Lederman v. Frontier Fire Prot., Inc.

• Decision Date: 11 July 2012
• Docket Number: No. 10–1534.,10–1534.
• Citation: 19 Wage & Hour Cas.2d (BNA) 678,685 F.3d 1151
• Parties: Gary LEDERMAN, Plaintiff–Appellee, v. FRONTIER FIRE PROTECTION, INC., a Colorado corporation, and Estate of Karl Smith, Defendants–Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

685 F.3d 1151

19 Wage & Hour Cas.2d (BNA) 678

Gary LEDERMAN, Plaintiff–Appellee,

v.FRONTIER FIRE PROTECTION, INC., a Colorado corporation, and Estate of Karl Smith, Defendants–Appellants.

No. 10–1534.

United States Court of Appeals, Tenth Circuit.

July 11, 2012.

Michael P. Zwiebel (Jeffrey A. Springer with him on the briefs) Springer and Steinberg, P.C., Denver, CO, for Appellant.

David Lichtenstein, Attorney at Law, Denver, CO, for Appellee.

Before BRISCOE, Chief Circuit Judge, TYMKOVICH, Circuit Judge, and EAGAN ^*, District Judge.

TYMKOVICH, Circuit Judge.

Gary Lederman sued his former employer, Frontier Fire Protection, Inc., to recover overtime pay he alleged was owed to him under the Fair Labor Standards Act (FLSA). A jury found Frontier liable and awarded Lederman $17,440.86 in damages. Frontier challenges the jury instructions issued by the district court.

Because we find the district court should not have instructed the jury that Frontier bore a heightened burden of proof in establishing its entitlement to an FLSA exemption, we REVERSE the judgment and REMAND the case for further proceedings.

I. Background

Frontier is a company in the business of selling and installing automatic fire sprinkler systems. Frontier hired Lederman as a senior estimator in 2002. Although the facts are contested, Lederman's job responsibilities appear to have involved contacting customers and potential customers, inspecting customer buildings to evaluate the cost of sprinkler system installation, and preparing bids. Lederman spent between 30 and 60 percent of his time in Frontier's office,¹ and did most of his bid preparation work there. The bids he prepared were sent as offers to customers, but the extent of his power to enter into binding contracts on behalf of Frontier is disputed.

Frontier paid Lederman a salary and an annual bonus. Lederman testified at trial that his annual bonuses totaled $30,000 in 2005 and $40,000 in 2006. Frontier did not pay Lederman overtime, and did not pay him any commission for the sales he arranged.

Lederman resigned in May 2007 and demanded that Frontier pay him $5,000 as a portion of his annual bonus for that year. Frontier refused. Lederman retained an attorney and filed suit.

Lederman asserted a claim against Frontier for overtime pay under the FLSA. ² According to Lederman, he began tracking the amount of overtime he worked on his home computer in 2002, and stopped tracking it in early 2006. He alleged that he frequently worked in excess of 40 hours per week, but was never paid overtime except on “approximately one or two occasions.” App. 11.

Frontier asserted the affirmative defense that Lederman qualified as an exempt employee under the FLSA, and therefore was not eligible for overtime pay. Specifically, Frontier alleged that Lederman was an exempt outside salesperson as defined by the FLSA. Id.

At trial, the evidence regarding whether Lederman qualified as an outside salesperson was mixed. In particular, the parties offered conflicting evidence regarding what proportion of Lederman's working time was spent in the office or traveling, the importance of sales to Lederman's position, and his authority to finalize sales.

After the close of evidence, the court conducted a conference to discuss jury instructions. Frontier proposed the following jury instruction regarding whether Lederman was an exempt employee: “An employer seeking an exemption from the overtime requirements of the FLSA bears the burden of proving an exemption.” Id. at 147. Lederman proposed a different instruction: “An employer seeking an exemption from the overtime requirements of the FLSA bears the burden of proving that the particular employee fits plainly and unmistakably within the terms of the claimed exemption.” Id. at 72. Lederman also proposed a special verdict form that started with the question, “Have Defendants carried their burden of proving that Gary Lederman fit plainly and unmistakably within the terms of the outside sales exemption?” Id. at 94.

Over Frontier's objection, the court adopted Lederman's instruction regarding the outside sales exemption issue.

In its oral instructions to the jury, the court said:

The party asserting a claim or an affirmative defense has the burden of proving the essential elements of the claim or affirmative defense by a preponderance of the evidence. To ‘prove by a preponderance of the evidence’ means to prove that something is more likely so than not so. In other words, a preponderance of the evidence means such evidence as, when considered and compared with that opposed to it, has more convincing force and produces in your minds a belief that what is sought to be proven is more likely true than not true. The rule does not require proof to an absolute certainty, since proof to an absolute certainty is seldom possible in any case.

An employer seeking an exemption from the overtime requirements of the FLSA bears the burden of proving that the particular employee fits plainly and unmistakably within the terms of the claimed exemption.

Persons employed in the capacity of “outside salesmen” are exempt from the minimum wage and overtime pay requirements of the Fair Labor Standards Act.

To prove this exemption, the defendants must prove by a preponderance of the evidence that (1) the plaintiff's primary duty was (a) making sales; or (b) obtaining orders or contracts for services; and (2) the plaintiff was customarily and regularly engaged away from the employer's place or places of business in performing such primary duty.

Id. at 659–60 (emphasis added).

The jury ultimately found that Lederman was not an outside salesperson. It went on to find Frontier liable to Lederman, but only for a portion of the amount sought.

II. Discussion

A. Standard of Review

“We review a district court's decision to give a particular jury instruction for abuse of discretion,” but “we review de novo legal objections to the jury instructions.” Frederick v. Swift Transp. Co., 616 F.3d 1074, 1079 (10th Cir.2010) (internal quotation marks and citations omitted); see also Webb v. ABF Freight Sys., Inc., 155 F.3d 1230, 1248 (10th Cir.1998) (“[W]e will find an abuse of discretion if the challenged instruction incorrectly states the governing law.”). We read and evaluate the jury instructions in light of the entire record to determine if they “fairly, adequately and correctly state the governing law and provide the jury with an ample understanding of the applicable principles of law and factual issues confronting them.” United States v. Barrera–Gonzales, 952 F.2d 1269, 1272 (10th Cir.1992) (internal quotation marks and citation omitted). We do not decide whether the instructions “are flawless, but whether the jury was misled in any way and whether it had a[n] understanding of the issues and its duty to decide those issues.” Brodie v. Gen. Chem. Corp., 112 F.3d 440, 442 (10th Cir.1997) (internal quotation marks and citation omitted). “[S]o long as the charge as a whole adequately states the law, the refusal to give a particular requested instruction” is not grounds for reversal. United States v. Suntar Roofing, Inc., 897 F.2d 469, 473 (10th Cir.1990).

If we determine that the trial court erred, we must then determine whether the error was prejudicial to Frontier. “[T]he judgment must be reversed ‘if the jury might have based its verdict on the erroneously given instruction.’ ” Wankier v. Crown Equip. Corp., 353 F.3d 862, 867 (10th Cir.2003) (quoting Townsend v. Lumbermens Mut. Cas. Co., 294 F.3d 1232, 1242 (10th Cir.2002)). “Although we may reverse the district court's judgment only if an erroneous instruction is prejudicial in light of the record as a whole, we note that ‘[j]ury instructions outlining the appropriate burdens of proof are almost always crucial to the outcome of the trial.’ ” Karnes v. SCI Colo. Funeral Servs., Inc., 162 F.3d 1077, 1079 (10th Cir.1998) (quoting Stevison v. Enid Health Sys., Inc., 920 F.2d 710, 714 (10th Cir.1990)).

B. FLSA's Outside Salesman Exemption

Lederman argued at trial that he was an employee entitled to overtime pay. The FLSA requires employers to pay covered employees overtime equal to one-and-one-half times their normal pay for work in excess of forty hours in a week. See29 U.S.C. § 207. Employers who fail to do so are liable to the employee for the unpaid overtime, plus “an additional equal amount as liquidated damages.” § 216(b).

But the FLSA exempts employers from this requirement for certain kinds of employees, including “any employee employed ... in the capacity of an outside salesman.” § 213. The definition of an outside salesman is established by federal labor regulations:

(a) The term “employee employed in the capacity of outside salesman” in section 13(a)(1) of the [FLSA] shall mean any employee:

(1) Whose primary duty is:

(i) making sales within the meaning of section 3(k) of the [FLSA], or

(ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

(2) Who is customarily and regularly engaged away from the employer's place or places of business in performing such primary duty.

(b) The term “primary duty” is defined at § 541.700. In determining the primary duty of an outside sales employee, work performed incidental to and in conjunction with the employee's own outside sales or solicitations, including incidental deliveries and collections, shall be regarded as exempt outside sales work. Other work that furthers the employee's sales efforts also shall be regarded as exempt work including, for example, writing sales reports, updating or revising the employee's sales or display catalogue, planning itineraries and attending sales conferences.

29 C.F.R. § 541.500; see Clements v. Serco, Inc., 530 F.3d 1224, 1227–28 (10th Cir.2008) (“The touchstone for making a sale, under the Federal Regulations, is obtaining a commitment. This can be done by making a sale or...