MILTON I. SHADUR, Senior District Judge.
Sharon Freeman ("Freeman") has brought a putative Class Action Complaint against Kaplan, Inc. ("Kaplan"), alleging violations of the Fair Labor Standards Act ("FLSA," 29 U.S.C. §§ 201 et seq.
Every Rule 56 movant bears the burden of establishing the absence of any genuine issue of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). For that purpose courts consider the evidentiary record in the light most favorable to the nonmovant (here Freeman) and draw all reasonable inferences in her favor (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir.2002)). Courts "may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts" in resolving motions for summary judgment (Payne v. Pauley, 337 F.3d 767, 770 (7th Cir.2003)). But a nonmovant must produce more than "a mere scintilla of evidence" to support the position that a genuine issue of material fact exists and "must come forward with specific facts demonstrating that there is a genuine issue for trial" (Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir.2008)). Ultimately summary judgment is warranted only if a reasonable jury could not return a verdict for the nonmovant (Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).
This lawsuit arises out of work Freeman did for Kaplan while she was a law student
Kaplan hires law students to help sell its test-prep products on their law school campuses, calling those students "student reps" (Freeman Dep. 11:22-12:7). Student reps sell Kaplan test-prep courses and materials to their peers and do general promotional work on behalf of Kaplan products (id.).
At all times relevant to this case Kaplan compensated student reps and hereafter-described "head reps" on a per-task basis rather than on a time basis and paid them in "credits" rather than currency (K. St. Ex. 4 at 000261
Kaplan hired Freeman as a student rep in March 2013 (K.St. ¶ 7). Kaplan's regional director, who brought Freeman on, assured her that even if she did not sell many bar-review courses the director would still "take care of" Freeman (Freeman Dep. 20:11-20:19). Because the director accompanied that assurance with a statement that "all of [her] reps get their courses" (id. 21:4-21:10), Freeman took the director to mean that she would have the opportunity to earn at least 25 credits (the cost of a bar course) in a variety of ways apart from sales (id.). Apparently true to her word, the director offered Freeman the position as head rep in September 2013, an offer that Freeman accepted in exchange for 25 credits (K.St. ¶ 12). Freeman stayed in that position until May 2014 (id. ¶ 1).
Freeman first completed her initial training (id. ¶ 22). After that, one of her primary responsibilities was to help set up, man and then take down the "Kaplan table" — Kaplan's regional director would rent space from Loyola about twice a month to set up a table full of promotional materials and giveaways to attract student attention and promote sales of Kaplan's law-related courses (K. St. ¶ 24; Freeman Decl. ¶ 10). Freeman also regularly met one-on-one with students that Kaplan put in touch with her, doing so at specific times and Loyola campus locations selected by Kaplan (Freeman Dep. 120:20-121:6). At Kaplan's direction Freeman posted fliers on Loyola bulletin boards, wrote Kaplan-themed messages on Loyola classroom blackboards and personally made Kaplan-themed announcements in Loyola classes (id. 46:9-53:12). Freeman also spent time answering customer emails (some of which were forwarded to her by Kaplan, and each of which Kaplan required her to answer within 24 hours) (F. Resp. St. ¶ 29, T & C 000261). She ran two Kaplan-themed promotional events at a Starbucks near Loyola (F.Resp.St. ¶ 30). Finally, she did general organizational and clerical tasks for Kaplan and received ongoing training (Freeman Dep. 30:13-30:21; Freeman Decl. ¶ 17).
For those 55.5 hours of work Freeman earned 47 credits.
Freeman filed this lawsuit as a proposed class and collective action on December 22, 2014. After the parties engaged in discovery, Kaplan filed its current motion, which as stated earlier is now ripe for decision.
On its face Freeman's Complaint pleads facts tending to show that Kaplan violated FLSA Sections 206 and 203(m) — provisions that call for a minimum wage timely paid in cash or its equivalent or in certain employer-provided facilities (see 29 C.F.R. § 531.27
And because the FLSA is intended to be a broadly remedial statute, its exemptions are to be construed narrowly. In practice that means that when there are real ambiguities of fact or law, the balance tilts in favor of finding the employee non-exempt (see Yi v. Sterling Collision Ctrs., Inc., 480 F.3d 505, 508 (7th Cir.2007)).
As for outside sales employees, Christopher v. SmithKline Beecham Corp., ___ U.S. ___, 132 S.Ct. 2156, 2173, 183 L.Ed.2d 153 (2012) (internal quotation marks and citations omitted) recently spelled out some of the historical reasons for exempting those workers from the FLSA:
That underlying rationale, as will be seen, reinforces this Court's ultimate conclusion that summary judgment would be inappropriate given the facts of record.
But to turn now to the more concrete particulars, "outside salesman" is defined not by the FLSA itself but in a web of interlocking Department of Labor regulations. Foremost of those regulations is Reg. § 541.500(a):
If those words were given their ordinary meanings Kaplan's motion could be granted, and rather easily. That is so because Freeman admits (1) that her entire job was to help sell Kaplan products (apparently satisfying the "primary duty [of] making sales" requirement) (subsection (a)(1)(i)) and (2) that she did her job almost
But as it happens, almost none of the operative terms in Reg. § 541.500(a) has its ordinary meaning. Rather each of the terms "primary duty [of] making sales," "customarily and regularly" and "away from the employer's place or places of business" has a definition (or at least an explanation) set out in Department of Labor regulations — and most of those regulatory definitions diverge in significant ways from their dictionary counterparts. At least under the presumptions that govern Rule 56, that divergence is the difference between granting and denying Kaplan's motion.
To satisfy the first component of the outside sales exemption, Kaplan must show that Freeman's "primary duty" was "making sales" (Reg. § 541.500(a)(1)(i)).
Under Reg. § 541.700(a) "`primary duty' means the principal, main, major or most important duty that the employee performs." Primary duty is determined by considering the employee's job as a whole (id.; Reg. § 541.500(b)). That is all straightforward enough, but there is a special rule that applies when considering whether "making sales" is the employee's primary duty, and Freeman argues that rule takes her out of the exemption.
That rule is Reg. § 541.503, and it addresses promotion work. In short, only promotion work that an employee does with the purpose of drumming up business for her own account can support a finding that an employee has a primary duty of sales. Paragraph (a) of the regulation makes that clear:
And giving the example of a company representative who visits chain stores to arrange merchandise and consult with store managers, "but does not obtain a commitment for additional purchases," paragraph (c) of the same regulation states that such an employee's work is non-exempt "[b]ecause the employee in this instance does not consummate the sale nor direct efforts toward the consummation of a sale." Gregory v. First Title of Am., Inc., 555 F.3d 1300, 1309 (11th Cir.2009) (per curiam), echoing guidance from the Department of Labor, has described promotion work as "paving the way" for sales by other employees.
Kaplan counters that Freeman's declaration contradicts her deposition testimony and must therefore be ignored (K. Reply Mem. 5-6). Kaplan points out that during Freeman's deposition she repeatedly acknowledged that her "goal" was "sales" (id. 5-7). Because Freeman admitted the purpose of the various tasks she completed was sales, says Kaplan, she cannot now say that her primary duty was not bringing about sales.
It is certainly true that Freeman cannot manufacture a dispute of fact by submitting a declaration that contradicts her earlier deposition testimony (Ineichen v. Ameritech, 410 F.3d 956, 963 (7th Cir. 2005)). But the problem with Kaplan's argument is that it ignores the reality that all promotion work has the goal of sales — the crucial question, and the dividing line between exempt and non-exempt promotion work, is whose sales are the goal. As Christopher, 132 S.Ct. at 2170 pointed out:
Freeman's deposition testimony is fundamentally ambiguous on the question whose sales she meant to promote. First off, Freeman made statements that the goal of much of her work — such as writing copy for Loyola's daily announcements, meeting with groups of students, tabling, training and demonstrating bar review material — was generically "making sales" or "promoting Kaplan" (Freeman Dep. 42:8-43:15, 47:22-48:6, 49:1-49:22). That, as has just been made plain, tells us nothing about whether her work was exempt, because it tells us nothing about who she expected would make (or attempt to make) the sale. Then there are a few statements where Freeman did admit that, at least as to making certain Facebook posts and responding to customer questions via text and email, her goal was to close a sale herself (id. 44:21-46:8).
In sum, Freeman's deposition testimony was fundamentally ambiguous on the question whether she was doing exempt or non-exempt promotional work. Hence Freeman's declaration is not inconsistent with her deposition — on the contrary, it makes sense of some of the deposition's ambiguities by clarifying that once she became head rep she stopped doing sales work for her own account (Freeman Decl. ¶ 15), which of course implies that she had earlier done some sales work as a student rep. Because Freeman's declaration plainly does not contradict her deposition testimony, it is admissible on summary judgment.
With the declaration considered appropriately along with the rest of the record, Kaplan's motion plainly must be denied as to Freeman's time as head rep. Freeman avers in her declaration that in exchange for agreeing to work as head rep she was "paid" the 25 credits necessary to enroll in a bar course (compared to the 5 credits she would get for closing a sale), that she therefore stopped trying to close sales herself and, indeed, that she was not expected to do so (Freeman Decl. ¶¶ 8-15).
Thus, because Freeman obviously spent much of her time as head rep fulfilling various non-exempt promotional activities rather than doing sales, and because Kaplan's compensation structure made sales a tiny proportion of Freeman's total compensation, a jury could certainly conclude that Freeman did not have a primary duty of sales (see Killion v. KeHE Distribs., LLC, 761 F.3d 574, 585 (6th Cir.2014)). That being the case, Kaplan's motion for summary judgment must be denied as to the period when Freeman worked as a head rep.
It is a very different story for Freeman's limited time spent as a student rep. For that job she could earn more compensation by closing sales than by carrying out any other compensable task (K. St. ¶ 11; Freeman Dep. 20:11-21:10). Freeman did testify that Kaplan's regional director indicated that Freeman would earn a bar review course whether or not she was successful in making sales — but the director honored that promise by moving Freeman to head rep, not by giving her non-sales duties in her capacity as a student rep. Finally, Freeman's declaration testimony that she stopped doing sales work once she became head rep necessarily implies that she did earlier do some sales work as a student rep. In short,
But the fact that Freeman had a primary duty of making sales during the portion of the time when she worked as a student rep does not end the inquiry. To fit Freeman into the outside sales exemption Kaplan must also show that Freeman was "customarily and regularly engaged away from [Kaplan's] place or places of business in performing such primary duty" (Reg. § 541.500). Kaplan argues that Freeman never worked at one of Kaplan's places of business because she worked mostly at Loyola and that its law school is not a Kaplan "place of business" — but even if it were, says Kaplan, Freeman worked away from it "customarily and regularly." Freeman counters that "place of business" has a much broader meaning under Department of Labor regulations than in common parlance, so that in fact Loyola qualifies as one of Kaplan's places of business under the relevant regulations. And, says Freeman, she worked away from Loyola only occasionally. For reasons that will shortly be made clear, Freeman has the better of the argument.
Reg. § 541.502 elaborates on the meaning of "away from the employer's place or places of business." No Court of Appeals has ever interpreted that regulation, so the parties seek to rely principally on opinion letters from the Department of Labor's Wage and Hour Division (along with a smattering of district court cases) in their competing readings of the regulation, which reads in its entirety:
About the only real message conveyed by the line of demarcation traced by that description is that it does not provide a bright-line definition. But fortunately for analytical purposes, focusing on the relationship between Kaplan's activities and those of an employee such as Freeman provides a satisfactory answer to the inquiry.
In that respect Loyola was surely a Kaplan place of business within the meaning of that regulation. Kaplan regularly rented space from Loyola to put up a table and sell its courses and materials: It certainly did so throughout the 14 months or so of Freeman's employment, far longer than the "short duration" spoken of by the
In summary, there can be no doubt on this record that Loyola fits the description of "any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales." Hence it was one of Kaplan's places of business "even though," as the regulation explicitly allows, Kaplan was "not in any formal sense the owner or tenant of the property."
Kaplan attempts to avert that conclusion by citing to Department of Labor Wage and Hour Division opinion letters, but none of them is persuasive.
As it happens, that conclusion comports not only with the plain language of the regulation (as has just been shown) but also with the purpose of the outside sales exemption. As said earlier, that exemption was premised on the idea that outside sales employees are largely self-directed, making it impossible (or at least overly difficult) for employers to track their hours or spread their work should one or
Taken together, all of those facts make it clear that the usual rationale for finding particular employees exempt as outside sales employees is simply not operative here. Instead, consideration of the exemption's purposes in light of the record facts reinforces this Court's conclusion that Loyola was a "place of business" for Kaplan within the regulatory meaning of that term.
Because Loyola is one of Kaplan's "places of business" for purposes of the outside sales exemption, Freeman will fit within that exemption only if Kaplan can show that she "customarily and regularly" (Reg. § 541.500(a)(2)) made sales or solicitations away from Loyola. Reg. § 541.701 defines "customarily and regularly":
Kaplan submits that because Freeman estimated that she spent about 20% of her time working off-campus (Freeman Decl. ¶ 21), she performed her primary duty of sales away from Loyola "customarily and regularly" as a matter of law. That portion of Freeman's work hours might perhaps reflect customary and regular work away from campus if it were in fact performed customarily and regularly, but here Kaplan has made no showing as to the frequency or regularity of Freeman's work. On that score it must be remembered that Freeman worked only a total of 55.5 hours for Kaplan, 20% of which is 11.1 hours. Without any guidance from the record about how "regularly" Freeman performed her off-campus work, there is just no basis upon which to conclude that Freeman's (estimated) 11 off-campus hours of work over the course of more than one academic year occurred "customarily and regularly," rather than being "occasional," "isolated or one-time tasks." Freeman could have racked up those few hours of work in the course of more than a year by (for example) running two one-off promotional events and sending a few emails. Of course, she might instead have run weekly 15-minute sales events. But the point is that the record says only how much total time Freeman spent working off-campus. It says precious little about how that time was distributed — whether it was customary and regular or occasional and infrequent. Given the record's silence on that central question, inferences must be drawn in favor of Freeman, so that Kaplan's motion must be denied for that reason as well.
Freeman has raised an issue of material fact as to whether she had a "primary duty [of] making sales" while she was employed
In retrospect, this Court is left with major misgivings about having allowed the parties to cabin that motion as they have, imposing such a major burden of time and effort on this Court and its excellent law clerk Michael Schorsch to address and resolve only one corner in the wide panoply of issues posed by this case — issues that comprise not only such questions as those referred to briefly in nn. 8 and 14 but, far more importantly, such questions as whether the pittance of time and effort that Freeman devoted to her brief stint as a student rep makes her a suitable representative for a class or collective group of Kaplan student reps, or whether creating a more limited head rep group representation by Freeman would satisfy the other legal requirements for class or collective representation, or whether — this list could go on at great length, but this opinion will not do so lest its listing might mistakenly be regarded as exhaustive. Lawyers for both sides are ordered to appear for a status hearing at 9:15 a.m. October 2, 2015 to determine the best way to go forward.
