Modeski v. Summit Retail Solutions, Inc.
| Decision Date | 25 February 2022 |
| Docket Number | No. 20-1747,20-1747 |
| Citation | 27 F.4th 53 |
| Parties | Joseph MODESKI, et al., Plaintiffs, Appellants, v. SUMMIT RETAIL SOLUTIONS, INC., Defendant, Appellee. |
| Court | U.S. Court of Appeals — First Circuit |
Benjamin L. Davis, III, with whom the Law Offices of Peter T. Nicholl was on brief, for appellants.
Barry J. Miller, with whom Michael E. Steinberg and Seyfarth Shaw LLP were on brief, for appellee.
Before Lynch, Lipez, and Thompson, Circuit Judges.
The Fair Labor Standards Act ("FLSA") generally requires employers to pay minimum wage and overtime. 29 U.S.C. §§ 206(a), 207(a)(1). However, it exempts from these protections anyone employed "in the capacity of outside salesman." Id. § 213(a)(1). The question here is whether the appellants in this case -- who worked as "Brand Representatives" for appellee, a marketing company -- fall within that outside sales exemption. Agreeing with the district court that the appellants qualify as outside salespeople under governing law, we affirm the district court's summary judgment ruling in favor of the marketing company.
The following facts are undisputed. Summit Retail Solutions is a marketing company that contracts with clients -- department stores, grocery stores, and wholesale retailers -- to provide in-store demonstrations designed to increase sales. Its clients include Costco, Sam's Club, and BJ's.
Summit employs "Brand Representatives" to perform these in-store demonstrations and engage with customers. Brand Reps are assigned to designated stores, where they set up a display featuring a particular product (for example, bamboo pillows, frozen pierogi, or a garlic butter purported to make the "best grilled cheese sandwich ever"). Brand Reps then hand out samples or otherwise demonstrate the product (e.g., by getting customers to "feel how soft the pillow" is). Summit provides Brand Reps with sales pitch scripts, promotional materials, and training in specific sales techniques. Brand Reps often have sales experience before joining Summit.
The Brand Reps' goal is to "convert" a sale by getting the customer to place the product in his or her cart or basket. Brand Reps do not finalize any sale at their display station. Rather, customers pay for all their items at cash registers near the front of the store. Summit adopted this approach because it is more efficient for the actual sales transactions to occur all at once, at the registers operated by the retail store's own employees. That is also how retail stores typically operate.
Because of these arrangements, Brand Reps cannot be sure that customers with whom they have spoken are ultimately purchasing the products. A shopper who takes a product from the display station might have second thoughts and decide to return the item to the display (or just leave it somewhere in the store). Conversely, a Brand Rep might not be personally responsible for every sale of a displayed item. For example, a customer might grab a box of pierogi from the freezer without engaging with the Brand Rep or take a pillow from the display station when the Brand Rep is away on lunch break. As a result, a Brand Rep would generally not know the exact sales numbers until he or she checks the sales report the next day.
In addition to assigning Brand Reps to specific stores, Summit sets their schedules and dictates which products they display. Once assigned to a store, Brand Reps set up and stock their own displays. At the beginning of their workday, Brand Reps are required to submit time-stamped pictures of their displays to Summit, to confirm that they have arrived on time and that the displays are properly set up. Brand Reps' hours are carefully recorded and tracked.
Summit pays its Brand Reps a base hourly wage ranging between $10 and $15 per hour. Brand Reps can also earn commission-style bonuses (referred to internally as "true-up payments").1
A group of former Brand Reps sued Summit on behalf of themselves and other Brand Reps, seeking to recover unpaid overtime wages under the FLSA and analogous state wage laws. Their theory was that the true-up system forced Brand Reps to systematically underreport their actual hours, lest they face termination or other adverse consequences for maintaining a negative balance between their hourly pay and the set percentage of product sales. As a result, they alleged, many Brand Reps failed to receive overtime wages for working over forty hours per week.
As part of its defense, Summit argued that plaintiffs fell within the FLSA's outside sales exemption and thus were not entitled to overtime compensation at all.2 The parties cross-moved for summary judgment on that issue. The district court agreed with Summit and, in a comprehensive and thoughtful decision, granted summary judgment in Summit's favor and dismissed the case in its entirety. On appeal, plaintiffs argue that the district court erred in concluding that they were subject to the exemption.3
We review a grant of summary judgment de novo and affirm if the record, construed in the light most favorable to the nonmovant, presents no genuine issue of material fact and shows that the movant is entitled to judgment as a matter of law. See Lawless v. Steward Health Care Sys., LLC, 894 F.3d 9, 20-21 (1st Cir. 2018). That both plaintiffs and defendant moved for summary judgment does not change the underlying standard; we simply determine whether either side deserves judgment as a matter of law on the undisputed facts. See Wells Real Est. Inv. Tr. II, Inc. v. Chardon/Hato Rey P'ship, S.E., 615 F.3d 45, 51 (1st Cir. 2010).
While the FLSA generally requires that employers pay their employees a statutory minimum wage and overtime, see 29 U.S.C. §§ 206(a), 207(a)(1), it exempts from those requirements "any employee employed ... in the capacity of outside salesman." 29 U.S.C. § 213(a)(1). The FLSA itself does not define "in the capacity of outside salesman" or the component terms. Instead, it leaves them to be "defined and delimited ... by regulations of the Secretary [of Labor]." Id.; see also Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 165, 127 S.Ct. 2339, 168 L.Ed.2d 54 (2007) ().
The relevant federal regulations, in turn, define an "employee employed in the capacity of outside salesman" as any employee (1) "whose primary duty is ... making sales within the meaning of [ 29 U.S.C. § 203(k) ]" and (2) "who is customarily and regularly engaged away from the employer's place or places of business in performing such primary duty." 29 C.F.R. § 541.500(a).4 The cross-referenced statutory provision, 29 U.S.C. § 203(k), provides that " ‘[s]ale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition."
Plaintiffs do not contest that they were "customarily and regularly engaged away from the employer's place or places of business." 29 C.F.R. § 541.500(a)(2). They also accept that their "primary duty" was communicating with potential customers and trying to convince them to buy the featured products (and not, for example, stocking shelves or setting up the displays). See id. § 541.500(a)(1)(i). But they reject the idea that those activities amount to "making sales." See id. They contend that as Brand Reps they did not "mak[e] sales" within the meaning of the FLSA because they "never sold anything" -- i.e., they did not obtain a sufficiently concrete purchase commitment from shoppers (who were always free to reconsider their decision to take a product from the display station and remove the item from their cart before heading to the register).
Our analysis begins with the Supreme Court's seminal consideration of the outside sales exemption in Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 132 S.Ct. 2156, 183 L.Ed.2d 153 (2012). In determining whether certain pharmaceutical sales representatives fell within the exemption, the Court in Christopher outlined several considerations that are germane to resolving the present dispute.
First, the FLSA provision establishing the exemption refers to anyone employed "in the capacity of [an] outside salesman." 29 U.S.C. § 213(a)(1) (emphasis added). Christopher suggested that "the statute's emphasis on the ‘capacity’ of the employee" is an "interpretative clue" that "counsels in favor of a functional, rather than a formal, inquiry, one that views an employee's responsibilities in the context of the particular industry in which the employee works." 567 U.S. at 161, 132 S.Ct. 2156.
Second, as previously mentioned, the relevant statutory definition provides that " ‘[s]ale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition." 29 U.S.C. § 203(k). Again, per Christopher: (1) the word "includes" suggests that the subsequent examples are "illustrative, not exhaustive," 567 U.S. at 162, 132 S.Ct. 2156, (2) the open-ended modifier "any" suggests a sale "indiscriminately of whatever kind" is sufficient to fall within the definition, id. (quoting United States v. Gonzales, 520 U.S. 1, 5, 117 S.Ct. 1032, 137 L.Ed.2d 132 (1997) ), and (3) the final phrase ("other disposition") functions as a "broad catchall," suggesting that Congress (and thus the Department of Labor ("DOL")) wanted to define sale in a "broad manner," did not intend to require a " ‘firm agreement’ or ‘firm commitment’ to buy," and meant "to accommodate industry-by-industry variations in methods of selling commodities," id. at 163-64, 132 S.Ct. 2156.
Third, Christopher noted that the DOL itself has explained (in reports and regulations) that the exemption is applicable "whenever an employee ‘in some sense make[s] a sale.’ " Id. at 149, 132 S.Ct. 2156 (). The Department has also "made it...
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