CACI No. 2720. Affirmative Defense - Nonpayment of Overtime - Executive Exemption

Judicial Council of California Civil Jury Instructions (2020 edition)

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2720.Affirmative Defense - Nonpayment of Overtime - Executive
Exemption
[Name of defendant] claims that [he/she/nonbinary pronoun/it] is not
required to pay [name of plaintiff] for overtime because [name of plaintiff]
is an executive employee. [Name of plaintiff] is exempt from overtime pay
requirements as an executive if [name of defendant] proves all of the
following:
1. [Name of plaintiff]’s duties and responsibilities involve
management of [name of defendant]’s [business/enterprise] or of a
customarily recognized department or subdivision of the
[business/enterprise];
2. [Name of plaintiff] customarily and regularly directs the work of
two or more employees;
3. [Name of plaintiff] has the authority to hire or fire employees, or
[his/her/nonbinary pronoun] suggestions as to hiring or firing and
as to advancement and promotion or other changes in status are
given particular weight;
4. [Name of plaintiff] customarily and regularly exercises discretion
and independent judgment;
5. [Name of plaintiff] performs executive duties more than half of the
time; and
6. [Name of plaintiff]’s monthly salary is at least [insert amount that is
twice the state minimum wage for full time employment].
In determining whether [name of plaintiff] performs executive duties
more than half of the time, the most important consideration is how [he/
she/nonbinary pronoun] actually spends [his/her/nonbinary pronoun] time.
But also consider whether [name of plaintiff]’s practice differs from [name
of defendant]’s realistic expectations of how [name of plaintiff] should
spend [his/her/nonbinary pronoun] time and the realistic requirements of
the job.
[Each of [name of plaintiff]’s activities is either an exempt or a
nonexempt activity depending on the primary purpose for which [he/she/
nonbinary pronoun] undertook it at that time. Time spent on an activity is
either exempt or nonexempt, not both.]
New December 2012; Revised June 2014
Directions for Use
This instruction is an affirmative defense to an employee’s claim for statutory
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overtime earnings. (See CACI No. 2702, Nonpayment of Overtime
Compensation - Essential Factual Elements.) The employer claims that the employee
is an exempt executive. (See Lab. Code, § 515(a).) The employer must prove all of
the elements. (United Parcel Service Wage & Hour Cases (2010) 190 Cal.App.4th
1001, 1014 [118 Cal.Rptr.3d 834].) For an instruction for the affirmative defense of
administrative exemption, see CACI No. 2721, Affırmative Defense - Nonpayment of
Overtime - Administrative Exemption.
This instruction is based on Industrial Welfare Commission Wage Order 9, which is
applicable to the transportation industry. (See 8 Cal. Code Regs., § 11090.) Different
wage orders are applicable to different industries. (See Lab. Code, § 515.) The
requirements of the executive exemptions under the various wage orders are
essentially the same. (Cf., e.g., 8 Cal. Code Regs., § 11040, Wage Order 4,
applicable to persons employed in professional, technical, clerical, mechanical, and
similar occupations.).
The exemption requires that the employee be primarily engaged in duties that “meet
the test of the exemption.” (See 8 Cal. Code Regs., § 11090 sec. 1(A)(1)(e), sec.
2(J) (“primarily” means more than one-half the employee’s work time).) This
requirement is expressed in element 5. However, the contours of executive duties
are quite detailed in the wage orders, which incorporate federal regulations under
the Fair Labor Standards Act and also provide some specific examples. (See also
Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 802 [85 Cal.Rptr.2d 844, 978
P.2d 2].) In many cases, it will be advisable to instruct further with details from the
applicable wage order and regulations as to what constitutes “executive duties” in
element 5.
Include the optional last paragraph if a particular work activity arguably involves
more than one purpose and could be characterized as exempt or nonexempt,
depending on its primary purpose.
This instruction may be expanded to provide examples of the specific exempt and
nonexempt activities relevant to the work at issue. (See, e.g., Heyen v. Safeway, Inc.
(2013) 216 Cal.App.4th 795, 808-809 [157 Cal.Rptr.3d 280].)
Sources and Authority
• Exemptions to Overtime Requirements. Labor Code section 515(a).
• “[T]he assertion of an exemption from the overtime laws is considered to be an
affirmative defense, and therefore the employer bears the burden of proving the
employee’s exemption.” (Ramirez, supra, 20 Cal.4th at pp. 794-795.)
• “In order to discharge its burden to show [plaintiff] was exempt as an executive
employee pursuant to Wage Order 9, [defendant] was required to demonstrate the
following: (1) his duties and responsibilities involve management of the
enterprise or a ‘customarily recognized department or subdivision thereof’; (2)
he customarily and regularly directs the work of two or more employees; (3) he
has the authority to hire or terminate employees, or his suggestions as to hiring,
firing, promotion or other changes in status are given ‘particular weight’; (4) he
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customarily and regularly exercises discretion and independent judgment; (5) he
is primarily engaged in duties that meet the test of the exemption; and (6) his
monthly salary is equivalent to no less than two times the state minimum wage
for full-time employment.” (United Parcel Service Wage & Hour Cases, supra,
190 Cal.App.4th at p. 1014 [citing 8 Cal. Code Regs., § 11090, subd. 1(A)(1)].)
• “Determining whether or not all of the elements of the exemption have been
established is a fact-intensive inquiry.” (United Parcel Service Wage & Hour
Cases, supra, 190 Cal.App.4th at p. 1014.)
• “Review of the determination that [plaintiff] was not an exempt employee is a
mixed question of law and fact. Whether an employee satisfies the elements of
the exemption is a question of fact reviewed for substantial evidence. The
appropriate manner of evaluating the employee’s duties is a question of law that
we review independently.” (Heyen, supra, 216 Cal.App.4th at p. 817, internal
citations omitted.)
• “The appropriateness of any employee’s classification as exempt must be based
on a review of the actual job duties performed by that employee. Wage Order 9
expressly provides that ‘[t]he work actually performed by the employee during
the course of the workweek must, first and foremost, be examined and the
amount of time the employee spends on such work, together with the employer’s
realistic expectations and the realistic requirements of the job, shall be
considered . . . .’ No bright-line rule can be established classifying everyone
with a particular job title as per se exempt or nonexempt - the regulations
identify job duties, not job titles. ‘A job title alone is insufficient to establish the
exempt status of an employee. The exempt or nonexempt status of any particular
employee must be determined on the basis of whether the employee’s salary and
duties meet the requirements of the regulations . . . .’ ” (United Parcel Service
Wage & Hour Cases, supra, 190 Cal.App.4th at p. 1014-1015, original italics,
internal citation omitted.)
• “This is not a day-by-day analysis. The issue is whether the employees ‘ “spend
more than 51% of their time on managerial tasks in any given workweek.” ’ ”
(Batze v. Safeway, Inc. (2017) 10 Cal.App.5th 440, 473, fn. 36 [216 Cal.Rptr.3d
390])
• “Put simply, ‘the regulations do not recognize “hybrid” activities - i.e., activities
that have both “exempt” and “nonexempt” aspects. Rather, the regulations
require that each discrete task be separately classified as either “exempt’ or
“nonexempt.” [Citations.]’ [¶] We did not state, however, that the same task must
always be labeled exempt or nonexempt: ‘[I]dentical tasks may be “exempt” or
‘nonexempt” based on the purpose they serve within the organization or
department.’ ” (Batze, supra, 10 Cal.App.5th at p. 474.)
• “[T]he federal regulations incorporated into Wage Order 7 do not support the
‘multi-tasking’ standard proposed by [defendant]. Instead, they suggest, as the
trial court correctly instructed the jury, that the trier of fact must categorize tasks
as either ‘exempt’ or ‘nonexempt’ based on the purpose for which [plaintiff]
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undertook them.” (Heyen, supra, 216 Cal.App.4th at p. 826.)
• “Wage Order 4 refers to compensation in the form of a ‘salary.’ It does not
define the term. The regulation does not use a more generic term, such as
‘compensation’ or ‘pay.’ Either of these terms would encompass hourly wages, a
fixed annual salary, and anything in between. ‘Salary’ is a more specific form of
compensation. A salary is generally understood to be a fixed rate of pay as
distinguished from an hourly wage. Thus, use of the word ‘salary’ implies that
an exempt employee’s pay must be something other than an hourly wage.
California’s Labor Commission noted in an opinion letter dated March 1, 2002,
that the Division of Labor Standards Enforcement (DLSE) construes the IWC
wage orders to incorporate the federal salary-basis test for purposes of
determining whether an employee is exempt or nonexempt.” (Negri v. Koning &
Associates (2013) 216 Cal.App.4th 392, 397-398 [156 Cal.Rptr.3d 697, footnote
omitted.)
• “[T]he costs incurred by an employer to provide an employee with board,
lodging or other facilities may not count towards the minimum salary amount
required for exemption . . . .” (Kao v. Holiday (2017) 12 Cal.App.5th 947, 958
[219 Cal.Rptr.3d 580].)
• “The rule is that state law requirements for exemption from overtime pay must
be at least as protective of the employee as the corresponding federal standards.
Since federal law requires that, in order to meet the salary basis test for
exemption the employee would have to be paid a predetermined amount that is
not subject to reduction based upon the number of hours worked, state law
requirements must be at least as protective.” (Negri, supra, 216 Cal.App.4th at p.
398, internal citation omitted.)
• “Under California law, to determine whether an employee was properly classified
as ‘exempt,’ the trier of fact must look not only to the ‘work actually performed
by the employee during the . . . workweek,’ but also to the ‘employer’s realistic
expectations and the realistic requirements of the job.’ ” (Heyen, supra, 216
Cal.App.4th at p. 828.)
• “Having recognized California’s distinctive quantitative approach to determining
which employees are outside salespersons, we must then address an issue
implicitly raised by the parties that caused some confusion in the trial court and
the Court of Appeal: Is the number of hours worked in sales-related activities to
be determined by the number of hours that the employer, according to its job
description or its estimate, claims the employee should be working in sales, or
should it be determined by the actual average hours the employee spent on sales
activity? The logic inherent in the IWC’s quantitative definition of outside
salesperson dictates that neither alternative would be wholly satisfactory. On the
one hand, if hours worked on sales were determined through an employer’s job
description, then the employer could make an employee exempt from overtime
laws solely by fashioning an idealized job description that had little basis in
reality. On the other hand, an employee who is supposed to be engaged in sales
activities during most of his working hours and falls below the 50 percent mark
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due to his own substandard performance should not thereby be able to evade a
valid exemption. A trial court, in determining whether the employee is an outside
salesperson, must steer clear of these two pitfalls by inquiring into the realistic
requirements of the job. In so doing, the court should consider, first and
foremost, how the employee actually spends his or her time. But the trial court
should also consider whether the employee’s practice diverges from the
employer’s realistic expectations, whether there was any concrete expression of
employer displeasure over an employee’s substandard performance, and whether
these expressions were themselves realistic given the actual overall requirements
of the job.” (Ramirez, supra, 20 Cal.4th at pp. 801-802, original italics.)
Secondary Sources
4 Witkin, Summary of California Law (11th ed. 2017) Agency and Employment,
§ 392 et seq.
Chin et al., California Practice Guide: Employment Litigation, Ch. 11-B, Coverage
And Exemptions - In General, ¶ 11:345 et seq. (The Rutter Group)
1 Wilcox, California Employment Law, Ch. 2, Minimum Wages, §§ 2.04, 2.06
(Matthew Bender)
11 California Forms of Pleading and Practice, Ch. 250, Employment Law: Wage and
Hour Disputes, § 250.71 (Matthew Bender)
Simmons, Wage and Hour Manual for California Employers, Ch. 2, Coverage of
Wage and Hour Laws (Castle Publications Limited)
Simmons, Wage and Hour Manual for California Employers, Ch. 10, Exemptions
(Castle Publications Limited)
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