Verdict Forms are Key in Executive Exemption Cases

A California appellate court recently overturned a jury verdict finding a Jack in the Box manager was misclassified under the executive exemption. The court found one question on the jury verdict form was too narrow in that it implied that the relevant inquiry on exemption status is a mere quantitative calculation. Rodriguez v. Parivar, Inc. (Cal. Court of Appeals, First Appellate District, Division 4, September 26, 2022).

The case was brought by plaintiff Patricia Rodriguez, a Jack in the Box manager, who alleged she was misclassified as an exempt employee and was therefore entitled to overtime wages and meal and rest breaks. Her employer, a Jack in the Box franchisee, contended that Rodriguez was properly classified as an exempt employee under the executive exemption.

One key element of the executive exemption is whether an employee is primarily engaged in duties that meet the test of the exemption. While this element comes from a California Wage Order and corresponding California regulations, the order and regulations incorporate the applicable federal regulations as they were in effect on the date the order and regulations were put into place. Thus, courts must interpret the federal regulations regarding the executive exemption as they existed in 2001.

The California regulations make clear that while the exemption requires employees to perform exempt duties more than half of the time the analysis is more complex than a mere quantitative assessment. Certainly the first, and seemingly most important, consideration is how the employee actually spends their time. But the finder of fact must also consider whether the employee’s practices diverge from the employer’s realistic expectations, whether the employer concretely expressed displeasure over the employee’s substandard performance and whether that expression was realistic given the overall requirements of the job.

Additionally, a jury must examine the work the employee performs to determine the extent to which that work is exempt. Under the applicable federal regulations, managerial and supervisory tasks are clearly exempt, but tasks that are “directly and closely related” to those functions are also exempt. For example, cashier work would traditionally be considered non-exempt. However, if a manager was acting as a cashier to train an employee or cover for an employee that unexpectedly did not show up for work, that task may be exempt. The jury must thus consider not only the frequency with which the employee performs certain work, but whether the character of that work falls within the exemption.

At the conclusion of Rodriguez’s trial, the jury was given a special verdict form that asked a single question with respect to the duties she performed—whether Rodriguez “performed exempt duties more than half of the time.” When the jury answered “no,” the Jack in the Box franchisee appealed on the basis that the verdict form question was too narrow. In particular, the employer believed the jury should have been asked an additional question—whether the employer reasonably expected Rodriguez to perform exempt duties more than half of the time.

On appeal, the court agreed with the employer that the verdict form was fatally defective. However, the court was clear that the special verdict form could not have been cured with the employer’s proposed additional question. This was because such a verdict form would have suffered from a similar flaw as the original verdict form—it would have impermissibly insinuated that the jury only had to consider two discrete questions to determine whether the plaintiff met the exemption. Given that an employee’s ultimate exemption status depends upon several subsidiary factual considerations, any verdict form that fails to “encompass as subsidiary issues all required elements” of the affirmative exemption defense is impermissible. The court therefore stated that a proper verdict form would have asked whether Rodriguez had “performed duties which met the test of the exemption more than half of the time.” Such a question would have made it clear that the jury was required to examine her work in the broad context of the exemption guidelines, rather than merely calculate the number of hours she had worked on various tasks.

The court ultimately determined that the special verdict form’s error was prejudicial because the issue of exempt duties and the employer’s expectation was not only a hotly contested issue, but a close decision for the jury. The jury’s verdict was 9-3, meaning that a slight change in the verdict form could have convinced even one juror to change their mind and the case would have turned out differently.

Given the appellate court’s decision, employers defending misclassification lawsuits should pay special attention to the verdict form. When proposing a special verdict form, ensure the questions adequately encompass all of the factual determinations the jury must make. In the event the court approves a verdict form that is too narrow or overly broad, it is critical to preserve arguments for appeal.

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