Exemptions from Overtime Requirements

If you’re an employer in California, you know the difficulties associated with proving an employee meets an exemption from overtime. Last month, a California appellate court issued an opinion highlighting those difficulties.  The case is entitled Pellegrino v. Robert Half International, Inc. (2010) 181 Cal.App.4th 713 (out of the Fourth Appellate District).   In Pellegrino, six former employees of a temporary staffing agency, most of whom were “account executives” sued the agency for Labor Code violations,  primarily failure to pay overtime and failure to provide meal periods.  The agency defended the lawsuit by arguing that the employees fell under the Administrative Exemption from wage requirements.   The appellate court decided in favor of the employees.

First, the appellate court considered the applicable wage order—in this case, Wage Order No. 4.   The wage order lays out a five-part test to determine whether an employee qualifies for an administrative exemption—and all five parts of the test must be satisfied.  Second, the court considered the duties and responsibilities of the employees:   "The duties and responsibilities of an account executive involved recruiting, interviewing, and evaluating candidates to be placed as temporary employees; selecting and placing candidates on job orders and assisting clients with their call-in business needs; and new business development."  The court also noted that the employees had little discretion with respect to performing their duties, as the employees were expected to follow the "recipe" set forth by the employer.  As a result, the court found that the employees’ jobs “did not directly relate to management policies or general business operations[,]" which is one of the Wage Order’s requirements for administrative exemption qualification.

The employer also defended by arguing that an employment agreement signed by the employees limited the statute of limitations for wage claims to six months.  That agreement, however, was unenforceable because it violated public policy and California Labor Code section 219, which prohibits such limits in private employment agreements.

In short, if you’re an employer in Humboldt County, classify employees with caution, and when in doubt, pay employees as non-exempt.