Mitchell v. NBT Bank
| Decision Date | 22 April 2022 |
| Docket Number | 21-AP-185 |
| Citation | 2022 VT 17 |
| Parties | Christie Mitchell v. NBT Bank, N.A. |
| Court | Vermont Supreme Court |
On Appeal from Superior Court, Chittenden Unit, Civil Division Samuel Hoar, Jr., J.
Pietro J. Lynn and Adrienne Shea of Lynn, Lynn, Blackman & Manitsky, P.C., Burlington, for Plaintiff-Appellant.
Gary L. Franklin of Primmer Piper Eggleston & Cramer PC Burlington, for Defendant-Appellee.
PRESENT: Reiber, C.J., Eaton, Carroll and Cohen, JJ., and Grearson, Supr. J. (Ret.), Specially Assigned
¶ 1. Employee Christie Mitchell appeals a summary judgment order in favor of NBT Bank, N.A. regarding its policy of deducting her overtime compensation from her commissions so that she was never paid more than gross commissions regardless of how many hours she worked in a week. She maintains that the federal Fair Labor Standards Act (FLSA) requires the bank to pay her entire gross commissions plus overtime wages. Because the FLSA contains no such requirement, we affirm.
¶ 2. The parties do not dispute the following material facts. Employee, a mortgage-loan originator, worked for the bank from 2017 to 2020, each year signing a new, though not substantially different, compensation agreement. Employee was nonexempt under the FLSA and was paid on a commission-only basis. Commissions were calculated and paid out every four weeks.
¶ 3. To bridge the gap between commission payouts, the employment contract provided that employee would receive a bi-weekly draw against her future commissions. In 2017, the bank paid this draw at $10 per hour, with an overtime rate of $15 per hour ($10 in straight-time pay and $5 in overtime premium pay). At the end of each four-week period, the bank calculated employee's "regular rate" for the weeks she reported overtime hours. It calculated this rate by dividing her pro rata gross commission by the total hours worked during the week. The bank multiplied the difference between the regular rate and the draw rate by one-half to determine the additional overtime premium. The bank then deducted her draw wages and her additional overtime premium from gross commission and paid her the remaining balance. If her gross commission did not exceed her draw and additional overtime premium, employee kept the draw and the negative balance was carried over to the next period when it was deducted accordingly.[1] As a result, employee received all her gross commissions but never more.
¶ 4. Employee expressed concern about this methodology to her supervisor. She was told the payment method was legal. Employee eventually stopped reporting overtime under the apparent belief that reporting overtime was futile. After leaving the bank, she filed a civil action arguing that the bank's payment method violated the FLSA and Vermont's wage law.[2] Employee argued that the FLSA requires the bank to pay her overtime wages in addition to gross commissions. The bank disagreed and both parties filed for summary judgment.
¶ 5. The superior court granted summary judgment to the bank. The court explained what was not in dispute. It clarified that this was not a breach-of-contract case, the parties agreed the issue was governed by the FLSA, and they agreed that the bank used the correct regulation to calculate employee's overtime wages. Rather, the sole question was whether the FLSA required the bank to pay employee overtime wages in addition to her gross commissions. Employee argued this was mandated by 29 C.F.R. § 778.119, the specific provision prescribing the method by which an employer must calculate overtime wages in a draw-on-commission plan. The court opined that employee's focus on § 778.119 "distracts her from the real question here: not how much overtime pay is required but instead what is the base pay to which overtime must be added to produce total statutorily mandated minimum compensation." "The flaw in [employee's] analysis," it continued, "is in equating the requirement to use gross compensation in calculating the 'regular rate' with a requirement to pay that gross compensation as some sort of base, to which overtime is then added." It concluded that there was nothing in the FLSA or its regulations that categorically precluded the bank from deducting employee's overtime wages from her gross commissions and carrying any negative running balances forward to the next four-week cycle. The court then performed a series of calculations based on the variables it discerned in § 778.119 to demonstrate that the bank's methodology did not violate the FLSA, which merely requires the payment of a minimum wage and overtime premiums calibrated to a regular rate.
¶ 6. On appeal, employee renews her argument that the FLSA requires the bank to pay overtime wages in addition to her gross commissions. She maintains that the FLSA requires the bank to pay her regular rate and then pay her overtime wages in addition to gross commissions. She suggests the civil division erred in concluding that overtime wages can be deducted from gross commissions so long as gross commissions exceed the FLSA-mandated minimum compensation. The bank counters that nothing in the FLSA expressly prohibits the bank's practice, employee's stipulation that her draw wages were paid "free and clear" largely determines the outcome, and the few authorities that have addressed similar issues support the civil division's conclusion. We agree that the FLSA does not prohibit the bank's method of deducting overtime wages from gross commissions, and that employee's framing of her argument omits an important aspect of the FLSA's structure that helps resolve the dispute.
¶ 7. We review summary judgment motions using the same standard as the trial court. See Stamp Tech, Inc. ex rel. Blair v. Lydall/Thermal Acoustical, Inc., 2009 VT 91, ¶ 11, 186 Vt. 369, 987 A.2d 292. "Summary judgment is appropriate 'if 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.'" Martel v. Connor Contracting, Inc., 2018 VT 107, ¶ 5, 208 Vt. 498, 200 A.3d 160 (quoting V.R.C.P. 56(a)). "[W]e give the nonmoving party the benefit of all reasonable doubts and inferences." Id. (quotation omitted).
¶ 8. The FLSA does not directly address the draw-on-commission plan involved here. Rather, it requires employers to pay a minimum wage of at least $7.25 an hour and mandates that overtime wages are to be paid for all hours worked more than forty hours a week at "one and one-half times the regular rate at which [the employee] is employed." 29 U.S.C. §§ 206(a)(1)(C), 207(a)(1). In turn, the FLSA defines the "regular rate" as "includ[ing] all remuneration for employment paid to, or on behalf of, the employee." Id. § 207(e).
¶ 9. Employee is effectively arguing that she did not receive compensation under § 207(a) for her overtime hours because not only was the bank required to use her gross commissions to calculate her regular rate, but the FLSA also required the bank to pay gross commissions in their entirety. However, the term "gross commission" does not appear in § 207, and the word "commission" appears only in an unrelated part of § 207(i). See Dean v. United States, 556 U.S. 568, 572 (2009) . On the other hand, § 207 defines regular rate and prohibits employers from employing "any of [its] employees" who work more than forty hours a week without overtime pay calibrated to the regular rate. Id. § 207(a). Thus, § 207 does not prohibit employers from deducting overtime wages from gross commissions because it does not mandate the payment of gross commissions at all. It simply requires that "all remuneration" is included in calculating the regular rate. Id. § 207(e). The regular-rate calculation ensures that employee receives her overtime wages at a rate that reflects her true hourly earnings, not that she receives her overtime wages in addition to her gross commissions.
¶ 10. Indeed, whether gross commission equals the base pay for calculating overtime wages depends on the contract and is not mandated by the FLSA. See, e.g., Reinig v. RBS Citizens, No. 2:15-CV-01042-AJS, 2017 WL 8941217, at *15 (W.D. Pa. Aug. 2, 2017) (). Employee agrees that the bank calculated her regular rate using gross commission. In fact, employee agrees with the bank's payment calculation except for the overtime wage deduction from gross commission. As the superior court demonstrated in some detail below, such a draw-on-commission plan only violates § 207 if employee's statutorily required minimum compensation exceeds her gross commission in a given week and the bank does not make up the difference. That never occurred here.
¶ 11. Employee next argues that § 778.117 and § 778.119 require that commissions are "payments . . . for hours worked" and must be "included in the regular rate," and that "additional overtime compensation" is due once the new regular rate is calculated, and therefore the bank is prohibited by the FLSA from capping her compensation at gross commissions. However, part 778's overtime calculation provisions do not, and cannot, require a different result from the statute.[3] See Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 321 (2014) .
¶ 12. Under 29 C.F.R. § 778.117, commissions, no matter how paid or how they are delayed, must be included "in the employee's regular rate." The regular rate...
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