Tag Archives: Exemptions

D.Mass.: SAFETEA-LU Does Not Apply Retroactively To Bar Claims Of Employees Who Drive Vehicles Of Less Than 10,001 Lbs.

Benoit v. Tri-Wire Engineering Solutions, Inc.

The parties filed cross-motions for partial summary judgment on the issue of the applicability of the Motor Carrier Act (“MCA”) exemption as a defense to Plaintiffs’ complaint which seeks to recover unpaid overtime from August 10, 2005, to the present. The issue was the retroactive applicability of the SAFETEA-LU Technical Corrections Act of 2008 (“SAFETEA-LU”).  Addressing numerous arguments from both Plaintiffs and Defendants, the Court concluded that SAFETEA-LU does not apply retroactively.

Plaintiff filed the instant complaint on December 11, 2007, and since then at least 125 additional technicians have filed consent-to-sue forms. On or about June 5, 2008, the court granted Plaintiffs’ motion for preliminary recognition of this case as a FLSA collective action and established a discovery schedule. Coincidentally, on the very next day, June 6, 2008, the FLSA was amended in a manner potentially applicable here, i.e., it called into question whether a long-standing overtime exemption for employers of light-weight vehicle drivers-the MCA exemption-should retroactively apply to August 10, 2005. Accordingly, on October 15, 2008, the court entered a new scheduling order which allowed the parties to file cross-motions for partial summary judgment addressing that issue. The motions were filed and the court heard oral argument on March 26, 2009. In deciding in Plaintiffs favor the Court discussed the nature of the SAFETEA-LU amendments and their affect on the FLSA and the MCA:

“On August 10, 2005, however, Congress passed the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (hereinafter “the SAFETEA-LU”).Pub.L. No. 109-59, 119 Stat. 1747 (2005). Among other things, the SAFETEA-LU narrowed the definition of a “motor carrier” to include only “person[s] providing commercial motor vehicle (as defined in section 31132) transportation for compensation.”49 U.S.C. § 13102(14) (emphasis added). In turn, the “commercial motor vehicle” definition required that the vehicle have “a gross vehicle weight rating or gross vehicle weight of at least 10,001 pounds, whichever is greater.”49 U.S.C. 31132(1) (emphasis added). The practical effect of this amendment-i.e., the narrowing of the MCA exemption to include only operators of motor vehicles weighing more than 10,000 pounds-was that qualified employees who operated light-weight vehicles were entitled, apparently for the first time, to overtime pay under the FLSA.

On June 6, 2008, however, the SAFETEA-LU was enacted. Pub.L. No. 110-244, 122 Stat. 1572 (2008). Among other things, the SAFETEA-LU, in section 305, re-amended the definition of “motor carrier” by striking the word “commercial” and, hence, restoring the definition to its pre-SAFETEA-LU state. Id. § 305(c), 122 Stat. at 1620. The effective date of this part of the SAFETEA-LU, however, is a bit unclear. Accordingly, the court focuses its analysis on the question of whether section 305 applies retroactively to August 10, 2005.

Defendant argued that section 305 of the SAFETEA-LU is an amendment “to the SAFETEA-LU” and that, according to subsection (b) of section 121, it should apply retroactively beginning August 10, 2005. As Plaintiffs argued, however, a close look at the text of section 305 reveals that it is not an amendment to the SAFETEA-LU. Rather, it is an amendment to a portion the United States Code that was created by the ICC Termination Act of 1995. See generally Vidinliev, 581 F.Supp.2d at 1288-90.

Perhaps more importantly for purposes of statutory construction, the court agrees with the following point made in Vidinliev: “If the definition of motor carrier in section 305 applies retroactively, then the one-year defense in section 306 is nothing more than surplusage.” Id. Or, put another way, “applying section 305 retroactively would violate the rule that a statute should be ‘interpreted so that no words shall be discarded as meaningless, redundant, or mere surplusage.’ ” Id. (quoting United States v. Canals-Jimenez, 943 F.2d 1284, 1286 (11th Cir.1991)). See also Wood v. Spencer, 487 F.3d 1, 7 (1st Cir.2007) (”It is common ground that all words and provisions of statutes are intended to have meaning and are to be given effect.”) (citation, alteration and internal quotation marks omitted). Other courts have come to this very conclusion, i.e., “to suggest that the court interpret § 121 in a way that renders the safe harbor in § 306 a nullity is at odds with basic rules of statutory construction.” Tews, 592 F.Supp.2d at 1349 n. 8 (citing Mountain States Tel. & Tel. Co. v. Pueblo of Santa Ana, 472 U.S. 237, 249 (1985)).See, e.g., Villegas, 2008 WL 5137321, at *21 n. 9 (”As this Court must presume that [all the] words of statutes are intended to have meaning, the Court will conclude that § 305 does not apply retroactively, and § 306 provides a one-year defense to liability.”); Veliz, 2008 WL 4911238, at * 6 (”For the one-year defense in Section [306(c) ] to have any relevance, Section 305(b) cannot apply retroactively.”).See also Hernandez v. Brink’s, Inc., 2009 WL 113406, at *7 (adopting reasoning of Vidinliev ); Loyd, 2008 WL 5211022, at *8 (following reasoning of both Vidinliev and Veliz );Horn v. Digital Cable & Communications, Inc., No. 1:06 CV 325, slip op. at 8-10 (N .D.Ohio Nov. 18, 2008) (following Vidinliev to hold that “Section 306 of the [TCA] undermines retroactivity finding”). And the Supreme Court recently reiterated, “one of the most basic interpretive canons [is] that ‘a statute should be construed so that effect is given to all of its provisions, so that no part will be inoperative or superfluous, void or insignificant.’ ” Corley v. United States, — U.S. —-, 2009 WL 901513, at *8 (Apr. 6, 2009) (quoting Hibbs v. Winn, 542 U.S. 88, 101 (2004)). In this court’s view as well, Plaintiffs’ section 306 surplusage argument cinches the result in their favor.”

Leave a comment

Filed under Exemptions

4th Cir.: Racing Track Employees Not Subject To The Administrative Exemption; Work Not “Directly Related To The Management Of General Business Operations”

Desmond v. PNGI Charles Town Gaming, L.L.C.

The case was before the Court on appeal. Previously the lower Court had awarded the employer Summary Judgment finding that all of the Plaintiff’s were exempt under the FLSA’s Administrative Exemption. The 4th Circuit disagreed and reversed.

“Charles Town Gaming operates a casino and live horse racing facility in Charles Town, West Virginia. The Former Employees worked for Charles Town Gaming in a non-supervisory position denominated as “Miscellaneous Racing Official,” which we will refer to as “Racing Official.” In the performance of their work duties, each of the Former Employees assisted in various tasks associated with Charles Town Gaming’s staging of live horse races. In the morning and on non-race work days, Racing Officials assist with clerical duties in the secretaries’ office, including noting rider changes, putting together the next day’s racing program, and completing racing entries for the following day. Racing Officials, including the Former Employees, rotated work in four roles: Placing Judge, Paddock Judge, Horse Identifier, and Clerk of Scales during horse races. A Placing Judge “observ[es] races from start to finish and determine[s] the final outcome using a viper computer system and photo finish systems … The Paddock Judge observ[es] the horses in the paddock prior to the running of a race, [ ] ensure[s] the horses are wearing the proper equipment for racing [and that] a responsible trainer or groom is in the paddock to saddle the horse and prepare it for the race. The Paddock Judge is also involved in seeing that a published workout is in the program or announced if [it is] not available by press time. The Horse Identifier is “responsible for foal papers, Coggins test results, and tattoos insuring the correct horse is running in any given race. The [Horse] Identifier goes to the paddock at race time and checks each horse’s tattoo.” J.A. 69, 152, 215; see also
W. Va.Code R. § 178-1-20 (2009). The Clerk of Scales “works in the jockeys’ room prior to and after each horse race and verifies each jockey’s presence and licensure, [as well as the jockey's weight] before and after each race….”

Finding that Plaintiff’s duties did not fulfill either the 2nd prong of the administrative exemption. “directly related to the management of general business operations,” the Court explained:

“In contrast to the duties of these exempt employees in Shockeley, West, and Darveau, the Former Employees’ work was not directly related to the general business operations of Charles Town Gaming. During the horse races, Racing Officials fulfilled one of several roles, which required them to observe and examine the horses, the jockeys, the trainers or grooms, the relevant paperwork for the horses, the order of finish for the race, or the paperwork associated with any subsequent claims. Racing Officials have no supervisory responsibility and do not develop, review, evaluate, or recommend Charles Town Gaming’s business policies or strategies with regard to the horse races. Simply put, the Former Employees’ work did not entail the administration of-the “running or servicing of”-Charles Town Gaming’s business of staging live horse races. The Former Employees were not part of “the management” of Charles Town Gaming and did not run or service the “general business operations.” While serving as a Placing Judge, Paddock Judge, or performing similar duties is important to the operation of the racing business of Charles Town Gaming, those positions are unrelated to management or the general business functions of the company.

Instead, a Racing Official’s work consisted of tasks somewhat similar to those performed “on a manufacturing production line or selling a product in a retail or service establishment.” Cf.
29 C.F.R. § 541.201(a). Although the administrative-production dichotomy is an imperfect analytical tool in a service-oriented employment context, it is still a useful construct. Other Circuit Courts of Appeal have adopted and modified its logic to less traditional “production” situations:

[A]pplying 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) (police investigators conduct or “produce” criminal investigations); Dalheim v. KDFW-TV, 928 F.2d 1220, 1230-31 (5th Cir.1990) (television station’s producers, directors, and assignment editors “produced” newscast, and were thus non-exempt).
Reich v. John Alden Life Ins. Co., 126 F.3d 1, 9 (1st Cir.1997).

As relevant here, Charles Town Gaming “produces” live horse races. The position of Racing Official consists of “the day-to-day carrying out of [Charles Town Gaming's] affairs” to the public, a production-side role. See Bratt v. County of Los Angeles, 912 F .2d 1066, 1070 (9th Cir.1990), cited with approval in Shockley, 997 F.2d at 29. Because a Racing Official’s duties are not directly related to the general business operations of Charles Town Gaming, the position does not satisfy the requirements for the administrative exemption under the FLSA.”

Note, the Court declined to determine whether the “independent judgment and discretion” requirement of the 3rd prong was met, after having decided that Plaintiff’s work was not “directly related to the management of general business operations” although it is likely that they would have found that prong to have been lacking as well.

Leave a comment

Filed under Exemptions

E.D.La.: Big Lots’ Assistant Store Managers Not Subject To The Executive Exemption

Johnson v. Big Lots Stores, Inc.

This case presented the issue of whether salaried “Assistant Store Managers” (ASM’s) were exempt pursuant to the FLSA’s executive exemption. In deciding that they were not, because their primary duty was not management, the Court went through a detailed analysis of the test required by the CFR.

Leave a comment

Filed under Exemptions

W.D.Ky.: “Plant Engineering-Facilities Support Group-Business Professional” For UPS Is Administrative Exempt

Hubbuch v. United Parcel Service, Inc.

This case was before the Court on Defendant’s Motion for Summary Judgment, seeking a finding that Plaintiff, a “plant engineering-facilities support group-business professional” was administratively exempt from the FLSA, and therefore not entitled to overtime pay. In reaching its decision the Court discussed the factual background of Plaintiff’s job duties:

“It is undisputed that Hubbuch is a salaried employee. Hubbuch does not dispute that his primary duty is directly related to the management or general business operations of UPS or its customers and includes the exercise of discretion and independent judgment with respect to matters of significance. However, Hubbuch argues that he does not perform office or non-manual work. Hubbuch argues that his job is “comparable to that of a maintenance mechanic, troubleshooting alarm systems, performing hands on investigations, solve [sic] problems with mechanical, electrical, plumbing and sprinklers, overhead door, etc.” UPS argues that Hubbuch performs exempt work.

Upon review of the facts, the court finds that Hubbuch performs a variety of non-manual work. The Job Description for engineering specialist at UPS identifies a host of responsibilities and activities that are fairly characterized as non-manual. The General Summary provides an overview:

The Business Professional is responsible for solving day-to-day problems inherent in keeping the physical facility in good working order, so as to enhance the hub operations. Activities performed include but are not limited to responding to internal customer requests, responding to facility alarms and emergencies, troubleshooting problems that arise, and coordinating repair work with outside vendors.

Each of the responsibilities and activities listed above have non-manual components. Other of Hubbuch’s enumerated Job Responsibilities, including developing training resources for other team members, working with vendors, and performing facility audits are non-manual in nature, as well. See Id. In addition, Hubbuch’s very basis for a claim here is that he has not been paid for the performance of non-manual work-troubleshooting by phone-while on call. Hubbuch has submitted an affidavit stating that, “The work performed while “on call” was the same work that Affiant performed on site.”

Hubbuch is not simply a mechanic.  Hubbuch may perform substantial manual labor as part of his job; nonetheless his primary duty is the performance of non-manual work directly related to the management or general business operations of UPS or its customers. Hubbuch meets the definition of an exempt administrative employee and thus is exempt from FLSA’s overtime requirements.”

Leave a comment

Filed under Exemptions

W.D.Pa.: Pharmaceutical Sales Representatives Are Exempt “Outside Salesmen” Notwithstanding The Fact That They Do Not Consummate Sales

Baum v. AstraZeneca LP

Addressing the oft-raised (recently) issue of whether pharmaceutical sales representative employees are subject to the Outside Sales exemption, the District Court answered the question in the affirmative and granted Defendant’s Motion for Summary Judgment on the issue. The Court went through a strained analysis of the pharmaceutical industry to reach this conclusion, and ultimately, seems to have refused to follow the long-standing mandate of FLSA construction that exemptions be narrowly construed against employers asserting them. The Court ultimately determined that the promotional work that sales reps do as their primary duty represents “sales” within the meaning of the FLSA, despite the fact that the sales reps do not actually obtain sales from anyone.

“The Court now returns to the definition of “sale”, and the somewhat related question of when a sale actually occurs. Obviously, a pharmaceutical sale is not exactly final until the patient herself completes a transaction by taking the physician permission slip (prescription) to a pharmacist for completion of the sale. However, the statutory language does not require a final sale, complete and consummated. Thus, pursuant to the above industry specifics, the Court believes that a “sale” may be defined as substantially occurring at the moment a physician commits to prescribing a particular pharmaceutical when treating a particular patient. In Clements v. Serco, in considering this question under the FLSA, the Tenth Circuit explained: “the touchstone for making a sale, under the Federal Regulations, is obtaining a commitment.” 530 F.3d 1224, 1227 (10th Cir.2008). Importantly, the facts of the case sub judice illustrate that the PSS’s were trained and employed for the purpose of obtaining a commitment, which is the “touchstone” for making a sale.

The Court concludes that in the pharmaceutical industry, the strongest evidence for sales activity and being employed for the purpose of making sales, is that the employee obtains commitments from physicians. Ms. Baum did precisely that: after carefully preparation and planning, she skillfully asked physicians for commitments to prescribe AstraZeneca products in appropriate situations. The capacity of a salesperson to obtain such commitments, in any field, is rare, and consequently well-compensated by private industry; the effort and charisma required to successfully close, as will be discussed infra, is a hallmark of professional sales activity.

Consequently, the Court holds that in the pharmaceutical context, given the realities of the professional paradigm, a sale occurs when a physician commits to prescribe a certain product in a certain situation. Therefore, the Court believes that a pharmaceutical sales representative, upon obtaining a commitment from a physician, has “in some sense” made a sale. See Dep’t of Labor, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees; Final Rule, Fed.Reg. 22122, 22162-63 (Apr. 23, 2004). Relatedly, where a pharmaceutical sales representative seeks to obtain a physician’s professional commitment to prescribe certain pharmaceuticals, that representative was engaged in making sales. Importantly, Ms. Baum was not visiting the physician only to provide some education or background to pave the way, or prepare the physician for another appointment with a primary salesperson.

This Court believes that other courts, and perhaps regulatory agencies, underestimate the significance of this oral commitment from physicians. In part, this error emerges from a misunderstanding of the ways in which human beings are socially and informally motivated. Sometimes lawyers and judges forget that a person’s word means something; remarkably, many people do not actually need a 400-page contract to bind themselves to their word. Yale’s Yochai Benklar, a thinker with incisive prescience, explains that non-market intrinsic factors can serve as a more powerful motivating force than typical extrinsic economic incentives; applying such a theory to this situation, it is possible to imagine one business that thrives over time, enjoying ongoing, non-contractual relationships with its clientele, while a nearly identical business falters, its obsession with formalized contracts driving away a clientele socially frustrated with the non-trusting relationship. In short, this Court believes that one professional’s commitment may be worth more in sales volume than a hundred firm orders from a insolvent or dishonest source. A proper critique of this interpretation of “sale” is that such reasoning, if applied in a broader sense across industries, would quickly arrive at an unsustainable breaking point. However, this Court is not broadening the definition of “sale”, but simply seeking to understand and apply the definition within this particular industry. See In Re Novartis Wage and Hour Lit., 593 F.Supp.2d 637, 659 (“Reps make sales in the sense that sales are made in the pharmaceutical industry.”). For all of the above reasons, this Court, in performing its own construction and application of this statutory exemption, finds that in the pharmaceutical context, where a representative asks for a commitment from a physician, such activity is sales activity for the purposes of the Pennsylvania outside sales exemption.

Admittedly, this construction and application has its weaker points: obviously, not every sale defined this way will actually result in the delivery of a pharmaceutical in exchange for legal tender. Furthermore, other courts, assessing different industries, have held that individuals seeking to obtain commitments are not necessarily performing exempt sales activity. See, e.g., Clements v. Serco, 530 F.3d 1224, 1227 (10th Cir.2008). Ms. Baum’s briefing hopes to capitalize upon this particular weak point, arguing that even when a physician commits to writing a prescription for AstraZeneca’s pharmaceuticals, this commitment is certainly not binding upon either the physician or a patient. However, the rationale of such a critique could be equally applied to sales transactions in simpler fields. For instance, where a hypothetical Mr. Loman sells a widget, but the widget is ultimately returned six months later under a warranty claim, did a sale actually occur? Was the sale binding? Given this country’s aggressive implied warranty laws, is any sale ever binding? While the Court is certain that Mr. Loman engaged in the process of making sales or obtaining orders, the question presents itself: is any traditional sale more or less binding than a commitment sought and obtained from a honest and thoughtful physician? Admittedly, in the pharmaceutical context, obtaining a commitment from a doctor may not be a formal, binding contract that inexorably leads to the exchange of goods and services. However, the Court believes such formalities are simply not necessary for a “sale” to occur. The Court notes that private companies perhaps have a wiser approach to discerning what constitutes a sale: rather than wasting effort and energy arguing about how to apply abstract and reduced definitions to diverse industries, such companies simply find and execute the methods that work to increase sales; notably, pharmaceutical companies have all decided to employ large, direct sales forces to visit physicians.

The Court also acknowledges that physicians are not the only customer involved in the sale of pharmaceuticals. However, it cannot be argued that physicians are not an integral and essential gatekeeper within this sales process. In some, likely most, instances, physicians will be the dispositive force behind a sale. Furthermore, in all instances, a physician’s approval and consent to the sale is ultimately necessary. Other courts, in expressing their analyses of this pharmaceutical sales dynamic, have similarly stated the integral role of physicians in the sale of a pharmaceutical. See Barnick v. Wyeth, 522 F.Supp.2d 1257, 1264 (C.D.Cal.2007)(explaining that because physicians “determine whether or not a patient will buy a prescription product”, the physicians themselves are the appropriate target of sales efforts); see also D’Este v. Bayer Corp., No. 07-cv-3206, 2007 U.S. Dist. LEXIS 87229, at *14 (C.D.Cal. Oct. 9, 2007) (emphasizing that the doctor places the order for the prescription product by writing a prescription).

In sum, in a determination unnecessary to present to a jury, and following an analysis of the dynamics of the industry, this Court finds that where pharmaceutical representatives seek to obtain physician commitments to write prescriptions, these representatives make sales and are engaged in the process of making sales for purposes of Pennsylvania’s outside sales exemption. In the alternative, this Court notes that a similar analysis could also be applied to pharmaceutical sales representatives “obtaining orders.” Consequently, a pharmaceutical sales representative performing duties similar to those performed by Ms. Baum, including visiting the offices of physicians for the purposes of obtaining commitments, meets this requirement of the outside sales exemption.”

Leave a comment

Filed under Exemptions

D.Conn.: Pharmaceutical Sales Reps Not Exempt Under FLSA’s Outside Sales Exemption; Promotional Work Performed Is Not “Sales”

Kuzinski v. Schering Corp.

Plaintiffs initiated this suit against Schering Corporation, their former employer, for relief from Defendant’s alleged misclassification of them as “exempt” employees resulting in its failure to pay them overtime wages, in violation of the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq. Defendant moved for summary judgment on the ground that Plaintiffs fall within the FLSA’s outside sales exemption. After an extensive review and discussion of the record evidence, the Court denied Defendant’s motion for summary judgment.

In denying Defendant’s motion, the Court made clear that the promotional work which Plaintiffs, as pharmaceutical sales reps, performed for Defendant was not “sales” within the meaning of the FLSA. The Court addressed head-on supporting cases as well as those which Defendant had argued supported a contrary finding:

“Under the FLSA, the term ” ‘[s]ale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition,”29 U.S.C. § 203(k), and also “include[s] the transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property,”29 C.F.R. § 541.501(b). Schering’s PSRs do not make, or engage in, any of these things. PSRs do not consummate or make any “sales” of pharmaceuticals to the physicians they visit. PSRs do not “exchange” with physicians for any drugs; they do not make any “contract[s] to sell” drugs to physicians; they do not make any “consignment for sale” with physicians; FN13 they do not make any “shipment[s] for sale” to physicians; and they do not make any “other disposition” of drugs with physicians.FN14 PSRs also do not “transfer [pharmaceuticals] for a price.” Cf.BLACK’S LAW DICTIONARY 1364 (8th ed.2004) (defining “sale”).

FN13. That is, PSRs do not “commit,” “dedicate,” “deliver,” “transfer,” “give” or “hand over possession” drugs into the physicians’ “custody,” or “entrust” drugs to physicians, for a later sale. See BLACK’S LAW DICTIONARY 327 (8th ed.2004) (defining “consign” and “consignment”); WEBSTER’S II DICTIONARY 157 (3d ed.2005) (same).

FN14. Plaintiffs did not “transfer[ ] something to [a physician's] care or possession” including “by deed or will,” and they did not engage in the “relinquishment of property” to physicians. See BLACK’S LAW DICTIONARY 505 (8th ed.2004) (defining “disposition”). Given this meaning of “disposition,” Defendant’s argument that the regulation’s catch-all term “other disposition” encompasses in its scope activities such as those performed by Plaintiffs is unavailing. Were the Court to construe the phrase “other disposition” broadly enough to encompass PSRs’ visits with physicians (see Def.’s Mem. Supp. at 22 (emphasizing phrase); Oral Arg. Tr. at 40:5-41:15 (Schering arguing that the phrase “allow[s] for those instances where there cannot be a direct interaction between the salesman and the purchaser”)), it would substantially expand the outside sales exemption, in direct contravention of its mandate to construe the exemption narrowly and within its plain terms.

Moreover, PSRs and physicians do not even have the capacity to consummate sales. Schering’s PSRs, like Boehringer’s PSRs, are barred both by law and by their employer from entering into contracts or binding commitments with physicians for the prescription of their employer’s products. Cf. Ruggeri I, 585 F.Supp.2d at 267-68 (PSRs “do not and cannot make or produce” sales); accord Smith, 2008 WL 5427802, *7, 2008 U.S. Dist. LEXIS 104952, *20-*21 (“in no ordinary sense of the word ‘consummation’ could one of [the PSR's] sales calls end in the consummation of a sale. [The PSR] could only provide useful information to the physician, and could not enter into an agreement regarding prescriptions by the physician.”). And physicians neither have nor exercise the capacity to make binding commitments to purchase or prescribe pharmaceuticals promoted by Schering’s PSRs. DeFeo testified that physicians never order pharmaceuticals directly from Schering even in potential “emergency” situations, when they would obtain them directly through a “group purchasing organization,” and in any event ethical and legal obligations bar physicians from “mak[ing] a binding commitment to a[PSR] to prescribe certain [pharmaceutical] products.” In re Novartis, 593 F.Supp.2d at 650;see also Ruggeri I, 585 F.Supp.2d at 268 (“physicians do not have ‘the capacity to purchase or place an order for’… pharmaceutical products”).

The conclusion that PSRs fall within the outside sales exemption from FLSA’s overtime provisions on the basis of “the characteristics of the industry in question,” In re Novartis, 593 F.Supp.2d at 649,“[n]otwithstanding PSRs’ lack of capacity to sell, and physicians’ lack of capacity to purchase,”see Ruggeri I, 585 F.Supp.2d at 268, appears to be the back-fitting of the FLSA to industry practices which this Court has rejected, see id. at 272;see also Clements, 530 F.3d at 1227 (“[t]he touchstone for making a sale, under the Federal Regulations, is obtaining a commitment.”); Smith, 2008 WL 5427802, *7, 2008 U.S. Dist. LEXIS 104952, *19 (“[p]hysicians … do indeed present a chokepoint in the sale of pharmaceuticals, but the nature of the prescription system insulates them from being amenable to ‘sales’ within the definition of the applicable regulation”).In re Novartis’s focus on a pharmaceutical product’s “purchase cycle,” which “commences” with a physician writing a prescription for the product for a patient, In re Novartis, 593 F.Supp.2d at 650-51, and which, in this case, presumably would continue through a patient’s filling the prescription at a pharmacy, to the pharmacy’s re-ordering the product from a wholesaler, who then places an order for additional product with the “trade organization” and “legal team” operating under Schering’s managed markets group, is not what the PSRs do, which excludes it from the relevant inquiry for FLSA purposes.

As DeFeo’s testimony and Plaintiffs’ declarations illustrate, the closest that Schering’s PSRs come to consummating “sales” is increasing the overall demand for its products, such that non-PSR Schering employees negotiate and commit to contracts with wholesalers-not the physicians to whom Schering’s products are promoted. An employee does not consummate a “sale” for purposes of the FLSA merely by “lay[ing] the groundwork” for another employee to obtain a customer’s commitment. Clements, 530 F.3d at 1229;29 C.F.R. § 541.503(a) (even though promotional work can be considered exempt sales work, “promotional work that is incidental to sales made, or to be made, by someone else is not exempt outside sales work”) (emphasis added). Here, not only do the PSRs not consummate the sales, but the physicians with whom the PSRs visit are not Schering’s customers. To the extent PSRs lay foundation or groundwork, it is to increase or maintain their employer’s market share for the products they promote. In this sense they pave the way for sales but in no more direct a manner as a pharmaceutical company’s direct-to-consumer advertising, which raises demand for that company’s products. Neither of these activities constitutes “sales” under the FLSA.

The Eleventh Circuit’s decision in Gregory v. First Title of America, Inc. is not to the contrary. There, the court held that an insurer’s “marketing executive” made sales-and thus was an exempt outside salesperson-because “[o]nce an order for title insurance services is obtained [by the plaintiff], the sale is complete.” 555 F.3d 1300, 1309 (11th Cir.2009) (first alteration in original). The court relied on the fact that the plaintiff “did not collect orders and turn them over to another salesperson,” and there was no “evidence of any other intervening sales effort between [the plaintiff] and orders placed with [the employer],” such that “[a]s opposed to conceiving of [the plaintiff] as ‘paving the way’ for others to consummate the sale, we view her as acting more as a conduit through which orders for services flowed.”Id. The critical difference between the work of First Title’s marketing executive and Schering’s PSRs is obvious: whereas the marketing executive did all of the work necessary to reach an agreement with a customer, PSRs do not even communicate with the entities to which Schering sells its products, let alone negotiate the contracts or process the orders by which its products are sold.

Some courts concluding that PSRs “sell” pharmaceutical products within the meaning of the FLSA have looked to IMS Health Inc. v. Ayotte, 550 F.3d 42 (1st Cir.2008). There, the court was faced with a constitutional challenge to the Prescription Information Law, a New Hampshire statute affecting PSRs’ work by preventing the use ” ‘for any commercial purpose’ ” of information about pharmaceutical prescriptions containing any ” ‘patient-identifiable and prescriber-identifiable data.’ ” Id. at 47 (quoting N.H.Rev.Stat. Ann. § 318:47-f). In the course of lengthy opinions upholding the constitutionality of the law, both the majority and concurrence/dissent described generally the work of PSRs-in the First Circuit’s parlance, “detailers”-within the pharmaceutical industry. The majority described each part of the state’s evidence that its law “directly advances [its] interest” of “cost containment” as “forg[ing] some part of the causal chain leading from transfers of prescribers’ histories for use in detailing to higher drug prices,” id. at 55, and stated: “[d]etailing works: that it succeeds in inducing physicians to prescribe larger quantities of brand-name drugs seems clear (even if the exact magnitude of that effect is not),” id. at 56.In an opinion concurring and dissenting, one member of the panel used the word “sales” in describing the efficacy of PSRs’ efforts: “Detailing is the face-to-face advocacy of a product by sales representatives who visit doctors’ offices and hospitals to meet with the prescribing health care professionals. Although the objective of these visits is to make sales, detailers often provide valuable information about the drugs they are selling.” Id. at 71 (Lipez, J., concurring and dissenting).”

In denying Defendant’s motion, the Court further stated, “[i]t is the clarity of the statutory and regulatory language at issue defining the conduct and activity which constitutes “selling” or making a “sale” which undermines Schering’s use of the term “sales” to classify PSRs’ work as exempt from FLSA’s overtime pay provisions and which renders unpersuasive other cases’ characterizations of PSRs’ work. Because PSRs undisputedly do not “sell” or make any “sales” as those terms are defined in the FLSA and its implementing regulations, they fall outside the FLSA’s outside sales exemption.”

Leave a comment

Filed under Exemptions

N.D.Ill.: Duties Listed On Resume Do Not Meet FLSA Defendants’ Burden On Exemption, In Light Of Testimony Regarding Actual Duties Performed

Boring v. World Gym – Bishop, Inc.

Defendants moved for Summary Judgment alleging, among other things, that Plaintiff was administratively exempt under the FLSA, and therefore not entitled to overtime compensation, regardless of whether she worked in excess of 40 hours per week or not. In support of their Motion, the Defendant relied on Plaintiff’s resume (created subsequent to the employment at issue) in which she stated her duties worked, while employed by Defendants. Since, the testimony of actual duties performed largely differed from the resume duties, the Court denied Defendants’ Motion for Summary Judgment on the exemption issue stating:

“Defendants rely on a description of Boring’s job duties as they appear on her resume. Her resume lists her positions at World Gym as “Accounts Payable, Secretary, Office Manager.” A sampling of the responsibilities listed includes: “Managed 8 full-time employees,” “Customer Service,” “Assisted company comptroller in budgeting, locating and reducing company losses,” “Security and overseeing of repairs,” “Revised and produced Employee Handbook,” “Coordinated resolution of internal theft,” “Assisted in creating slogans and artwork for advertising and sales events,” and “Recommended changes that increased the monthly collections of bad debt by the outside collection company.”The appropriate inquiry, though, is into Boring’s actual job duties and not into what she lists on her resume. Boring denies that she actually performed office manager duties, managed 8 full time employees at World Gym, or actually determined any revisions to be made in the Employee Handbook. Based on the testimony in the record, a reasonable finder of fact could conclude that Boring’s job description as listed on her resume is incompatible with the actual work she performed. Both Al and Barbara described Boring’s primary duties as letter writing and issuing checks.

A reasonable finder of fact could conclude that Boring’s primary duty at World Gym was not directly related to management policies or general business operations and that her work did not include any meaningful exercise of discretion or independent judgment. Accordingly, Defendants have not met their burden of proof that Boring fits within the administrative exemption to the FLSA, and their motion for summary judgment on this claim must be denied.”

Although not groundbreaking, this decision is notable, because it speaks to an issue widely raised by Defendants in FLSA cases, that actual duties are trumped by resume or job description. It is clear from this decision, as many others have previously stated, the inquiry of importance in determining the applicability of an exemption are the actual duties performed, rather than some paper description of same.

Leave a comment

Filed under Exemptions

D.S.C.: “Salaried” Accountant May Be Hourly After All; Question of Fact For Jury

Holladay v. Burch, Oxner, Seale Co., CPA’s, PA

In this FLSA case, the parties cross-moved for summary judgment, regarding the applicability of the professional exemption. It was not disputed that Plaintiff was an accountant, who performed exempt duties. The sole issue before the Court was whether Plaintiff received at least $455.00 per week on a salary basis.

Plaintiff stated that the amount she was paid was based on an hourly rate computed by dividing the total estimated compensation by 2300, the expected hours worked per year. She took the position in her brief that the firm’s pay scheme was based on an expectation that she would work 44.23 hours per week (based on 2300 hours divided by 52 weeks) and that her guaranteed wages compute to 32.31 hours per week (for 2006).

The parties did not dispute that the Plaintiff was working in a professional capacity and that she received at least $455 per week in compensation.  However, the Plaintiff contended that her status as an exempt salaried employee was lost as a matter of law since her pay was in fact calculated on an hourly basis and that her guaranteed pay did not bear a reasonable relationship to her actual earnings for her normal workweek as set forth in 29 C.F.R. 541.604(b).  Defendant contended that the Plaintiff retained her exempt status as a matter of law and that her method of pay placed her under subsection (a) of 541.604.

In denying both parties’ motions for summary judgment, after a lengthy discussion of the issue presented—hourly vs. salary basis – the Court determined it was a question of fact whether the guaranteed salary amount paid to the plaintiff was for forty (40) hours (the normal workweek) or for only 32.31 hours (for example, in 2006) as the plaintiff suggests. The Court further explained, If the jury determined the guaranteed salary amount was for a normal workweek (i.e., 40 hours) then the defendant would not have lost the exemption and the plaintiff could not recover. However, if the jury determined the guaranteed amount was in fact for fewer hours than a normal workweek of forty (40) hours, such as 32.31 hours as Plaintiff contends for 2006, then the exemption is lost and the plaintiff would be entitled to damages. The jury would determine the number of overtime hours, the hourly rate of pay for each period, as well as wilfulness. The Court would then make the mathematical calculations. After reviewing the record submitted, the Court is simply unable to make a ruling as a matter of law for either party on the issue of whether the plaintiff is an exempt employee without additional factual findings. See, e.g., Archuleta v. Wal-Mart Stores, Inc., 543 F.3d 1226, 1236 (10th Cir.2008); Davis v. Lenox Hill Hospital, 2004 WL 1926087 (S.D.N.Y.2004).

Leave a comment

Filed under Exemptions

S.D.Fla.: “Offensive” Collateral Estoppel Appropriate Where Defendant’s Exemption Argument Previously Rejected By 11th Circuit

Schulman v. Southern Shuttle Services Inc.

Defendant, a company which provides bus shuttle transportation to and from airports for a fee filed a motion for summary judgment, asserting that Plaintiffs were exempt under the so-called taxicab exemption to the FLSA of § 213(b)(17).  Plaintiffs, drivers for Defendant, opposed the motion, primarily by pointing to a recent decision by the 11th Circuit, which held such drivers not to be taxi cab exempt.

In denying Defendant summary judgment the Court stated:

“[We] find that offensive collateral estoppel is appropriate. Defendant, Southern Shuttle, has previously litigated unsuccessfully the issue of whether it qualifies for the taxicab exemption. See Abel v. Southern Shuttle Services, Inc., 2008 WL 5047626 (11th Cir. Nov.28, 2008. The Eleventh Circuit held that, while Defendant’s airport shuttle vans share some characteristics with taxicabs, they are not “taxicabs” under the narrow interpretation required of an FLSA exemption. Id. Since Defendant received a “full and fair” opportunity to litigate its taxicab exemption claim in the Abel action, the law of collateral estoppel leads inescapably to the conclusion that Defendant is collaterally estopped from relitib Exemption, Collateral Estoppel, Summary Judgmentgating the question of whether it qualifies for the taxicab exemption under the FLSA. See Blonder-Tongue Laboratories, 402 U.S. at 328. The Court is unconvinced that the factual distinctions alleged between this case and Abel v. Southern Shuttle Services, Inc. (07-80584-KLR) are sufficient to prevent the exercise of collateral estoppel here.”

Leave a comment

Filed under Collateral Estoppel