous records where supervisors and managers evaluate employees on the administrative exemption will carry more weight than job descriptions and after-the-fact explanations of daily duties. Employees will sign their feedback form acknowledging the manager’s comments and will be hard-pressed later on to challenge the company’s evaluations on these criteria.
3. Policies: Employers often have one-size-fits all employee handbooks. For example, many handbooks apply to all employees. The handbooks then refer employees to management to clarify questions they may have on any given topic. Plaintiffs will often attempt to argue that those handbooks are evidence that employees are improperly classified as administratively exempt because they are directed to pose questions to management, thereby showing a lack of independent discretion and judgment. Separate policies for managers and supervisors versus other employees may help to rebut these types of arguments.
Workplace Solutions: The above safeguards are just a few steps employers may consider to protect their administratively-exempt job classifications. Seyfarth Shaw advises employers of all sizes regarding questions posed by the administrative (and other) exemptions. Where there are questions concerning a particular exemption, a privileged audit can be performed and additional safeguards can be put in place, which may help provide further protection in the event of a lawsuit.