In a case of major significance for California employers, the California Supreme Court issued its decision in Ramirez v. Yosemite Water Company, Inc., 1999 Daily Journal D.A.R. 6065 (June 17, 1999). At issue before the Supreme Court was the question of whether or not Peter Ramirez, the plaintiff, who delivered bottled water to business and residential customers, was exempt from overtime under Labor Code Section 1171, which expressly excludes from the overtime laws those employees who are "outside salespersons."
In holding that the lower courts were wrong in concluding that Ramirez was exempt from California.s overtime requirements, the State Supreme Court made a major distinction between the "Outside Sales" exemption under the Federal Fair Labor Standards Act and the same exemption under California law. Specifically, the court held that California Wage Order No. 7-80, which defines "outside salesperson" as any person ". . . 18 years of age or over, who customarily and regularly works more than half the working time away from the employer.s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities," created a purely quantitative test for exempt status. The court said that the wage order focused solely on whether the employee ". . . works more than half . [of his or her] . . working time . . . selling . . . or obtaining orders or contracts." The Supreme Court contrasted the California overtime exemption provision with the federal exemption that provides for overtime exemption if the employee.s "primary function" is the making of sales or the taking of orders.
Also of great importance is the fact that the court.s opinion in Yosemite Water is not limited to the overtime exempt status of outside salespersons. This is so because the court.s interpretation of the California Wage Orders suggests that it would also apply a quantitative test in deciding the exempt status of executive and administrative employees under the so-called "white collar" exemption provisions of California law. For example, California.s mercantile Wage Order No. 7-98, 8 California Code of Regulations ' 11070, provides an overtime exemption for persons employed in "executive," "administrative," and "professional" capacities. The exemption is limited to employees engaged in work which is "primarily" intellectual, managerial or creative and involves the use of discretion and independent judgment. The Wage Order defines "primarily" as " . . . more than one half the employees. work time . . ." A footnote in the Court.s opinion in Yosemite Water indicates that the Court regards the white collar exemption test as being a "quantitative" test. The Court also distinguished the California overtime exemptions from the federal exemptions, which are based on a so-called "primary duty" test.
The decision in Yosemite Water is clearly a loud "wake up call" for California employers who rely upon either the outside salesperson or the so-called "white collar" exemptions from California.s overtime requirements to carefully analyze the exempt status of those employees in light of the pure "quantitative" tests articulated by the Supreme Court. The Court.s opinion raises questions as to how the test is to be applied; the role of outside salespersons. travel time; the effect of job descriptions describing "exempt" duties; and the effect of the employee.s failure to properly adhere to such descriptions. The language used by the Court in discussing these important issues suggests that California employers can take steps to enhance their chances of preserving the exempt status of outside sales and managerial employees. The steps employers must take will turn on a careful analysis of the Court.s opinion and a careful application of the principles discussed by the Court to the jobs in question.
This article was originally published as a Labor & Employment Update (July 1999), a Sheppard, Mullin, Richter & Hampton LLP publication.