Robert M. Dow, Jr., United States District Judge.
Plaintiffs Wayne Bland, Danuta Durkiewicz, David Bowles and Adam Reyes ("Plaintiffs") filed this putative collective and class action on behalf of themselves and all those similarly situated against Defendants Edward D. Jones & Co., L.P. and The Jones Financial Companies, L.L.L.P.; alleging violations of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (Count I) and several Illinois and Missouri statutes. Currently before the Court is Defendants' motion to dismiss [38] Plaintiffs' Amended Class and Collective Action Complaint [35]. For the reasons stated below, Defendants' motion to dismiss [38] is granted. Plaintiff Bowles's claims in Count I are dismissed with prejudice, except as to any claims that relate to the TCR Provision, which are dismissed without prejudice. Plaintiffs' recordkeeping claim in Count I is also dismissed with prejudice. The rest of Count I and Counts II-VI are dismissed without prejudice. Plaintiffs are given until April 15, 2019 to file an amended complaint consistent with this opinion. The case is set for further status on April 23, 2019 at 9:00 a.m. Finally, Defendants' request for oral argument [63] is denied as moot.
Plaintiffs are all former Financial Advisors who worked for Defendants and participated in Defendants' Financial Advisor training program.
[39-2, ¶ 21.] Each of the Plaintiffs also received a "Compensation Agreement," [35, ¶ 20], that provides a schedule of compensation for both their time as trainees and then as "New Financial Advisors", [39-3].
The training program comprises a 17-week "Study Calendar" period divided into two stages. [Id. ¶¶ 17-18.] During the first or "self-study" stage, trainees study for industry licensing exams using written online materials on computers loaned to them by Defendants." [Id. ¶ 18.] At the end of that stage, trainees take and must pass the FINRA Series 7 and 66 licensing exams.
The second or "door knock" stage, begins with one week of on-site training in either St. Louis, Missouri or Tempe, Arizona, followed by seven weeks of knocking on doors in a designated neighborhood to obtain individuals' contact information. [Id. ¶ 19.] This stage ends with another on-site week, designated as "Evaluation/Graduation,"
During this Study Calendar period, trainees are paid on a bi-weekly basis. [Id. ¶ 20.] The trainees also qualify as overtime eligible. [Id.] Although Defendants expect trainees to work 45 hours during the first stage and 60 hours during the second stage, the projected bi-weekly pay does not vary between the two periods. [39-3, at 2.] Rather, Defendants adjust the hourly rate between the two periods such that individuals like Plaintiffs are paid an almost identical amount in both periods.
Upon achieving "can sell" status, trainees become "new financial advisors" and Defendants classify them as overtime "exempt." [35, ¶ 23; 39-3, at 2.] Financial Advisors are salaried, though the salary begins to fluctuate based on performance after four months. [39-3, at 2-3.] However, a financial advisor's salary includes a "minimum guaranteed salary" ("MGS") that does not fluctuate and is paid regardless of performance. [Id.] What amount of a financial advisor's salary is composed of MGS "is determined by the applicable federal and state guidelines where [the advisor's] branch is located." [Id. at 3.]
As new financial advisors, individuals such as Plaintiffs solicit "door knock" contacts to become clients. [35, ¶ 23.] They receive little training during this period, which primarily constitutes "access to a Regional Trainer and wholesaler presentations by `preferred partner' firms whose products the Firm pushes [new financial advisors] to sell to clients." [Id.] However, their primary duty is to sell financial products. [Id.] In fact, Plaintiffs allege that Defendants instructed them to "sell these financial products without regard to the clients' individual needs, financial circumstances, or investment objectives." [Id. ¶ 85.] Nor were Plaintiffs placed in job positions "whose primary duty was to perform work directly related to the management or general business operations of Edward Jones or clients * * *." [Id. ¶ 86.]
Plaintiffs worked for Defendants at various offices around the country and at various periods between January 2014 and June 2016. [Id. ¶¶ 10-13.] They each signed the Financial Advisor Employment Agreement containing the TCR Provision.
In response to this conduct, Plaintiffs filed this purported collective and class action suit alleging multiple violations of the FLSA and various Illinois and Missouri statutes on March 13, 2018. See generally [1]. On June 12, 2018, Plaintiffs filed an amended complaint further detailing those claims. See generally [35]. On July 10, 2018, Defendants filed the instant motion to dismiss. [38.] The court now resolves the motion.
To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the complaint first must comply with Rule 8(a) by providing "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), such that the defendant is given "fair notice of what the * * * claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)) (alteration in original). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the "speculative level." E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). "A pleading that offers `labels and conclusions' or a `formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Dismissal for failure to state a claim under Rule 12(b)(6) is proper "when the allegations in a complaint, however true, could not raise a claim of entitlement to relief." Twombly, 550 U.S. at 558, 127 S.Ct. 1955. In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts as true all of Plaintiffs' well-pleaded factual allegations and draws all reasonable inferences in Plaintiffs' favor. Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007). Evaluating whether a "claim is sufficiently plausible to survive a motion to dismiss is `a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" Id. (quoting McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011)).
Plaintiffs allege five separate violations of the FLSA (Count I), a violation of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (Count II), a violation of the Illinois Minimum Wage Law, 820 ILCS 105/1 et seq. (Count III), and a violation of the Missouri Minimum Wage Law, V.A.M.S. 290.500 et seq. (Count VI). In addition, Plaintiffs seek the rescission of the TCR Provision (Count IV) and the disgorgement of funds under a theory of unjust enrichment (Count V).
Plaintiffs allege five violations of the FLSA: (1) that the TCR Provision violated the FLSA's requirement to pay wages "free and clear;" (2) that enforcement of the TCR Provision would result in Plaintiffs' compensation falling below the minimum wage; (3) that Defendants failed to adequately pay the minimum wage or overtime while they were in non-exempt positions;
The FLSA requires a subject employer to pay its employees a minimum hourly wage, and to compensate its employees at one and one-half time the regular rate for a workweek longer than forty hours. See 29 U.S.C. §§ 206, 207. Pursuant to the FLSA, the Department of Labor has issued regulations requiring that minimum wages be paid "free and clear," i.e.:
29 C.F.R. § 531.35. Claims under § 531.35 are only cognizable if the effect of the condition complained of would reduce the employee's wages below the statutory minimum. See, e.g., Franks v. MKM Oil, Inc., 2010 WL 3613983, at *4 (N.D. Ill. Sept. 8, 2010) (concluding plaintiff failed to state a claim because she had not pled any facts that the condition she complained of resulted in her earning less than the minimum wage); see also Brown v. Lululemon Athletica, Inc., 2011 WL 741254, at *4 (N.D. Ill. Feb. 24, 2011) (collecting cases holding plaintiffs must allege that their pay fell below minimum wage). Given these rulings, the Court addresses Plaintiffs claims that the TCR Provision places an illegal condition on their pay, [35, ¶¶ 77-78], and that enforcement of the provision would reduce their earnings to below the minimum wage, [id. ¶¶ 77-78, 81], together. Defendants move to dismiss both claims on the grounds that Plaintiffs do not have standing to challenge the TCR Provision because they were paid the minimum wage during the entirety of their employment and have not paid any amount since their termination, and that in any event the TCR Provision does not violate the FLSA because it amounts to a loan to cover the training that they received.
Because it is a threshold issue, the Court must address Defendants' standing argument first.
At first glance, Plaintiffs' standing appears tenuous. In all but one of the cases cited by the parties in which a court has reviewed a contract provision similar to the TCR Provision at issue here, the plaintiff had actually been deprived of a concrete dollar amount by the defendant. See Gordon v. City of Oakland, 627 F.3d 1092, 1094 (9th Cir. 2010) ("Gordon paid the City the $5,268.03 it claimed was due" for "`training reimbursement' and `collection costs.'"); Heder v. City of Two Rivers, Wisconsin, 295 F.3d 777, 778 (7th Cir. 2002) ("Two Rivers withheld all of Heder's pay from his last two pay periods."); City of Oakland v. Hassey, 163 Cal.App.4th 1477, 78 Cal.Rptr.3d 621, 629 (2008), as modified on denial of reh'g (July 15, 2008), as modified (July 17, 2008) (noting the city withheld a plaintiff's final paycheck and a check to cash out his retirement balance to cover money owed under a repayment agreement); Park v. FDM Grp. (Holdings) PLC, 2017 WL 946298, at *2 (S.D.N.Y. Mar. 9, 2017) ("Plaintiff resigned from her FDM Consultant position * * * and paid a Termination Fee of $20,000 * * *."). Only one case cited by either party or located by the Court involved a plaintiff without a concrete deprivation. See Ketner v. Branch Banking and Trust Company, 143 F.Supp.3d 370 (M.D.N.C. 2015).
In Ketner, the named plaintiffs alleged that a provision of their employment contracts nearly identical to the TCR Provision violated the FLSA's minimum wage requirement and sought a declaratory judgment invalidating it. 143 F.Supp.3d at 375-76; see also Ketner v. Branch Banking and Trust Company, No. 14-cv-967, Docket Entry 1, ¶¶ 69-72 (M.D.N.C. Nov. 19, 2014). In response, the defendant argued that at least one of the plaintiffs lacked standing because he had not paid any portion of his "loan obligation." Id. at 382. The court rejected that argument, noting that (1) the plaintiff disputed the validity of the contract, (2) the defendant's law firm had sent plaintiff letters demanding payment and threatening legal action if payment was not forthcoming, and (3) the defendant had previously enforced the provision in question and actually recovered money. Id. at 383. The court concluded that these facts undermined any concerns that the plaintiff's injury was speculative or hypothetical and that based on the facts alleged, the plaintiff had "`an objective and reasonable apprehension of future litigation' regarding his alleged payment obligations
Whether a plaintiff has "an objective and reasonable apprehension of future litigation" is one of the standards used by the Fourth Circuit to determine if a plaintiff has standing under the Declaratory Judgment Act ("DJA), 28 U.S.C. § 2201. See Energy Recovery, Inc. v. Hauge, 133 F.Supp.2d 814, 817 (E.D. Va. 2000). Thus, it appears that North Carolina district court relied on the Fourth Circuit's jurisprudence regarding declaratory judgments to determine whether the Ketner plaintiffs had standing. Given that the Supreme Court has held that "the `actual controversy' requirement of the Declaratory Judgment Act is coextensive with the `case or controversy' standard for determining whether the Court has jurisdiction under Article III," see Deutsche Leasing USA, Inc. v. Hamps Enterprises, LLC, 2015 WL 536010, at *3 (N.D. Ill. Feb. 6, 2015) (citing MedImmune, 549 U.S. at 126-27, 127 S.Ct. 764), the Court elects to do the same, especially in view of Plaintiffs' request for a declaration that "Defendants' conduct, policies, and practices are unlawful and constitute willful violations of the [FLSA] * * *." [35, at 27 ¶ d.] The question therefore is whether the allegations demonstrate that there is "`a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'" Bell v. Taylor, 827 F.3d 699, 711 (7th Cir. 2016) (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007)).
Here, Plaintiffs have alleged that Defendants sent some form of communication stating that they owe or demanding that they pay $75,000 as provided for by the TCR Provision, [35, ¶¶ 41, 50, 59], the validity of which Plaintiffs clearly dispute. However, unlike in Ketner, Plaintiffs have not alleged any facts suggesting that Defendants have (1) taken any steps to bring litigation against them, (2) ever actually collected money from individuals pursuant to the TCR Provision, or (3) even expressly threatened to file suit.
Plaintiffs invocation of the Supreme Court's decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127-28, 137,
Turning to the substance of Plaintiffs' claims, Defendants maintain that Heder and Gordon should control the outcome in this case and require concluding in their favor. [62, at 2-6.] Plaintiffs argue that Heder actually supports their position, and that in any event this Court should follow the analysis laid out in Ketner, which questioned the applicability of Heder and viability of Gordon.
In Heder, the Eastern District of Wisconsin and then the Seventh Circuit evaluated the validity of an agreement between the City of Two Rivers and the city's firefighters under Wisconsin law. Heder v. City of Two Rivers, 149 F.Supp.2d 677 (E.D. Wis. 2001); Heder, 295 F.3d at 778, 780-83. As part of the agreement in Heder, Two Rivers agreed to pay for the city's firefighters' paramedic training but required any individual who left the department before three years of service to repay the city for (1) the training, (2) any overtime wages received due to that training, and (3) any premium wages the firefighter earned as a result of that training. 149 F.Supp.2d at 688. The district court, describing the contract term as a "liquidated damages" provision, held that the provision was unenforceable as to the wage repayment because it violated the FLSA, but noted that the portion "`equal to the cost of tuition, books, and other training costs for the paramedic training' [was] not problematic * * *." Id. at 693-94. Nonetheless, the district court invalidated the entire provision under Wisconsin law because the agreement did not reduce the amount due over time. Id. at 693.
At the Seventh Circuit, the city conceded that Heder was entitled to keep "any compensation that the FLSA specified as a statutory floor below which no contract may go." Heder, 295 F.3d at 779. Thus, he was entitled to "at least the statutory minimum wage for his final two pay periods," the paychecks for which the city had previously withheld as payment for the training costs, and other liquidated damages. Id. at 778-79. However, the court also noted that the City was entitled to collect any residual amount as an ordinary creditor, i.e. the City could collect from any difference between the statutory minimum and the total of the paychecks. Id. After addressing the proper way to
Relying on Heder, the Ninth Circuit in Gordon concluded that the money that a police officer paid to the defendant city pursuant to a training reimbursement agreement did not constitute an illegal kickback under the FLSA. 627 F.3d at 1093, 1095-96. The court focused on Heder's comment that "[a]s long as the city paid departing firefighters at least the minimum wage, it could collect the training costs as an ordinary creditor." Id. at 1096 (citing 295 F.3d at 779). The Ninth Circuit relied on this principle to conclude that because the City of Oakland had paid Gordon at least the minimum wage for her final week of work, it was free to seek repayment of her "training debt" as an ordinary creditor. Id.
The few district courts that have examined both Heder and Gordon have split in regard to whether a tuition reimbursement provision such as the one at issue here is actionable as a matter of law. In Ketner, the court concluded that Heder was inapposite as it had not actually held such an agreement was acceptable under the FLSA and that Gordon's reliance on Heder was therefore misplaced. 143 F.Supp.3d at 383. It further distinguished the two cases noting that the training at issue in Ketner was employer specific, while Heder and Gordon both involved training that provided portable skills. Id. at 383-84. The court also noted that the damage amount at issue (∼$36,000) was significantly more than that at issue in Gordon ($8,000) and Heder ($1,500) before denying the defendant's motion to dismiss. Id. The court noted that "factual development" would "determine whether the costs of training for the LDP is a bona fide loan as asserted by [Defendant] or a kick-back of salary." Id. at 384.
By contrast, Park v. FDM Grp. (Holdings) PLC held that a "termination fee" which required a payment if an individual left within a certain amount of time after the completion of her training did not violate the FLSA. 2017 WL 946298, at *4 (S.D.N.Y. Mar. 9, 2017). Like the TCR Provision at issue here, the contract in Park characterized the termination fee as liquidated damages approximating the damages the defendant would suffer if the employee breached the agreement prior to the end of the contracted period. Id. Additionally, the maximum fee of $30,000 corresponded to the maximum value of the training provided and the agreement included the plaintiff's specific "acknowledgement that the Company incurred significant costs in training the employees and that the two-year term was contracted in consideration of such costs." Id. Nor was the fee "a deduction for tools used or costs incurred in the course of [p]laintiff's performance of her job as a consultant." Id. Finally, the court noted that "[s]uch liquidated damages provisions in employment agreements are not unusual, and even those that are explicitly tied to repayment of the costs of a training program
This Court elects to follow Park, Gordon, and especially Heder, which constitutes controlling authority in this Circuit. As in Park, Plaintiffs explicitly agreed that the reimbursable amount "bears a reasonable relationship to the computed damages Edward Jones would suffer from a breach by you and that Edward Jones will suffer demonstrable loss as result of your breach." [39-2, ¶ 21.] Although the Court is somewhat skeptical that the actual costs of training totaled $75,000—especially considering that the contract explicitly notes that the $75,000 includes "the cost of selection and hiring"—the Court cannot infer from the contract that Defendants seek reimbursement for the tools of the trade or costs incurred in the performance of Plaintiffs' jobs. [Id.] Nor is this case like Heder, in which the city withheld paychecks from the plaintiff and where the liquidated damages provision expressly attempted to claw back the compensation paid to the plaintiff.
Rather, like the tuition reimbursement provision of Heder, instead of requiring employees to pay for all the necessary training out of their own pocket, Defendants made an investment in their employees, but required the employees to repay at least part of that investment if they left before the company felt it had recouped fair value for its investment—which the company determined to take place over time at the rate of a 1/8 reduction in Plaintiffs' obligation every quarter they remained employed after the first year. [39-2, ¶ 21.] Moreover, unlike the purported training in Ketner, the training here did result in Plaintiffs' receiving portable credentials—namely, Series 7 and 66 licenses. [35, ¶¶ 18, 38, 46, 55.]
At bottom, the contract and the parties' performance pursuant to it resulted in Plaintiffs' accrual of a debt that Defendants are entitled to collect. See Heder, 295 F.3d at 782. Plaintiffs have not cited, nor has this Court located, any case that suggests employers may not act to collect a debt incurred for an employee's benefit at the termination of their employment on the basis that such a collection is a kickback that would reduce Plaintiffs' wages below the statutory minimum. In fact, courts have held just to the contrary. See, e.g., Vazquez v. Tri-State Mgmt. Co., 2002 WL 58718, at *5 (N.D. Ill. Jan. 14, 2002) (counterclaim against employee to recover on loan used to purchase a vehicle for the employee's use, at the employee's request, was not an impermissible set-off under § 531.35). Moreover, Defendants never reduced Plaintiffs wages below the minimum wage while they were employed, so all the case law stating an employer may not do so is inapposite. See, e.g., Calderon v. Witvoet, 999 F.2d 1101, 1107 (7th Cir. 1993) (noting employers "may not reduce the wage below the statutory minimum to collect a debt to the employer").
All the arguments that Plaintiffs raise against the TCR Provision—that $75,000 does not bear a rational resemblance to the costs Defendants actually incurred in their training, that Defendants used the threat of the TCR Provision to force Plaintiffs to work extra allegedly uncompensated time, etc., see, e.g. [35, ¶¶ 24, 26]—are either potential defenses to the enforcement of the contract that Plaintiffs could
Because Plaintiffs do not have standing to challenge the TCR Provision, and in any event fail to state a claim, the Court grants Defendants' motion as to Plaintiffs' claims in Count I regarding the TCR Provision. However, because the Court concludes that Plaintiffs lack standing based on the complaint as pled, the dismissal is without prejudice and with leave to replead.
Plaintiffs also assert that they and all those similarly situated worked well in excess of 45-60 hours per week in the non-exempt positions and were not paid the minimum wage or overtime for those hours.
"Courts generally construe FLSA * * * wage claims to apply to the work-week unit." Hughes v. Scarlett's G.P., Inc., 2016 WL 4179153, at *2 (N.D. Ill. Aug. 8, 2016). Therefore, to determine whether an employer has violated the minimum wage provision of the FLSA:
Hirst v. Skywest, Inc., 2016 WL 2986978, at *5 (N.D. Ill. May 24, 2016) (collecting cases and regulations). "To state a FLSA claim under the workweek averaging approach, then, the plaintiffs must plausibly allege at least one workweek for which the compensation they received, divided by their total compensable time, failed to meet the FLSA minimum [hourly] wage." Hughes, 2016 WL 4179153, at *2 (quoting Hirst, 2016 WL 2986978 at *6). In both Hirst and Hughes, the plaintiffs failed to meet this standard because they did not include in their complaint any allegations concerning their "hourly wages or any examples of the total compensation they received for any workweek" or concerning "the number of hours worked in any given week." Hughes, 2016 WL 4179153, at *2-3 (citing Hirst, 2016 WL 2986978, at *6).
As in Hirst and Hughes, Plaintiffs have not provided a single allegation regarding what the Plaintiffs' effective hourly wages were during the relevant period, nor have they introduced any examples of the total compensation they received
Similarly, to state a claim under the FLSA for failure to pay overtime, courts in this district generally require a plaintiff to plead some details beyond a bare allegation that he or she worked more than 40 hours without premium pay. See Trujillo v. Mediterranean Kitchens, Inc., 2017 WL 2958240, at *1 (N.D. Ill. July 11, 2017); Hughes, 2016 WL 4179153, at *2 (collecting cases). The question is just how many more details are needed to make a claim plausible. While a plaintiff need not "plead infinitesimal details to render [FLSA] claims plausible or provide defendants fair notice of the claims against them," Brown v. Club Assist Rd. Serv. U.S., Inc., 2013 WL 5304100, at *6 (N.D. Ill. Sept. 19, 2013), he or she must still "provid[e] some specific facts to ground those legal claims." Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009).
Thus, this Court, other courts in this district, and several courts of appeals have instructed that to state a claim for failure to pay overtime, "`a plaintiff must sufficiently allege forty hours of work in a given workweek as well as some uncompensated time in excess of forty hours.'" Parks v. Speedy Title & Appraisal Review Servs., 318 F.Supp.3d 1053, 1069 (N.D. Ill. 2018) (quoting Silver v. Townstone Fin., Inc., 2015 WL 1259507, at *2 (N.D. Ill. Mar. 17, 2015)); see also Trujillo, 2017 WL 2958240, at *1; Hughes, 2016 WL 4179153, at *3; DeJesus v. HF Management Services, 726 F.3d 85, 89 (2d Cir. 2013) (allegations that plaintiff worked over forty hours in "some or all weeks" insufficient because at least one given week must be alleged); Pruell v. Caritas Christi, 678 F.3d 10, 12 (1st Cir. 2012) (allegation that plaintiffs "regularly worked" more than 40 hours a week insufficient).
Plaintiffs allegations do put Defendants on notice of the time periods during which Defendants failed to properly compensate them. Although Plaintiffs do not state the exact time periods at issue, it would be easy to determine the exact eight weeks that each of the Plaintiffs spent in the "study stage" and the nine weeks each participated in the "door-knocking" stage of their training with Defendants. However, Plaintiffs specifically allege that "Edward Jones neither tracks nor compensates FA Trainees
While this approaches the detail required to place Defendants on notice of a plausible claim, it is not quite sufficient to state a claim. Compare Brown, 2013 WL 5304100, at *6 (plaintiffs adequately pled an overtime claim where they asserted that "since July 2009, they have worked an average of 85 hours per week but have not been properly compensated for that time."), and Hancox v. Ulta Salon, Cosmetics & Fragrance, Inc., 2018 WL 3496086, at *3 (N.D. Ill. July 20, 2018) (finding that plaintiff adequately stated a claim for overtime pay where she alleged that for a two-year period "she worked more than 40 hours in a workweek during 30 to 35 pay periods" and "was never paid proper overtime wages"), with Parks, 318 F.Supp.3d 1053, at 1069 ("Here, Plaintiff generally alleges that she worked overtime without sufficient pay. * * * She also states her dates of employment and her approximate salary during that timeframe. * * * However, Plaintiff does not allege how many hours she worked in a week (and whether or not this was over forty hours) or how many overtime hours she worked without being paid the proper salary. Without such allegations, Defendants are not on notice of the factual basis for her FLSA claim.") (internal citations omitted), and Hughes v. Scarlett's G.P., Inc., 2016 WL 454348, at *5 (holding insufficient plaintiffs' claim that "`[a]t such times as Plaintiffs worked more than forty hours in a week, they were not paid time and a half.'"), and Pruell, 678 F.3d at 13 (allegation that "[t]hroughout their employment with defendants, Plaintiffs regularly worked hours over 40 in a week and were not compensated for such time, including the applicable premium pay" was insufficient to state a claim), and DeJesus, 726 F.3d at 89 (allegation that "in `some or all weeks' [plaintiff] worked more than "forty hours" a week without being paid `1.5' times her rate of compensation" insufficient to state a claim). Plaintiffs allegations are hard to distinguish from those dismissed in Parks, Hughes, Pruell, or DeJesus.
Brown or Hancox do not support a different conclusion. In Brown, the contracts at issue called for individuals to be on call for "17.5 hour shifts, seven days a week,"
By contrast, Plaintiffs simply allege that "[u]nder its policy and practice, Edward Jones knowingly discourages non-exempt FA Trainees from accurately reporting all of the hours they work" [35, ¶ 22], and that Plaintiffs accordingly did so [id. ¶¶ 38, 46, 55, 64]. However, Plaintiffs do not allege any facts detailing what, if any, specific pressure or policies led Plaintiffs to underreport their time,
Plaintiffs also allege that they are entitled to overtime after they achieved "can sell" status and began working as financial advisors because Defendants' misclassified them as non-exempt. Defendants argue that Plaintiffs were not misclassified, and that in any event, Plaintiffs have not adequately alleged that they worked overtime during the relevant period.
As explained above, the FLSA generally requires employers to pay employees overtime for any hours worked over forty hours in a given week. 29 U.S.C. § 207(a). That requirement does not apply, however to employees working in "a bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213(a)(1). Here, the parties dispute whether Plaintiffs and those similarly situated qualify for the "administrative exemption." The administrative exemption exempts employees
29 C.F.R. § 541.200(a)(1)-(3). Plaintiffs allege that Defendants misclassified them as
Generally, affirmative defenses—such as an employee's classification as exempt in the FLSA context—do not justify dismissal under Rule 12(b)(b). See Doe v. GTE Corp., 347 F.3d 655, 657 (7th Cir. 2003). However, this rule does not apply when a party has included in its complaint "facts that establish an impenetrable defense to its claims." Tamayo v. Blagojevich, 526 F.3d 1074, 1086 (7th Cir. 2008). "If the plaintiff voluntarily provides unnecessary facts in her complaint, the defendant may use those facts to demonstrate that she is not entitled to relief." Id.; see also Hecker v. Deere & Co., 556 F.3d 575, 588 (7th Cir. 2009) (affirming dismissal of claims because complaint "so thoroughly anticipated" an affirmative defense that dismissal was appropriate). In this case, Plaintiffs have put Defendants' exemption defense "in play" by necessity. Hecker, 556 F.3d at 588. In addition to their claims for overtime during their non-exempt employment addressed above, Plaintiffs assert Defendants should have continued to pay them overtime once they achieved "can sell" status because they were misclassified as "exempt" under both the "salary basis" and "job duties" tests.
Before examining either of those claims, however, the Court must determine whether Plaintiffs' have adequately alleged that they worked overtime once they were classified as exempt given that for the affirmative defense to apply there must have been an underlying offense. See, e.g., Ottaviano v. Home Depot, Inc., USA, 701 F.Supp.2d 1005, 1007-08 (N.D. Ill. 2010) (proceeding to determine whether the plaintiffs were properly classified as exempt after noting the plaintiffs' allegation that defendant "terminates ASMs who regularly work less than the fifty-five hours for which they are scheduled").
Under the standard elaborated above in Section III(A)(2), Plaintiffs have not alleged an overtime claim for the time that they worked after attaining "can sell" status. Plaintiffs simply allege (1) that they "routinely worked in excess of 40 hours per week after their `can-sell' date, without receiving proper overtime pay" and (2) that each Plaintiff "[a]fter achieving `can-sell' status, * * * continued to work long hours, well in excess of 40 hours per week * * *." [35, ¶¶ 24, 38, 46, 55, 64.] As the Court previously explained, without more, such formulaic and conclusory allegations are simply not enough to state a claim for overtime. Moreover, even if Plaintiffs had properly alleged an overtime violation after Plaintiffs achieved "can sell" status, they have not yet alleged facts to show that they were misclassified as exempt.
Plaintiffs allege that they were not paid a guaranteed, predetermined salary within the meaning of the regulations above because (1) Defendants "paid Plaintiffs and those similarly situated wages on the condition that Plaintiffs and those similarly situated pay `training costs' up to $75,000 under certain circumstances" and (2) Plaintiffs' "wages were subject to reduction because of alleged variations in the quality or quantity of work performed." [35, ¶¶ 84-85.]
First, as explained above, the TCR Provision has no effect vis-à-vis the FLSA's wage and hours requirements. It is not a kickback of Plaintiffs' salaries, but a contractual debt owed by Plaintiffs. Thus,
Plaintiffs' citation to Ketner and the Department of Labor Opinion Letters that it addressed are unavailing. First, the Court has already explained why it disagrees with Ketner's conclusion that the TCR Provision constitutes a kickback with implications under the FLSA. See Section III(A)(1) supra. Additionally, the Department of Labor Opinion Letters on which Ketner relied and that the additional letters cited by Plaintiffs also are unpersuasive. Each of the letters involved either a purposed deduction from an employee's paycheck to recover a previous payment that the DOL concluded did not constitute a loan or other inapposite situation. See U.S. Dep't of Labor, Wage & Hour Div., Opinion Letter (Nov. 27, 2006), 2006 WL 3832994, at *7 n.5 ("What matters is that the employee receives no less than the weekly-required amount as a guaranteed salary constituting all or part of total compensation, which amount is not subject to reduction due to the quality or quantity of the work performed, and that the employee is never required to repay any portion of that salary even if the employee fails to earn sufficient commissions or fees"); U.S. Dep't of Labor, Wage & Hour Div., Opinion Letter (Mar. 10, 2006), 2006 WL 940663, at *1-2 ("deductions from the salaries of otherwise exempt employees for the loss, damage, or destruction of the employer's funds or property due to the employees' failure to properly carry out their managerial duties * * * would defeat the exemption * * *"); U.S. Dep't of Labor, Wage & Hour Div., Opinion Letter (Feb. 20, 2001), 2001 WL 1558760, at *1-2 (concluding that the two programs at issue were both incentive programs, and not bona fide loans or cash advances, which precluded the company from deducting amounts related to those programs from the pharmacists' last paychecks).
As explained above, nothing in Ketner or the DOL letters examined above convinces the Court that it should treat the TCR Provision as a kickback of the Plaintiffs' salaries designed to punish them if they failed to perform to a certain level. Rather, it is an education loan which only requires repayment if an individual attempts to use that education for the benefit of a competitor. As explained above, an employer may enforce such a provision without falling afoul of the FLSA. Plaintiffs therefore cannot ground their salary basis challenge on the TCR Provision.
Plaintiffs' second allegation likewise fails to plausibly allege that their compensation did not meet the salary basis test. While Plaintiffs reference a compensation plan in their complaint and allege that their compensation was contingent on performance and decreased within a few months of achieving "can sell" status during the transition to commission pay [35, ¶¶ 20, 23], that compensation plan—which Defendants attached to their motion—provides that Plaintiffs' compensation shall never fall below $455 a week. [39-3, at 3 (explaining that Plaintiffs are guaranteed at least $23,660 annually, or $455 a week).] The Court may properly consider such an exhibit attached to a motion to dismiss, Adams v. City of Indianapolis, 742 F.3d 720, 729 (7th Cir. 2014), and where those exhibits contradict the complaint allegations, "the exhibits trump the allegations." Abcarian v. McDonald, 617 F.3d 931, 933 (7th Cir. 2010). Consequently, the Court cannot conclude that the compensation plan set in place for Plaintiffs failed to meet the salary basis test.
Plaintiffs allege that they do not meet the job duties test because their primary duties "did not include the exercise of discretion and independent judgment with respect to matters of significance." [35, ¶ 85.] Rather, they were encouraged "to sell [] financial products without regard to the clients' individual needs, financial circumstances, or investment objectives." [Id.] Specifically, they were instructed to sell financial products, mostly Defendants' proprietary products and those pre-picked and designated as "preferred product partners," which generated additional fees for Defendants. See [id. ¶¶ 2-3]. Nor did Defendants place "Plaintiffs * * * in job positions whose primary duty was to perform work directly related to the management or general business operations of Edward Jones or its clients * * *." [Id. ¶ 86.] Plaintiffs assert that these allegations are enough to show that they did not perform such duties that would qualify them to be classified as exempt.
First, as the cases cited by Defendants show, determining whether an individual's actual job duties meet the requirements of the administrative exemption is a factually intense process. See, e.g., In re Morgan Stanley Smith Barney LLC Wage & Hour Litig., 2017 WL 772904, at *7-8 (D.N.J. Feb. 28, 2017) (examining the exact details of the plaintiffs' responsibilities on a motion for summary judgment); Tsyn v. Wells Fargo Advisors, LLC, 2016 WL 612926, at *4-17 (N.D. Cal. Feb. 16, 2016) (same); Hein v. PNC Fin. Services Grp., Inc., 511 F.Supp.2d 563, 566, 570-75 (E.D. Pa. 2007) (same). Likewise, the exemption status of an employee is an affirmative defense that employers bear the burden of proving. A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 493, 65 S.Ct. 807, 89 S.Ct. 1095 (1945); Jackson v. Go-Tane Servs., Inc., 56 F. App'x 267, 270 (7th Cir. 2003). However, as explained above, Plaintiffs themselves have placed their classification at issue and alleged facts to support their claim that they were misclassified.
Both cases cited by Plaintiffs for the proposition that their allegations are sufficient to plausibly state a misclassification claim contained more factual allegations than are present here. In Lloyd v. J.P. Morgan Chase, the plaintiffs put forward a declaration that detailed their typical day to day duties. 2013 WL 4828588, at *1-2. The Lloyd plaintiffs even included allegations about the physical spaces in which worked, i.e. the defendant bank's physical branches. Id. at *1. Likewise, in Blum, the plaintiffs alleged that they were engaged primarily in "lead generation activities: identifying protentional clients, calling protentional clients, and conducting appointments with potential clients to encourage them to do business * * *." Blum v. Merrill Lynch & Co., No. 15-cv-1636, ECF. No. 1, ¶ 67, 2015 WL 971734 (S.D.N.Y. March 5, 2015). They also alleged that they "regularly" attended "client prospecting functions" and "client prospecting events." Id. at ¶¶ 26, 29, 39, 75. Although the Court did not provide a written disposition of the motion to dismiss, at oral argument the Court explained that "the allegations that [Plaintiffs] * * * make are sufficient allegations to, at most, [sic] for the defense to raise a factual dispute that cannot be resolved on the motion" and denied the motion in a separate order. See Blum, ECF No. 86, 85:19-23; Blum, ECF No. 84.
Here, Plaintiffs have not provided details about the type of environment in which they worked, what they did on a day
Because the Court concludes Plaintiffs have not adequately pled that they worked overtime once being deemed "exempt" or enough facts to plausibly establish that they were exempt, the Court grants Defendants motion as to Plaintiffs' misclassification claim in Count I, again without prejudice.
Finally, although Plaintiffs appear to concede in their briefing that there is no private right of action under the FLSA for violations of the that statute's recordkeeping requirements [59-1, at 27], it is well established that Plaintiffs cannot maintain a suit for recordkeeping violations under the FLSA. See Farmer v. DirectSat USA, LLC, 2010 WL 3927640, at *12 (N.D. Ill. Oct. 4, 2010) (collecting cases). The Court therefore grants Defendants' motion as to the recordkeeping claims within Count I with prejudice.
While the Court will allow Plaintiffs to file an amended complaint, it must dismiss Plaintiff Bowles with prejudice as to his overtime and misclassification claims in Count I. While the Court generally refrains from dismissing claims on the basis of an affirmative defense, such as the statute of limitations, Doe, 347 F.3d at 657, the allegations laid out above establish that Bowles employment terminated
Having granted Defendants' motion to dismiss the one federal claim over which it has original jurisdiction, the Court addresses whether to retain jurisdiction over the remaining state law claims, Counts II-VI. 28 U.S.C. § 1367(c)(3). The Seventh Circuit has consistently stated that "it is the well-established law of this circuit that the usual practice is to dismiss without prejudice state supplemental claims whenever all federal claims have been dismissed prior to trial." Groce v. Eli Lilly & Co., 193 F.3d 496, 501 (7th Cir. 1999); Alonzi v. Budget Constr. Co., 55 F.3d 331, 334 (7th Cir. 1995); Brazinski v. Amoco Petroleum Additives Co., 6 F.3d 1176, 1182 (7th Cir. 1993). Finding no justification for departing from that "usual practice"
For the reasons explained above, the Court grants Defendants' motion to dismiss [38]. Plaintiff Bowles's claims in Count I are dismissed with prejudice, except as to any claims that relate to the TCR Provision, which are dismissed without prejudice. Plaintiffs' recordkeeping claim in Count I is also dismissed with prejudice. The remainder of Count I and Counts II-VI are dismissed without prejudice. Plaintiffs are given until April 15, 2019 to file an amended complaint consistent with this opinion. The case is set for further status on April 23, 2019, at 9:00 a.m.
300 F.3d 730, 735 (7th Cir. 2002). Here, Plaintiff specifically referenced the documents in question. See [35, ¶ 15; ¶ 20 ("Edward Jones FA Trainees are paid on a bi-weekly basis pursuant to compensation plan, and each employee receives a schedule of expected compensation shortly after their hire")]. The Court will therefore consider both documents in ruling on the instant motion.
