>Question: I seem to recall that, in California, maybe the nation overall,
>the (or one) defining distinction is whether or not an employee actually
>creates a product from which the company makes a profit. Anyone ever heard
>about this or seen a reference to it?
1. The Administrative-Production Dichotomy
Subsection 541.205(b) of the interpretations offers the following definition of "administrative" work:
The administrative operations of the business include the work performed by so-called white collar employees engaged in "servicing" a business as, for example, advising the management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control.
However, applying the administrative-production dichotomy is not as simple as drawing the line between white-collar and blue-collar workers. On the contrary, non-manufacturing employees can be considered "production" employees in those instances where their job is to generate (i.e., "produce") the very product or service that the employer's business offers to the public. See, e.g., Reich v. New York, 3 F.3d 581, 587-89 (2d Cir. 1993), cert. denied, 510 U.S. 1163 (1994) (police investigators conduct or "produce" criminal investigations); Dalheim, 918 F.2d at 1230-31 (television station's producers, directors, and assignment editors "produced" newscasts, and were thus non-exempt).
Applying this distinction, the district court held that the marketing representatives were engaged in administrative rather than production activities, a finding in which this Court joins. As stated in the stipulation of facts, John Alden is in the business of designing, creating, and selling insurance policies to the public. It follows, as the district court properly recognized, that the "products" generated by John Alden are these insurance policies themselves. As the marketing representatives are in no way involved in the design or generation of insurance policies, the very product "that the enterprise exists to produce and market," Dalheim, 918 F.2d at 1230, they cannot be considered production employees.
In its arguments both to the lower court and on appeal, the Secretary has urged that the Third Circuit's decision in Martin v. Cooper Electric Supply Co., 940 F.2d 896 (3d Cir. 1991), cert. denied, 503 U.S. 936 (1992), compels the conclusion that the employees at issue here are production employees. However, both the district court and John Alden have properly distinguished Cooper Electric from the instant case. The company at issue in Cooper Electric was a wholesaler that did not manufacture any products of its own, but instead sold products made by other firms. Id. at 903. Thus, the parties stipulated that the wholesaler's primary business purpose was to produce sales of electrical products. Id. Since the employees at issue in Cooper Electric, the company's salespeople, worked to generate the very product that the company existed to market -- sales of electrical products -- the Third Circuit concluded that they were non-exempt production employees. Id. at 903-04. Of course, the facts of Cooper Electric are clearly distinguishable from this case, as John Alden does indeed generate a product, insurance policies, not merely sales of a product.
In an attempt to answer this argument, the Secretary points out that the stipulation of facts describes John Alden's business purpose as the design, creation, and sale of insurance policies. Thus, the Secretary contends that, in addition to the production of insurance policies, John Alden also produces sales, and that any employee engaged in the generation of sales should be deemed non-exempt under the logic of Cooper Electric.6 However, Cooper Electric itself provides an effective counter. In discussing the "servicing" component of the Secretary's interpretations, see 29 C.F.R. § 541.205(b), the Third Circuit explained that "servicing a business" entailed "employment activity ancillary to an employer's principal production activity." Cooper Electric, 940 F.2d at 904 (emphasis in original). In the instant case, the activities of the marketing representatives are clearly ancillary to John Alden's principal production activity -- the creation of insurance policies -- and therefore could be considered administrative "servicing" within the meaning of section 541.205(b).
As the district court noted, the day-to-day activities of marketing representatives are more in the nature of "representing the company" and "promoting sales" of John Alden products, two examples of exempt administrative work provided by § 541.205(b) of the interpretations. As John Alden's primary contact with the insurance market (via agent contacts), marketing representatives represent the company by keeping the market informed of changes in John Alden's product offerings and pricing structure. Further, by advising agents as to which of John Alden's products to market against competing products, and by helping them put together proposals for bidding on new business, marketing representatives are, again to quote Cooper Electric, engaged in "something more than routine selling efforts focused simply on particular sales transactions." Id. at 905. Rather, their agent contacts are "aimed at promoting (i.e., increasing, developing, facilitating, and/or maintaining) customer sales generally," id. (emphasis in original), activity which is deemed administrative sales promotion work under section 541.205(b). Therefore, there was no error in the district court's finding that John Alden's marketing representatives are engaged primarily in administrative rather than production work.
http://www.law.emory.edu/1circuit/sept97/97-1053.01a.html