Skyriver Communications, Inc., a San Diego wireless broadband Internet service provider, employed Mark Combs as director of network operations and classified him as an exempt administrator. Combs spent about 60 to 70 percent of his workday ensuring that the company’s network was operating properly at all times. Combs eventually resigned, and he slapped Skyriver with a lawsuit for unpaid overtime and missed meal and rest breaks, claiming he was misclassified and didn’t qualify for overtime exemption. He won at a trial, but a California appeals court has now disagreed with Combs, issuing an opinion that provides a broad and employer-friendly interpretation of who the administrative exemption from overtime covers.
Administrative/Production Dichotomy
Combs’s suit relied on prior court cases that applied the “administrative/production worker dichotomy” to determine overtime exemption. Under this theory, employees who perform administrative work (payroll, taxes, human resources, or information technology (IT) work, for example) are eligible for exemption, but those who produce the employer’s product aren’t. Combs argued that he fell into the production category because his work focused on Skyriver’s product, which is network connectivity. Thus, although many high-level IT workers at other types of companies are exempt, Combs claimed he was not.
Skyriver contended that the court shouldn’t use the administrative/production distinction to analyze Combs’s job duties because he otherwise met all of the requirements set out in the applicable Wage Order—here, Wage Order 4—to qualify as an exempt employee. (Combs and Skyriver both agreed that Combs met the salary requirement for exemption, and only the duties test was at issue.)
Scrutinize Duties
The appeals court agreed with Skyriver that the administrative/production distinction isn’t a mandatory test for determining which employees perform exempt work.1 Some employees, such as Combs, perform specialized work that simply can’t be properly categorized using the dichotomy analysis, the court said. In these instances, courts must look more closely at the employee’s duties, referring to the duties elements set out in the applicable Wage Order.
Paying Overtime: 10 Key Exemption Concepts
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Combs qualified as an exempt administrator according to the Wage Order provisions, the court ruled. Substantial evidence established that his work involved high-level problem-solving, troubleshooting, planning, negotiating, and purchasing. Thus, as Wage Order 4 requires, his primary duty “directly related to the management or general business operations” of Skyriver. The court also pointed out that the Wage Orders incorporate by reference federal exemption regulations, which specify that administrative work includes “computer network, Internet, and database administration.”
A Win for Employers
This appeals court decision is welcome news for employers, providing a more expansive view of who qualifies for the often confusing administrative overtime exemption. For more help with determining whether an employee qualifies as exempt, consult “Who’s Entitled to Overtime: How to Avoid Mistakes When Classifying California Employees,” an exclusive CEA Employer Guide.
1Combs v. Skyriver Communications, Inc., Calif. Court of Appeals (Dist. 4) No. D049884, 2008