KEVIN McNULTY, District Judge.
Now before this Court are motions for summary judgment by both sides in this FLSA collective action. Defendant The Scotts Company, LLC ("Scotts") seeks an order that the administrative exemption from FLSA coverage applies to the plaintiff sales managers. Plaintiffs seek an order that the executive and administrative exemptions do not apply to the plaintiff sales managers. For the reasons explained herein, I will deny both parties' motions for summary judgment on the FLSA employee-exemption issues. Scotts also seeks a ruling that the FWW methodology is appropriate for the calculation of damages. That portion of its motion, considered as a motion in limine, is granted.
Scotts has proffered a statement of some 1500 material facts, some of them many paragraphs or even pages long. (DSOF (asserting 776 alleged material facts); DR, pp. 98-270 (asserting 766 additional, allegedly material facts)). Plaintiffs have asserted some 60 material facts. (PSOF; DE 187).
Scotts is a multi-national lawn and garden supply company headquartered in Marysville, Ohio. (DSOF, PR ¶ 40). Scotts sells its products to retailers throughout the United States. (DSOF, PR ¶ 44). Those retailer-customers range from large home centers, such as Lowe's, Home Depot, and Wal-Mart, to independent and local hardware stores, such as Ace Hardware. (Id.). Scotts' business development team negotiates and executes the sale of Scotts products to the various retailers. (Id.).
Scotts' field sales organization is divided into regions, which are divided into districts, which are further divided into territories. (PSOF, DR ¶ 12; see also DSOF, PR ¶ 45-48). Before 2016, there were five regions; in 2016-17 there were four. (DSOF, PR ¶¶ 46-47). Each district has its own District Market Manager ("DMM"). (DSOF, PR ¶¶ 48-49). Scotts currently has 27 districts in the United States. (DSOF, PR ¶ 50).
Each district is divided into from 8 to 12 territories. (DSOF, PR ¶¶ 51, 52) Each contains, e.g., Lowe's and Home Depot stores. (DSOF, PR ¶ 53).
In each territory are Sales Managers, a category that includes the plaintiffs to this action.
M&Cs are the employees beneath Sales Managers. (DSOF, PR ¶ 59). M&Cs are responsible for merchandising Scotts' products in retail stores by placing them on designated shelves, building and constructing product displays, and maintaining, organizing, cleaning, and replenishing shelf space. (DSOF, PR ¶ 40). The parties dispute whether the M&Cs' responsibility for merchandising is shared with Sales Managers. (Id.).
Plaintiffs characterizes M&Cs as seasonal and part-time employees; Scotts asserts that some M&Cs work full-time. (PSOF, DR ¶ 2). The parties dispute whether M&Cs log most of their hours during a busy spring season. (PSOF, DR ¶ 3). It remains unclear how many how many M&Cs work for the company during and after the purported peak season. (PSOF, DR ¶ 3).
The parties dispute how much time Sales Managers spent supervising M&Cs. (DSOF, PR ¶ 59). Plaintiffs rely on spreadsheets allegedly containing the names and hours of every M&C who worked with each Plaintiff. (PSOF ¶ 6). Using the spreadsheets and payroll data provided by Scotts (see Lesser Decl. DE 181 ¶¶ 18-20), Plaintiffs have created a summary chart of the time Plaintiffs spent supervising two or more M&Cs. (Id.; Summary Chart, Ex. 16, DE 181-16; see also PSOF, DR ¶¶ 7-9). Plaintiffs' counsel, Seth R. Lesser, has provided a declaration in support of the summary chart, explaining it as follows:
(DE 181 ¶ 20) (referring to Chart, Ex. 16, DE 181-16)).
Scotts takes issue with the Plaintiffs' use of the summary charts and Lesser Declaration. (See e.g., PSOF, DR ¶¶ 7-9). In Section II.b.i.l.a, infra, I conclude that Plaintiffs may rely on summary charts. Nevertheless, the amount of time Plaintiff Sale Managers spent directing the work of two or more employees remains a disputed issue of fact. (PSOF, DR ¶¶ 8-9).
I write for the parties and therefore assume familiarity with the procedural history, including my (DE 66, 120, 217) and Judge Dickson's (DE 107) previous opinions.
On December 20, 2013, Plaintiffs Depalma and Leszczynski, through their counsel, filed a "Class Action Complaint and Demand for a Jury Trial." (DE 1). On February 4, 2014, Depalma and Leszczynski filed their "First Amended Collective Action Complaint and Demand for Jury Trial." (DE 5).
In April 2014, after the retirement of Judge Cavanaugh, this case was reassigned to me. (DE 25). Although Magistrate Judge Hammer originally had the case, it was soon reassigned to Magistrate Judge Dickson. (DE 31).
On March 31, 2016, I granted Plaintiffs' motion for conditional certification. (DE 66, 67). About two weeks later, I approved the form of the parties' proposed FLSA notice. (DE 70). By July 22, 2016, approximately 100 opt-ins had filed their consent forms. (See DE 72-106).
On August 4, 2016, Judge Dickson granted Plaintiffs' equitable tolling motion and ordered that the statute of limitations for the collective action opt-ins to be tolled from March 20, 2015 to April 11, 2016. (DE 109). Scotts appealed (DE 110), and I affirmed Judge Dickson's order. (DE 120, 121).
On November 12, 2018, Plaintiffs filed the motions that are now before me. Scotts filed a motion for summary judgment as to all plaintiffs (DE 174); Plaintiffs filed their own motion for summary judgment. (DE 177).
Federal Rule of Civil Procedure 56(a) provides that summary judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment, a court must construe all facts and inferences in the light most favorable to the nonmoving party. See Boyle v. County of Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998). The moving party bears the burden of establishing that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[W]ith respect to an issue on which the nonmoving party bears the burden of proof ... the burden on the moving party may be discharged by `showing'—that is, pointing out to the district court—that there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 325.
Once the moving party has met that threshold burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The opposing party must present actual evidence that creates a genuine issue as to a material fact for trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (setting forth types of evidence on which nonmoving party must rely to support its assertion that genuine issues of material fact exist). "[U]nsupported allegations ... and pleadings are insufficient to repel summary judgment." Schoch v. First Fid. Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990); see also Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) ("A nonmoving party has created a genuine issue of material fact if it has provided sufficient evidence to allow a jury to find in its favor at trial."). If the nonmoving party has failed "to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial, ... there can be `no genuine issue of material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Katz v. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex, 477 U.S. at 322-23).
In deciding a motion for summary judgment, the court's role is not to evaluate the evidence and decide the truth of the matter, but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249, 106 S.Ct. 2505. Credibility determinations are the province of the fact finder. Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992).
The summary judgment standard, however, does not operate in a vacuum. "[I]n ruling on a motion for summary judgment, the judge must view the evidence presented through the prism of the substantive evidentiary burden." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S.Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986). That "evidentiary burden" is discussed in the following section.
When the parties file cross-motions for summary judgment, the governing standard "does not change." Clevenger v. First Option Health Plan of N.J., 208 F.Supp.2d 463, 468-69 (D.N.J. 2002) (citing Weissman v. U.S.P.S., 19 F.Supp.2d 254 (D.N.J. 1998)). The court must consider the motions independently, in accordance with the principles outlined above. Goldwell of N.J., Inc. v. KPSS, Inc., 622 F.Supp.2d 168, 184 (D.N.J. 2009); Williams v. Philadelphia Housing Auth., 834 F.Supp. 794, 797 (E.D. Pa. 1993), aff'd, 27 F.3d 560 (3d Cir. 1994). That one of the cross-motions is denied does not imply that the other must be granted. For each motion, "the court construes facts and draws inferences in favor of the party against whom the motion under consideration is made" but does not "weigh the evidence or make credibility determinations" because "these tasks are left for the fact-finder." Pichler v. UNITE, 542 F.3d 380, 386 (3d Cir. 2008) (internal quotation and citations omitted).
I am presented with both sides' motions for summary judgment on the issue of whether the plaintiffs to this action ("Sales Managers" or "SMs") were exempt employees under the FLSA. Plaintiffs move for summary judgment, arguing that neither the executive nor administrative exemption applies. (DE 177-1). Defendant moves for summary judgment, arguing that the administrative exemption applies. (DE 174-1 pp. 14-27). Defendant argues in the alternative that, even if no exemption applies, Plaintiffs' damages should be calculated under a fluctuating-work-week method. (Id. pp. 27-30).
"The FLSA establishes federal minimum-wage, maximum-hour, and overtime guarantees that cannot be modified by contract." Davis v. Abington Mem'l Hosp., 765 F.3d 236, 241 (3d Cir. 2014) (quoting Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 69 (2013)). Generally, an employer must pay its employees at least a minimum hourly wage for work performed and must pay one and one-half times the employee's regular wage for hours worked in excess of forty hours per week. 29 U.S.C. §§ 206, 207. Exempt from the coverage of FLSA, however, are white-collar salaried employees, meaning "any person employed in a bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213(a)(1). See also 29 C.F.R. § 541.3.
FLSA exemptions are to be given a fair (as opposed to narrow) interpretation. Encino Motorcars, LLC v. Navarro, 138 S.Ct. 1134, 1142 (2018) (quoting A. Scalia & B. Garner, Reading Law 363 (2012)). Employers bear the burden to prove that an employee qualifies for an FLSA exemption. Mazzarella v. Fast Rig Support, LLC, 823 F.3d 786, 790-91 (3d Cir. 2016); Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 900 (3d Cir. 1991).
Plaintiffs move for summary judgment on the executive exemption, arguing that Sales Managers did not "customarily and regularly" supervise two or more employees, as required by 29 C.F.R. § 541.100(a)(3). In opposition, Defendant counters that there is at least an issue of fact as to whether the Sales Managers are subject to the executive exemption, or in the alternative that they are subject to the combination exemption.
An employee qualified under the executive exemption is one
29 C.F.R. § 541.100(a). On these motions, subsection (a)(3) is the primary focus. Under (a)(3), an employee must "customarily and regularly" direct the work of two or more employees. "[C]ustomarily and regularly" refers to supervision that is more than "occasional" but may be less than "constant." 29 C.F.R. § 541.701. A customary and regular activity "includes work normally and recurrently performed every workweek; it does not include isolated or one-time tasks." Id.
The thrust of Plaintiffs' argument against the executive exemption is that the Sales Managers supervised the M&Cs for an inadequate amount of time to satisfy 29 C.F.R. § 541.100(a)(3). In support, Plaintiffs cite depositions and the declaration and summary chart submitted by Plaintiff's Counsel, Seth R. Lesser. (DE 177-1 pp. 7-11). The summary chart is purportedly based on data provided by Defendant in discovery. (DE 196, p. 4, n. 3, p. 6). In particular, Plaintiffs point to spreadsheets identifying the hours worked by M&Cs who worked concurrently with the Plaintiffs. (See DE 181-14, 181-15).
Defendant argues that Plaintiffs' reliance on their counsel's declaration and summary chart is contrary to Federal Rule of Civil Procedure 56(c)(4), Local Civil Rule 7.2(a), and Federal Rule of Evidence 701(c). (DE 182 pp. 7-10). Fed. R. Civ. P. 56(c)(4) requires that declaration submitted in relation to a motion "must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Loc. Civ. R. 7.2(a), too, requires personal knowledge, and states that any legal arguments or summations included in a declaration "will be disregarded by the court and may subject the signatory to the appropriate censure, sanctions or both." In addition, Fed. R. Evid. 701(a) states that, if a witness is not an expert, opinion testimony must be "rationally based on the perceptions of the witness." Fed. R. Evid. 701(c) provides a distinction between lay and expert testimony: "While expert testimony `results from a process of reasoning which can be mastered only by specialists in the field,' 701(c) demands that lay testimony be grounded on `process[es] of reasoning familiar in everyday life.'" Acosta v. Cent. Laundry, Inc., 273 F.Supp.3d 553, 557 (E.D. Pa. 2017) (citing Notes to 2000 Amendments).
Plaintiffs respond that the summary chart is allowed under Fed. R. Evid. 1006 because it summarizes the information contained in the voluminous but independently admissible Exhibits 14 and 15. At the court's discretion, see Hutchins v. United Parcel Serv., Inc., 197 F. App'x 152, 59 (3d Cir. 2006) (citing Fed. R. Evid. 1006; Pritchard v. Liggett & Myers Tobacco Co., 295 F.2d 292, 300-301 (3d Cir. 1961)), a proponent may
Fed. R. Evid. 1006.
Here, I agree with Plaintiffs. It is true that some courts have exercised their discretion to exclude summary charts under, for example, Loc. Civ. R. 7.2(a), but I am not bound to do so. See Hutchins, 197 F. App'x at 158-59. The reasons for offering a summary are manifest. Exhibits 14 and 15 contain data so voluminous that it was impractical even to file it electronically on the docket. (See DE 181-14, 181-15 (spreadsheets range anywhere from 200 to 174,000 lines long).)
The proponent, counsel for the plaintiffs, has gained personal familiarity with the underlying data furnished by Scotts; the underlying data would be admissible in evidence; and the calculations, which involve little more than arithmetic, are within the ken of a lay person. See Fed. R. Civ. P. 56(c)(4). (See also Ex. 16, DE 181-16 (reflecting simple percentage calculations of the time that an opt-in plaintiff managed 2 or more M&Cs)). As required by Fed. R. Evid. 1006, the underlying data are available to—indeed, were produced by—the defendant. As contemplated by that Rule, the defendant may of course challenge any perceived inaccuracies. If the summary remains the subject of disagreement, it might be the subject of conflicting testimony, perhaps even expert testimony, at trial. The background principle remains that the underlying data in Exhibits 14 and 15 could be placed in evidence. (I set aside the question of whether that would be an effective trial tactic.) The indicia of admissibility, and the fact that the chart summarizes defendant's own data, persuade me that I may consider the chart, at least on summary judgment for the purpose of determining whether there is a triable issue of fact.
This is Scotts' own information. Exhibits 14 and 15 are before the Court, and a defendant cannot defeat summary judgment by stating that its own documents are too voluminous or complex for the court to consider. For purposes of this summary judgment motion, I will consider the summary chart.
That is not to say, however, that the chart disposes of the issues. There are several disputes regarding the underlying data and analysis in the summary chart. (Compare DE 181 ¶ 20 (citing Ex. 16, DE 181-16), with Nickerson Decl., DE 182-1.) Under Evidence Rule 1006, Scotts is entitled to raise such objections. These disputes in themselves are significant enough to give rise to issues of material fact that preclude summary judgment.
Defendant argues with some force that the "summary chart" is based on incomplete data and that its analysis is flawed. First, Defendant's expert disputes some of Mr. Lesser's calculations. (See DE 182 p. 9 (citing Nickerson Decl., DE 182-1)). Second, Defendant argues that the summary chart uses incomplete or improperly formatted data. Specifically, Defendant says (1) the chart is missing a plaintiff, Mr. Jonathan Bridges; (2) the chart arbitrarily focuses on a 2-week pay period rather than individual work weeks; and (3) the chart does not consider data dating from after 2016. (DE 182 p. 10). Plaintiffs retort that the chart is relevant and that Defendants' criticisms do not imply that it cannot be considered. (DE 196 pp. 6-7).
The parties' dispute over the contents and significance of the summary chart, directly implicates the key issue of how many hours the Plaintiffs spent supervising M&Cs. I will therefore deny both sides' motions for summary judgment on the issue of the executive exemption.
Plaintiffs suggest a meritorious alternative to a battle of experts before a jury. They request that the Court appoint a special master to review the time records. See Perez v. RadioShack Corp., 386 F.Supp.2d 979, 993 (N.D. Ill. 2005) (considering the appointment a special master to review time records to identify affected class members).
I will direct that within seven days, counsel for the parties shall set up a conference by telephone or in person with Magistrate Judge Dickson. The object of the conference is to set up the appointment of a special master to review the time records and to extract information from them concerning the hours that Sales Managers spent supervising M&Cs in the relevant period. The parties may propose additional areas of review in which the assistance of a special master might be of use. In the conference, counsel may suggest candidates for this appointment and propose procedures, but the Magistrate Judge will have the authority to make the appointment and decide such matters as the scope of the special master's mandate and the allocation of costs.
I will add the following comment. This case has been pending for far too long. Referral to the Special Master is not an invitation to obstructionism, and I will consult with the Special Master periodically to ensure that the parties are striving in good faith to clarify, not obscure, the issues. If this case must be tried, then so be it; the parties will be expected to render it trial-ready with dispatch and efficiency.
In the alternative, Plaintiffs invoke the "combination exemption."
The applicable regulation, 29 C.F.R. § 541.100(a)(2), sets forth the "primary duty" requirement of the executive exemption. However, even if an employee does not satisfy the executive exemption's primary duty requirement, the employee may qualify for a so-called "combination" exemption. 29 C.F.R. § 541.708 ("[A]n employee whose primary duty involves a combination of exempt administrative and exempt executive work may qualify for exemption."). That means that if an employee satisfies (a)(1), (a)(3) and (a)(4), but not (a)(2), the employee may still qualify as exempt, if that employee satisfies the combination primary-duty test. See IntraComm, Inc. v. Bajaj, 492 F.3d 285, 295 (4th Cir. 2007) (holding that § 541.708 creates an alternative method for satisfying the primary duty test).
As discussed supra, the applicability of 29 C.F.R. § 541.100(a)(3) remains in dispute. I therefore will not reach the issue of the combination exemption at this time.
Plaintiffs and Scotts have both moved for summary judgment on the administrative exemption from FLSA coverage, which is distinct from the executive exemption. Issues of fact also preclude summary judgment on the issue of whether these Sales Managers fall under the administrative exemption.
The administrative exemption applies to an employee:
29 C.F.R. § 541.200(a).
While the parties' submissions cover a range of issues,
I first look to the regulations for further insight on § 541.200(a)(2). In order for an employee's duties to be "directly related to the management or general business operations," the employee "must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a manufacturing production line or selling a product in a retail or service establishment." 29 C.F.R. 541.201(a).
An employee's "primary duty" is the principal, main, major or most important duty that the employee performs." 29 C.F.R. § 541.700(a). "Determination of an employee's primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee's job as a whole." Id. Factors to consider include, but are not limited to
29 C.F.R. § 541.700(a). While time spent performing exempt work is a "useful guide," it is not the "sole test" of primary duty. 29 C.F.R. § 541.700(b). Even so, "employees who spend more than 50 percent of their time performing exempt work will generally satisfy the primary duty requirement." Id. On the other hand, "if other factors support" that an employee meets the primary duty requirement, then it is not necessary that the employee spends more than 50 percent of her time performing exempt duties. Id. See also Itterly v. Family Dollar Stores, Inc., 606 F. App'x 643, 646 (3d Cir. 2015) (recognizing "that an employee need not spend the majority of his time performing managerial tasks in order to be considered exempt."). Accordingly, courts apply a qualitative standard, looking to "the relative importance of the [exempt] duties as compared with the employee's nonexempt duties," and "whether the [exempt] activities are critical to the successful operation of the enterprise." Itterly v. Family Dollar Stores, Inc., 606 F. App'x 643, 646 (3d Cir. 2015).
Defendants assert that the Sales Managers' primary duty was managing their territory (see DE 174-1 p. 19; DE 182 p. 19); Plaintiffs respond that their primary duty was merchandising (DE 177-1 pp. 20-21; DE 184 pp. 15-16). Plaintiffs state that they performed merchandising work a majority of the time, and cite the testimony of certain plaintiffs that they spent 80%-90% of their time on merchandising. (PSOF ¶ 17). Defendants dispute these facts and also argue that they are not material to the Plaintiffs' primary duties. (DR ¶ 17).
To be sure, time spent on exempt work is not the "sole test" of a primary activity, but it is surely probative. The primary duty test looks at the character of the employees' job as a whole. The time spent on a particular activity, whether exempt or non-exempt, is a useful tool in weighing that activity's importance in the balance. I therefore decline to award either side summary judgment when there is a live factual dispute as to how much time the Plaintiffs spent merchandising.
Scotts argues that if its motion on the administrative exemption is denied, the Court should rule that damages should be calculated using the fluctuating-work-week method ("FWW method"). (DE 174-1. pp. 27-30). In opposition, Plaintiffs argue that the FWW method is inapplicable to exemption misclassification cases, and, even if it is applicable, it is inappropriate given the facts of this case. The damages issues need not be considered unless liability is established. Still, because the liability case is necessarily structured in relation to what is recoverable, guidance on damages should be of assistance to the parties. I therefore treat this portion of Scotts' motion as being in the nature of a motion in limine, and grant it on that limited and provisional basis.
Under the FLSA, employees who have agreed to work at a fixed weekly salary, but whose hours vary week-to-week, are "assumed to have been paid for all hours worked at their regular rate of pay, with excess overtime due for hours worked over forty at one-half the regular rate of pay." Banford v. Entergy Nuclear Operations, Inc., 649 F. App'x 89, 90 (2d Cir. 2016). The Supreme Court first upheld the use of the FWW method, albeit not in a misapplication case, in Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942), holding:
Missel, 316 U.S. at 580 (internal quotations, footnotes omitted).
In 1968, the Department of Labor enshrined the FWW method in an interpretive rule, 29 C.F.R. § 778.114. Under the rule, payment may be remitted under the FWW method when: (1) "there is a clear mutual understanding of the parties that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period"; (2) the salary the employee receives is no less than minimum wage "for every hour worked in those workweeks in which the number of hours he works is greatest"; and (3) the employee "receives extra compensation, in addition to such salary, for all overtime hours worked at a rate not less than one-half his regular rate of pay." 29 C.F.R. § 778.114(a).
Every Circuit that has directly addressed the issue has determined that the FWW method applies to exemption misclassification cases, some relying on the implications of Missel, and others relying on § 778.114. See e.g., Desmond v. PNGI Charles Town Gaming, L.L.C., 630 F.3d 351 (4th Cir. 2011) (relying on Missel); Urnikis-Negro v. Am. Family Prop. Servs., 616 F.3d 665 (7th Cir. 2010) (relying on Missel); Clements v. Serco, Inc., 530 F.3d 1224 (10th Cir. 2008) (relying on § 778.114); Valerio v. Putnam Assocs. Inc., 173 F.3d 35, 40 (1st Cir. 1999) (relying on § 778.114).
In Urnikis-Negro, the Seventh Circuit distinguished between Missel, on which it relied, and Section 778.114(a), which it held "does not provide the authority to apply the FWW method in a misclassification case." 616 F.3d at 666. While Section 778.114(a) provides a way for an employer to compensate a nonexempt employee for fluctuating hours, it "looks forward rather than backward," id. at 678, and "it is not a remedial measure that specifies how damages are to be calculated when a court finds that an employer has breached its statutory obligations." Id. Moreover, the court held, because the rule was not issued pursuant to the usual notice and rulemaking procedures, it is not owed full Chevron deference, although, it is still entitled to a "measure of respect" from the judiciary. Id. at 675-676. Finally, Section 778.114 requires that the parties mutually understand that the employee is paid for overtime work, which is an impossible agreement to reach if the employer believes the employee to be nonexempt and therefore not subject to overtime. Id. at 681. Thus, the Seventh Circuit held, instead of Section 778.114(a), the authority to calculate damages stems from Missel. Id. at 681-682. Other courts, however, have found Section 778.114 applicable. See e.g., Valerio v. Putnam Assocs. Inc., 173 F.3d at 40.
What that means in practical terms is this: Under the FWW method, the employee's hourly rate for a given week will be calculated by dividing the fixed weekly salary by the number of hours worked. Urnikis-Negro, 616 F.3d at 681 (citing Missel, 316 U.S. at 579-580). That calculated hourly rate is considered to be the agreed-upon amount for that week, so long as the calculation does not yield a rate that is lower than the minimum wage. Id. at 680. For hours in excess of (usually) 40, additional overtime will be paid at one-half of that calculated hourly rate.
Following Missel, "employees and employers are free to agree to a reduced hourly wage in exchange for a fixed weekly salary, provided the fixed weekly salary covers all hours worked and meets minimum wage requirements." Desmond, 630 F.3d 351, 357 (4th Cir. 2011) (citing Missel, 316 U.S. at 580). Setting aside some complications, what Missel and section 778.114 essentially do is put a floor under the resulting wage. There is no fixed limit on the number of hours to be worked, but the fixed salary cannot result in a calculated hourly rate that is lower than the hourly minimum wage. It follows that the additional 50% premium for overtime hours cannot come out to less than half the hourly minimum wage. If the weekly salary divided by the number of hours worked comes out to a figure higher than the hourly minimum wage, then both the regular and overtime rate will be correspondingly higher.
Our Circuit, the Third, has not yet decided the issue. Lacking binding authority, I am persuaded that the proper approach is that of Urnikis-Negro, 616 F.3d at 672-80 and Desmond, 630 F.3d at 356-357. I hold that the Court may apply the FWW method to calculate damages in an exemption misclassification case. However, the FWW method applies only if the parties had a "mutual understanding that the fixed weekly salary was compensation for all hours worked each workweek and the salary provided compensation at a rate not less than the minimum wage for every hour worked." Desmond, 630 F.3d at 354.
Plaintiffs argue that issues of fact preclude summary judgment in Scotts' favor because they and Scotts did not have the necessary "clear mutual understanding . . . that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number." 29 C.F.R. § 778.114. (The Plaintiffs make their argument based on the language of Section 778.114, but the argument under Missel would be the same. See supra.) That requirement flows from the recognition that employees may bargain away a fixed per-hour rate in return for the security of a fixed weekly salary, but will not be presumed to have done so. See Desmond, 630 F.3d at 357 (citing Missel).
Scotts has brought forth evidence that, at least for some Plaintiffs, there was the necessary "clear mutual understanding." (See DSOF ¶ 731 (stating that certain Plaintiffs testified that they understood their weekly salary would compensate them for all hours worked in a week, regardless of how few or how many)).
I think the Plaintiffs misidentify the issue. The issue is not whether they knew in advance the number of hours they would work each week. The necessary "mutual understanding" or "agreement" concerns whether their weekly salary would represent their compensation irrespective of the number of hours worked in any particular week (with additional compensation for overtime hours)—as opposed to, say, a fixed rate per-hour rate to be multiplied by the number of hours actually worked. In some instances, Plaintiffs' responding statement of facts also fails to cite to the record. (See PR ¶ 731 (stating, without citation, that the Plaintiffs understood they were salaried employees, but "they did not agree or anticipate that the SM position would routinely require them to work more than 60 hours a week")).
I therefore rule in limine, subject to proofs at trial establishing liability and the other prerequisites, that the FWW method is appropriate.
For the reasons set forth above, the motion (DE 177) for summary judgment of Plaintiffs on FLSA employee-exemption issues is DENIED, and the motion (DE 174) for summary judgment of Defendant Scotts on FLSA employee-exemption issues is also DENIED. Scotts' motion, insofar as it addresses the FWW methodology for damages, is treated as a motion in limine and on that limited basis is GRANTED.
An appropriate order follows.
29 C.F.R. § 541.3(a).
Encino, however, clearly overturns that former narrow-construction approach. Encino, 138 S. Ct. at 1142; see also id. at 1147 n. 7 (Ginsburg, J., dissenting) (objecting that the majority had "unsettle[d] more than half a century of our precedent"). Thus, employers are no longer bound to prove that an exemption is "plainly and unmistakably" within the statute. See Mosquera v. MTI Retreading Co., 745 F. App'x 568, 570 (6th Cir. 2018) (stating the employee's burden, but no longer including that the exemption must be demonstrated "plainly and unmistakably"); see also Danny Flores, et al. v. City of San Gabriel, et al., No. LACV124884JGBJECGX, 2018 WL 8017788, at *3 (C.D. Cal. Nov. 5, 2018) (considering, on a post-Encino motion for reconsideration of a FLSA summary judgment ruling made pre-Encino, that "[t]he narrow construction doctrine was a demanding test, under which employers asserting exemptions bore the burden of showing that their claimed exemption was plainly and unmistakably within their terms and spirits"). But see Carr v. Flowers Foods, Inc., No. CV 15-6391, 2019 WL 2027299, at *6 (E.D. Pa. May 7, 2019) (Stating, in a post-Encino exemption case, that "FLSA exemptions must be construed narrowly against the employer, and Defendants bear the burden of proving plainly and unmistakably that the drivers qualify for [an] exemption").
Fraternal Order of Police, Lodge 1 v. City of Camden, 842 F.3d 231, 238-39 (3d Cir. 2016) (internal citations omitted) (holding that out-of-court statements that plaintiffs relied on were admissible at trial when "[p]laintiffs identified the out-of-court declarants . . . and noted their availability to testify"); see also Fed. R. Civ. P. 56 (advisory committee notes to 2010 edition) ("The burden is on the proponent to show that the material is admissible as presented or to explain the admissible form that is anticipated.").
Getting to the point, Scotts then cites contrary testimony to the effect that that merchandising was not the primary duty of SMS: the declarations of Plaintiffs' supervising DMMs, the prior declarations of some of the Plaintiffs, a string of purportedly time-intensive, exempt activities that Plaintiffs testified to performing, Plaintiffs' annual performance evaluations, the job description of the Sales Manager role, Plaintiffs' resumes and LinkedIn profiles, and Plaintiffs' e-mails. (Id.). In addition, Scotts asserts that, even while merchandising products, Plaintiffs are still in charge of their work. (Id.). This surely suffices to create an issue of fact.
Case law within the Second Circuit is split on this issue. See Banford v. Entergy Nuclear Operations, Inc., 649 F. App'x 89, 90 (2d Cir. 2016) (comparing Costello v. Home Depot, supra (rejecting application of FWW method), with Klein v. Torrey Point Grp., LLC, 979 F.Supp.2d 417, 434-39 (S.D.N.Y. 2013) (finding FWW applicable in misclassification cases based upon Missel)).
Urnikis-Negro, 616 F.3d at 675.
Assume, for simplicity, that minimum wage is $10 per hour, and that an employee has agreed to a weekly salary of $700 for whatever hours arc worked.
If the employee worked 35 hours in a particular week, the salary would be $700 and the calculated hourly rate would be 700/35, or $20 per hour.
If the employee worked 50 hours, the calculated hourly rate would be 700/50, or $14 per hour. The agreed-upon base salary would still be $700 per week. For the 10 hours worked in excess of 40, however, the employee would be entitled to an overtime premium at a rate of half of $14, i.e., $7 per hour.
If the employee worked 80 hours in a particular week, the calculated hourly rate would be 700/80, or $8.75—less than my hypothetical minimum wage, and therefore below the salary floor set by § 778.114(a) (requiring that the salary the employee receives is no less than minimum wage "for every hour worked in those workweeks in which the number of hours he works is greatest").
