and Calaveras Counties. Other sources of water are the runoff from the
local watershed, plus limited access to water from the American River (to
offset deficiencies in drought years).
Plaintiffs, who are employees of EBMUD, filed this proposed class
action for overtime compensation and liquidated damages pursuant to
section 16(b) of the Fair Labor Standards Act of 1938, as amended
("FLSA"), 29 U.S.C. § 201, et seq. The FLSA requires employers to pay
employees overtime compensation for all hours worked over forty per
week, unless the employees are "employed in a bona fide executive,
administrative, or professional capacity." See 29 U.S.C. § 207, 213.
Approximately 85 per cent of EBMUD employees are designated hourly and are
entitled to overtime compensation, and approximately 15 per cent are
designated exempt. This case was filed by a number of plaintiffs who had
been designated exempt, each of whom asserted that he or she was
nonexempt and therefore entitled to overtime compensation.
Six plaintiffs remain in the case — Ida A. McClendon, Gayle B.
Montgomery, Thomas F. Fox, Clark G. Sharick, William D. Kerr, and Bruce
A. Lepore. EBMUD now seeks summary judgment that the remaining six
plaintiffs fall within the executive and/or administrative exemption.
A. Legal Standard
1. Summary Judgment
Summary judgment is appropriate when there is no genuine issue as to
material facts and the moving party is entitled to judgment as a matter
of law. Fed. R.Civ.P. 56. Material facts are those that might affect the
outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is
"genuine" if there is sufficient evidence for a reasonable jury to return
a verdict for the nonmoving party. See id. In ruling on a motion for
summary judgment, the court may not weigh the evidence, and is required
to view the evidence in the light most favorable to the nonmoving party.
A party seeking summary judgment bears the initial burden of informing
the court of the basis for its motion, and of identifying those portions
of the pleadings and discovery responses that demonstrate the absence of
a genuine issue of material fact. See Celotex Corp. v. Catrett,
477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the
moving party will have the burden of proof at trial, it must
affirmatively demonstrate that no reasonable trier of fact could find
other than for the moving party. On an issue where the nonmoving party
will bear the burden of proof at trial, the moving party can prevail
merely by pointing out to the district court that there is an absence of
evidence to support the nonmoving party's case. See id. If the moving
party meets its initial burden, the opposing party must then set forth
specific facts showing that there is some genuine issue for trial in order
to defeat the motion. See Anderson, 477 U.S. at 250, 106 S.Ct. 2505.
2. FLSA Exemptions
The FLSA requires employers to pay overtime compensation to all
employees who do not fall within the three exemptions. See
29 U.S.C. § 213 (exempt employees include those "employed in a bona
fide executive, administrative, or professional capacity," as defined by
the Department of Labor). The employer bears the burden of establishing
that an employee falls within an exemption, see Corning Glass Works v.
Brennan, 417 U.S. 188 196-97, 94 S.Ct. 2223, 41 L.Ed.2d 1 (1974); Reich
v. John Alden Life Ins. Co., 126 F.3d 1, 7 (1st Cir. 1997); and the
exemptions must be "narrowly construed against the employers seeking to
assert them." See Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80
S.Ct. 453, 4 L.Ed.2d 393 (1960).
The FLSA does not articulate the parameters of the three exemptions;
application of the exemptions is set forth in the regulations and
interpretations promulgated by the Secretary of Labor, pursuant to
29 U.S.C. § 213. The Secretary's regulations have the force of law,
see United States v. Nixon, 418 U.S. 683, 695, 94 S.Ct. 3090, 41 L.Ed.2d
1039 (1974), and are to be given controlling weight unless found to be
arbitrary, capricious, or contrary to the statute. See Chevron U.S.A. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct.
2778, 81 L.Ed.2d 694 (1984). The interpretive regulations, on the other
hand, are not conclusive, as they merely set forth the Secretary's
position regarding the application of the regulations in specific
contexts. See Reich v. John Alden, 126 F.3d at 8. "Even so, these
interpretations have the `power to persuade, if lacking power to
control,' as they `constitute a body of experience and informed judgment
to which courts and litigants may properly resort for guidance.'" Id.
(quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161,
89 L.Ed. 124 (1944)).
The interpretative regulations emphasize that "job titles [are]
insufficient as yardsticks" in determining the importance of an employee
to the employer, or the employee's exempt or nonexempt status under the
regulations. "Titles can be had cheaply and are of no determinative
value." 29 C.F.R. § 541.201 (b). The status of any particular
employee must be determined on the basis of whether his or her duties,
responsibilities, and salary meet all the requirements of the appropriate
section of the regulations. See 29 C.F.R. § 541.201 (b)(2).
B. Defendant's Motion for Summary Judgment
Department of Labor regulations establish two tests for classification
as exempt white collar employees: the "duties" test and the "salary"
test. See 29 C.F.R. § 541.1-541.3. Generally, employees must satisfy
both tests before they can be classified as exempt. See Barner v. City of
Novato, 17 F.3d 1256, 1259-60 (9th Cir. 1994). The issue remaining for
decision in this case is whether the six above-named plaintiffs are
exempt employees under the "duties" test. EBMUD contends that all six
qualify under the administrative exemption, and that three of the
six-Bruce A. Lepore, William D. Kerr, and Thomas F. Fox — also
qualify under the executive exemption.
1. The executive and administrative exemptions
a. The executive exemption
The requirements of the executive exemption are set forth at
29 C.F.R. § 541.1. An employee whose salary is more than $250 a
week*fn1 qualifies for the executive exemption if that
employee's primary duty consist of "management of the enterprise" in
which she is employed "or a customarily recognized subdivision
thereof."*fn2 In addition, the employee must customarily
and regularly direct the work of two or more employees. See id.
Duties that may qualify a position as "management" for purposes of the
executive exemption include i) interviewing, selecting, and training
employees; ii) directing employees' work; in) appraising employees'
productivity and efficiency for the purpose of recommending promotions or
other changes in their status; iv) handling employee complaints and
grievances, and disciplining when necessary; v) planning the work; vi)
determining the techniques to be used; vii) apportioning the work among
the workers; and viii) determining the type of materials, supplies,
machinery, or tools to be used or
merchandise to be bought, stocked, or sold. See 29 C.F.R. § 541.102.
To determine whether an employee has management as his or her "primary
duty," the court may look at the amount of time spent on those duties.
"In ordinary cases . . . primary duty means the major part, or over 50
percent, of the employee's time. Thus, an employee who spends over 50
percent of his [or her] time in management would have management as [the]
primary duty." 29 C.F.R. § 541.103. Where an employee spends less than
50 percent of his or her time on managerial duties, the employee might
still qualify under the executive exemption if other factors support such
a conclusion. Those factors include
the relative importance of the managerial duties as
compared with other types of duties, the frequency
with which the employee exercises discretionary
powers, [the employee's] relative freedom from
supervision, and the relationship between [the
employee's] salary and the wages paid other employees
for the kind of nonexempt work performed by the
b. The administrative exemption
The requirements of the administrative exemption are set forth at
29 C.F.R. § 541.2. An employee whose salary is more than $250 a week
qualifies under the administrative exemption if first, that employee's
primary duty is the performance of non-manual work "directly related to
management policies or general business operations" of the employer or
the employer's customers; and second, if the employee exercises
"discretion and independent judgment." See 29 C.F.R. § 541.2 (a).
An employee performs work directly related to management policies or
general business operations of the employer (i) if the employee is
engaged in "administrative" rather than "production" activity, and (ii)
if the administrative activity is of "substantial importance" to
management or operations. See 29 C.F.R. § 541.205. Administrative
work is the work performed by so-called white collar employees engaged in
"servicing" a business — as, for example, "advising the
management, planning, negotiating, representing the company, purchasing,
promoting sales, and business research and control." 29 C.F.R. § 541.205
(b). Examples of employees in administrative positions include buyers in
industrial plants and retail establishments; personnel analysts; and
advisory specialists and consultants such as credit managers, safety
directors, claims agents and adjustors, wage-rate analysts, tax experts,
account executives at advertising agencies, stock brokers, and promotion
people. See 29 C.F.R. § 541.205 (c)(1)-(c)(5).
"Production" or "line" work, by contrast, entails producing the product
of the employer's business. Although the traditional model of production
work is factory manufacturing or assembly-line work, the concept is not
limited to the manufacturing setting. See, e.g., Martin v. Cooper Elec.
Supply Co., 940 F.2d 896, 903 (3rd Cir. 1991), cert. denied, 503 U.S. 936,
112 S.Ct. 1473, 117 L.Ed.2d 617 (1992). Courts have frequently analogized
from the factory setting to other work settings. See, e.g., Dalheim v.
KDFW-TV, 918 F.2d 1220, 1226 (5th Cir. 1990) (producers, directors, and
assignment editors in a television station "produce" newscasts, and thus
are nonexempt workers); Cooper Elec., 940 F.2d at 903 (inside salesperson
whose primary duty is to sell the employer's products performs production
work); Gusdonovich v. Business Info. Co., 705 F. Supp. 262, 264-65
(W.D.Pa. 1985) (insurance claims adjustor who produces information for
the company's clients performs production work).
The distinction between "administrative" and "production" work is
illustrated by the case of Reich v. John Alden. In that case, the
Secretary of Labor sought to enjoin the John Alden Life Insurance Company
("John Alden") from violating FLSA's overtime requirements. The Secretary
argued that John Alden's marketing representatives were not exempt
administrative employees because they were engaged in
"production" rather than "administrative" activities. The district court
ruled in favor of John Alden, and the First Circuit agreed, finding that
John Alden was in the business of designing, creating, and selling
insurance policies to the public, and that the "products" created by the
company were the insurance policies themselves. Because the marketing
representatives were not involved in the design or generation of the
policies, they could not be considered "production" employees, and were
therefore exempt. The court also found that the day-today activities of
the marketing representatives were
more in the nature of "representing the company" and
"promoting sales" of John Alden products, two examples
of exempt administrative work provided by [29 C.F.R.]
§ 541.205(b) . . . As John Alden's primary contact
with the insurance market (via agent contacts),
marketing representatives represent the company by
keeping the market informed of changes in John Alden's
product offerings and pricing structure. Further by
advising agents as to which of John Alden's products
to market against competing products, and by helping
them to put together proposals for bidding on new
business, marketing agents are engaged in "something
more than routine selling efforts. . . ." Rather,
their agent contacts are "aimed at promoting . . .
customer sales generally," activity which is deemed
administrative sales promotion work under section
Reich v. John Alden, 126 F.3d at 9 (citations omitted).
The John Alden court distinguished the Third Circuit's decision in
Cooper Electric, where the court found that the salespeople for an
electrical parts wholesaler were nonexempt because they were "production"
employees. That is, because the company's primary purpose was to produce
sales of electrical products, the salespeople were engaged in generating
the very product that the company existed to market — the sales of
electrical products. The court explained that in John Alden, by
contrast, the insurance company actually produced a product of its own
— insurance policies — and did not exist merely to produce
sales of another company's policies. See id. In addition, in line with
the "servicing" component of the interpretive regulations, see
29 C.F.R. § 541.205 (b), the John Alden court agreed with the Third
Circuit's explanation that "servicing a business" entails "employment
activity ancillary to an employer's principal production activity." Id.
at 10 (citing Cooper Electric, 940 F.2d at 904).
The administrative exemption is further limited to employees who
perform work of "substantial importance to management or operations." Work
need not involve the formulation of management policies or the operation
of a business as a whole, however, in order to qualify as work of
Employees whose work is "directly related" to
management policies or to general business operations
include those [whose] work affects policy or whose
responsibility it is to execute or carry it out. The
phrase also includes a wide variety of persons who
either carry out major assignments in conducting the
operations of the business, or whose work affects the
business operations to a substantial degree, even
though their assignments are tasks related to the
operation of a particular segment of the business.
29 C.F.R. § 541.205 (c). Examples of such employees include those
holding positions in personnel administration, labor relations, and
research and planning, as well as those who provide assistance to
management officials in carrying out their executive or administrative
functions. See id.