Jelus v. All Creatures Animal Hosp., Inc.

• Decision Date: 26 May 2016
• Docket Number: CIVIL ACTION NO. 1:15-cv-184 (WOB)
• Parties: KERI JELUS PLAINTIFF v. ALL CREATURES ANIMAL HOSPITAL, INC., ET AL DEFENDANTS
• Court: U.S. District Court — Southern District of Ohio

KERI JELUS PLAINTIFF v. ALL CREATURES ANIMAL HOSPITAL, INC., ET AL DEFENDANTS

CIVIL ACTION NO. 1:15-cv-184 (WOB)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

May 26, 2016

MEMORANDUM OPINION AND ORDER

This matter is before the Court on Plaintiff's motion for collective-action certification (Doc. 10) and cross-motions for summary judgment regarding an exemption to overtime-wage requirements of the Fair Labor Standards Act (FLSA). (Docs. 20, 21.) The parties agreed at oral argument that no issues of fact warrant a trial on the exemption issue and the Court may decide it on the existing record. Having previously taken the matter under submission (Doc. 39), the Court now issues the following Memorandum Opinion and Order.

Factual and Procedural Background

Defendants are All Creatures Animal Hospital, Inc. (ACAH) and its veterinarian owners Daniel Meakin and Linda Meakin. ACAH provides veterinary services, such as vaccinations, dental care, and surgery. In addition to pet-health services, it offers pet grooming, boarding, and training. Many pet products are also available for sale at ACAH, such as pet foods, prescriptions, shampoos, toys, and leashes, among many others.

Plaintiff Keri Jelus worked for Defendants as a pet groomer for three years, beginning in August 2011. Jelus's wages did not include a significant hourly-rate component. Instead, Defendants paid her almost entirely by commission, calculated as a percentage of the fee the customer paid ACAH for the grooming service. Jelus's pay period cycled every two weeks. Defendants' payroll records show that she worked more than forty hours in several weeks during her three years of employment. Believing themselves to qualify for an exemption to the overtime-wage requirements of the FLSA, Defendants did not increase Jelus's normal commission percentage or otherwise supplement her compensation for the weeks in which she clocked more than forty hours. Jelus filed suit, seeking damages for her unpaid overtime hours.¹

Analysis

For hours worked in excess of forty in one week, the FLSA requires an employer to pay its employee "not less than one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a)(1). This requirement is subject to several exceptions. An employee is exempt from the right to overtime pay if: (1) "more than half [the employee's] compensation . . . represents commissions," (2) "the regular rate of pay of such employee is in excess of one and one-half times the minimum hourly rate," and (3) the employee works at "a retail or service establishment." Id. at (i); 29 C.F.R. § 779.412; McAninch v. Monro Muffler Brake Inc., 799 F. Supp. 2d 807, 810-11 (S.D. Ohio 2011). An FLSA exemption is an affirmative defense, and an employer must prove each element by a preponderance of the evidence. Thomas v. Speedway SuperAmerica, LLC, 506 F.3d 496, 501-02 (6th Cir. 2007). Jelus challenges each element.

With respect to this exemption, Department of Labor (DOL) interpretive regulations "are entitled to considerable weight." Luther v. Z. Wilson, Inc., 528 F. Supp. 1166, 1171 (S.D. Ohio 1981) (quoting Hamblen v. Ware, 526 F.2d 476, 478 (6th Cir. 1975). Though not binding, courts interpreting ambiguous FLSA statutes or regulations have also often found persuasive the DOL Wage and Hour Division's (WHD) other interpretive guidelines, such as Field Operation Handbooks (FOH), opinion letters, and published Fact Sheets. See, e.g., Fazekas v. Cleveland Clinic Found. Health Care Ventures, 204 F.3d 673, 677 (6th Cir. 2000) ("[A]n opinion of the [WHD] Administrator . . . has persuasive value if [it] is well-considered and well-reasoned."); Jastremski v. Safeco Ins. Cos., 243 F. Supp. 2d 743, 757-58 (N.D. Ohio 2003) (deferring to Administrator's opinion letter because it was factually similar and well-reasoned).

A. Bona Fide Commission

While the FLSA does not define "commission," case law, DOL regulations, and other administrative materials clearly establish that Jelus's pay was by bona fide commission. A qualifying commission requires "some proportionality between the employee's compensation and the amount charged to the customer." McAninch, 799 F. Supp. 2d at 813 (quoting Wilks v. Pep Boys, 278 F. App'x 488, 489 (6th Cir. 2008)). A straight commission where "the employee is paid a flat percentage on each dollar of sales" amounts to a bona fide commission. Viciedo v. New Horizons Comput. Learning Ctr. of Columbus, 246 F. Supp. 2d 886, 896 (S.D. Ohio 2011) (quoting 29 C.F.R. § 779.413(a)(4)); see also DOL WHD FOH 21h04(a) (Jul. 12, 1990) ("[C]omput[ation of] an employee's compensation on the basis of [a] percentage of the charge to the customer . . . 'represents commissions on goods or services' for purposes of applying Sec[tion 207](i)."). Although many factors and nuances can affect whether more complicated pay systems amount to bona fide commissions, see 29 C.F.R. § 779.413(a)(2), (3), (5), § 779.416; Viciedo, 246 F. Supp. 2d at 896-99, this case does not implicate any of those nuances.

Here, Defendants paid Jelus a commission in its most basic form, a straight percentage of the fee charged to the customer for each service she performed. Jelus alleged in her own complaint that "Defendants paid [her] based on a grooming-fee commission." She further alleged that her commission was "calculated as a percentage of grooming fees charged by the Defendants to customers." (Emphasis added). Defendants admitted both these allegations in their answer. Admissions made in the parties' pleadings are generally binding. Ferguson v. Neighborhood Hous. Servs. of Cleveland, 780 F.2d 549, 551 (6th Cir. 1986). In response to Defendants' "requests for admissions," Jelus admitted she "was paid on a flat commission basis." And in her written declaration supporting her motion for collective-action certification, Jelus represented that she "was paid by commission for [her] work. Commissions were based on the amount of fees [she] earned for [Defendants] by grooming pets." (Emphasis added).

ACAH's practice manager unambiguously swore to the same fact in four separate affidavits. (Doc. 7-1 at PageID 38, ¶ 13) ("[C]ompensation was based upon a percentage of the charge to the customer for the work she performed grooming the animal."); (Doc. 11-1 at PageID 105, ¶ 8) ("Plaintiff was paid a flat % commission based upon the charge for the grooming."); (Doc. 22-2 at PageID 219, ¶¶ 11-12) ("Dog groomers are paid a percentage of the charge to the customer for grooming the pet." Groomers were "paid [a percentage] of the charge to the customer."); (Doc. 26-1 at PageID 461, ¶¶ 6, 8) (Payment was "[a percentage] of the amount charged to the grooming customer." If ACAH charged the customer more, then "the groomer would be paid more."). Clearly this method of payment amounts to a bona fide commission because it is a "[s]traight commission . . . [where] the employee is paid a flat percentage on each dollar of sales." 29 C.F.R. § 779.413. With the exception of de minimis wages for staff meetings, vacation, and holidays, Defendants paid Jelus solely by a percentage commission.

Because Defendants' admissions of Plaintiff's allegations, Plaintiff's admissions of Defendants' requests for admissions, Plaintiff's declaration signed under penalty of perjury, and the practice manager's four sworn affidavits show—without contradiction—that nearly all of Jelus's compensation was paid in bona fide commissions, the exemption's first element is met.²

B. One and One-Half Times the Minimum Wage

Defendants always paid Jelus more than one and one-half times the minimum wage. The second element of Section 207(i) requires that "the regular rate of pay of [the] employee [must be] in excess of one and one-half times the minimum hourly rate." 29 U.S.C. § 207(i); 29 C.F.R. § 779.412. The "regular rate" is an employee's total compensation converted to an hourly rate. 29 U.S.C. § 207(e); 29 C.F.R. § 778.109. If this rate does not exceed the minimum wage for a period, the exemption is lost for that period. Id. at 779.419(a). When possible, the rate must be established on a weekly basis. Id. at .419(a), .104 ("Act takes a single workweek as its standard and does not permit averaging of hours over 2 or more weeks. . . . The rule is also applicable to [] employees paid on a commission basis. It is therefore necessary to determine the hours worked and the compensation earned by [] commission employees on a weekly basis."). However, DOL regulations also recognize exceptions to the weekly calculation where the compensation cannot be attributed to particular workweeks. Id. at 778.209(b) (If bonuses meant to cover multiple weeks cannot be attributed to when they were actually earned, a reasonable alternative allocation may be used.); Id. at .119-.120 (same for commissions).

"If it is not possible or practicable to allocate the commission among the workweeks of the period in proportion to the amount of commission actually earned or reasonably presumed to be earned each week, some other reasonable and equitable method must be adopted." Id. at .120. The DOL considers it reasonable and equitable for the employer to allocate total commissions equally to: (1) each week in the pay period, or (2) each hour in the pay period. Id. Where the number of hours worked varies significantly from week to week, the second method may be more equitable. Id. at (b). Where an employer pays commissions at intervals spanning more than one week, several courts—including this one—have upheld the calculation of the regular rate by allocating total commissions among the weeks or hours in the pay period.

In Luther, the plaintiff worked as a real estate broker for the defendant and brought an action for unpaid minimum and overtime wages. 528 F. Supp. at 1168. The plaintiff was paid lump-sum commissions, often intended to compensate her for multiple weeks of work. Id. at 1174. Given the employer's payment method, this Court held:

[F]or each pay

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