California Administrative Exemption Inapplicable

Eicher v. ABI contains a thorough analysis of the administrative exemption to overtime law.

Here are the facts from the opinion:
ABI owns the rights to ABI MasterMind software . . . ABI’s primary business is
to sell the software . . . , implement the software for the customer, train the
customer, and provide additional support. During the implementation phase, ABI typically sends its employees to the customer’s site to install and train the customer, based on the specific needs of that customer. . . . Hired as a consultant, Eicher eventually became a senior consultant. His college degree was in sociology, not computer science. He spent half of his time in the office and the other half on-site
at customers’ venues. Eicher primarily provided customer service and training on the ABI MasterMind software. He did not hire or fire employees, negotiate contracts with customers, or consult with ABI or its customers about business policies and practices. . . . Concerning Eicher’s duties as an employee of ABI, the trial court found that Eicher “devoted the majority of his work time in training customer employees on MasterMind and troubleshooting the software when he was engaged in implementation on the customer’s site. [Eicher] also spent time gathering information about the customers’ employment practices and entering data into the appropriate fields of the MasterMind program. [Eicher] testified that he spent the
majority of his time, when in [ABI’s] office, performing customer service work. The remainder of his time was spent on individual training and administrative duties.
So, Eicher was exempt, right? Wrong. The court noted that he was a "production" employee, involved in implementing ABI's core business. He did not affect policy at the customer or his employer. He simply customized the ABI software for the customer's use.

The court did not entertain ABI's argument that Eicher qualified under the administrative exemption because he “carr[ies] out major assignments in conducting the operations of the business, or whose work affects business operations to a substantial degree.” ABI did not make that argument at the trial court and did not support it with evidence, the court of appeal said.

The moral: The administrative exemption is not a catch all for all office-based work. Also, if the employee is generating revenue for the business, chances are the administrative exemption will not apply. Where does this decision leave lower level consultants assigned to work on customers' projects? (Watch your backs consultant firms. There be sharks in these waters).