On Behalf Of All Others Similarly Situated v. Nutrisystem Inc. Deloris Wynn

• Decision Date: 07 September 2010
• Docket Number: No. 09-3545.,09-3545.
• Citation: 620 F.3d 274
• Parties: Adrian E. PARKER, Individually and on behalf of all others similarly situated v. NUTRISYSTEM, INC. Deloris Wynn, Administratrix of the Estate of Adrian E. Parker; Donald J. Wilson; Frank L. Stephens, IV; Monica Thompson; Senya Saunders, Appellants (Pursuant to Rule 12(a), Fed. R.App. P.) (Pursuant to Rule 43(a)(1), Fed. R.App. P.).
• Court: U.S. Court of Appeals — Third Circuit

620 F.3d 274

Adrian E. PARKER, Individually and on behalf of all others similarly situated

v. NUTRISYSTEM, INC.Deloris Wynn, Administratrix of the Estate of Adrian E. Parker; Donald J. Wilson; Frank L. Stephens, IV; Monica Thompson; Senya Saunders, Appellants(Pursuant to Rule 12(a), Fed. R.App. P.)(Pursuant to Rule 43(a)(1), Fed. R.App. P.).

No. 09-3545.

United States Court of Appeals,Third Circuit.

Argued June 21, 2010.

Filed: Sept. 7, 2010.

Shanon J. Carson (Argued), Ellen T. Noteware, Berger & Montague, Philadelphia, PA, R. Andrew Santillo, Peter D. Winebrake, The Winebrake Law Firm, Dresher, PA, for Appellants.

Sarah E. Bouchard (Argued), Katherine E. Kenny, Jonathan S. Krause, Morgan, Lewis & Bockius, Philadelphia, PA, for Appellee.

Paul L. Frieden, Laura Moskowitz (Argued), United States Department of Labor, Office of the Solicitor, Washington, DC, for Amicus Curiae, Secretary of Labor.

David A. Borgen, Goldstein, Demchak, Baller, Borgen & Dardarian, Oakland, CA, for Amicus Curiae, National Employment Lawyers Association, Comité De Apoyo A Los Trabajadores Agrícolas, Community Legal Services, Cornell Labor Law Clinic, Friends of Farmworkers, Juntos, National Lawyers Guild Labor and Employment Committee, Southern Poverty Law Center, The Sugar Law Center, and Working Hands Legal Clinic.

Before: SMITH, FISHER and COWEN, Circuit Judges.

OPINION OF THE COURT

FISHER, Circuit Judge.

This appeal arises from an order of the District Court, entered July 30, 2009, granting Appellee NutriSystem, Inc.'s (“NutriSystem”) motion for summary judgment on Appellants' claims for past overtime payments based on violations of the Fair Labor Standards Act (“FLSA” or the “Act”), 29 U.S.C. § 201, et seq. ¹ We must decide whether the District Court correctly concluded that NutriSystem's method of compensating its call-center employees constituted a commission under the FLSA so that NutriSystem was exempt from paying Appellants overtime. For the reasons articulated below, we agree with the District Court that NutriSystem's compensation plan qualified as a commission and affirm its ruling.

I.

A.

The facts in this case are undisputed. NutriSystem is a provider of weight loss and weight management products. It markets and sells its prepackaged meals directly to customers for personal use. Its core product is a 28-day meal program. NutriSystem offers several varieties of the meal plan depending on customers' needs. In 2008, NutriSystem offered plans under two methods of shipping, regular or auto-ship, at different prices: a men's regular 28-day plan for $371.50, or $319.95; a women's regular 28-day meal plan for $342.36, or $293.72; a women's or men's silver 28-day plan (for older customers) for $342.36, or $293.72; a women's or men's diabetic-friendly 28-day plan for $342.36, or $293.72; and a women's or men's vegetarian 28-day plan for $342.36, or $293.72. Under the regular method, the customer receives only a 28-day shipment and then must affirmatively request additional shipments. Under the auto-ship method, a customer signs up to receive automatic monthly shipments of food and is charged by NutriSystem on a monthly basis. Customers are permitted to cancel the auto-ship plan after the first month.

NutriSystem customers typically place their orders via telephone or the internet. The phone calls are fielded at a NutriSystem call center in Horsham, Pennsylvania, which employs approximately 230 sales associates. Under a NutriSystem sales policy, sales associates are prohibited from remaining idle for more than five minutes while awaiting an inbound call. Before the five-minute mark is reached, an associate must originate an outbound sales call. These calls are generally to people who filled out profiles on the company website but failed to place an order or to customers who previously placed orders but whose credit cards were declined.

NutriSystem sales associates are assigned to six different work shifts: 7:00 a.m. to 3:30 p.m., 9:00 a.m. to 5:30 p.m., 11:00 a.m. to 7:30 p.m., 1:30 p.m. to 10:00 p.m., 3:30 p.m. to 12:00 a.m., and 11:00 p.m. to 7:30 a.m. (the “overnight shift”). Since January 2007, sales associates, except those working the overnight shift, have been permitted to work extra hours during a week if in the preceding week they exceeded the average “sales dollars per call,” a figure the company calculates based on the revenue the sales associates generate and the calls they make each week.

In March 2005, NutriSystem implemented the compensation scheme for sales associates at issue in this case. Under the plan, sales associates receive the greater of either their hourly pay or their flat-rate payments per sale for each pay period. The hourly rate is $10 per hour for the first forty hours per week, and $15 per hour for overtime. The flat rates per sale are $18 for each 28-day program sold via an incoming call during daytime hours, $25 for each 28-day program sold on an incoming call during evening or weekend hours, and $40 for each 28-day program sold on an outbound call or during the overnight shift. These flat rates do not vary based on the cost of the meal plan to the consumer.

The majority of the sales associates are compensated based on these flat rates, not their hourly earnings. Under the compensation plan, sales associates do not receive overtime compensation when they are paid the flat rates for the sales made. There is no change to the flat rates when a sales associate works more than forty hours in one week.

B.

Adrian Parker, a former sales associate, sued NutriSystem for violations of the FLSA and the Pennsylvania Minimum Wage Act (“PMWA”), 43 Pa.Stat.Ann. § 333.101, et seq. , on behalf of himself and others similarly situated (collectively “Appellants”). Parker asserted his FLSA claim as a collective action under 29 U.S.C. § 216(b) and his PMWA claim as a class action under Federal Rule of Civil Procedure 23.

In a July 25, 2008 order, the District Court declined to exercise supplemental jurisdiction over Parker's PMWA class action claim. ² On September 26, 2008, the District Court conditionally granted Parker's motion to proceed as a collective action for his FLSA claims, and seventy-eight plaintiffs opted in.

NutriSystem moved for summary judgment against lead plaintiff Parker and the first four opt-in plaintiffs in the FLSA collective action. NutriSystem informed the District Court it would move for summary judgment against the remaining plaintiffs if the court found in its favor. Parker also moved for summary judgment against NutriSystem. On July 30, 2009, the District Court granted NutriSystem's motion for summary judgment and denied Parker's.

Appellants filed a timely notice of appeal. The Secretary of Labor has filed a brief as amicus curiae in support of Appellants' position.

II.

The District Court had jurisdiction over Appellants' FLSA claim pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 216(b). We have appellate jurisdiction under 28 U.S.C. § 1291. We review a district court's grant of summary judgment de novo. Levy v. Sterling Holding Co., 544 F.3d 493, 501 (3d Cir.2008). Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c).

III.

The dispute in this case centers on the limited issue of whether NutriSystem's method of compensating its sales associates represents “commissions on goods or services,” which turns on whether the “earnings result [ ] from the application of a bona fide commission rate.” 29 U.S.C. § 207(i). We conclude that NutriSystem's compensation plan establishes a “bona fide commission rate” and is therefore a “commission” under the FLSA.

A. Background

The FLSA requires that employers pay their employees one and one-half times their regular rate of pay for any hours worked in excess of forty hours per week. 29 U.S.C. § 207(a). The Act contains an exception to the overtime requirements for employees working in retail or service establishments. Section 7(i), the “retail commission exception,” provides:

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). The employer has the burden of demonstrating that it is eligible for the retail commission exception. See Mitchell v. Ky. Fin. Co., 359 U.S. 290, 295-96, 79 S.Ct. 756, 3 L.Ed.2d 815 (1959); Madison v. Res. for Human Dev., Inc., 233 F.3d 175, 183 (3d Cir.2000).

Here, the parties agree that under § 7(i), NutriSystem qualifies as a retail establishment and that its sales associates' regular rate of pay is more than one and one-half times the federal minimum wage; the question we face is the meaning of “commissions on goods or services.”

“ ‘In interpreting a statute, the Court looks first to the statute's plain meaning and, if the statutory language is clear and unambiguous, the inquiry comes to an end.’ ” Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 155 (3d Cir.2009) (quoting Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992)). Where the statutory language is unambiguous, the court should not...