Wills v. Radioshack Corp.

• Decision Date: 07 November 2013
• Docket Number: No. 13 Civ. 2733(PAE).,13 Civ. 2733(PAE).
• Citation: 981 F.Supp.2d 245
• Parties: Jaime WILLS on behalf of himself and all others similarly situated, Plaintiff, v. RADIOSHACK CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

981 F.Supp.2d 245

Jaime WILLS on behalf of himself and all others similarly situated, Plaintiff,

v.RADIOSHACK CORPORATION, Defendant.

No. 13 Civ. 2733(PAE).

United States District Court, S.D. New York.

Nov. 7, 2013.

Anthony James Lazzaro, The Lazzaro Law Firm, LLC, Jason Robert Bristol, Joshua Richard Cohen, Cohen Rosenthal & Kramer LLP, Cleveland, OH, Glen David Savits, Green & Savits, LLC, Morristown, NJ, for Plaintiff.

James S. McNeill, McKenna Long & Aldridge LLP, San Diego, CA, John R. Oh, Dombroff and Gilmore, NY, NY, for Defendant.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge:

Plaintiff Jaime Wills (“Wills”) brings this putative class action against RadioShack Corporation (“RadioShack”). Wills claims that RadioShack's use of the U.S. Department of Labor's (“DOL”) Fluctuating Workweek (“FWW”) method for calculating overtime pay has, since May 5, 2011, violated the rights of RadioShack's New York-based non-exempt store managers under New York Labor Law (“NYLL”) §§ 191 et seq. Wills claims that RadioShack's payment of performance-based bonuses to those managers precluded it from using the FWW method, and required it to use instead the more generous “time-and-a-half” method of calculating overtime. Wills seeks to recover the difference between the overtime pay yielded by those two methods. He also seeks liquidated damages under the NYLL, and declaratory judgments that: (1) RadioShack's method of calculating overtime pay since May 5, 2011 violated the NYLL; and (2) RadioShack is collaterally estopped from contending that using the FWW method after that date complied with the NYLL.

RadioShack now moves to dismiss, on the grounds that its use of the FWW method to calculate overtime was permitted under the NYLL. For the reasons that follow, the Court agrees with RadioShack, and holds that the NYLL, which in all pertinent respects tracks the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., permitted RadioShack to use the FWW method to calculate its store managers' overtime pay. The Court, accordingly, grants the motion to dismiss.

I. BackgroundA. RadioShack's Bonus Plan for Non–Exempt Store Managers¹

Between October 2008 and December 2011, Wills worked as a non-exempt store manager for a RadioShack in Tonawanda, New York. Am. Compl. ¶¶ 11–12. Wills was paid under RadioShack's “Non–Exempt Store Manager Compensation Plan” (“SMCP”), which applied to managers of RadioShack stores outside of California with more than $750,000 in annual sales.²Id. ¶ 15; SMCP at 1. Under the SMCP, RadioShack paid store managers “a base salary for all hours worked each workweek,” plus quarterly and year-end bonuses “based on the performance of the store to which the Store Manager is assigned.” Am. Compl. ¶ ¶ 17–18; SMCP at 1. These bonuses were performance-based and non-discretionary. Am. Compl. ¶¶ 18, 45; see also SMCP at 1–4.

The bonuses were calculated as follows. Each store manager had a “target bonus” of 20% of his or her base salary, meaning that if the store met its performance targets in all respects, the manager received 20% additional pay. SMCP at 1. This bonus was comprised of quarterly bonuses and a year-end bonus; where the performance targets were met, the quarterly bonuses added together supplied half of the 20% bonus and the year-end bonus supplied the other half. Quarterly bonuses were calculated based on the store's “actual sales performance compared to sales plan.” Id. For instance, if the store's actual quarterly sales amounted to 95% of the target set in the sales plan, then the manager received 25% of his or her “target bonus.” If actual sales reached the target set in the plan, the manager received the entire “target bonus.” And if a store achieved 120% or more of the target set in the sales plan, the manager received 150% of the “target bonus.” Id. at 1–2.

An illustration: Take a store manager earning a $30,000 annual salary. The manager's total bonus target was $6,000 (20% of salary). Half, or $3,000, was allocated to quarterly bonuses, i.e., $750 per quarter. If a store met its sales expectations in a quarter, the manager received the full $750 bonus. If the store achieved 120% of expected sales, the manager received a $1,125 bonus (150% of $750). But, if the store achieved only 95% of expected sales, the manager received a $187.50 bonus (25% of $750).

The other half of the bonus target was allocated to a year-end bonus. It was calculated based on a concept RadioShack calls Net Profit Before Bonus (NPBB). Id. at 2–3. Each store had an annual NPBB target; the year-end bonus for store managers turned on how the store performed relative to this target. If the store achieved 85% of the NPBB target, the manager received 25% of his or her year-end “target bonus.” If the store met the NPBB target, the manager received 100% of that “target bonus.” And if the store reached 115% of the NPBB target, the manager received 150% of the “target bonus.” Id. at 3. Thus, a manager whose year-end target bonus was $3,000 would receive the full $3,000 if the store met the NPBB target exactly; $4,500 if the store's NPBB achieved 115% of the target; and $750 if the store's NPBB was 85% of the target. ³

In addition to base salary and bonuses keyed to store performance, RadioShack paid store managers for overtime hours worked. Am. Compl. ¶ 19; SMCP at 1. To calculate overtime pay under the SMCP, RadioShack used the FWW method. Am. Compl. ¶ 20 (citing 29 C.F.R. § 778.114). Under this method, a manager who worked more than 40 hours in a given week received, in addition to base salary, one-half (50%) of the “regular rate” for every hour over 40 hours worked. Id. ¶ 19. The “regular rate” was calculated by dividing the manager's base weekly pay by the number of hours worked that week. Id. So, if a manager's base weekly pay was $1,000, and he or she worked 50 hours that week, the “regular rate” for that week was deemed to be $20. The manager then received, as overtime pay, one-half of this “regular rate” for every hour worked above 40. Thus, the manager would receive an additional $10/hour for 10 hours of overtime, for a total of $100. The manager's total compensation for the week would be $1,100.⁴

B. The DOL's May 2011 Final Ruling, and the Sisson Litigation in Ohio

Wills' lawsuit has its roots in a 2011 ruling by the DOL and an Ohio lawsuit based on that ruling.

On July 28, 2008, the DOL issued a Notice of Proposed Rulemaking (“NPRM”). See73 Fed.Reg. 43654 (“Updating Regulations Issued Under the Fair Labor Standards Act”). The notice described a number of proposed modifications to regulations under the FLSA. Only one is relevant here: A proposed rule that would have stated that an employer's payment of bonuses to an employee did not prevent the employer from using the FWW method to calculate the employee's overtime. Specifically, the proposed rule would have added this sentence to the end of 29 C.F.R. § 778.114(a), the regulation which addresses the FWW method: “Payment of overtime premiums and other bonus and non-overtime premium payments will not invalidate the ‘fluctuating workweek’ method of overtime payment, but such payments must be included in the calculation of the regular rate unless excluded under section 7(e)(1) through (8) of the [FLSA].” 73 Fed.Reg. at 43670. The DOL also proposed to add “an example to § 778.114(b) to illustrate these principles where an employer pays an employee a nightshift differential in addition to a fixed salary.” Id. at 43662;see also id. at 43670.

After receiving comments on the various regulatory proposals, the DOL, on April 5, 2011, issued what it termed a “Final Rule,” effective May 5, 2011. See76 Fed.Reg. 18832 (hereinafter, the DOL's “Final Ruling”).⁵ Although adopting various other new regulations, the DOL announced that it had decided not to implement the proposed revisions to § 778.114. Rather, it announced, save for non-substantive revisions, it would leave the text of § 778.114 unchanged. In an explanation it issued of the decision not to adopt the proposed revisions to § 778.114, the DOL stated broadly that it had concluded that bonuses and premium payments “are incompatible with the [FWW] method of computing overtime under section 778.114.” 76 Fed.Reg. at 18850. The DOL also stated that the decision not to implement the proposed changes would avoid “expand[ing] the use of [the FWW] method of computing overtime pay beyond the scope of the current regulation,” and “restore the current rule.” Id.⁶

On April 19, 2012, two RadioShack store managers, Michael Sisson (“Sisson”) and Matthew Dana (“Dana”), filed a Complaint against RadioShack in the Northern District of Ohio. See Sisson v. RadioShack Corp., No. 12 Civ. 958(CAB) (N.D.Ohio) (“ Sisson ”), Dkt. 1. The plaintiffs asserted that, from the effective date of the DOL's Final Ruling (May 5, 2011) forward, RadioShack's use of the FWW method to calculate non-exempt store managers' overtime pay had violated the FLSA, the NYLL, and Ohio law, because RadioShack, applying the SMCP, had paid them bonuses. The Sisson Complaint was brought as a collective action under the FLSA, and a putative class action under Fed.R.Civ.P. 23 for a sub-class of Ohio employees represented by Sisson (under Ohio Revised Code § 4111.03), and a sub-class of New York employees represented by Dana (underthe NYLL Articles 6 and 19). Id. On June 15, 2012, RadioShack moved to dismiss. Id. at Dkt. 15.

On March 11, 2013, the district court granted in part and denied in part RadioShack's motion to dismiss. Sisson v. Radioshack Corp., No. 12 Civ. 958(CAB), 2013 WL 945372 (N.D.Ohio Mar. 11, 2013). The court agreed with the plaintiffs that the DOL's Final Ruling had substantively altered the DOL's construction of § 778.114, such that the agency “now considers bonus and premium payments, with the exception of overtime premium payments, incompatible with the FWW method.” Id. at *6. The court also held it appropriate to give Chevron deference to that...