Opinion ID: 844232
Heading Depth: 1
Heading Rank: 4

Heading: The Administrative Exemption

Text: As part of its function, the IWC issues Statements As To The Basis (hereafter, Statement or Commission Statement) explaining how and why the commission did what it did. ( California Hotel & Motel Assn. v. Industrial Welfare Com. (1979) 25 Cal.3d 200, 213 [157 Cal.Rptr, 840, 599 P.2d 31].) With respect to Wage Order 4-2001, the Commission Statement notes, The IWC intends the regulations in these wage orders to provide clarity regarding the federal regulations that can be used [to] describe the duties that meet the test of the exemption under California law, as well as to promote uniformity of enforcement. The IWC deems only those federal regulations specifically cited in its wage orders, and in effect at the time of promulgation of these wage orders, to apply in defining exempt duties under California law. (Italics added.) Accordingly, Wage Order 4-2001 specifically directs that whether work is exempt or nonexempt shall be construed in the same manner as such terms are construed in the following regulations under the Fair Labor Standards Act effective as of the date of this order: 29 C.F.R. Sections 541.201-205, 541.207-208, 541.210, and 541.215. [5] (Wage Order 4-2001, subd. 1(A)(2)(f).) Like its predecessor, Wage Order 4-2001 exempts persons employed in administrative, executive, or professional capacities. (Wage Order 4-2001, subd. 1(A).) Unlike its predecessor, subdivision 1(A)(2) of the new wage order describes the administrative exemption in some detail. It provides, in part, that persons are employed in an administrative capacity if their duties and responsibilities involve office or nonmanual work directly related to management policies or general business operations of [ their ] employer or [ the ] employer's customers. (Wage Order 4-2001, subd. 1(A)(2)(a)(i), italics added.) (3) Federal Regulations former part 541.205 (2000) is one of the regulations incorporated in Wage Order 4-2001, subdivision 1(A)(2)(f). [6] That regulation defined the italicized phrase above. It is this directly related phrase that distinguishes between administrative operations and production or sales work. (Fed. Regs. § 541.205(a) (2000).) (4) Parsing the language of the regulation reveals that work qualifies as administrative when it is  directly related  to management policies or general business operations. Work qualifies as directly related if it satisfies two components. First, it must be qualitatively administrative. Second, quantitatively, it must be of substantial importance to the management or operations of the business. Both components must be satisfied before work can be considered directly related to management policies or general business operations in order to meet the test of the exemption. (Fed. Regs. § 541.205(a) (2000).) The regulation goes on to further explicate both components. Federal Regulations former part 541.205(b) (2000) discusses the qualitative requirement that the work must be administrative in nature. It explains that administrative operations include work done by white collar employees engaged in servicing a business. Such servicing may include, as potentially relevant here, advising management, planning, negotiating, and representing the company. Federal Regulations former part 541.205(c) (2000) relates to the quantitative component that tests whether work is of substantial importance to management policy or general business operations. Read together, the applicable Labor Code statutes, wage orders, and incorporated federal regulations now provide an explicit and extensive framework for analyzing the administrative exemption.