Schwind v. Ew & Associates, Inc., 03 CIV. 9904(WCC).

Citation371 F.Supp.2d 560
Decision Date25 May 2005
Docket NumberNo. 03 CIV. 9904(WCC).,03 CIV. 9904(WCC).
PartiesJohn SCHWIND, Plaintiff, v. EW & ASSOCIATES, INC. and Elaine Wirth, Defendants.
CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

Law Offices of Dan Getman (Dan C. Getman, Esq., Of Counsel), New Paltz, NY, for Plaintiff.

Kaufman, Borgeest & Ryan, LLP (Jonathan B. Bruno, Esq., Vincent C. Ansaldi, Esq., Of Counsel) Valhalla, NY, for Defendants.

OPINION AND ORDER

WILLIAM C. CONNER, Senior District Judge.

Plaintiff John Schwind brings the instant action against defendants EW & Associates, Inc. ("EWA") and Elaine Wirth (collectively, the "defendants"), pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201 et seq., New York State Labor Law, New York common law, the Employee Retirement Income Security Act ("ERISA") and the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Plaintiff alleges that during the course of his employment, as an independent contractor from April 1998 through January 1, 2001 and June 2002 through October 2002, and as an employee from January 1, 2001 through June 24, 2002, he was improperly denied overtime pay pursuant to 29 U.S.C. § 213 and New York State Labor Law Articles 6 and 19 and its implementing regulations 12 N.Y.C.R.R. §§ 142.2 et seq. Plaintiff also alleges a common law claim for breach of contract and an ERISA-COBRA claim for EWA's alleged failure to provide notice of plaintiff's right to receive a continuation of his employee health plan pursuant to 29 U.S.C. § 1166(a)(4). In an Opinion and Order dated February 18, 2005, we dismissed plaintiff's claim relating to alleged violations of the overtime provisions of the FLSA during the period of January 1, through June 24, 2002. However, we declined to consider whether the "retail or service establishment" exemption (also referred to as the "commissioned salesman exemption") under 29 U.S.C. § 207(i) was applicable to the period in which plaintiff was an independent contractor,1 and instead gave the parties an opportunity to submit additional evidence accompanied by supplemental memoranda of law with respect to this issue.

In the present motion, defendants move for summary judgment pursuant to FED. R. CIV. P. 56 on the basis that plaintiff's overtime is exempt during the period in which he was an independent contractor pursuant to the commissioned salesman exemption. For the reasons stated hereinafter, defendants' motion is granted.

BACKGROUND

The facts of this case are set forth extensively in our previous opinion, familiarity with which is presumed. See Schwind, 357 F.Supp.2d at 693-96. Accordingly, we set forth below only the facts necessary for decision on the present motion.

DISCUSSION
I. Summary Judgment Standard

Under FED. R. CIV. P. 56, summary judgment may be granted where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is material only if, based on that fact, a reasonable jury could find in favor of the non-moving party. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The burden rests on the movant to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In deciding whether summary judgment is appropriate, the court resolves all ambiguities and draws all permissible factual inferences against the movant. See Anderson, 477 U.S. at 255, 106 S.Ct. 2505. However, to defeat summary judgment, the nonmovant must go beyond the pleadings and "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The court's role at this stage of the litigation is not to decide issues of material fact, but to discern whether any exist. See Gallo v. Prudential Residential Services, L.P., 22 F.3d 1219, 1224 (2d Cir.1994).

II. FLSA Overtime Claim
A. General FLSA Standards

The FLSA was enacted to eliminate "labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers" and to ensure that employees are fairly compensated. 29 U.S.C. § 202(a); see also Reich v. New York City Transit Auth., 45 F.3d 646 (2d Cir.1995). The statute requires that employers pay overtime at a rate of not less than one and one-half times the employee's regular rate for hours worked in excess of forty per week. See 29 U.S.C. § 207(a).

The FLSA, however, specifically provides for exemptions that exclude certain employees from the FLSA's overtime provisions. These exemptions are defined by the Department of Labor ("DOL") regulations and "[e]mployees whose jobs fall within one of the enumerated categories are not entitled to certain protections of the Act [FLSA].... Employers need not pay exempt employees overtime no matter how many hours they work each week." Wright v. AARGO Sec. Servs., Inc., No. 99 Civ. 9115, 2001 WL 91705, at *2 (S.D.N.Y. Feb. 2, 2001).

The employer has the burden of proof to establish that the subject employee falls under any of the enumerated exemptions. See Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960); Wright, 2001 WL 91705, at *2. Because the FLSA is a remedial statute, "its exemptions are construed narrowly against the employer." Wright, 2001 WL 91705, at *2 (citing Martin v. Malcolm Pirnie, Inc., 949 F.2d 611, 614 (2d Cir.1991); Dambreville v. City of Boston, 945 F.Supp. 384, 391 (D.Mass.1996)).

B. Commissioned Salesman Exemption2

Defendant contends that although this Court concluded that during the period plaintiff was an independent contractor, April 1998 through January 1, 2001 and June 2002 through October 2002, he was an employee within the meaning of the FLSA, plaintiff is still exempt from the overtime provisions because he falls under the commissioned salesman exemption. 29 U.S.C. § 207(i) provides that in the case of "employment by retail or service establishment:"

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.

Thus, to be entitled to the commissioned salesman exemption, an employer must demonstrate that: (1) the employee was employed by a retail or service establishment; (2) the employee's regular rate of pay exceeded one and one-half times the minimum hourly rate; and (3) more than half of the employee's compensation for a representative period (not less than one month) represented commissions on goods or services. 29 U.S.C. § 207(i); 29 C.F.R. § 779.412. Consequently, defendants contend that plaintiff is not entitled to overtime during the period he was an independent contractor because he was paid on a commission basis and earned in excess of one and one-half times the minimum hourly rate. (Defs. Reply Mem. Supp. Summ. J. at 6.) Plaintiff, however, maintains that the commissioned salesman exemption is inapplicable because EWA is not a retail or service establishment within the meaning of the FLSA and defendants are unable to demonstrate that plaintiff's regular rate of pay was more than one and one-half times the applicable minimum wage. (Pl. Suppl. Mem. Opp. Summ. J. at 2-3, 5.) We will consider each element of the commissioned salesman exemption in turn.

1. More Than Half of Compensation For a Representative Period Represents Commissions on Goods or Services

Neither party appears to contest that this prong has been met. In fact, plaintiff admits that he was paid solely on a commission basis from 1998 through 2000 and from June 2002 through October 2002. (Schwind Aff. ¶ 7.) Accordingly, we find that there is no material issue of fact as to whether more than half of plaintiff's compensation for a representative period represents commission on goods or services and conclude that it does.

2. Retail or Service Establishment

Plaintiff contends that EWA is not a "retail or service establishment" within the meaning of the FLSA, and therefore the commissioned salesman exemption is inapplicable. A retail or service establishment means "an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or of both) is not for resale3 and is recognized as retail sales or services in the particular industry."4 29 C.F.R. § 779.332. The regulations further define a retail or service establishment as:

one which sells goods or services to the general public. It serves the everyday needs of the community in which it is located. The retail or service establishment performs a function in the business organization of the Nation which is at the very end of the stream of distribution, disposing in small quantities of the products and skills of such organization and does not take part in the manufacturing process.

29 C.F.R. § 779.318(a). However, 29 C.F.R. § 779.318(b) further explains that "[t]he legislative history of the section 13(a)(2) exemption for certain retail or service establishments shows that Congress also intended that the retail exemption extend in some measure beyond consumer goods and services to embrace certain products almost never purchased for family or...

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