Reber v. AIMCO/Bethesda Holdings, Inc.

Administrative Exemption

Key Issue: (1) Whether construction project managers performed duties “directly related to management policies or general business operations” of the defendant; and (2) Whether construction project managers “customarily and regularly exercise[] discretion and independent judgment” on “matters of significance.”  See 29 C.F.R. section 541.202.

Court: United States District Court, Central District of California

Exemption(s) Analyzed: Administrative Exemption

Law(s) Applied: California Labor Code, Industrial Welfare Commission Wage Order 5-2001, 29 C.F.R. section 541.202

Job Position(s) Analyzed: Construction Project Managers

Analysis: The court had a hard time trying to apply the restrictions of the administrative exemption to these plaintiffs. The court made many remarks that lawyers will likely be using for a long time to come to support their position in administrative exemption cases. Here’s what the Court had to say about the two main issues:

Work Directly Related to Management Policies or General Business Operations

The Court made these observations about the administrative exemption in this context:

  • “Conducting detailed property inspections to determine necessary repairs and replacements seems akin to a building inspector or a ‘grader.’ It involves using construction expertise to apply standard criteria — i.e. whether the property needed repair.”
  • “Soliciting bids from contractors might involve the general business of AIMCO, particularly where it involved specific contacts known to Reber and Dunnington. However, Reber and Dunnington also selected contractors based on a standard book used in the industry known as the ‘blue book.’ Further, although recommending a contractor could be administrative, Reber testified that it was always based on one objective factor: who the lowest bidder was.”
  • “[P]roviding detailed estimates is administrative.”
  • “After AIMCO created a budget, Reber and Dunnington walked through the sites with business managers to create a ‘plan of attack’ for completing repairs within budget. This sort of planning is part of the general business of AIMCO.”
  • “[A]ssuring that contractors met milestones in a timely manner seems to be an issue of scheduling versus the sort of “quality control” identified in the Regulations. See Copas v. East Bay Municipal Utility Dist., 61 F. Supp. 2d 1017, (N.D. Cal. 1999) (‘the responsibility of ensuring that outside contractors performed their work correctly [does] not transform” a job into an administrative position.’)”
  • “[P]aying contractors and vendors, determining whether projects were complete, and handling change orders, are all the sort of day-to-day operations not classified as administrative.”
  • Negotiating invoices is directly related to business operations.
  • “Taking contractors on walks at the construction site and providing information about the projects does not seem to involve management or general business. Nor does assuring that the projects are completed on schedule and within budget or reporting the same to AIMCO.”
  • “However, evaluating contractors and making recommendations does. Likewise, developing ‘punch-lists’ is a planning activity apparently related to general business. Negotiating invoices is also business-related.”

Exercising Discretion and Independent Judgment

The Court made these observations about the administrative exemption’s requirement that the employee exercise discretion and independent judgment:

  • “[I]nspecting a property and determining what needs repair or replacement seems to involve merely ‘the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources.’ 29 C.F.R. § 541.202.”
  • “Applying their construction know-how to determine whether properties need repair is not an exercise of discretion, it is an exercise of skill.”
  • “Soliciting bids from contractors that are personal contacts involves discretion and independent judgment. Soliciting bids from contracts in the ‘blue book’ does not. Likewise, selecting from among a number of bids could involve discretion and independent judgment. However, simply selecting the lowest bid involves no discretion or independent judgment.”
  • “Dealing with problems that arise on site could involve discretion, but merely assuring that work is properly and promptly completed does not. Nor does checking whether certain milestones have been completed or issuing checks to contractors.”
  • “Evaluating and recommending contractors involves discretion. Explaining projects to contractors does not.”