Court Overturns DLSE on Administrative Exemption for Computer Professionals

In the case of Eicher v. Advanced Business Integrators, Inc. (ABI), a California Court of Appeals helped to define what types of positions are covered under California's Administrative Exemption.  There are very few cases that cover computer professionals that reach the appellate court level, which makes this case very important. 

The case is also interesting because it shows the problems with taking such a case to the Division of Labor Standards Enforcement, also known as the California Labor Board. The employee, Eicher, worked as a  "Senior Consultant" for ABI in which he regularly visited customer sites to help them implement and troubleshoot ABI's automated payroll software.  He also trained people on how to use the software, once it was installed.

The Labor Board ruled against the employee.  There is a common misconception that the Labor Board is "pro employee."  This is simply not the case.  Especially in complex cases involving the technology field, the Labor Board is anything but "pro employee."  The problem created by a loss at the DLSE is that if the employee appeals an unfavorable decision and looses, he will be required to pay the other side's attorney fees.  Fortunately, the employee won in this case, and the employer had to pay his $40,000 attorney fee bill.  However, had he lost, he likely would have been devastated by having to pay their bill.

In any case, the court held that the Administrative Exemption was not applicable in this case because the employee was not engaged in "non-manual work directly related to management policies or general business operations of ABI or its customers."  In an important part of the analysis, the court held :

While he was required to learn of the customers’ management policies and business operations in the course of his work, in order to ensure that the product met the needs of the customers, he did so only to implement the software in the most beneficial way for the customers and not to participate in policy-making or alter the general operation of the business.

This is a crucial determination, as defense attorneys have been using this mis-interpretation of the exemption for years.  The court clearly ruled that the administratively exempt employee must participate in policy-making or alter the general business operations -- not simply install and configure software.

The court went on to specifically reject that the "[i]nstallation and troubleshooting are also exempt administrative activities." 

The court concluded: "Eicher was an employee who engaged in the core day-to-day business of ABI. He had no personal effect on the policy or general business operations of ABI or its customers."  Which has been my position on the Administrative Exemption for Computer Professionals for some time.

Comments

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This is a crucial determination, as defense attorneys have been using this mis-interpretation of the exemption for years. The court clearly ruled that the administratively exempt employee must participate in policy-making or alter the general business operations -- not simply install and configure software.

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[Employment Law Manchester]

Cant see why they should be exempt

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Why is it such a crucial determination?