Merritt v. Tex. Farm Bureau
| Decision Date | 16 May 2023 |
| Docket Number | CIVIL W-19-CV-00679-DTG |
| Parties | JERRY MERRITT, Plaintiff, v. TEXAS FARM BUREAU, TEXAS FARM BUREAU BUSINESS CORPORATION, TEXAS FARM BUREAU CASUALTY INSURANCE COMPANY, TEXAS FARM BUREAU MUTUAL INSURANCE COMPANY, TEXAS FARM BUREAU UNDERWRITERS, FARM BUREAU COUNTY MUTUAL INSURANCE COMPANY OF TEXAS, SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — Western District of Texas |
ORDER ON SUMMARY JUDGMENT MOTIONS PERTAINING TO 29 U.S.C. §207(i)
Before the Court are competing summary judgment motions concerning the applicability of the exemption codified in the Fair Labor Standards Act (FLSA) as 29 U.S.C. §207(i): Plaintiffs call it the “retail exemption” (ECF No. 93 at 1) Defendants refer to it as the “commission exemption” (ECF 97 at 1)[1]. Defendants filed a Motion for Final Summary Judgment Based on the Commission Exemption (ECF No. 97) and Plaintiff filed a Motion for Partial Summary Judgment on the Retail Exemption (ECF No. 93).[2] The Court held oral argument on the motions on April 26, 2023 (ECF No. 163) where the parties both stated on the record there were no material issues of fact in dispute. Thus, this issue is ripe for determination as a matter of law. After carefully considering the relevant law the extensive briefing on the matter, and the arguments made at the hearing, the Court (for the reasons below) GRANTS Plaintiff's Motion for Partial Summary Judgment (ECF No. 93) and DENIES Defendant's Motion for Summary Judgment (ECF No. 97).
' Plaintiff Jerry Merritt contracted to serve as Agency Manager (“AM”) of Texas Farm Bu reau (TFB) agencies covering Grimes and Brazos Counties to manage a multiline insurance agency selling insurance products. ECF No. 97 at 1, 4. The Agencies offered a wide variety of consumer insurance products underwritten by the Defendant insurance companies[3], such as property, automobile, homeowners, and life insurance, and brokerage products issued by other companies. Id. at 4. Before a person can qualify for a TFB insurance policy, there is a “membership requirement to be a member of the Farm Bureau's nonprofit arm.” ECF No.93 at 2 n. 6. While the parties dispute the effect of this membership (as discussed below), there is no dispute that the membership element exists. TFB provided a declaration from Gary Wood, a District Sales Manager that the TFB “marketed, offered, and sold insurance policies... on a retail basis to consumers and members of the general public.” ECF 101-2 at ¶14. Defendant also cites portions of Merritt's deposition where he refers to having responsibilities over “stores” and being the “store manager.” Once a member submits an insurance application, the Farm Bureau must evaluate and determine whether to issue a policy. ECF No. 93 at 3. Farm Bureau has the right to reject applicants and has exercised that right. Id.
The familiar standard for summary judgment applies here. A court must grant summary judgment when “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 Meadaa v. K.A.P. Enterprises, L.L.C., 756 F.3d 875, 880 (5th Cir. 2014). “Substantive law will identify which facts are material.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is only genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.
In seeking summary judgment, the moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this burden, the nonmoving party must come forward with specific facts that establish the existence of a genuine issue for trial. Distribuidora Mari Jose, S.A. de C.V. v. Transmaritime, Inc., 738 F.3d 703, 706 (5th Cir. 2013) (quoting Allen v. Rapides Par. Sch. Bd., 204 F.3d 619, 621 (5th Cir. 2000)). “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Hillman v. Loga, 697 F.3d 299, 302 (5th Cir. 2012).
In Encino Motorcars v. Navarro, 138 S.Ct. 1134, 1142 (2018), the U.S. Supreme Court overruled longstanding precedent holding that exemptions under the FLSA should be narrowly construed. The Court held that there was “no reason” to give FLSA exemptions a narrow construction; rather, that they should be given a “fair reading.” Id. Accordingly, this Court is to apply a “fair reading” standard to all exemptions to the FLSA, including the 29 U.S.C. §207(i) addressed here.
Section 7(i) of the FLSA exempts from its overtime pay requirement certain commissioned employees of a “retail or service establishment.” See 29 U.S.C. § 207(i). The exemption provides as follows:
No employer shall be deemed to have violated subsection (a) of this section by employing any employee of a retail or service establishment for a workweek in excess of the applicable workweek specified therein, if (1) the regular rate of pay of such employee is in excess of one and one-half times the minimum hourly rate applicable to him under section 206 of this title, and (2) more than half his compensation for a representative period (not less than one month) represents commissions on goods or services. In determining the proportion of compensation representing commissions, all earnings resulting from the application of a bona fide commission rate shall be deemed commissions on goods or services without regard to whether the computed commissions exceed the draw or guarantee.
29 U.S.C. § 207(i).
Therefore, for the Section 7(i) exemption to apply, three statutory requirements must be met: (1) the employee must be employed by a retail or service establishment; (2) the employee's regular rate of pay must be more than 1.5 times the applicable minimum wage; and (3) more than half of the employee's compensation for a representative period (not less than 1 month) must represent commissions on goods or services. Leal v. Magic Touch Up, Inc., 855 Fed. App'x 924, 928 (5th Cir. 2021). The employer bears the burden to show by a preponderance of the evidence that an employee is exempt. Faludi v. U.S. Shale Sols., L.L.C., 950 F.3d 269, 273 (5th Cir. 2020).
The parties here agree that the second two elements are satisfied- that (i) Merritt's “regular rate of pay” exceeded “one and one-half times the minimum hourly rate,” and (ii) “more than half of his compensation ... represents commissions on goods or services.”
29 U.S.C. § 207(i). ECF No. 147 at 1, ECF No. 93 at 4. The parties dispute, however, whether Farm Bureau's insurance businesses are retail establishments with a retail concept. Id.
A “retail or service establishment” is not a term defined in the current statute, however, Congress had defined this term in a different section -§ 213(a)(2)-the former intrastate businesses exemption-to “mean an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or both) is not for resale and is recognized as retail sales or services in the particular industry[.]” See Fair Labor Standards Amendments of 1961, Pub. L. 87-30, § 6, 75 Stat. 65, 69-70 (1961). “Although Congress repealed § 213(a)(2) in 1989, § 3(c)(1), 103 Stat. 939 (1989), courts continue to apply § 213(a)(2)'s definition of retail or service establishment to the commissioned work exemption. Diggs v. Ovation Credit Servs., Inc., 449 F.Supp.3d 1280, 1286 (M.D. Fla. 2020) (collecting cases) (internal citation omitted). Within the Western District of Texas, Judge Ezra has approved of this approach. Casanova v. Gold's Texas Holdings Grp., Inc., No. 5:13-CV-1161-DAE, 2016 WL 1241548, at *4 (W.D. Tex. Mar. 23, 2016) ().
The parties do not dispute that the FLSA defines “goods” to include insurance. See 29 C.F.R. § 776.20(b). “Insurance policies are ‘goods' within the meaning of the Act.” Instead, the parties vehemently disagree as to whether insurance is “recognized as retail.”
To determine whether defendants' businesses are recognized as retail, “courts have fashioned another two-prong test based on DOL regulations: (1) the establishment must be part of an industry in which there is a ‘retail concept'; and (2) the establishment's services must be recognized as retail in that particular industry.” Johnson v. Wave Comm GR LLC, 4 F.Supp.3d 423, 436 (N.D.N.Y. 2014) (citing 29 C.F.R. §§ 779.316, .322). The first prong must be satisfied before moving onto the second. Brennan v. Great Am. Disc. & Credit Co., 477 F.2d 292, 295 (5th Cir. 1973) ()
Both prongs are ultimately questions of law for the Court. See Johnson v. Wave Comm GR LLC, 4 F.Supp.3d 423, 436 (N.D.N.Y. 2014) () (citing Idaho Sheet Metal Works, Inc. v. Wirtz, 383 U.S. 190, 204-05 86 S.Ct. 737, 15 L.Ed.2d 694 (1966)); Rodriguez v. Home Heroes, LLC, No. 8:13-CV-2711-T-26AEP, 2015 WL 668009, at *7 (M.D. Fla. ...
To continue reading
Request your trial