Reich v. John Alden Life Ins. Co.
| Decision Date | 08 October 1996 |
| Docket Number | Civil Action No. 95-40086-NMG. |
| Citation | 940 F.Supp. 418 |
| Parties | Robert B. REICH, Secretary of Labor, United States Department of Labor, Plaintiff, v. JOHN ALDEN LIFE INSURANCE CO., Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Albert H. Ross, U.S. Department of Labor, Office of the Solicitor, Boston, MA, for Robert B. Reich.
William J. Kilberg, Eugene Scalia, Gibson, Dunn & Crutcher, Washington, DC, Norman Holtz, Holtz, Gilman & Grunehaum, Boston, MA, for John Alden Life Ins. Co.
Plaintiff Robert B. Reich, Secretary of the United States Department of Labor ("the Secretary"), brings this action against defendant, John Alden Life Insurance Company ("John Alden"), pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq. The Secretary contends that John Alden has failed to pay overtime wages to certain employees known as marketing representatives and marketing specialists who work in its Westborough, Massachusetts office (hereinafter referred to collectively as "marketing representatives" or "MRs"). John Alden responds that these marketing representatives fall within the "administrative exception" to the overtime provisions of FLSA as stated in 29 U.S.C. § 213(a)(1), which exempts "any employee employed in a bona fide executive, administrative, or professional capacity".
Both parties have moved for summary judgment and have stipulated to the facts. For the reasons set forth below, this Court finds that the marketing representatives are exempt under 29 U.S.C. § 213(a)(1) and therefore John Alden's motion for summary judgment will be allowed and the cross-motion by the Secretary will be denied.
Summary judgment shall be rendered where the pleadings, discovery on file and affidavits, if any, show "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The Court must view the entire record in the light most favorable to the plaintiffs, the non-moving party, and indulge all reasonable inferences in their favor. O'Connor v. Steeves, 994 F.2d 905, 907 (1st Cir.1993).
The moving party initially bears the burden of showing that "there is an absence of evidence to support the non-moving party's case." FDIC v. Municipality of Ponce, 904 F.2d 740, 742 (1st Cir.1990) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986)). If the movant satisfies that burden, it shifts to the non-moving party to set forth specific facts to establish the existence of a genuine material issue. Id. In deciding whether a factual dispute is genuine, this Court must determine whether "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); accord Aponte-Santiago v. Lopez-Rivera, 957 F.2d 40, 41 (1st Cir.1992). The non-movant's assertion of mere allegation or denial of the pleadings is insufficient on its own to establish a genuine issue of material fact. Fed.R.Civ.P. 56(e).
In the instant case, the parties have stipulated to the following relevant facts:
1. Defendant John Alden designs, creates, and sells insurance products of various kinds, including group health, group dental, disability, life insurance, annuities and long-term care. Stipulation of Facts ("Stipulation") at ¶ 1. It does not sell its products through direct contacts with the end-purchasers. Rather, it employs marketing representatives ("MRs"), whose primary duty is to contact and deal with licensed independent insurance agents ("agents") who, in turn, are in contact with the end-purchasers. Id. at ¶ 6. The agents recommend to the end-purchasers a variety of insurance products, including those of John Alden as well as those of its competitors. Id. When the end-purchasers ultimately decide which insurance product to buy, the agent acts as an intermediary between the marketing representatives and the end-purchasers. Id.
2. In order to increase purchases of John Alden insurance products by the end-purchasers, the MRs maintain constant contact with the agents. MRs do not "share" agents with one another. They all handle agents in Massachusetts and responsibility is divided for agents in Maine, New Hampshire, Rhode Island and Vermont. Each keeps a list or "deck" of approximately 500 agents with whom he or she is in contact. Id. at ¶ 7.
The MRs independently decide which of those agents to contact, when to contact them, and which products to emphasize to any particular agent. Id. On a typical day, the MRs make three kinds of calls to agents: 1) cold calls intended to acquaint agents with John Alden products and to enable MRs to determine the needs of the agents and potential end-purchasers; 2) calls to those agents with whom the MRs are already familiar; and 3) follow-up calls. Id. at ¶ 8. In dealing with agents, the MRs operate without scripts or required verbatim statements. Id. at ¶ 12.
3. The MRs serve as the agents' primary contact with John Alden. They keep the agents apprised of new products or combinations of products that are available to meet the needs of prospective or existing endpurchasers any price changes in those products, and they provide competitive analysis on new or renewal business. Id. at ¶¶ 10, 12. The MRs also answer questions about the company, its products and its pricing structure, provide customer service, and refer agents, if necessary, to those John Alden employees who can provide more detailed information on specific topics such as underwriting. Id. at ¶ 10.
Frequently, the MRs help agents develop proposals for bidding on new or existing business and recommend an appropriate plan, taking into account the age and health of the prospective end-purchasers, as well as past rates and benefits. Id. The prices and terms of John Alden products are, however, set by the company, not by the MRs, and are non-negotiable. Id. at ¶ 13. The MRs sometimes a) pass along studies and articles about John Alden or its competitors; b) give talks and presentations describing John Alden products and services to groups of agents; and c) ask agents to forward information about their competitors so that they can maintain files on the competition. Id. at ¶ 12.
4. MRs generally do not have direct contact with the end-purchasers. When an end-purchaser decides to buy a John Alden product, the agent informs the MR who then sends to the agent an application or "request for participation" (hereinafter "request"). The agent then meets with the end-purchaser for a formal "closing" and presents the request. Once the request is completed, the agent returns it, along with one month's premium, to the MR, who, in turn, forwards the materials to the underwriting department. While that request is pending, the MR acts as a conduit between the agent and prospective purchaser on the one hand, and the underwriting department on the other. The decision whether to approve a request is made solely by the underwriting department. Id. at ¶¶ 14, 15.
5. John Alden MRs are typically college graduates with two to six years of marketing experience. They initially receive training for a period between several weeks and several months. During that time, they attend seminars, receive personal instruction from District Managers and experienced MRs, and engage in role-playing to simulate contacts with agents. In general, MRs receive both formal and informal instruction and guidance on which products and product features to emphasize to agents. They attend weekly "sales" meetings, where they discuss issues that have arisen in past conversations with agents, including information about products or prices of competitors that are intriguing. In the past, recommendations of MRs in the weekly meetings have been relayed by supervisors and have contributed to changes in John Alden products. Id. at ¶ 11.
6. The following qualities are important to a MR's success over time: familiarity with the needs, clients and techniques of various insurance agents, the ability to cultivate an agent's interest in John Alden products, the ability to know which agents have end-purchasers with needs that John Alden can meet and to contact them, and the ability to gather sufficient information about particular end-purchasers in order to make an appropriate proposal. Id. at ¶ 6.
7. The average annual compensation for John Alden MRs is $50,000. More experienced MRs earn as much as $75,000. Id. at ¶ 23. Their pay consists of a) a base salary, b) incentive compensation based upon the number and value of John Alden products sold through agents included in their "deck", and c) a bonus tied to the performance of the John Alden products issued through agents credited to them. Id. at ¶ 21. To encourage MRs to increase sales, John Alden maintains a "sales board" in the Westborough office which lists every MR and the number of sales each day. The company also generates weekly "sales reports" identifying the sales credited to each MR, most of whom are expected to meet quarterly benchmarks. Id. at ¶ 17.
8. The MRs at issue in this case work from approximately 7:30 a.m. to 5:30 p.m., with a one-hour lunch period. Of that time, they spend approximately seven hours on the telephone with their agents and an additional two hours performing paperwork related to those contacts. Id. at ¶¶ 18, 19. The parties agree that the MRs are paid more than $250 per week. Id. at ¶ 23.
The FLSA establishes a minimum wage for working Americans and requires that employees be compensated for hours worked in excess of 40 hours per week at a minimum rate of one-and-a-half times their regular rate of pay. 29 U.S.C. § 207(a). Section 213(a)(1) of 29 U.S.C. exempts from that requirement "any employee employed in a bona fide executive,...
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