Knapp v. Diestel Turkey Ranch CA5 ( 2022 )

Filed 12/20/22 Knapp v. Diestel Turkey Ranch CA5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
LISA OLMSTEAD KNAPP,
F082999
Plaintiff and Appellant,
(Super. Ct. No. CV62536)
v.
DIESTEL TURKEY RANCH, OPINION
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Tuolumne County. Kevin M.
Seibert, Judge.
Dumont Law Offices and Mary T. Dumont for Plaintiff and Appellant.
Jackson Lewis, James T. Jones and Dylan B. Carp for Defendant and Respondent.
-ooOoo-
Plaintiff and appellant Lisa Olmstead Knapp brought a lawsuit against defendant
and respondent Diestel Turkey Ranch (Diestel), alleging that her former employer
misclassified her as an exempt employee and therefore violated various provisions of the
Labor Code. She appeals from a June 14, 2021 judgment of the Tuolumne County
Superior Court entered in favor of Diestel. For the reasons set forth below, we affirm the
judgment.
FACTUAL AND PROCEDURAL HISTORY
I. Background
Headquartered in Sonora, Diestel raises, processes, and sells turkey products. Its
clients include Del Monte, Draeger’s, Jackson Whole Grocer, Lunardi’s, Market of
Choice, Newport Meat, New Seasons, Plymouth Poultry, Raley’s, Rock Island, Safeway,
Tony’s Fine Foods, and Whole Foods. Tony’s Fine Foods is Diestel’s main distributor.
In 2012, Knapp applied for a position at Diestel. She noted in her resume that she
“ha[d] been employed in the same field for over 30 years.” Specifically, Knapp worked
at Tambellini Meat Company between 1980 and 1990; Queen City Farms Produce
between 1990 and 1994 as “Assistant to the President”; Facciola Meat Company between
1995 and 2011 as “Director of Sales Service”; and Sysco in 2011 as “Meat and Seafood
Representative.” Thereafter, Knapp was hired by Joan Diestel (Joan), Diestel’s founder,
to be the director of quality assurance and customer service.1 The “Employment Offer”
letter stated that the job was “Full Time” and “Exempt” and paid an annual salary of
$70,000. Knapp’s direct supervisor was Heidi Orrock, née Diestel (Heidi), Joan’s
daughter and the wife of Diestel’s president Jared Orrock (Jared).2
1 Knapp’s job title varied throughout her employment.
2 For the sake of clarity, we refer to members of the Diestel and Orrock families
by their first names. No disrespect is intended.
2.
Prior to the hiring, Joan sent Knapp an e-mail dated March 15, 2012, summarizing
some of the latter’s forthcoming work duties:
“TOUCHING THE CUSTOMER
“-Acct Exec
“-Frequency of contact (visit, phone) established
“-Tasks—contacting decision maker, phone
“Contacting store/unit, phone
“NEW PRODUCT INTRODUCTION-Customer Side
“-Samples
“-Placement of product
“-Follow-up of sustained sales
“SAMPLES
“-send, confirm, follow-up, placement
“HOLIDAY SERVICE to Customers
“-worksheet/‘letters’
“-Holiday orders in, on schedule—it’s Thanksgiving all year long!
“-Customer delivery needs-date/time—customer drives the delivery
schedule
“-the ranch IS the Holiday Order Contact
“INVENTORY
“-address overstocks, [less than optimum], etc[.]—making sure all is
sold/handled
“NEW STORE OPENINGS
“-[Point of sale], trainings, demos, etc.
“Tony’s [Fine Foods] Communication
3.
“-facilitate with [Tony’s Fine Foods customer service] and sales
teams.”
On October 23, 2017, Diestel reclassified Knapp as a customer service
representative, a nonexempt employee. On November 17, 2017, Knapp resigned.
II. The complaint
In a complaint filed January 16, 2018, Knapp claimed that Diestel failed to pay
“compensation for overtime as required by law”; failed to provide “either uninterrupted
meal or rest breaks”; failed to provide “timely and accurate wage and hour statements”;
and engaged in “unlawful, unfair and fraudulent business practices.” In an answer filed
November 7, 2018, Diestel asserted—among other things—that Knapp’s complaint “is
barred, in whole or in part, to the extent [she] was exempt from such pay pursuant to the
exemptions contained in the applicable wage and hour laws . . . .”
III. Bench trial
a. Diestel’s affirmative defense
At the outset of trial, Diestel appeared to advance two separate exemptions:
(1) the outside sales exemption; and (2) the administrative exemption. Diestel’s counsel
later clarified that “[Diestel’s] position all along is that outside sales was a job title” and
“wasn’t the exemption”; instead, “[i]t’s [the] administrative exemption that [Diestel]
believe[s] applies here.”
b. Knapp’s testimony
Knapp testified that she performed the duties enumerated in Joan’s March 15,
2012 e-mail, save for inventory, trainings, and demonstrations. These duties essentially
remained the same until her resignation in 2017. Over the course of her employment,
Knapp managed many of Diestel’s major accounts, including those of Del Monte,
4.
Draeger’s, Newport Meats, Raley’s, Safeway, and Tony’s Fine Foods. She “didn’t do a
lot with production . . . .”3
Knapp provided a description of her typical workday in a response to an
interrogatory. It read:
“My typical days involved the following tasks: Answering phones, which
were either redirected or if a customer service issue addressed by me;
responding to emails from customers and sales representatives, doing
appropriate research to answer said emails; review Tony[’s] Fine Foods
sales report, respond to new customers therein, write thank you notes,
discuss with my manager, discuss back orders and other ordering issues
with appropriate personnel; responding to customer complaints, including
consulting with management on appropriate responses; log customer
complaints; log new customer inquiries, consult with management as to
follow up; update customer service contact lists daily; pack merchandise,
etc. for trade shows as approved by management; physically procuring and
preparing for shipment customer samples; prepared summaries for
management of promotional dollars spent weekly, new product sales, retail
slice sales, key account sales, major distributor accounts; prepared
promotional material for customers; in addition, I supported as needed all
other customer service employees and sales employees.”
At trial, Knapp elaborated further:
“Well, the first thing I would typically do in the mornings would be
to – I’d get an email from Tony’s Fine Foods, and it would show all the
sales for that day that went out. We would look to see if there was any – I
would look to see if there was any back orders for a customer, like if they
weren’t going to get what they ordered. That would give me time to call
the customer, let them know it wasn’t coming, because I don’t think Tony’s
called their back orders, let them know when it would be back in stock so
that – I mean, I could ask Casey Overmier[4] to check the inventory. I think
she was more into the inventory part, when it would be back in stock at
Tony’s.
3At trial, Jared testified that Diestel’s “production departments” “would be
everything from feed milling and live operations or turkey farming.”
4Overmier had been Diestel’s customer service manager. At the time of trial, she
was a customer service sales analyst.
5.
“I would look through it to see if there was anything that was new
that was sold, like, if a customer first time ever bought turkey tails. I had
thank-you cards with little feathers, so I would – and so I would write the
customer a thank-you note with a little feather saying we appreciate you
bringing a new item aboard.
“Then I would log those items on what I called my Diestel success
stories. So I would say New Seasons bought this for the first time ever. So
I would save all those so at the end of the month I could do a Diestel
success report for Heidi [Orrock]. It would have all of the stuff that I
gathered through the month, you know, that I sent out thank-you notes for.
And then Dan Dentone[5] would send me a list of everything that he did, all
the samples that he put out, what the customers’ feedback was. So that was
the end-of-the-month report on that duty. And that took generally a little
bit of time in the mornings.
“We did QC [quality control] calls. But that changed. I mean, we
did QC calls, but it changed between who was the customer service
manager at the time. Sometimes, like, I would do it A through Z, and
sometimes it would be, like, the top customers call first. Or sometimes they
would give us a list of customers, you know, call all the natural grocers. I
would do 50 calls. Robin [Decker] would do 50 calls. Occasionally I think
Pam [Thomson] helped out with those when we got a little behind, but not
often. It was usually just Robin and I doing all those sort of calls.[6]
“A lot of reporting. A lot of pulling Excel sheets for the regular
monthly stuff that we had to do. Then I had the other stuff I had, a report
for the new customer inquiry report, a sample report, the Diestel success
stories report, a distributor report, which shows all of our distributors, and
who was – I ranked them, like, 1 through 10 so that we could kind of see
who was winning the race. And then all of the year-over-year reports for
Heidi and Joan when they went out visiting customers like in the Pacific
Northwest or down to Newport Meat Company, any[]place that was, you
know, out of state or far away, big customers like Plymouth Poultry.
“Then there would be year-end meetings that Joan and Heidi would
go to for Lundardi’s [sic] restaurants because that was a big one for them.
New Seasons, Market of Choice. There’s a long list of larger customers
that they want and visited at the year end. [¶] . . . [¶]
5 Dentone was a Tony’s Fine Foods employee.
6 Decker and Thomson were customer service representatives for Diestel.
6.
“In between phone calls, constant phone calls. All the holiday – the
holiday was a big deal. Really, that was a huge deal because if you make a
mistake on a holiday order and you send out 200 oven-roasted turkey
breasts and they want oven-roasted turkeys, you’re going to be in trouble.
So that was a daily thing from the minute we sent those letters out and
started getting them back in January, that was constant. We had to call and
confirm this was what they wanted, did they want anything else. And they
would call all the time making changes throughout the whole year.”
Knapp acknowledged that her prior experience in the food industry helped her at
Diestel. She confirmed that—as part of her job—she made proposals to Heidi “regarding
how [she] would conduct business with Diestel’s customers . . . .” (Boldface omitted.)
Knapp could not recall an instance when Heidi, “the ultimate decision-maker,” refused
her suggestion.
c. Heidi’s testimony
Heidi testified that Knapp “really worked independently,” “had very little
oversight,” and “used, throughout her job, the majority of the time, discretion,
independent judgment, thoughtful, strategic thinking.” When asked about how Knapp
would “spend most of her time” (boldface omitted), Heidi stated that “ ‘manag[ing] all
distributor and independent accounts, daily and holiday needs’ ” was “a really big piece.”
She detailed:
“Distributor, whether that be to a retailer like a Tony’s Fine Foods or
whether that be to food service outlets like a Newport [Meat] or Del Monte,
right? This would be – this would be an entire trajectory, right? Your
distributors are some of your largest customers. Like, we sell the majority
of our pounds, you know, through these distributors because we’re not
running all of our own distribution. So we are not putting trucks – Diestel
is not filling up a truck and shipping it to our customers. The majority of it
is going through the distributor, right?
“So you talk about the manufacturer, who is Diestel, the distributor,
and then the wholesaler. So – and the retailer. So [Knapp] managed all of
the distributors for Diestel. Okay?
“Now, was she entering in their order on a weekly basis and billing
it out and, you know, managing every single [purchase order]? No, she
7.
wasn’t doing that. She was managing them from a very strategic
standpoint. She was talking with the executive levels, the buyers, the
coordinators within those accounts . . . to ensure that there was direct
communication, quick turnaround, great relationships, building our sales,
growing our market share within all of these distributors.
“She also did that with very specific independent accounts. So that
would be any category for our year-round products and production, from
prepared foods in the deli segment, to the meat segment, to the wall deli
segment, which, mind you, are three different people, three different buyers
and three different personalities. A meatcutter in the meat department, a
butcher, is going to be an entirely different person than a deli food service
coordinator, who is more chefy and talking about, you know, a brie ham
and arugula salad, okay?
“So there’s a lot of dynamics here. There’s a lot that she did. It
came second nature to her because she had a whole career of doing this;
but, nevertheless, [Knapp] was managing all distributors and independent
accounts on a daily and the holiday. [¶] . . . [¶]
“. . . [S]he would be taking – she would have phone calls set up with
customers to review programs, to review new programs, existing programs.
She would be, you know, working with, you know, the distributors, points
of contacts, if there were any issues with products or needs for, you know,
potential promotions, upcoming food shows. She would be working on
holiday logistics planning.
“You know, there was some internal work internally to ensure that if
she did set a promotion or she did make a great sale, you know, of a
specific product or program, that Pam [Thomson] and Richard [Rust7] at
the dock were actually executing that correctly. So she would have
interaction in this way.
“She would be generating sales data to analyze. So she would be
running sales reports to look at, to say year over year, month to month, how
are we doing? What’s performing? What isn’t? Where do I need to be
spending my time? I have my list of priorities; how do I need to shuffle
them around?
“She would be potentially entering, you know, and reviewing, like,
the spend, the ad spend, right? So she would get credit memos and debit
7 Rust worked at a Diestel’s processing plant in Chinese Camp.
8.
memos and say, okay, how much did we spend? How did this go? And
she’d be looking at that. She’d be logging it, and then she’d be looking to
say but was this effective? Is this a good use of time? So it’s a very –
“And then on the holiday – I guess I should finish – the holiday time
frame, depending upon what time of year it was, she could be heavy on
holiday work, where she’s, like, planning a lot for the holidays or – you
know, like March is usually when we get our first confirmation, and then
we start entering those orders. And so she would be doing that. She would
be receiving back the orders, which is a very important process, okay?
“Again, like, I know that it seems that it may not be to someone who
doesn’t do it, but if you do that receiving incorrectly and you
misunderstand your customers’ requests and demands, it goes into our
system incorrectly, it gets produced incorrectly, and then whether or not
you catch it, it could actually get delivered to a customer incorrectly.
“And the holidays are a really touchy piece of it. Because if you
mess up a holiday for a customer, they usually remember that and they
don’t necessarily want to be with you in the following year. It’s some of
the biggest orders that our customers write. It’s very important that these
things are correct.
“So depending on the time of year, on a daily basis, she could be
heavy into holiday or she could be really light on holiday and she could be
working on other program planning with her distributors or her independent
accounts.”
Heidi highlighted more of Knapp’s responsibilities. She specified how Knapp
“ ‘[m]anage[d] the holiday letter distribution process and ensure[d] completion of order
taking’ ”:
“This means that [Knapp] is managing the holiday letter distribution
process. So highly collaborative, internally speaking, with our IT team,
with our systems team, who, – you know, sometimes that bleeds into the
accounting team because he’s closest in on IT, and he helps us. And we’re
saying, hey, we need to pull all the letters. We need to generate all the
letters. We need to ensure that the letters are accurate, that the system
didn’t mess something up, and that the reference of their holiday order data
year over year is actually correct. We would need to determine the cut-off
times and days that were associated with the coming year. And [Knapp]
would be a part of that process.
9.
“Was she the person, you know, pressing the button? Probably not.
But was she integrally involved in this process? Yes.
“When the letters were developed, she would be spot-checking
everything and saying, okay, we’re good to go or we’re not good to go.
This doesn’t look accurate to me.
“If that was done incorrectly, you’re talking about a huge component
of the business, where the order data that you’re sending out to your
customers year over year would have been wrong. And, again, that’s
managing the holiday letter distribution process and ensures completion of
order taking . . . . That’s highly impactful in the success of the company
and in the orders that are to be coming into our company year over year that
we’re already planning for, right? Because turkeys take a long time to
grow. [¶] . . . [¶]
“So that’s like a very key gatekeeper process that, if it goes poorly, it
will impact, you know, the health – the customer relationship of the account
management of Diestel with their customers for that singular holiday.
[¶] . . . [¶]
“. . . [W]hat I’m saying is that it’s more than just a black-and-white
type of duty, okay? Because given the fact that it’s integral to the success
of the previous holiday, there’s a lot of collaboration between the
departments that have to happen in order for this function to be performed
because, as I said, we were trading out a lot of different programs and
platforms, and there were issues year over year. The letters were a whole –
were a whole situation.
“And then on top of that she would be determining the dates for the
time line of that next year. She would be authenticating that the data was
pulled correctly, that the orders were correct, which mind you, how would
– like, if you don’t recall, if you’re not really thinking, if you’re not, you
know, very articulate, you’re not going to be able to remember, you know,
so-and-so’s order from the previous year. So, you know, she was trusted to
really use her judgment and determine the authenticity of this process.
[¶] . . . [¶]
“. . . So from there, in order to determine the time line for the next
year, right – roughly we would say, okay, it’s going to be in March. It was
in March last time. But it’s also dependent upon – like, let’s take Easter,
for example. Easter is sometimes in April. It’s sometimes in March.
Easter is a holiday that we would plan for. So she wouldn’t just be able to
go look at what we did last year, pick a date out of random thin air, and
10.
stick it on the order letter. She would have to work with our production
team to say, ‘Hey, when is this happening? Do we have this product at this
time? If we confirm orders on this date, is that acceptable?’ Right? This
would be a very collaborative process. [¶] . . . [¶]
“. . . [A]s to who sent the letters, [Knapp] herself would send those
order letters out with a note that would describe, you know, the previous
year, you know, what new items were happening, any, you know,
relationship building that had happened over the previous year. ‘Hey, I felt
like this distribution logistics worked really well. I know that we want to
change this, that, and the other about how we service your account this
year,’ so on and so forth.
“So [Knapp] would not only ensure that the entire process happened
correctly, but then she would go and she would actually be sending and
selling, as you call it, managing this account to garner their order for the
coming year.”
Knapp also “set[] ads, promotions with customers”:
“So if [Knapp]’s going to set ads and promotions with customers,
then she’s going to have pulled sales reports to determine kind of a hit list
of target of customers that she thinks needs promotions, items or categories
that needs support and create promotional planners for either a quarter, a
few months, a year, what have you.
“So in order to effectively plan and execute and establish a
promotional schedule, you have to look back through previous history,
sales, sales kind of analysis of what promotions did we run in the previous
year, how effective were those, and what promotions do we want to run.
What are my goals for the customer, strategically and tactically speaking?
What are the customers’ goals?
“She would have had to have had multiple discussion with buyers,
executive levels, depending upon where she – who she was working with,
from a Jackson [Wh]ole Grocer to a, you know, buyer of Del Monte or
Rock Island or, you know, any of her distributors, and she would have had
to have done a lot of fact finding and discussion around what are your
goals? What do you want to accomplish this year? What are the sales
trends? What do we want to – what do we want to push? ‘Hey I’m
[Knapp]. I really want to have more of your deli case. I only have an oven-
roasted deli whole piece in this case, and I want smoked and honey and
peppered, and I want my competitor out. So what is it going to take for me
to earn that space in your set?’ Right?
11.
“I mean, so simply to do this task there would have been a lot of
discretion and judgment and thoughtful strategy planning in order to simply
set ads and promotions with customers.
“Now, does that mean every single customer would take this much
thought and effort and energy? No. Because she probably wouldn’t have
gotten through to every single customer, right? She carried a lot of weight.
It was, like, 20 percent of, you know, our customer set was just with
[Knapp]. And so there would be some customers that would be really easy,
‘Hey, we do this every year. It’s a rinse and repeat. Here we go. It’s
established.’
“But if she’s looking to grow our market share and maintain our
market share, a core goal of Diestel’s has been, you know, pretty much
every year to increase penetration within existing accounts, then you have
to actually strategically think about what are these promotions going to do
for me and my business with this customer? What’s the buy-in from the
buyer? How effective are they going to be? What’s the [return on
investment]? We’re not in the business of just giving away margin and
giving away sales dollars for the fun of it. And [Knapp] was tasked with
doing this. [¶] . . . [¶]
“. . . So we used a basis of 5 cents per pound, roughly, on any given
account. So depending upon their sales volume in pounds, we would, you
know, do a calculation of 5 cents per pound. If they were in that scope, that
was fine. If it was something that was going to get outside or grotesquely
exceed that, then in the case of [Knapp], you know, she would really be
giving her recommendations and saying, ‘Hey, if we want to win, if we
want to have this set – you know, I talked to this buyer. I think we need to
do this.’ And it would be a very collaborative conversation around, you
know, the promotional trajectory of a specific account that was outside of,
you know, the very fundamental rule of 5 cents [p]er pound. [¶] . . . [¶]
“Each year we would set a bit of a market strategy. We would set
goals that the company had for products or categories or segments of the
market that we wanted to own or dominate, and then we would set a
trajectory of promotional support, allowances, new item promotional
offerings. That would kind of ladder up to her work and her trajectory and
strategy that she was doing with her set of business.
“So, yes, there’s general guidelines, and then each year we would
kind of set a more umbrella-like strategy for our sales team, our customer
service and sales team. And then we would go and work within those
confines.
12.
“Now, [Knapp] was a highly collaborative individual. So she would
go out and work her accounts. She was very independent in that way. She
came from a career of industry knowledge, coming from Facciola and the
food service world. She had context. She knew not only the distributors
and the politics and the buyers within those distributors, but she knew the
distributors’ customers, all of the country clubs and food courts and how to
kind of work the system in order to get your products placed. And that’s
just the food service channel. So [Knapp] came to us with this huge basis,
probably at the time more than I even knew about that channel, and she was
using her discretion to determine how to win with Diestel in that market.
[¶] . . . [¶]
“. . . [A]ll of these channels require a different go-to-market strategy.
You can’t do in retail what you do in food service. You can’t do in food
service what you think you’re going to do in the online world. They’re all
different ways and different behaviors, different customer interactions,
different ways that you appear on shelf. Your digital strategy, your on-
shelf promotional or, you know, the way that you display on shelf, the
ability in a retail setting to cross-merchandise with a bread and a turkey,
versus food service, where you’re going to have a signature sandwich or a
chef’s special – it’s all very different and dynamic.
“And [Knapp] managed multiple channels, multiple sets of
customers, and had a lot of girth to devise kind of that go-to-market
strategy, if we’re talking about specifically just this one bullet point of
promotions and ads. [¶] . . . [¶]
“. . . So we talked earlier in the trial about a 5-cent accrual across
pounds for certain specific customers. [Knapp] would be able to take those
accrued funds and apply them to promotional endeavors with customers –
BOGO [buy one, get one free] deals, dollar off, 50 cents – to how she and
her customers would set their goals for that sales period. [¶] . . . [¶]
“. . . She would use those funds in a manner in which she saw fit. If
she wanted to go largely outside of the bounds of the kind of normalcy in
which we would conduct ourselves, she would then, you know, usually chat
with me about it. But, again, she used her discretion the majority of the
time. [¶] . . . [¶]
“. . . Newport Meat Company is a distributor in Southern California.
They buy 15 truckloads of turkeys at the holidays. They’re one of the
larger holiday customers, and they would – [Knapp] would coordinate their
point-of-sale material . . . to be literally sent down in a truck to them. And
13.
she would coordinate that and organize that and do that with her judgment
and discretion. [¶] . . . [¶]
“. . . It would be any of those: brochures, posters, shirts, hats, pens,
brochure holders. Like, anything that’s going to support the sale, support
the customer, support the way that the brand appears on shelf, that’s
promotional. [¶] . . . [¶]
“. . . [L]ike Newport, for example, there would be some crazy asks
of I need 500 hats. I need 300 hats. [¶] Okay. This is unreasonable.
We’re going to get you 100 or we’re going to get you a sleeve or, you know
– we can’t – we’re not in the business of, like, giving away thousands and
thousands of hats.
“But she would use her discretion, and if she felt it was important
that a certain sales rep within the Newport network received a specific
amount of hats for their new business, then she had the discretion to do
that.”
Knapp played a significant role at food shows, which occurred “at least once a quarter”
for “5 to 7 days”:
“Well, so [Knapp], prior to the food shows, would be contacting
customers, setting up appointments [for herself] with buyers, you know,
working to establish the promotional offerings that we might have at those
– in collaboration with me, establishing some of those promotional
activities.
“And then at the food shows she was, you know, a Diestel
representative, you know, conducting those meetings, having discussions
with the buyers about, you know, the products we were launching, items
that were coming out, holiday planning and logistics. Gosh, you know, the
promotional plans, offers, you know, trying to probably, you know, fish for
new – new customers that could be at the food show, creating industry
contacts. All of the above. Any function of, you know, being outward-
facing and trying to capture new sales, establish and increase our
penetration with existing customers. Any of these things. [¶] . . . [¶]
“. . . If it was a customer that [Knapp] would want me to sit in on
the meeting or sit in on the discussion, then, you know, she would let me
know, ‘Hey, this customer is coming. I think, Heidi, it would be really
important that you come by and say hello, talk with this customer,’ so then
I would be there.
14.
“But I would set up a lot of my own contacts and a lot of my own –
you know, I would do the same thing that [Knapp] was doing for these
shows.”
d. Jared’s testimony
Jared testified that Diestel’s mission is “to produce the highest-quality turkey
products available in the country” and “to deliver the highest level of service available in
the food business.” When questioned about Knapp’s job duties as an “outside sales
representative,” he answered:
“From my assessment, which, again, I don’t directly manage this
function and never managed [Knapp], my understanding in the company’s
expectations of her role was really as an account manager. So to us that
means she holds a very specific book of business. It includes distributors
and retail customers. And her responsibilities are to maintain those
relationships, maintain the sales, and grow the sales. So that’s holiday,
year-round. That’s across multiple channels, including food service and
retail grocery. And she is the primary point of contact for that book of
business 12 months of the year. [¶] And so that does include, in [Knapp]’s
case, traveling to meet with those customers to review prior period sales
activities and discuss strategies for growing business, both at Diestel and
with a given customer. [¶] . . . [¶]
“We believe she was exempt based on the entirety of her
responsibilities, which was high-level account management. That included
roughly 20 percent of our entire business. [¶] . . . [¶] . . . Account
management is – is total responsibility and accountability to our business
within specific accounts. [Knapp] happened to have a very substantial
book of business across multiple channels, including distributors and
retailers. And in our company her role would have been responsible for
everything having to do with that customer, from day-to-day interactions, to
sales strategies, to pricing negotiations, to promotional accrual/utilization,
holiday execution and planning. So she is the primary point of contact for
that customer. She’s accountable to our success and our brand success
within those outlets. [¶] . . . [¶]
“. . . Managing those accounts as it relates to [Knapp]’s role would
be maintaining that relationship, so often frequent communications, solving
problems for them, understanding their business and how Diestel fits into it,
understanding and kind of working with those customers on optimal
product mix, pricing, promotions, order fulfillment and fill rates. Also any
15.
problems and kind of quality or distribution challenges, [Knapp] would be
responsible for analyzing and solving those. She also would be responsible
for running reports, analyzing reports in order to strategize on the business
going forward and try to grow our business within those accounts.”
Jared added that—in connection with account management—Knapp “ ‘w[]ork[ed] with
production and outside sales to ensure quality and product consistency.’ ” (Boldface
omitted.) He explained:
“This is kind of the back end of account management, right? So
once – once you’ve made a sale, negotiated pricing, determined the
distribution process and assigned a distributor if necessary, if it’s not a
distributor and actually sold and delivered a product, then there is the
requirement in our case, right, where we’re attempting to make – to
produce the best products available and also to produce them consistently
and offer industry-leading fill rates. So this is the feedback loop side of it,
back end of account management, ensuring once all that was done the
product did arrive in good condition, good shelf life, the specs were met,
deliveries are consistent and on time and orders are filled. All those things.
“So seeking that feedback is the first step of that process. And then,
unfortunately, there are times where it’s not what we want, and so the
sales/customer service team needs to go back to the production and
operations team, share those concerns and coordinate with those teams to
get those issues rectified. And then once again kind of go back through that
process to ensure that once we think it’s corrected, in fact, it is, based on
customer feedback and follow-up.”
Regarding Knapp’s exercise of discretion and independent judgment, Jared
testified:
“I think probably the largest or most impactful example of that is both
pricing and promotional planning and strategies. And so she did have
discretion within her book of business to negotiate those pricing
considerations.
“She also had the authority to develop the strategy and execute
promotional programs within the company’s kind of set guidelines, which
are different today, but at the time and historically under Joan was really an
accrual system. So we would accrue X cents per pound sold to an account.
So as pounds sold grows, so too does that accrual of promotional dollars,
16.
which then can be deployed at the discretion of that account manager.[8] So
that, again, at the end of the year is a significant cost to our company. And
in [Knapp]’s role she would have had discretion over both of those
functions.
“And then another one here that jumps out, customer inquiries, all
new customer inquiries went through [Knapp]. So in a given week – you
know, I really don’t know how many new customer inquiries come
through, whether it’s by email or phone call. Those all would route through
to [Knapp], and it would be completely up to her discretion to vet those out,
elevate those that make sense – or may make sense to our company or take
different course of action if something really wasn’t a fit or didn’t make
sense for us.
“So, again, she was the gatekeeper there. So Heidi, myself, Joan,
nobody would ever see any of that without [Knapp] first making her own
assessment, appraisal of those, and sharing it out with the appropriate team.
And I think that, again, is another really critical area where discretion and
judgment were completely necessary.”
As to Knapp’s discretion “to change the prices” “within her book of business” (boldface
omitted), he remarked:
“It’s really a case-by-case basis, right? And so as an account
manager, whether it’s [Knapp] or Heidi . . . , it really has to be case by case,
and this is why a specific individual who is the primary point of contact is
responsible for that.
“In most cases – or in, I guess – at the highest level, right, the cost
accountants, our accounting team, sometimes myself will set target prices,
or a file price, we call it, or a list price. If you look at any given period, the
average sales price across 4- or 500 different items is almost never that file
or list price that was set by the accountants. And that’s because in each
scenario, in each account or each channel, there are different competitive
dynamics, different competitors, and different needs to price that
differently. So the same product in our business is certainly not line priced.
Customer A may pay – let’s say list price is $5. Customer A might pay
4.99, while customer B may pay 4.70
8 When questioned about the amount of promotional funds that Knapp had at her
disposal in 2017, Jared estimated a total of $100,000.
17.
“And so if you’re talking about a big variance, which I would say
4.70 off of a five-dollar item is a big variance to us, those are things we’re
going to want to know about and Heidi or myself or our cost accountants
are going to want to look at and determine if that’s good business. But
there’s no hard-and-fast rules, and it’s really driven by competitive
dynamics, as well as our willingness to reduce price based on strategic
needs. [¶] . . . [¶]
“[Knapp] was [a member of management]. She was – her role had
the discretion to make these decisions and we expected she would know
when to raise questions around anything up to a larger group or when to
just make decisions and execute.”
e. Testimony of Casey Kerns
At the time of the trial, Kerns was Diestel’s human resources and safety
coordinator. Although he and Knapp worked in different departments, he was familiar
with her duties. Kerns testified:
“[O]utside sales has really evolved for us as a company. [Knapp] was truly
our first outside sales rep. And since then we’ve branched out and we have
more, but [Knapp] was the first one that was still part of our customer
service department, was the one that was out meeting with new customers
and developing new business and developing strategies within existing
customers to grow existing business. [¶] . . . [¶] . . . So as the outside sales
rep, she’s out meeting with clients . . . . But also, as any reasonable person
would know, the work doesn’t just start and stop when you’re meeting with
a client. It’s – there’s a ton of preparation work, developing marketing
materials, developing strategic planning. All of that goes into it. So I don’t
know how much time she would spend on all of that. [¶] . . . [¶]
“. . . The account management of her customers. I can’t speak to the
number of accounts or how big or the sales of those accounts. It’s not part
of my duties. But she was absolutely critical to our business, handling a lot
of these accounts entirely on her own. [¶] . . . [¶] . . . Again, I’m not in her
department so I can’t tell you, like, you know, how her day goes; but,
generally speaking, in the management of these accounts you’re taking
phone calls from the – you know, the buyers of some of these big grocery
store chains or multistate chains. You are discussing current business.
You’re upselling for future business or other products. You’re – you know,
you’re trying to grow their business, grow our business. You’re out on the
floor at times, showing product samples. You’re – again, there’s other
folks that could speak much better to this, but, you know, like when – for
18.
example, when the head buyer of one of those stores calls they’re calling
for [Knapp] specifically because she’s in charge of that account. [¶] . . . [¶]
“. . . I think she was critical to the strategic planning of future sales
and growing current business. [¶] . . . [¶] . . . So she would collaborate
with the owners of Diestel on, you know, the best – the best way for us to
grow our business. And part of that was based on, you know, her extensive
history in the meat business. [¶] . . . [¶]
“. . . So to my knowledge she managed our distributors, which then
had a certain number of retailers per distributor, and then she also had a
high number of large retail accounts herself. So, yes, a regular customer
service rep might take an order for 15 turkeys, where [Knapp] would
facilitate a full order of, like, 15 truckloads of turkeys. [¶] . . . [¶] . . . [S]he
was in charge of those large-quantity sales. But not just the sales, the entire
customer relationship. [¶] . . . [¶] . . . [S]he handled [large] account[s] in
[their] entirety. She was the face of the company to th[ose] customer[s].
She set pricing. She set the strategy going forward. She facilitated the
entire thing. She had the discretion to do that.”
Kerns pointed out that “a regular customer service representative would not have the
discretion to send samples to try and make a sale,” but Knapp was able to “send[]
samples for a customer to try before they worked out a deal.”
IV. The superior court’s ruling
In a statement of decision filed April 27, 2021, the superior court concluded that
“Diestel properly classified Ms. Knapp as an exempt employee under the administrative
exemption.” The statement read:
“California law presumes employees are non-exempt and are entitled
to overtime compensation. [Citations.] On the other hand, properly
classified exempt employees are not entitled to overtime pay. An
employer’s claim that an employee was properly classified as an exempt
employee constitutes an affirmative defense. Because Diestel relies on its
classification of Ms. Knapp as an exempt employee in its defense to Ms.
Knapp’s claims, Diestel has the burden of proving that Ms. Knapp was an
exempt employee.
“In order to meet its burden of proof on the affirmative defense,
Diestel was required to show at trial that Ms. Knapp earned at least twice
the California minimum wage (often referred to as the ‘salary test’) and that
19.
Ms. Knapp spent more than half of her time performing exempt duties.
Initially, Diestel relied on two claims of exemption: exempt outside sales
and the administrative exemption. However, Diestel abandoned the outside
sales exemption claim early on in the trial. The parties both acknowledge
that Diestel satisfied the salary test requirement. The focus of the trial,
therefore, was whether Diestel could establish that Diestel properly
classified Ms. Knapp as non-exempt under the administrative exemption.
“The applicable California Wage Order establishing the
administrative exemption requires that each of the following apply in order
for an employee to be exempt:
“1. The employee’s duties and responsibilities must involve the
performance of office or non-manual work directly related to
general operations of his or her employer or his or her
employer’s customers;
“2. The employee must customarily and regularly exercise
discretion and independent judgment;
“3. The employee must regularly and directly assist a proprietor
or another employee in bona fide executive or administrative
position or who performs under only general supervision
special assignments and tasks[9]; or
“4. The employee must execute under only general supervision
special assignments and tasks; and
“5. The employee must be primarily engaged (more than 50% of
the time) in duties that meet the test of exemption
“[Citations.]
“Both sides acknowledge that Ms. Knapp worked in conjunction
with Diestel’s customer service department. They also agree that her job
was to facilitate sales of Diestel’s products. The agreement of the parties
ends there.
“[Knapp] attempted at trial to establish that she was more of a
clerical/production type employee. [Knapp]’s case minimized Ms. Knapp’s
9 The court’s recitation of this element of the administrative exemption mistakenly
substituted the phrase “special assignments and tasks” for “work along specialized or
technical lines requiring special training, experience, or knowledge.” (See at p. 27, post.)
20.
exercise of judgment and the significance of her role as the face of Diestel
Turkey with large customers and distributors.
“Diestel offered the testimony from Heidi Diestel, Casey Kerns,
Jared Orrock and through cross-examination of Ms. Knapp in an attempt to
demonstrate that she spent a large majority of her time performing account
management duties with very limited supervision. Diestel emphasized that
Ms. Knapp exercised her own direction and independent judgment as she
engaged in account management duties with customers. Several witnesses,
including Heidi Diestel and Jared Orrock, testified that Ms. Knapp played a
critical role in managing a significant portion of Diestel’s business and in
strategic planning for expanding Diestel’s market. The evidence showed
that Ms. Knapp used independent discretion in her work managing
Diestel’s largest and most important accounts, which accounted for
approximately twenty percent (20%) of Diestel’s annual business. The
evidence showed that as the account manager she played a significant role
in pricing decisions and negotiations, developing sales strategies and
holiday season execution and planning. Numerous witnesses emphasized
that Diestel hired Ms. Knapp in large part due to the fact that she had
specialized and significant experience in the meat industry, and had
developed an ability to manage these accounts with only very general
supervision. In addition, the evidence showed Diestel assigned Ms. Knapp
special projects such as overseeing the holiday order process and Diestel
provided very little supervision on that front. Ms. Knapp’s supervisors
testified that these types of special projects were critical to Diestel’s success
as a company. The evidence showed that Ms. Knapp controlled in large
measure how she spent her time at work. Diestel management personnel
also testified that Ms. Knapp had a certain amount of discretion with regard
to promotional activity and that she had the delegated authority to discount
pricing for customer accounts she controlled.
“Among the tasks that Ms. Knapp performed were meeting with new
customers, developing new business, and developing strategies to grow
existing business. Testimony elicited at trial established that Ms. Knapp
was not simply a regular customer service sales person. She had the
assignment to handle entire customer relationships on behalf of Diestel.
She set pricing to some extent, developed strategies in maintaining and
increasing the business with various customers and handled those customer
accounts in their entirety. Diestel gave her discretion not given to other
customer service representatives, such as discretion to send out samples to
customers or potential customers. Ms. Knapp worked on a daily basis with
Diestel’s main distributor, Tony’s Fine Foods. Ms. Knapp was also
involved with pricing negotiations, accrual and use of promotion funds, and
21.
was the primary contact for many customers of Diestel. Ms. Knapp was
involved in preparing for and conducting marketing for Diestel at food
shows.
“According to the testimony of Heidi Diestel, Ms. Knapp was in
charge of making choices regarding creating promotional offers and
strategically planning an order to increase sales and promote Diestel
products. Diestel relied on Ms. Knapp’s specialized knowledge and
experience in dealing with distributors and customers of its distributors to
get Diestel products placed in a variety of settings. Ms. Knapp managed
customers who worked with Diestel’s distributor Tony’s Fine Foods to be
sure that the distributor was providing good service to those customers.
“[Knapp] testified that she did not really do production work. She
also testified that she managed all distributor and independent accounts
daily and holiday needs [citation]. The evidence also established that she
managed customer complaints and made business-related proposals to her
supervisor, which were always accepted and acted upon to increase sales.
Mr. Orr[o]ck similarly testified that [Knapp] maintained good relationships
with her accounts, grew sales across multiple channels, was the main point
of contact with a large percentage of Diestel’s main customers and
independently managed a promotional budget. [Citation.]
“Based upon the evidence presented, the Court finds that [Knapp]
spent more than 50% of her work time performing exempt duties, including
both assisting the proprietor relating to the general business operations of
Diestel and Diestel’s customers and performing work under only general
supervision that required specialized training. In performing these tasks
[Knapp] exercised discretion and judgment.”
Given Knapp’s exempt status, the court did “not make findings on the overtime and meal
break claims.” Judgment was entered on June 14, 2021.
DISCUSSION
I. Overview of relevant law
“California law provides that, absent an exemption, an employee must be paid
time and a half for work in excess of 40 hours per week. To be exempt from that
requirement the employee must perform specified duties in a particular manner and be
paid ‘a monthly salary equivalent to no less than two times the state minimum wage for
full-time employment.’ ” (Negri v. Koning & Associates (2013) 216 Cal.App.4th 392,
22.
394, quoting Lab. Code, § 515, subd. (a).) “The Labor Code authorizes the Industrial
Welfare Commission (IWC) to establish [such] exemptions . . . .” (Semprini v. Wedbush
Securities, Inc. (2020) 57 Cal.App.5th 246, 251.)10 “[T]he IWC has promulgated 17
different wage orders that apply to distinct groups of employees.” (Combs v. Skyriver
Communications, Inc. (2008) 159 Cal.App.4th 1242, 1253 (Combs); see Cal. Code Regs.,
tit. 8, §§ 11010-11170.) In the instant case, the pertinent wage order is IWC Wage Order
No. 4-2001 (Wage Order No. 4), which is codified in title 8 of the California Code of
Regulations and titled “Order Regulating Wages, Hours, and Working Conditions in
Professional, Technical, Clerical, Mechanical, and Similar Occupations.” (See Cal. Code
Regs., tit. 8, § 11040; see also id., subd. 2(O) [nonexclusive list of jobs within Wage
Order No. 4’s ambit].)
California Code of Regulations, title 8, section 11040, subdivision 1(A) “provides
that portions of [Wage Order No. 4]—including provisions relating to overtime pay, meal
and rest periods and wage statements—do not apply to ‘persons employed in
administrative, executive, or professional capacities.’ [Citations.]” (Soderstedt, supra,
197 Cal.App.4th at p. 145; see Dailey v. Sears, Roebuck & Co. (2013) 214 Cal.App.4th
974, 979.) Subdivision 1(A)(2) sets forth the “Administrative Exemption”:
“A person employed in an administrative capacity means any employee:
“(a) Whose duties and responsibilities involve either: [¶] (i) [t]he
performance of office or non-manual work directly related to
management policies or general business operations of his/her
employer or his[/her] employer’s customers; or [¶] (ii) [t]he
10“ ‘ “The IWC, established by the Legislature in 1913, was the state agency
authorized to formulate the regulations, or wage orders, that govern employment in
California. [Citation.] In fulfilling its broad statutory mandate to regulate wages, hours,
and working conditions of California employees, the IWC acted in a quasi-legislative
capacity. [Citation.] Although the IWC was defunded effective July 1, 2004, its wage
orders remain in effect. [Citation.]” [Citation.]’ [Citation.]” (Soderstedt v. CBIZ
Southern California, LLC (2011) 197 Cal.App.4th 133, 145, fn. 1 (Soderstedt).)
23.
performance of functions in the administration of a school system, or
educational establishment or institution, or of a department or
subdivision thereof, in work directly related to the academic
instruction or training carried on therein; and
“(b) Who customarily and regularly exercises discretion and
independent judgment; and
“(c) Who regularly and directly assists a proprietor, or an employee
employed in a bona fide executive or administrative capacity . . . ; or
[¶] (d) [w]ho performs under only general supervision work along
specialized or technical lines requiring special training, experience,
or knowledge; or [¶] (e) [w]ho executes under only general
supervision special assignments and tasks; and
“(f) Who is primarily engaged in duties that meet the test of the
exemption. The activities constituting exempt work and non-exempt
work shall be construed in the same manner as such terms are
construed in the following regulations under the Fair Labor
Standards Act effective as of the date of this order: 29 C.F.R.
Sections 541.201-205, 541.207-208, 541.210, and 541.215.[11]
11 The language of California Code of Regulations, title 8, section 11040,
subdivision 1(A)(2)(f) “expressly incorporates certain [Fair Labor Standards Act]
regulations effective as of the date [Wage Order No. 4] was issued” (Combs, supra, 159
Cal.App.4th at p. 1254), i.e., January 1, 2001 (Harris v. Superior Court (2011) 53 Cal.4th
170, 177, fn. 1). “Effective August 23, 2004, the [federal Department of Labor] revised
the [Fair Labor Standards Act]’s implementing regulations governing certain exemptions
from the [federal] minimum wage and overtime pay requirements, including the
exemption for any employee employed in a bona fide administrative capacity.” (Combs,
supra, at p. 1255, fn. 5.) “The purpose of the 2004 revisions . . . was to ‘simplify, clarify
and better organize the regulations defining and delimiting the exemptions for
administrative, executive and professional employees.’ [Citation.]” (Soderstedt, supra,
197 Cal.App.4th at p. 150; see Simmons, Wage and Hour Manual for Cal. Employers
(25th ed. 2022) § 10.3(a)(7) [“Many provisions of these regulations will aid in the
interpretation of California law. The mere fact that the Wage Orders cite provisions of
the federal regulations that existed on October 1, 2000 should not alter this conclusion.
Indeed, many features of the updated federal regulations do not change the prior
standards; rather, they offer helpful clarifications and embellishments that address
modern-day work settings based upon principles enunciated in judicial and administrative
interpretations of the prior regulations.”].) Thus, courts may rely on the revised federal
regulations in interpreting Wage Order No. 4’s administrative exemption. (Soderstedt,
supra, at p. 150.)
24.
Exempt work shall include, for example, all work that is directly and
closely related to exempt work and work which is properly viewed
as a means for carrying out exempt functions. The work actually
performed by the employee during the course of the workweek must,
first and foremost, be examined and the amount of time the
employee spends on such work, together with the employer’s
realistic expectations and the realistic requirements of the job, shall
be considered in determining whether the employee satisfies this
requirement.
“(g) Such employee must also earn a monthly salary equivalent to no
less than two (2) times the state minimum wage for full-time
employment. . . .” (Cal. Code Regs., tit. 8, § 11040, subd. 1(A)(2);
accord, Combs, supra, 159 Cal.App.4th at p. 1254.)
“[T]he assertion of an exemption from the overtime laws is considered to be an
affirmative defense, and therefore the employer bears the burden of proving the
employee’s exemption.” (Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 794-
795.)
II. Analysis
a. Contrary to Knapp’s assertion, the superior court did not concoct a new
“hybrid” administrative exemption.
On appeal, Knapp contends that “[t]he trial court’s decision is based on an
incorrect statement of the law.” She explains:
“The trial court in setting forth the applicable standard borrowed
elements from a distinct type of administratively exempt employee, one
who executes special assignments and tasks under only general
supervision[] [citation] and added this as alternative to the required element
that the employee directly assist a proprietor or exempt executive or
administrative employee as specified in the Wage Order. [Citations.] The
test as set forth by the Wage Order provides, ‘(c) [an employee] who
regularly and directly assists a proprietor, or an employee employed in a
bona fide executive or administrative capacity.’ [Citation.] This is a
mandatory element. The trial court in setting forth the applicable law stated
this requirement as an alternative: ‘The employee must regularly and
directly assist a proprietor or another employee in bona fide executive or
administrative position or who performs work under only general
supervision special assignments and tasks.” [emphasis added.] The test as
25.
set out by the trial court could be satisfied by an employee who either
directly assists a proprietor ‘or who performs under only general
supervision special assignments or tasks.’
“There is no such exemption. The statement of the applicable law as
set forth by the trial court completely scrambles the analysis and makes it
impossible to know what the trial court did. The applicable law as set out
by the trial court creates a new hybrid exemption: an employee who has
duties administering the business or who performs specialized assignments
under general supervision. The trial court further confounds the question
when it then lists as an apparently distinct exemption an employee who
executes under only general supervision special assignments and tasks.
[Citation.] It is impossible to say from its Statement of Decision how these
various standards were applied in this case.”
“We review the trial court’s interpretation of statutes and regulations de novo.”
(Combs, supra, 159 Cal.App.4th at p. 1253.) “As quasi-legislative regulations, wage
orders are to be construed in accordance with the ordinary principles of statutory
interpretation. [Citation.] ‘The fundamental purpose of statutory construction is to
ascertain the intent of the lawmakers so as to effectuate the purpose of the law.’
[Citation.] To determine that intent, the court turns first to the words, attempting to give
effect to the usual, ordinary import of the language and to avoid making any language
mere surplusage. [Citations.] When the language is clear, we must apply that language
without further interpretation. [Citation.] ‘If there is no ambiguity in the language of the
statute, “then the Legislature is presumed to have meant what it said, and the plain
meaning of the language governs.” ’ [Citation.]” (Singh v. Superior Court (2006) 140
Cal.App.4th 387, 392.)
The pertinent regulatory language shows that the administrative exemption has
five elements. First, the employee’s duties must involve “[t]he performance of office
or non-manual work directly related to management policies or general business
operations of his/her employer or his[/her] employer’s customers . . . .” (Cal. Code
Regs., tit. 8, § 11040, subd. 1(A)(2)(a)(i).) Second, the employee must “customarily and
regularly exercise[] discretion and independent judgment . . . .” (Id., subd. 1(A)(2)(b).)
26.
Third, the employee must either “regularly and directly assist[] a proprietor, or an
employee employed in a bona fide executive or administrative capacity . . . or [¶] . . .
perform[] under only general supervision work along specialized or technical lines
requiring special training, experience, or knowledge; or [¶] . . . execute[] under only
general supervision special assignments and tasks . . . .” (Id., subd. 1(A)(2)(c)-(e), italics
added.) Fourth, the employee must be “primarily engaged in duties that meet the test of
the exemption.” (Id., subd. 1(A)(2)(f).) Finally, the employee “must also earn a monthly
salary equivalent to no less than two (2) times the state minimum wage for full-time
employment.” (Id., subd. 1(A)(2)(g).)
The wording as to the third element is clear and unequivocal: said element may be
established in one of three different ways. (See White v. County of Sacramento (1982) 31
Cal.3d 676, 680 [“[U]se of the word ‘or’ in a statute indicates an intention to use it
disjunctively so as to designate alternative or separate categories.”].) Thus, the
regulatory language undercuts Knapp’s argument that the third element could only be
satisfied upon proof that she regularly and directly assisted a proprietor or an employee
employed in a bona fide executive or administrative capacity.12
b. Substantial evidence supports the superior court’s judgment in favor of
Diestel.
“Whether an employee satisfies the elements of [an] exemption is a question of
fact reviewed for substantial evidence.” (Heyen v. Safeway Inc. (2013) 216 Cal.App.4th
12 As noted, the court’s recitation of the third element of the administrative
exemption substituted the phrase “special assignments and tasks” for “work along
specialized or technical lines requiring special training, experience, or knowledge.” (See
ante, fn. 9.) Knapp also points this out. This mistake, however, is not the crux of her
argument. In any event, the error appears to be clerical since the statement of decision’s
factual findings referred to Knapp’s “specialized knowledge and experience” and her
assigned “special projects.” (Cf. Squier v. Davis Standard Bread Co. (1919) 181 Cal.
533, 536-537 [the possibility that the jury could have been misled by an instruction’s
improper use of “the” instead of “a” was remote in view of the totality of the
instructions].)
27.
795, 817; see Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513
[“Under the general rules applicable to a trial court’s statement of decision, an appellate
court . . . applies the substantial evidence standard to findings of fact.”].) “Thus, our
authority begins and ends with a determination whether, on the entire record, there is any
substantial evidence—that is, of ‘ “ponderable legal significance,” ’ reasonable, credible
and of solid value—contradicted or uncontracted, which will support the judgment.” As
long as there is such evidence, we must affirm. [Citation.]” (Nordquist v. McGraw-Hill
Broadcasting Co. (1995) 32 Cal.App.4th 555, 561.) “Moreover, when . . . the evidence is
in conflict, the appellate court will not disturb the findings of the trial court. The court
must consider the evidence in the light most favorable to the prevailing party, giving that
party the benefit of every reasonable inference and resolving conflicts in support of the
judgment.” (Ibid.; see Holt v. Ravani (1963) 221 Cal.App.2d 213, 215 [“The credibility
of the witnesses, as well as all the conflicts in the evidence, were the exclusive province
of the trial court.”].)
On appeal, Knapp does not dispute that the “salary test” set forth in California
Code of Regulations, title 8, section 11040, subdivision 1(A)(2)(g) was satisfied. (See
Combs, supra, 159 Cal.App.4th at p. 1263.) Instead, she challenges the court’s findings
as to the remaining elements of the administrative exemption. We conclude substantial
evidence supports these findings.
i. Duties and responsibilities involving the performance of office or
non-manual work directly related to Diestel’s management
policies or general business operations
“To qualify for the administrative exemption, an employee’s primary duty must be
the performance of work directly related to the management or general business
operations of the employer or the employer’s customers.” (29 C.F.R. § 541.201(a)
(2022).) “To meet this requirement, an employee must perform work directly related to
assisting with the running or servicing of the business, as distinguished, for example,
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from working on a manufacturing production line or selling a product in a retail or
service establishment.” (Ibid.; see Palacio v. Progressive Ins. Co. (C.D.Cal. 2002) 244
F.Supp.2d 1040, 1047 [“[A]n employee who negotiates with clients and settles damage
claims on behalf of an employer engages in duties consistent with the servicing of a
business even though those activities can be viewed as ancillary to the provision of a
good or service.”].)13
The record—viewed in the light most favorable to Diestel—demonstrates that
Knapp handled accounts that comprised of approximately 20 percent of the company’s
business on a daily basis. Her management of these accounts helped Diestel maintain or
grow its market share. As the clients’ primary point of contact, Knapp directly
communicated with their representatives: she delivered product samples, negotiated
pricing, developed sales strategies, established promotions, evaluated product quality,
and oversaw holiday orders, among other things. Knapp generated sales reports, which
she used to analyze product performance and prioritize areas in need of improvement.
She offered recommendations to her superiors—such as deviating from the company’s
standard five-cents-per-pound accrual system to increase promotional funds for a
particular client—and such recommendations were typically accepted. (See Smith v.
Johnson & Johnson (3d Cir. 2010) 593 F.3d 280, 285 [“[The plaintiff’s] non-manual
position required her to form a strategic plan designed to maximize sales in her
territory.”]; Palacio v. Progressive Ins. Co., supra, 244 F.Supp. 2d at p. 1047 [“The
evidence establishes that [the plaintiff] was ‘advising the management, planning,
negotiating, [and] representing’ [the defendant] throughout her employment and
generally ‘servicing’ the business.”].) Knapp also headed the holiday letter distribution
process. (See 29 C.F.R. § 541.203(c) (2022) [“An employee who leads a team of other
13 Federal law interpreting Fair Labor Standards Act exemptions that are similar to
state law exemptions at issue is properly considered as persuasive authority. (See United
Parcel Service Wage & Hour Cases (2010) 190 Cal.App.4th 1001, 1015.)
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employees assigned to complete major projects for the employer . . . generally meets the
duties requirements for the administrative exemption, even if the employee does not have
direct supervisory responsibility over the other employees on the team.”].) Substantial
evidence supports a finding that Knapp’s work “satisfied the ‘directly related to the
management or general business operations of the employer’ provision of the
administrative employee exemption because it involved a high level of planning and
foresight, and the strategic plan that [she] developed guided the execution of her . . .
duties.” (Smith v. Johnson & Johnson, supra, 593 F.3d at p. 285.)
ii. Regular exercise of discretion and independent judgment
“To qualify for the administrative exemption, an employee’s primary duty must
include the exercise of discretion and independent judgment with respect to matters of
significance. In general, the exercise of discretion and independent judgment involves
the comparison and the evaluation of possible courses of conduct, and acting or making a
decision after the various possibilities have been considered. The term ‘matters of
significance’ refers to the level of importance or consequence of the work performed.”
(29 C.F.R. § 541.202(a) (2022).)
“The phrase ‘discretion and independent judgment’ must be applied in the light of
all the facts involved in the particular employment situation in which the question arises.
Factors to consider when determining whether an employee exercises discretion and
independent judgment with respect to matters of significance include, but are not limited
to: whether the employee has authority to formulate, affect, interpret, or implement
management policies or operating practices; whether the employee carries out major
assignments in conducting the operations of the business; whether the employee performs
work that affects business operations to a substantial degree, even if the employee’s
assignments are related to operation of a particular segment of the business; whether the
employee has authority to commit the employer in matters that have significant financial
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impact; whether the employee has authority to waive or deviate from established policies
and procedures without prior approval; whether the employee has authority to negotiate
and bind the company on significant matters; whether the employee provides consultation
or expert advice to management; whether the employee is involved in planning long- or
short-term business objectives; whether the employee investigates and resolves matters of
significance on behalf of management; and whether the employee represents the
company in handling complaints, arbitrating disputes or resolving grievances.” (29
C.F.R. § 541.202(b) (2022).)
“The exercise of discretion and independent judgment implies that the employee
has authority to make an independent choice, free from immediate direction or
supervision. However, employees can exercise discretion and independent judgment
even if their decisions or recommendations are reviewed at a higher level. Thus, the term
‘discretion and independent judgment’ does not require that the decisions made by an
employee have a finality that goes with unlimited authority and a complete absence of
review. The decisions made as a result of the exercise of discretion and independent
judgment may consist of recommendations for action rather than the actual taking of
action. The fact that an employee’s decision may be subject to review and that upon
occasion the decisions are revised or reversed after review does not mean that the
employee is not exercising discretion and independent judgment.” (29 C.F.R.
§ 541.202(c) (2022).)
The record—viewed in the light most favorable to Diestel—demonstrates that
Knapp exercised discretion and independent judgment with respect to matters of
significance in the performance of her duties. She identified areas of need—e.g.,
advertising, promotions—and set priorities based on her analysis of a client’s sales data
and goals. Knapp decided how to expend promotional funds, which could total up to
$100,000 in a single year. She advised her superiors on business concerns in light of
competitive dynamics, such as increasing a particular client’s promotional funds. Knapp
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negotiated pricing, responded to complaints, and was in charge of the holiday letter
distribution process. In addition, as part of her job, she vetted inquiries by prospective
clients. Knapp’s decisionmaking was informed by her industry experience and
connections. (See 29 C.F.R. § 541.202(e) (2022) [“The exercise of discretion and
independent judgment must be more than the use of skill in applying well-established
techniques, procedures or specific standards described in manuals or other sources.”].)
iii. Categorization requirement
To qualify for the administrative exemption, an employee must fall into one of the
following three categories: (1) he or she “regularly and directly assists a proprietor, or an
employee employed in a bona fide executive or administrative capacity”; (2) he or she
“performs under only general supervision work along specialized or technical lines
requiring special training, experience, or knowledge”; or (3) he or she “executes under
only general supervision special assignments and tasks.” (Cal. Code Regs., tit. 8,
§ 11040, subd. 1(A)(2)(c)-(e).)
The record—viewed in the light most favorable to Diestel—demonstrates that
Knapp reported directly to Heidi, the daughter of Diestel’s founder Joan and the wife of
Diestel’s president Jared. When appropriate, Knapp advised and/or consulted with Heidi
and/or Jared. Her ability to independently manage her accounts, which included many of
Diestel’s major accounts, was buttressed by her extensive industry experience; in fact, it
may be reasonably inferred from the record that this experience was vital to her hiring.
Finally, Knapp was entrusted with special assignments and tasks—including the holiday
letter distribution process and quarterly food shows—with little or no oversight.
Substantial evidence supports a finding that Knapp was within the ambit of at least one of
the three categories set forth under California Code of Regulations, title 8, section 11040,
subdivision 1(A)(2)(c) through (e).
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iv. Primary engagement in duties that meet the test of the exemption
To qualify for the administrative exemption, an employee must be “primarily
engaged in duties that meet the test of the exemption.” (Cal. Code Regs., tit. 8, § 11040,
subd. 1(A)(2)(f).) “ ‘Primarily’ . . . means more than one-half the employee’s work
time.” (Id., subd. 2(N); accord, Lab. Code, § 515, subd. (e).)
Here, Heidi testified that Knapp spent most of her time on the job performing
exempt duties related to account management. “A single witness’s testimony may
constitute substantial evidence to support a finding.” (Thompson v. Asimos (2016) 6
Cal.App.5th 970, 981.)
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to defendant and
respondent Diestel Turkey Ranch.
DETJEN, J.
WE CONCUR:
HILL, P. J.
SNAUFFER, J.
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