Campanelli v. the Hershey Co.

• Decision Date: 23 February 2011
• Docket Number: No. C 08–1862 BZ.,C 08–1862 BZ.
• Citation: 765 F.Supp.2d 1185
• Parties: Julie CAMPANELLI, et al., Plaintiff(s),v.The HERSHEY COMPANY, Defendant(s).
• Court: U.S. District Court — Northern District of California

765 F.Supp.2d 1185

Julie CAMPANELLI, et al., Plaintiff(s),

v.The HERSHEY COMPANY, Defendant(s).

No. C 08–1862 BZ.

United States District Court, N.D. California.

Feb. 23, 2011.

Thomas J. Brandi, Brian J. Malloy, The Brandi Law Firm, San Francisco, CA, David C. Feola, Hoban & Feola, LLC, Evergreen, CO, for Plaintiffs.Chris A. Hollinger, Adam P. KohSweeney, Sarah A. Stofferahn, O'Melveny & Meyers LLP, San Francisco, CA, Framroze Murzban Virjee, Michael W. Garrison, Jr., Benjamin J. Kim, O'Melveny & Myers LLP, Los Angeles, CA, for Defendants.

ORDER GRANTING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT

BERNARD ZIMMERMAN, United States Magistrate Judge.

Plaintiffs have moved for partial summary judgment that the outside sales and administrative exemptions do not apply to their job duties. ¹ Docket No. 315. Having considered the papers submitted by the parties and the arguments of counsel, the Court GRANTS plaintiffs' motion for the reasons explained below.

I. BACKGROUND ²

In 2003, defendant The Hershey Company restructured its domestic sales force to adapt to a changing retail environment. As part of the restructuring, defendant created an entry-level Retail Sales Representative (RSR) position. Defendant classified this position as exempt from overtime under both federal and California law, and never paid hourly compensation to RSRs for any overtime they worked.³

Under the new retail strategy, RSRs are part of teams that help defendant sell its products directly to retail outlets of various sizes, ranging from Walmarts to grocery chains to mom-and-pop stores. Each RSR services retail outlets in a designated sales territory. Last year, defendant employed about 500 RSRs nationwide with approximately 37 working in California.

The parties dispute the scope of the RSRs' job duties. From defendant's perspective, the RSRs are vital to the company's sales. Their job duties include selling defendant's products directly to retail stores, meeting and consulting with key decision makers at retail stores to increase sales, and occasionally assisting retail stores with merchandising ⁴ when it is incidental to the sales. Plaintiffs disagree with this description of the RSRs' duties. They contend defendant sells most of its products in bulk at the corporate level through other upper-level company employees, such as Customer Service Executives (CSEs). Rather than selling, the RSRs are primarily responsible for merchandising the previously sold products at the retail stores in their district.

In 2008, three former RSRs brought this wage and hour action against defendant. They alleged defendant misclassified them as exempt employees, denying them compensation for the overtime hours they had worked. Defendant denied these allegations, asserting that plaintiffs' employment position satisfies the exemptions from overtime for outside salesmen and administrative employees. In 2010—after 19 additional RSRs had joined the suit—this Court, over defendant's objection, allowed the case to proceed as a collective action for plaintiffs' federal and pendant California claims.⁵ Docket No. 157. Following notice,⁶ 99 RSRs joined the collective action in addition to the 21 remaining named plaintiffs.⁷

Because plaintiffs filed their complaint almost three years ago, both parties have had ample time to conduct discovery on the issues presented in the case. The record on this motion is almost two feet thick, and includes declarations from 37 plaintiffs as well as RSRs who did not opt-in.⁸ The parties also took the depositions of 14 plaintiffs. Even though the Court is troubled that both parties chose not to submit material portions of the plaintiffs' deposition testimony regarding their actual day-to-day job duties, the totality of the evidence before the Court is voluminous. There is consequently a sufficient record for the Court to determine if a triable issue exists regarding the outside sales and administrative exemptions.

II. LEGAL STANDARD FOR SUMMARY JUDGMENT

Summary judgment is appropriate only when there is no genuine dispute of material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The moving party bears both the initial burden of production as well as the ultimate burden of persuasion to demonstrate that no genuine dispute of material fact remains. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Companies, Inc., 210 F.3d 1099, 1102 (9th Cir.2000). Once the moving party meets its initial burden, the nonmoving party is required “to go beyond the pleadings and by [its] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (internal quotations and citations omitted). If the nonmoving party's evidence is not significantly probative, summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Courts, however, are required to view the evidence in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). If a reasonable jury could return a verdict in favor of the nonmoving party, summary judgment is inappropriate. Liberty Lobby, 477 U.S. at 248, 106 S.Ct. 2505.

Here, plaintiffs seek summary adjudication on defendant's affirmative defenses asserting the outside sales and administrative exemptions. Defendant does not argue that plaintiffs have not met their initial burden of production. Rather, defendant's position is that it has submitted probative evidence that raises a genuine dispute as to whether the plaintiffs' job duties fall under the exemptions. Having reviewed the evidence most favorably to defendant, defendant fails to raise a triable issue because the undisputed facts, discussed in detail below, demonstrate that plaintiffs are not outside salesmen or administrative employees.

III. THE FLSA

In 1938, Congress enacted the Federal Labor Standards Act (FLSA) to eliminate “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.” 29 U.S.C. § 202(a). As part of this effort, the FLSA requires employers to pay overtime compensation to employees who work more than 40 hours per week. See 29 U.S.C. § 207(a)(1). Certain employees are exempt from this provision, including outside salesmen and administrative employees. See 29 U.S.C. § 213(a)(1). These exemptions are “narrowly construed against the employers seeking to assert them” and are limited to those employees “plainly and unmistakably” within the exemptions' “terms and spirit.” Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1124–25 (9th Cir.2002) (internal citations and quotations omitted). The employer bears the burden of showing that an exemption applies.⁹ Id.

The scope of the FLSA's exemptions is not set forth in the Act, but in the regulations and interpretations of the Department of Labor (DOL). Auer v. Robbins, 519 U.S. 452, 456, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) (“The FLSA grants the [DOL] broad authority to ‘defin[e] and delimi[t]’ the scope of the exemption for executive, administrative, and professional employees” (citing 29 U.S.C. § 213(a)(1))). These regulations and interpretations are particularly important to this matter because no other court has evaluated the classification status of employees that have the specific characteristics and job duties of RSRs. DOL's regulations are given controlling weight by courts unless found to be arbitrary, capricious, or contrary to the statute, something that defendant does not argue in its opposition. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843–844, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). While DOL's interpretations of its regulations do not have the force and effect of law, courts look to them as persuasive authority. See Christensen v. Harris County, 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000); Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944).¹⁰

During oral argument, defendant suggested that the Ninth Circuit's recent decision in Christopher v. SmithKline Beecham Corporation required that this Court give less deference to the DOL regulations. See 635 F.3d 383, 2011 WL 489708 (9th Cir.2011). Defendant is incorrect for a number of reasons. First, much of the Ninth Circuit's analysis in Christopher seems to focus on the degree of deference to be accorded to the interpretation of the statute and regulations made by the DOL in its amicus brief. See, e.g., 635 F.3d at 394-95, 2011 WL 489708 at *10. Second, unlike the pharmaceutical industry to which the regulations governing sales did not neatly apply because of the legal prohibitions against sales to doctors, here certain provisions of the DOL regulations, such as 29 C.F.R. § 541.503, squarely apply to defendant's RSRs. Plaintiffs' complaint that they do not “sell” to defendant's customers, does not “ignore the structure and realities” of a heavily regulated industry. 635 F.3d at 396, 2011 WL 489708 at *11. Nor does the Ninth Circuit's concern that the DOL had acquiesced in the drug industry's practices for over 70 years apply here; the RSR position is less than 10 years old. See 635 F.3d at 399-400, 2011 WL 489708 at *15.

A. Outside Sales Exemption

Defendant first asserts that RSRs are outside salesmen. For this exemption to apply to plaintiffs, their primary duty must be “making sales” ¹¹ or “obtaining orders or contracts for services.” 29 C.F.R. § 541.500(a)(1).¹² Primary duty is the “principal, main, major or most important duty” that employees perform. 29 C.F.R. § 541.700. While time alone is not the sole test for primary duty, most employees meet this requirement if they spend more than 50...