19-Year Wage-and-Hour Case Offers Warning on Exempt Classification

A California wage-and-hour case nearly two decades in the making is headed back to the trial court after an appeals court in May reversed a $43 million judgment against an employer, offering HR professionals a stark reminder of both the complexity of employee classification and the extraordinary cost of getting drawn into prolonged class litigation.

In Cortina v. North American Title Co., the California Court of Appeal ordered the case decertified as a class action and remanded the named plaintiffs’ individual claims for retrial. The court said the trial court improperly rejected the employer’s exemption defenses on a classwide basis and committed other procedural errors, including conducting an unauthorized reference proceeding. The trial court may consider a new motion to certify the previously certified exempt class on remand. 

The decision comes 19 years after the original complaint was filed in 2007. The litigation involved approximately 700 current and former employees of North American Title Company (NATC), divided into classes of workers the company had classified as exempt and nonexempt. 

After years of proceedings — including testimony from more than 230 class members — the trial court entered a judgment of roughly $43.5 million against NATC in 2022. More than half of that amount consisted of prejudgment interest. 

Toolkit: Complying with California Wage and Hour Laws 

A Costly Win for the Employer

Although the appellate decision erased the $43 million judgment for now, the extraordinary length of the dispute illustrates that ultimately prevailing on a major issue does not eliminate the business costs of litigation.

“The Cortina case underscores that even employers with meritorious defenses can face enormous costs — here, a $43 million judgment that stood for years before being reversed,” said Adam Karr, an O’Melveny & Myers attorney who represented NATC in the case. 

For HR, he said, prevention begins well before a lawsuit is filed.

“Proactive, well-documented classification practices are the best protection against protracted litigation,” Karr said, “because the cost of defending even a winning case over nearly two decades is itself a significant business risk.”

Sample Policy: California Employee Classification Policy

Why Individual Duties Mattered

At the heart of the dispute was whether employees working in several escrow-related positions qualified for exemptions from California overtime requirements.

That distinction is particularly important in California. Under the state’s wage rules, qualifying for executive or administrative exemptions depends in part on an employee being “primarily engaged” in exempt duties. California generally defines that as spending more than half of working time on qualifying work and directs employers to examine the work employees actually perform, along with the realistic expectations and requirements of the job. 

The appeals court concluded that the lower court’s approach failed to adequately account for differences among workers. The exempt class encompassed employees with multiple job titles who worked at more than 80 offices in 23 California counties over a decade. Evidence showed variation in how individual employees spent their working time. 

That makes documentation especially important. “The most critical documentation captures what employees actually do day-to-day — not just their job title or a generic job description,” Karr said.

He recommended detailed and regularly updated job descriptions, time-and-task records, documentation of supervisory responsibilities such as hiring and performance-evaluation authority, and records demonstrating employees’ exercise of discretion and independent judgment.

“As the Court of Appeal emphasized, exemption defenses are inherently individualized,” Karr added, meaning “HR teams should maintain documentation that can demonstrate, on an employee-by-employee basis, that each person’s actual duties satisfy the applicable exemption criteria.”

Specialty Credential: California Law HR

Titles Aren’t Enough

The case also highlights the danger of assuming a professional-sounding or managerial title automatically makes an employee exempt.

“The biggest red flag is a disconnect between the job title and the work actually performed,” Karr said. “HR professionals should look closely at whether employees spend more than half their time on duties that are genuinely managerial, administrative, or otherwise exempt — rather than routine or production-level tasks.”

Other warning signs include applying a blanket classification to employees whose responsibilities differ substantially or failing to reconsider classifications as positions evolve, he said.

For employers, that means classification audits should look beyond organizational charts and written job descriptions. Interviews with employees and managers, reviews of actual workflows and regular reassessments as responsibilities change can help determine whether workplace reality still matches the exemption on paper.

Cortina also demonstrates what can happen when those individual realities become the subject of classwide litigation. The appellate court stressed that when common evidence cannot establish misclassification, courts cannot simply extrapolate from the experiences of a subset of workers to everyone else without a reliable methodology. 

For HR departments, the practical lesson is straightforward: classification should not be treated as a one-time decision made when a position is created. The more closely an employer’s records reflect what employees actually do, the better positioned it may be to defend those classifications years — or, as Cortina demonstrates, potentially decades — later.