Ramirez v. Yosemite Water Co., Inc.

• Decision Date: 17 June 1999
• Docket Number: No. S070114,S070114
• Citation: 978 P.2d 2,85 Cal.Rptr.2d 844,20 Cal.4th 785
• Court: California Supreme Court
• Parties: , 978 P.2d 2, 138 Lab.Cas. P 58,648, 99 Cal. Daily Op. Serv. 4725, 99 Cal. Daily Op. Serv. 5203, 1999 Daily Journal D.A.R. 6065 Peter RAMIREZ, Plaintiff and Appellant, v. YOSEMITE WATER COMPANY, INC., Defendant and Respondent

Page 844

85 Cal.Rptr.2d 844

20 Cal.4th 785, 978 P.2d 2, 138 Lab.Cas. P 58,648,

99 Cal. Daily Op. Serv. 4725,

99 Cal. Daily Op. Serv. 5203,

1999 Daily Journal D.A.R. 6065

Peter RAMIREZ, Plaintiff and Appellant, v. YOSEMITE WATER COMPANY, INC., Defendant and Respondent.

No. S070114.

Supreme Court of California

June 17, 1999.

Dennis F. Moss for Plaintiff and Appellant.

Sonnenschein, Nath & Rosenthal, Lee T. Paterson and Weston A. Edwards, Los Angeles, for Defendant and Respondent.

Sheppard, Mullin, Richter & Hampton, Richard J. Simmons, Los Angeles, and Kelly L. Hensley for the Employers Group as Amicus Curiae on behalf of Defendant and Respondent.

MOSK, J.

Generally, employees in the State of California who work more than 40 hours per week and 8 hours per day (at least, in the latter case, up until January 1, 1998), have had the right to receive premium pay for the hours worked over this limit. (See 1 Wilcox, Cal. Employment Law (rev. Mar. 1998) § 3.04, pp. 3-21 to 3-28.) Labor Code section 1171 ¹ expressly excludes from the overtime laws employees who are "outside salespersons," ² and the California Industrial Welfare Commission (IWC), the agency charged with implementing section 1171, defined the term "outside salesperson" in Wage Order No. 7-80, as someone who "regularly works more than half the working time" engaged in sales activities outside the workplace. (Cal.Code Regs., tit. 8, § 11070, subd. 2(I) (hereinafter Wage Order No. 7-80, 2(I)).) ³ In this case we are called on to decide whether an employee who performs a mixture of sales and nonsales duties is an "outside salesperson" within the meaning of section 1171. The trial court and the Court of Appeal came to the conclusion that the employee, who delivered bottled water and was also expected to sell the water service to new customers, was an outside salesperson for purposes of section 1171. Their conclusion was based on a reading of federal regulations that differ substantially from the state regulations applicable in this case: the former regulations define the term by determining the employees' "primary purpose," rather than by calculating how they spend their time.

We conclude these courts may have erred in determining that the employee in this case was an outside salesperson because they incorrectly relied on the federal regulation and interpretation of that regulation when construing this state's distinct definition of "outside salesperson." Accordingly, we reverse the Court of Appeal's judgment and remand for further proceedings.

I. Factual and Procedural Background

Yosemite Water Company, Inc. (Yosemite) is in the business of selling bottled water and other products incidental to the bottled water business, such as cups, coffee, and other ingredients, and of renting water coolers. By 1995, the company had grown from 70 to 150 routes. A route is a defined territory over which a "route sales representative" is responsible for all delivery and sales activity.

Plaintiff Peter Ramirez was employed by Yosemite as a route sales representative between April 1989 and November 1992. From November 1992 to March 3, 1993, when he left the company, Ramirez served as a relief route sales representative.

After he left the company, Ramirez filed a complaint against Yosemite for unpaid overtime wages, unlawful wage deductions and employee charges, and unpaid wages. The company cross-complained against him for damages for interference with contractual relations and interference with prospective economic advantage as the result of his alleged attempt to solicit Yosemite's customers when he left the company. At a subsequent bench trial, much of the evidence presented concerned the matter of how Ramirez spent his average workday. Because the question whether Ramirez was an "outside salesperson," as we will see, turns on a detailed fact-specific determination of this matter, we shall recount that evidence at some length.

Ramirez spent a substantial portion of his workday delivering bottled water to business and residential customers. Each five-gallon bottle of water Ramirez delivered weighed forty pounds. On an average business stop, Ramirez would deliver six to seven bottles; an average residential customer purchased one to two bottles. About 70 percent of his customers were residential. When he began on route No. 15, it was an 800-bottle route serving about 400 customers. The route grew so that, at its height, he had 550 customers and averaged 1,500-1,900 bottles delivered in a 10-day cycle, or an average of between 150 and 190 bottles per day. He averaged six delivery stops per hour, delivering one to two bottles on average to residential customers and six to seven bottles for commercial ones. For established customers, he would carry the bottles into a business or place of residence, exchange full for empty bottles, and refill and replace other stock and supplies. He would also rotate bottles on his truck, check the bottles for leaks and foreign objects, and carry the bottles to the customer's house. For some customers he would also rotate the spare water bottles, wipe off the tops and place the bottles in the coolers. He would also do minor service on the coolers.

According to Ramirez's testimony, he engaged in very little solicitation of regular customers to persuade them to increase their service. He testified that once customers commenced service their purchasing habits became stable, and he generally did not "push" established customers into buying more or different products for fear of offending them. Moreover, he had little direct contact with residential customers, who were frequently not home when he delivered the water. He saw a customer only about 5 to 7 percent of the time, usually at the customer's request. He did not engage in selling to customers he did not see. Customers would communicate by leaving notes or calling, and he would leave bills and reminders of overdue payments under the bottles.

Yosemite employed several full-time employees as solicitors, whose principal task was to sign up new customers. Ramirez was also expected to engage in solicitation of new customers. He testified that he was expected to obtain at least 1 new customer per workday, and to do so, he made on average 10 contacts per day on his route, which took him a total of approximately 30 minutes. He was also generally responsible for "setting up" the new customers. Between once a month and once every two months, he spent six hours on Saturday with other route sales representatives going door-to-door soliciting new customers. He also attended sales meetings designed to improve sales techniques approximately twice a month. In a five-day workweek, he estimated he would spend about three to three and one-half hours trying to sell his service to potential new customers. Occasionally, he would pass out to old and new customers a list of the company's products.

If a potential customer called Yosemite to initiate service, Ramirez would receive a note to call that person back and set up a time to begin service. At the time he set up a new customer, if he met the customer face-to-face, he would explain the service rules and minimum purchases, and describe the additional products the company had to offer.

From the time Ramirez left the plant around 8 a.m., until he returned in the evening, he testified he worked anywhere from seven to nine hours not counting the time he spent soliciting new customers. His average day lasted 11 hours and sometimes longer, such as when he had difficulty balancing his accounts. He worked Monday through Friday, more than 40 hours in a week, in addition to the occasional Saturday noted above. He was not paid for any overtime hours worked.

When he was a route sales representative, Ramirez was paid a minimum of $1,200-$1,400 per month, which Yosemite considered a "guaranteed draw" against future bottle sales. He would also receive an additional 22 percent per bottle and 10 percent for cups, tea, coffee and cooler rentals he delivered once he had exceeded the guaranteed draw. He was paid according to the number of bottles he delivered, whether or not he had originally solicited the customers to whom they were delivered. Thus, if a company solicitor sold water to a new resident located on route 15, Ramirez would deliver the water and get the credit for the bottles delivered even though he did not do the soliciting. In addition to his usual compensation, he received a small commission for each new customer he signed: He was paid nothing for the first 10 customers he signed, $5 per new customer for the 11th through 15th customers, $10 per customer for the next 10, and $20 for each new customer over 25.

Maya Soderstrom, Yosemite's president, testified that when a route sales representative made a delivery, he or she was expected to engage in selling activity. As Soderstrom explained, selling "is the main job of our route salespeople," who are in the field selling "constantly." The company's expectation is that the route sales representatives are selling 90 percent or more of their workday, although she later clarified that she was counting the time spent delivering bottles of water to the customer as part of the selling activity. She also explained that the route sales representatives are the primary contact between the company and the customer. Daniel Ledbetter, Ramirez's route supervisor, also testified that over 80 percent of Ramirez's time at work was spent away from the Yosemite plant and over 90 percent of his working day was spent in selling activities, although it is unclear whether or not he had a similarly broad definition as Soderstrom of the term "sales." Ledbetter also confirmed that Ramirez was expected to obtain the equivalent of 1 new customer per day worked and to speak to 10-15 people a day to accomplish this goal.

Claude I. Niesen, special projects manager and a sales training manager at Yosemite, offered an...