In an unpublished opinion, Abarca v. JK Residential Services, Inc.., No. B256488 (June 26, 2015), the California Court of Appeal, Second Appellate District, recently affirmed a trial court order rejecting a residential property manager’s misclassification and overtime claims.

The plaintiff, Flor Abarca, was responsible for the operation of 11 to 13 apartment buildings with a total of 400 to 500 units. Her duties included serving as the contact between the building managers and the company’s corporate office, supervising building managers and maintenance workers, setting employees’ schedules, approving vendor requests, interviewing potential employees, determining and enforcing disciplinary actions, and providing the human resources department with hiring and firing recommendations.

JK Residential Services, Inc. paid Abarca a monthly salary in excess of the exempt employee threshold (her monthly salary was no less than two times the state minimum wage for full-time employment). At certain times, however, Abarca was required to perform nonexempt building manager duties when a property was without a building manager. According to the evidence provided at trial, the need for Abarca to cover these tasks did not eliminate the need for her to complete her supervisory responsibilities, which generally accounted for 80 percent of her time.

Initially, Abarca made misclassification and overtime claims to the labor commissioner, who found in her favor and awarded approximately $50,000 in damages.  JK Residential Services, Inc. appealed the award to the Superior Court of California in the County of Los Angeles, de novo. After a bench trial, the trial court found that Abarca was indeed an exempt employee and not entitled to the compensation sought under a misclassification theory, thus entering a judgment in favor of JK Residential Services, Inc. Abarca appealed.

The Court of Appeal affirmed the lower court’s decision, finding that Abarca’s job duties fell under the Industrial Welfare Commission’s executive exemption. Specifically, the Court of Appeal found that the evidence demonstrated that Abarca did in fact have supervisory duties—including exercising discretion and independent judgement over a variety of matters—even though at times she performed nonexempt tasks and coordinated with human resources or her own supervisors on decision-making. The court affirmed the trial court’s decision as the majority of Abarca’s job duties were well within the Labor Code’s executive exemption definition.

Practical Impact

According to Keith A. Watts, Managing Shareholder of the Orange County office of Ogletree Deakins, “While Abarca in this case attempted to establish that she was no longer exempt because she performed some non-exempt duties, the court found that the performance of occasional non-exempt duties does not an exempt employee make. The plaintiff’s attempt to make an end run around the exemption under the Wage Orders because she performed non-exempt duties—by her own admission only 20 percent of the time—was met with the appropriate skepticism by the court. The practical impact here is that employers may continue to rely on the quantitative analysis established by previous court precedent, whereby an employee would have to, on average, perform non-exempt duties more than half the time before being able to claim they were misclassified and the overtime exemption destroyed.