Many overtime cases challenge the exempt status of the members of the putative class and, more specifically, contest whether their “primary” duties are exempt and therefore meet the requirements of the exemptions relied upon by the employer.. This inquiry is made somewhat more difficult because of the differences in federal law and the laws of some states, most notably California. While federal law and California both require that the employee’s primary duties be exempt for purposes of the administrative, professional, executive, and outside sales exemptions, they define the term differently. Under federal law, the question is qualitative, looking at which of the employee’s duties are the most important. 29 C.F.R. Section 541.700(a). In California, the question is quantitative, looking instead at how much time the employee spends on exempt versus non-exempt duties, and requiring that more than one half of the employee’s time be spent on exempt work. See, e.g., Ramirez v. Yosemite Water Co., 20 Cal. 4th 785, 801-02 (1999).
While many employers have encountered litigation in California arising from this difference, the primary duties test remains alive and well outside of that state, as shown most recently by a case from the United States District Court for the District of New Jersey. In Bouder v. Prudential Financial, Inc.pdf, the plaintiffs brought a collective action under federal law, and a class action under the laws of several states, on behalf of a putative class of commissioned insurance salespeople. They claimed that they were improperly classified as exempt because their “primary duty” was not commissioned sales, but rather providing “financial advice and service.”
The court examined various tests for determining the employees’ primary duties. It looked to factors such as whether the employees actually earned commissions, the level of supervision, the amount of work done at the employer’s place of business, and the employees’ work in soliciting new business and concluded that, indeed, the employees’ primary duties were outside sales. Based on that finding, the court granted summary judgment in the employer’s favor. Interestingly, although one of the approximately 12 states at issue was California, the court did not engage in the separate quantitative analysis, but based on its discussion it may very well have come out with the same result had it done so.
The bottom line: Even in collective actions, the employer can prevail if it demonstrates that the employee’s primary duties, those most important to the job, are exempt. California employers should be aware of the different, and in some cases harder to meet, requirements of state law.