Litigating California Wage & Hour and Labor Code Class Actions

production role—a concept referred to as the “administrative/production dichotomy.” 34
In doing so, the court examined FLSA regulations and case law that draw a
distinction between “administrative work” which can qualify as exempt work under the
exemption and “production work” which cannot qualify. 35
Because Farmers Insurance Exchange was the claims subsidiary of Farmers Group,
performing adjusting services for a variety of underwriting entities within the group,
and because Farmers Group provided administrative support to Farmers Insurance
Exchange, the court held that the work of adjusters was inherently production of
Farmers’ product (insurance adjusting), which rendered them ineligible for the
exemption regardless of their duties. 36 In a more recent published decision from the
same Bell case, the court declined to reconsider its earlier holding on this point. 37
Both these decisions left open the possibility that an insurance adjuster that did not
work for a special claims adjusting subsidiary insurance company might still qualify
for the exemption.
Bell was decided under the pre-2000 version of the Wage Orders, which did not
expressly incorporate the FLSA’s regulations on its administrative exemption. Given
that the current version of the IWC regulations expressly incorporates the federal
administrative exemption regulations, and given that numerous federal decisions
have refused to apply Bell’s reasoning to FLSA insurance adjuster cases, 38
employers have at least a colorable argument that Bell is not good law for cases
arising since 2001. Moreover, the 2004 amendments to the FLSA regulations, which
purport merely to clarify and to update what the FLSA has always required, state that
insurance adjusters can be covered by the administrative exemption “whether they
work for an insurance company or another type of company.” 39 Several federal
34
35
36
37
38
39
Id. at 811-12.
See, e.g., Dalheim v. KDFW-TV, 918 F.2d 1220, 1230 (5th Cir. 1990) (“The distinction § 541.205(a) draws is between
those employees whose primary duty is administering the business affairs of the enterprise from those whose primary
duty is producing the commodity or commodities, whether goods or services, that the enterprise exists to produce and
market.”).
Bell, 87 Cal. App. 4th at 823-28. Although the court specifically held that it did not need to look at the duties test, it
noted that the undisputed evidence showed that the adjusters at issue simply acted as claims processors with little
authority or discretion.
Bell v. Farmers Ins. Exch. (Bell III), 115 Cal. App. 4th 715 (2004).
See, e.g., Miller v. Farmers Ins. Exch., 481 F.3d 1119 (9th Cir. 2007) (criticizing Bell’s interpretation of the
administrative/professional dichotomy and finding insurance adjusters categorically to qualify as exempt employees); In
re Farmers Ins. Exch., 336 F. Supp. 2d 1077, 1087-88, 1091 (D. Or. 2004) (rejecting notion that Farmers’ adjusters
were non-exempt “production” workers regardless of whether they met the other requirements of the administrative
exemption; refusing to apply Bell to a case under the FLSA).
29 C.F.R. § 541.203(a). The current regulations still require an adjuster to meet the duties test to qualify as exempt,
which requires the adjuster to perform such activities as “interviewing insureds, witnesses and physicians; inspecting
property damage; reviewing factual information to prepare damages estimates; evaluating and making
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