Freeman v. Kaplan, Inc.
Filing
48
MEMORANDUM Opinion and Order; Defendant Kaplan, Inc.'s for summary judgment 28 is denied. Lawyers for both sides are ordered to appear for a status hearing at 9:15 a.m. October 2, 2015 to determine the best way to go forward. Signed by the Honorable Milton I. Shadur on 9/25/2015:Mailed notice(clw, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SHARON FREEMAN, on behalf of herself
and all similarly situated persons,
Plaintiff,
v.
KAPLAN, INC.,
Defendant.
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Case No. 14 C 10265
MEMORANDUM OPINION AND ORDER
Sharon Freeman ("Freeman") has brought a putative Class Action Complaint against
Kaplan, Inc. ("Kaplan"), alleging violations of the Fair Labor Standards Act ("FLSA," 29 U.S.C.
§§ 201 et seq. 1) and the Illinois Minimum Wage Law ("Wage Law," 820 ILCS 105/1 to 105/15)
by failing to pay her a minimum wage in an acceptable medium and in a timely fashion. Kaplan
has moved for summary judgment under Fed. R. Civ. P. ("Rule") 56 on the ground that Freeman
was an outside sales employee and therefore exempt from the requirements of both the FLSA
and the Wage Law. 2 After Freeman responded to that motion, Kaplan filed a reply
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1
All further FLSA references will take the form "Section --," using the Title 29
numbering rather than the FLSA's internal numbering.
2
Both parties agree that for the purposes of this motion the Wage Law's outside sales
exemption is coterminous with the FLSA's. That position reflects the Illinois practice of
interpreting the Wage Law in accordance with its federal counterpart when no Illinois cases are
on point (e.g., Lewis v. Giordano's Enters., Inc., 397 Ill. App. 3d 581, 588, 921 N.E.2d 740, 746
(1st Dist. 2009); 56 Ill. Admin. Code § 210.120). Because that is the situation here, this opinion
dispenses with any analysis of the Wage Law as such and focuses instead on federal cases and
regulations interpreting the FLSA.
memorandum, teeing up the dispute for decision. For the reasons set forth in this opinion,
Kaplan's motion is denied.
Summary Judgment Standard
Every Rule 56 movant bears the burden of establishing the absence of any genuine issue
of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). For that purpose courts
consider the evidentiary record in the light most favorable to the nonmovant (here Freeman) and
draw all reasonable inferences in her favor (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471
(7th Cir. 2002)). Courts "may not make credibility determinations, weigh the evidence, or
decide which inferences to draw from the facts" in resolving motions for summary judgment
(Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003)). But a nonmovant must produce more than
"a mere scintilla of evidence" to support the position that a genuine issue of material fact exists
and "must come forward with specific facts demonstrating that there is a genuine issue for trial"
(Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir. 2008)). Ultimately summary judgment is
warranted only if a reasonable jury could not return a verdict for the nonmovant (Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
Factual and Procedural Background 3
This lawsuit arises out of work Freeman did for Kaplan while she was a law student at
Loyola University Law School ("Loyola") in Chicago. Kaplan is in the business of creating and
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3
LR 56.1 requires parties to submit evidentiary statements and responses to such
statements to highlight which facts are disputed and which facts are agreed upon. This opinion
identifies Kaplan's and Freeman's respective submissions as "K." and "F." followed by
appropriate designations: LR 56.1 statements as "St. ¶ --," responsive statements as "Resp. St.
¶ --" and memoranda as "Mem. --" and "Reply Mem. --." Naturally, given the requirements of
Rule 56, this opinion recounts the facts in the light most favorable to Freeman and resolves
factual disputes in her favor.
-2-
selling study materials and review courses, including prep courses for the bar exams of numerous
states (K. St. ¶ 2). Kaplan also sells study materials and courses aimed at improving law
students' performance in their first-year courses (id.).
Kaplan hires law students to help sell its test-prep products on their law school campuses,
calling those students "student reps" (Freeman Dep. 11:22-12:7). Student reps sell Kaplan
test-prep courses and materials to their peers and do general promotional work on behalf of
Kaplan products (id.).
At all times relevant to this case Kaplan compensated student reps and
hereafter-described "head reps" on a per-task basis rather than on a time basis and paid them in
"credits" rather than currency (K. St. Ex. 4 at 000261 4). Students received credits only for
completing some of the tasks they performed, some of which were enumerated in Kaplan
policies and some of which were decided at the Kaplan regional director's discretion (K. St. ¶ 11;
Freeman Dep. 20:11-21:10). Among the tasks that Kaplan policies set out, student reps and
"head reps" were to receive 5 credits for successfully enrolling a student in a Kaplan bar-exam
prep course, 1 credit for enrolling students in other Kaplan courses, 1 credit for recruiting
another student to work as a student rep and 25 credits for agreeing to serve as "head rep" (K. St.
¶ 11). Those credits could be redeemed only with Kaplan, only in certain increments and only
for certain goods and services -- for example, a student rep could redeem 25 credits for a Kaplan
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4
K. St. Ex. 4 reproduces Kaplan's Student Representative Terms & Conditions, which
are required to be agreed to by every student rep. Further references to that document will take
the form "T&C" followed by Kaplan's six-digit Bates number designated in this lawsuit.
-3-
bar-exam prep course or 10 credits for a third-party gift card (Freeman Decl. ¶¶ 5-7; T&C
000261). 5
Kaplan hired Freeman as a student rep in March 2013 (K. St. ¶ 7). Kaplan's regional
director, who brought Freeman on, assured her that even if she did not sell many bar-review
courses the director would still "take care of" Freeman (Freeman Dep. 20:11-20:19). Because
the director accompanied that assurance with a statement that "all of [her] reps get their courses"
(id. 21:4-21:10), Freeman took the director to mean that she would have the opportunity to earn
at least 25 credits (the cost of a bar course) in a variety of ways apart from sales (id.).
Apparently true to her word, the director offered Freeman the position as head rep in
September 2013, an offer that Freeman accepted in exchange for 25 credits (K. St. ¶ 12).
Freeman stayed in that position until May 2014 (id. ¶ 1).
So in total Freeman worked for Kaplan from March 2013 to May 2014. During that
period of some 14 months she logged (in her estimation) 55.5 hours of work for Kaplan (K. St.
¶ 23) and made just one sale (Freeman Decl. ¶ 9). She did a variety of tasks, recounted in the
next paragraph, during those hours.
Freeman first completed her initial training (id. ¶ 22). After that, one of her primary
responsibilities was to help set up, man and then take down the "Kaplan table" -- Kaplan's
regional director would rent space from Loyola about twice a month to set up a table full of
promotional materials and giveaways to attract student attention and promote sales of Kaplan's
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5
Actually Kaplan's T&C 000261 promised student reps that they could redeem
10 credits for $100 cash, but Freeman submitted a declaration stating that to her knowledge
Kaplan never paid a student rep in cash but only in gift cards (Freeman Decl. ¶ 7). Of course
Freeman has no personal knowledge of how Kaplan conducts its law school sales nationwide, so
the commonsense import of her statement is that student reps whom she knew at Loyola received
only gift cards and not cash.
-4-
law-related courses (K. St. ¶ 24; Freeman Decl. ¶ 10). Freeman also regularly met one-on-one
with students that Kaplan put in touch with her, doing so at specific times and Loyola campus
locations selected by Kaplan (Freeman Dep. 120:20-121:6). At Kaplan's direction Freeman
posted fliers on Loyola bulletin boards, wrote Kaplan-themed messages on Loyola classroom
blackboards and personally made Kaplan-themed announcements in Loyola classes (id.
46:9-53:12). Freeman also spent time answering customer emails (some of which were
forwarded to her by Kaplan, and each of which Kaplan required her to answer within 24 hours)
(F. Resp. St. ¶ 29, T&C 000261). She ran two Kaplan-themed promotional events at a Starbucks
near Loyola (F. Resp. St. ¶ 30). Finally, she did general organizational and clerical tasks for
Kaplan and received ongoing training (Freeman Dep. 30:13-30:21; Freeman Decl. ¶ 17).
For those 55.5 hours of work Freeman earned 47 credits. 6 Freeman redeemed 25 of her
credits for one of Kaplan's bar-review courses and took that course in the summer of 2015
(Freeman Dep. 9:9-9:11). Kaplan wrongly credited Freeman with only 5 of the remaining
22 credits she had earned, so that Freeman was prevented from receiving any compensation for
the remainder of her work -- Kaplan allowed its sales employees to redeem credits only in
25-credit or 10-credit increments (Freeman Decl. ¶¶ 3-6).
Freeman filed this lawsuit as a proposed class and collective action on December 22,
2014. After the parties engaged in discovery, Kaplan filed its current motion, which as stated
earlier is now ripe for decision.
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6
Although the record does not state exactly how Freeman earned those 47 credits,
apparently 25 came from her becoming a head rep and 5 came from her signing up one student
for a Kaplan bar review course, with the remainder earned by her completing undisclosed tasks.
-5-
FLSA "Outside Salesman" Exemption
On its face Freeman's Complaint pleads facts tending to show that Kaplan violated FLSA
Sections 206 and 203(m) -- provisions that call for a minimum wage timely paid in cash or its
equivalent or in certain employer-provided facilities (see 29 C.F.R. § 531.27 7) -- by paying her
only once yearly in "credits" of uncertain value. While Section 206 generally covers any
employee of an employer in interstate commerce, several classes of workers are explicitly
exempted from the reach of Sections 206 and 207. Among those exempted workers are those
"employed . . . in the capacity of outside salesman" (Section 213(a)(1)), and Kaplan's argument
on summary judgment is that Freeman fits squarely within that exemption. 8 Freeman denies that
is so.
There are some general principles that guide the analysis of FLSA claims. Blanchar v.
Standard Ins. Co., 736 F.3d 753, 756 (7th Cir. 2013) (internal quotation marks and citations
omitted) provides a useful starting point:
The evaluation of a FLSA claim requires a thorough, fact-intensive analysis of the
employee's employment duties and responsibilities. The burden is on the
employer to establish that an employee is covered by a FLSA exemption.
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7
All future references to the Secretary of Labor's regulations implementing the FLSA
will simply take the form "Reg. § --," omitting the prefatory "29 C.F.R."
8
Because Kaplan's motion is limited to that issue, its function fits more within the scope
of Rule 16's pretrial matters than within the more conventional Rule 56 motion -- for example,
the litigants have not addressed any of the other material questions likely to be contested in this
action, such as whether Freeman was indeed Kaplan's employee within the meaning of Section
203, whether the "credits" with which she was paid were "negotiable instruments" or "other
facilities" (or neither) within the meaning of Reg. § 531.27 and -- should it turn out that the
credits were "other facilities" -- how to value them under Reg. § 531.3. For the present, then,
this opinion must assume that all those other questions would be resolved in favor of Freeman,
but this Court of course expresses no view as to their ultimate merits.
-6-
And because the FLSA is intended to be a broadly remedial statute, its exemptions are to be
construed narrowly. In practice that means that when there are real ambiguities of fact or law,
the balance tilts in favor of finding the employee non-exempt (see Yi v. Sterling Collision Ctrs.,
Inc., 480 F.3d 505, 508 (7th Cir. 2007)).
As for outside sales employees, Christopher v. SmithKline Beecham Corp., 132 S. Ct.
2156, 2173 (2012) (internal quotation marks and citations omitted) recently spelled out some of
the historical reasons for exempting those workers from the FLSA:
The exemption is premised on the belief that exempt employees typically earned
salaries well above the minimum wage and enjoyed other benefits that set them
apart from the nonexempt workers entitled to overtime pay. It was also thought
that exempt employees performed a kind of work that was difficult to standardize
to any time frame and could not be easily spread to other workers. . . .
That underlying rationale, as will be seen, reinforces this Court's ultimate conclusion that
summary judgment would be inappropriate given the facts of record.
But to turn now to the more concrete particulars, "outside salesman" is defined not by the
FLSA itself but in a web of interlocking Department of Labor regulations. Foremost of those
regulations is Reg. § 541.500(a):
The term "employee employed in the capacity of outside salesman" in section
[213(a)(1)] of the Act shall mean any employee:
(1)
Whose primary duty is:
(i) making sales within the meaning of section [203(k)] of the Act,
or
(ii) obtaining orders or contracts for services or for the use of
facilities for which a consideration will be paid by the client or
customer; and
(2)
Who is customarily and regularly engaged away from the
employer's place or places of business in performing such primary duty. 9
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9
For the most part the analysis in this opinion focuses on Freeman's relationship with
Kaplan as head rep -- not on her single sign-up of a student for a bar review course, credited to
Freeman's own account (but see nn. 8 and 14 and the final paragraph of this opinion).
-7-
If those words were given their ordinary meanings Kaplan's motion could be granted, and
rather easily. That is so because Freeman admits (1) that her entire job was to help sell Kaplan
products (apparently satisfying the "primary duty [of] making sales" requirement (subsection
(a)(1)(i)) and (2) that she did her job almost entirely at Loyola (apparently satisfying the
"customarily and regularly engaged away from the employer's place of places of business"
requirement (subsection (a)(2)).
But as it happens, almost none of the operative terms in Reg. § 541.500(a) has its
ordinary meaning. Rather each of the terms "primary duty [of] making sales," "customarily and
regularly" and "away from the employer's place or places of business" has a definition (or at least
an explanation) set out in Department of Labor regulations -- and most of those regulatory
definitions diverge in significant ways from their dictionary counterparts. At least under the
presumptions that govern Rule 56, that divergence is the difference between granting and
denying Kaplan's motion.
"Primary duty [of] making sales"
To satisfy the first component of the outside sales exemption, Kaplan must show that
Freeman's "primary duty" was "making sales" (Reg. § 541.500(a)(1)(i)). 10 Freeman and Kaplan
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10
Subsection (a)(1)(ii) provides an alternative route for satisfying the "primary duty"
concept, but its "obtaining orders or concepts for services" component clearly parallels the
"making sales" component as explained in the ensuing textual discussion. It is therefore
unnecessary to explore that second alternative here.
-8-
do not dispute that she engaged in "making sales," 11 but they do disagree over whether that was
her "primary duty."
Under Reg. § 541.700(a) "'primary duty' means the principal, main, major or most
important duty that the employee performs." Primary duty is determined by considering the
employee's job as a whole (id.; Reg. § 541.500(b)). That is all straightforward enough, but there
is a special rule that applies when considering whether "making sales" is the employee's primary
duty, and Freeman argues that rule takes her out of the exemption.
That rule is Reg. § 541.503, and it addresses promotion work. In short, only promotion
work that an employee does with the purpose of drumming up business for her own account can
support a finding that an employee has a primary duty of sales. Paragraph (a) of the regulation
makes that clear:
Promotion work is one type of activity often performed by persons who make
sales, which may or may not be exempt outside sales work, depending upon the
circumstances under which it is performed. Promotional work that is actually
performed incidental to and in conjunction with an employee's own outside sales
or solicitations is exempt work. On the other hand, promotional work that is
incidental to sales made, or to be made, by someone else is not exempt outside
sales work.
And giving the example of a company representative who visits chain stores to arrange
merchandise and consult with store managers, "but does not obtain a commitment for additional
purchases," paragraph (c) of the same regulation states that such an employee's work is
non-exempt "[b]ecause the employee in this instance does not consummate the sale nor direct
efforts toward the consummation of a sale." Gregory v. First Title of Am., Inc., 555 F.3d 1300,
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11
Section 203(k) provides that "sale" means -- among other things -- "any sale, exchange,
contract to sell . . . or other disposition." Neither party disputes that signing up one's fellow
students for Kaplan courses and obligating them to pay for those courses fits within that statutory
definition.
-9-
1309 (11th Cir. 2009) (per curiam), echoing guidance from the Department of Labor, has
described promotion work as "paving the way" for sales by other employees.
Freeman asserts in a declaration submitted after her deposition that at least once she
became a head rep her primary duty was general promotion of Kaplan products rather than
making sales for her own account (Freeman Decl. ¶¶ 8-9, 15). She says that as a head rep she no
longer attempted to consummate sales and was not expected to do so (id. ¶ 15). Rather she did
background work that paved the way for student reps to sell (id. ¶ 9). Hence, her lawyers argue,
Freeman does not fit into the outside sales exemption.
Kaplan counters that Freeman's declaration contradicts her deposition testimony and must
therefore be ignored (K. Reply Mem. 5-6). Kaplan points out that during Freeman's deposition
she repeatedly acknowledged that her "goal" was "sales" (id. 5-7). Because Freeman admitted
the purpose of the various tasks she completed was sales, says Kaplan, she cannot now say that
her primary duty was not bringing about sales.
It is certainly true that Freeman cannot manufacture a dispute of fact by submitting a
declaration that contradicts her earlier deposition testimony (Ineichen v. Ameritech, 410 F.3d
956, 963 (7th Cir. 2005)). But the problem with Kaplan's argument is that it ignores the reality
that all promotion work has the goal of sales -- the crucial question, and the dividing line
between exempt and non-exempt promotion work, is whose sales are the goal. As Christopher,
132 S. Ct. at 2170 pointed out:
The promotion-work regulation does not distinguish between promotion work and
sales; rather, it distinguishes between exempt promotion work and nonexempt
promotion work.
Freeman's deposition testimony is fundamentally ambiguous on the question whose sales
she meant to promote. First off, Freeman made statements that the goal of much of her work -- 10 -
such as writing copy for Loyola's daily announcements, meeting with groups of students, tabling,
training and demonstrating bar review material -- was generically "making sales" or "promoting
Kaplan" (Freeman Dep. 42:8-43:15, 47:22-48:6, 49:1-49:22). That, as has just been made plain,
tells us nothing about whether her work was exempt, because it tells us nothing about who she
expected would make (or attempt to make) the sale. Then there are a few statements where
Freeman did admit that, at least as to making certain Facebook posts and responding to customer
questions via text and email, her goal was to close a sale herself (id. 44:21-46:8). 12 And then
there are other moments in Freeman's deposition where she made it clear that her work was to
promote Kaplan generally rather than close sales on her own account, such as when she made
in-class announcements, wrote on chalkboards and posted Kaplan fliers (id. 46:9-47:21,
52:9-53:12). In those latter instances she said that her goal was more general: "just to inform"
the potential customers about Kaplan's products, in one representative instance (id. 53:10-53:12).
Finally and most tellingly, when defense counsel asked Freeman whether she thought her "key
duty as a student rep was to get [her] classmates to enroll," Freeman responded, "I believe it was
one of the primary duties as well as just providing information" (id. 57:24-58:7).
In sum, Freeman's deposition testimony was fundamentally ambiguous on the question
whether she was doing exempt or non-exempt promotional work. Hence Freeman's declaration
is not inconsistent with her deposition -- on the contrary, it makes sense of some of the
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12
Freeman also said that the goal of carrying enrollment forms with her was to make
sales and that the goal of Kaplan's maintenance of a Google document of potential customers
was to provide her with sales targets (Freeman Dep. 50:2-51:14). But it appears from the record
that she never attempted to sign up a student with the enrollment forms Kaplan required her to
carry, and the record is silent as to whether she ever used the Kaplan-maintained customer list. It
is also worth noting that defense counsel's questions and Freeman's responses left it totally
unclear whether she did particular tasks while employed as a student rep or as a head rep.
- 11 -
deposition's ambiguities by clarifying that once she became head rep she stopped doing sales
work for her own account (Freeman Decl. ¶ 15), which of course implies that she had earlier
done some sales work as a student rep. Because Freeman's declaration plainly does not
contradict her deposition testimony, it is admissible on summary judgment.
With the declaration considered appropriately along with the rest of the record, Kaplan's
motion plainly must be denied as to Freeman's time as head rep. Freeman avers in her
declaration that in exchange for agreeing to work as head rep she was "paid" the 25 credits
necessary to enroll in a bar course (compared to the 5 credits she would get for closing a sale),
that she therefore stopped trying to close sales herself and, indeed, that she was not expected to
do so (Freeman Decl. ¶¶ 8-15). 13 She also states that she earned 47 credits in total, but only 5
were for making a single sale (id. ¶¶ 3, 9; Freeman Dep. 20:5-20:9) -- hence the vast majority of
her compensation came from completing non-sales tasks.
Thus, because Freeman obviously spent much of her time as head rep fulfilling various
non-exempt promotional activities rather than doing sales, and because Kaplan's compensation
structure made sales a tiny proportion of Freeman's total compensation, a jury could certainly
conclude that Freeman did not have a primary duty of sales (see Killion v. KeHe Distribs., LLC,
761 F.3d 574, 585 (6th Cir. 2014). That being the case, Kaplan's motion for summary judgment
must be denied as to the period when Freeman worked as a head rep. 14
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13
Kaplan correctly points out that Freeman stated in her deposition that she did mostly
the same work while a head rep (just more of it) that she did while a student rep. But saying that
she did the same work does not mean she had the same goal in doing that work.
14
Importantly, that could very well deep-six Freeman's hope of representing a class or
collective group of all student reps Kaplan has employed for the past three years. That is so
because Freeman's status as head rep with primarily non-exempt duties gives her a defense to the
(continued)
- 12 -
It is a very different story for Freeman's limited time spent as a student rep. For that job
she could earn more compensation by closing sales than by carrying out any other compensable
task (K. St. ¶ 11; Freeman Dep. 20:11-21:10). Freeman did testify that Kaplan's regional director
indicated that Freeman would earn a bar review course whether or not she was successful in
making sales -- but the director honored that promise by moving Freeman to head rep, not by
giving her non-sales duties in her capacity as a student rep. Finally, Freeman's declaration
testimony that she stopped doing sales work once she became head rep necessarily implies that
she did earlier do some sales work as a student rep. In short, nothing in the record could
reasonably support the inference that Freeman's primary duty as a student rep was anything other
than making sales herself. Indeed, that appears to have been the purpose of her employment
during that limited time period.
Away from the "employer's place of business"
But the fact that Freeman had a primary duty of making sales during the portion of the
time when she worked as a student rep does not end the inquiry. To fit Freeman into the outside
sales exemption Kaplan must also show that Freeman was "customarily and regularly engaged
away from [Kaplan's] place or places of business in performing such primary duty" (Reg.
§ 541.500). Kaplan argues that Freeman never worked at one of Kaplan's places of business
because she worked mostly at Loyola and that its law school is not a Kaplan "place of
______________________________
(footnote continued)
exemption that few members of the proposed class or collective group would share. And that in
turn could render her not "similarly situated" to such other employees within the meaning of
Section 216(b). Then again, as this opinion will soon set out, Freeman and other Kaplan
employees may not have been exempt even while serving in roles with a primary duty of
generating sales. This Court therefore reserves ruling on Freeman's motion for conditional
certification and notice (Dkt. 32) and invites Kaplan to address the just-highlighted issue in its
response to that motion.
- 13 -
business" -- but even if it were, says Kaplan, Freeman worked away from it "customarily and
regularly." Freeman counters that "place of business" has a much broader meaning under
Department of Labor regulations than in common parlance, so that in fact Loyola qualifies as one
of Kaplan's places of business under the relevant regulations. And, says Freeman, she worked
away from Loyola only occasionally. For reasons that will shortly be made clear, Freeman has
the better of the argument.
Reg. § 541.502 elaborates on the meaning of "away from the employer's place or places
of business." No Court of Appeals has ever interpreted that regulation, so the parties seek to rely
principally on opinion letters from the Department of Labor's Wage and Hour Division (along
with a smattering of district court cases) in their competing readings of the regulation, which
reads in its entirety:
An outside sales employee must be customarily and regularly engaged "away
from the employer's place or places of business." The outside sales employee is
an employee who makes sales at the customer's place of business or, if selling
door-to-door, at the customer's home. Outside sales does not include sales made
by mail, telephone or the Internet unless such contact is used merely as an adjunct
to personal calls. Thus, any fixed site, whether home or office, used by a
salesperson as a headquarters or for telephonic solicitation of sales is considered
one of the employer's places of business, even though the employer is not in any
formal sense the owner or tenant of the property. However, an outside sales
employee does not lose the exemption by displaying samples in hotel sample
rooms during trips from city to city; these sample rooms should not be considered
as the employer's places of business. Similarly, an outside sales employee does
not lose the exemption by displaying the employer's products at a trade show. If
selling actually occurs, rather than just sales promotion, trade shows of short
duration (i.e., one or two weeks) should not be considered as the employer's place
of business.
About the only real message conveyed by the line of demarcation traced by that
description is that it does not provide a bright-line definition. But fortunately for analytical
- 14 -
purposes, focusing on the relationship between Kaplan's activities and those of an employee such
as Freeman provides a satisfactory answer to the inquiry.
In that respect Loyola was surely a Kaplan place of business within the meaning of that
regulation. Kaplan regularly rented space from Loyola to put up a table and sell its courses and
materials: It certainly did so throughout the 14 months or so of Freeman's employment, far
longer than the "short duration" spoken of by the regulation as to trade shows (where, it should
be noted, employers also rent space to put up tables and sell goods and services). And Kaplan
was not absent from Loyola in between tabling sessions. On the contrary, it maintained several
sales employees (Freeman among them) on the Loyola campus -- people who used Loyola as
their base of operations (Freeman Dep. 58:13-59:2; T&C 000261). Kaplan regularly directed
Freeman to hold one-on-one meetings in particular places on Loyola's property, to make
announcements in Loyola classrooms and to use Loyola's bulletin boards and internal mailing
system to advertise Kaplan products. There is no evidence in the record that Kaplan's
Loyola-based sales force ever traveled to other campuses to sell Kaplan products, rather than
being hired to sell at Loyola and nowhere else.
In summary, there can be no doubt on this record that Loyola fits the description of "any
fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic
solicitation of sales." Hence it was one of Kaplan's places of business "even though," as the
regulation explicitly allows, Kaplan was "not in any formal sense the owner or tenant of the
property."
- 15 -
Kaplan attempts to avert that conclusion by citing to Department of Labor Wage and
Hour Division opinion letters, but none of them is persuasive. 15 Opinion Letter FLSA2008-6NA
involved sales employees who set up shop at a new store every three to six days, while Freeman
remained at -- and sold only at -- Loyola for months on end. Opinion Letters FLSA2007-2 and
FLSA2007-4 dealt with the sale and leasing of real estate, and the question whether "any fixed
site" might include the very properties up for sale or rent posed an unusual scenario that made
the employers' continuing possessory interest in those purported "places of business" a relevant
factor to weigh. Here of course Freeman was selling study courses, not Loyola campus
buildings, so the exception that those letters carved out to Reg. § 541.502's usual rule -- that
"even though the employer is not in any formal sense the owner or tenant of the property," "any
fixed site" can be an employer's "place of business" -- simply does not apply. Loyola fits well
within the broad parameters that the regulation sets for an "employer's place of business." 16
As it happens, that conclusion comports not only with the plain language of the
regulation (as has just been shown) but also with the purpose of the outside sales exemption. As
said earlier, that exemption was premised on the idea that outside sales employees are largely
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15
Persuasion is indeed what is at issue, rather than deference under Auer v. Robbins, 519
U.S. 452, 461 (1997), because all of the cited opinion letters expressly limit themselves to their
own facts. And none of the cited letters is based on facts analogous to those presented by
Kaplan's business model.
16
Equally unpersuasive is Kaplan's assertions that "customer's place of business" means
simply the "location of the customers" (which would include Loyola) and that no "location of the
customers" can also be an "employer's place of business" (K. Mem. 7). That reading sweeps so
broadly that it conflicts with the last sentence of Reg. § 541.502, which holds that long-running
trade shows are to be considered the employer's place of business -- even though, of course, such
shows are not only the "location of the customers" but also occur at places not usually owned or
even controlled by the employer. Contrary to Kaplan's preferred reading of Reg. § 541.502, the
unmistakable thrust of that regulation is that "customer's place of business" is a narrow category
and "employer's place of business" is a broad one.
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self-directed, making it impossible (or at least overly difficult) for employers to track their hours
or spread their work should one or another of them reach an hours limit (Christopher, 132 S. Ct.
at 2173). But here Kaplan undisputedly had its sales employees, including Freeman, all working
at a single physical plant that their supervisor visited regularly (Freeman reported that she
received much direct supervision from that supervisor), and Kaplan had a system for scheduling
student rep and head rep work hours remotely. All of that suggests it would pose no great
challenge for Kaplan to track sales work by the hour rather than by the completed task.
Moreover, the type of selling Freeman described -- in which student reps and head reps
communicated with potential customers in a piecemeal fashion, so that it was often pretty much
a random matter as to who received the commission for a particular sale (Freeman Decl. ¶ 13) -would easily allow for work to be spread.
Taken together, all of those facts make it clear that the usual rationale for finding
particular employees exempt as outside sales employees is simply not operative here. Instead,
consideration of the exemption's purposes in light of the record facts reinforces this Court's
conclusion that Loyola was a "place of business" for Kaplan within the regulatory meaning of
that term.
"Customarily and regularly"
Because Loyola is one of Kaplan's "places of business" for purposes of the outside sales
exemption, Freeman will fit within that exemption only if Kaplan can show that she "customarily
and regularly" (Reg. § 541.500(a)(2)) made sales or solicitations away from Loyola. Reg.
§ 541.701 defines "customarily and regularly":
The phrase "customarily and regularly" means a frequency that must be greater
than occasional but which, of course, may be less than constant. Tasks or work
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performed "customarily and regularly" includes work normally and recurrently
performed every workweek; it does not include isolated or one-time tasks.
Kaplan submits that because Freeman estimated that she spent about 20% of her time
working off-campus (Freeman Decl. ¶ 21), she performed her primary duty of sales away from
Loyola "customarily and regularly" as a matter of law. That portion of Freeman's work hours
might perhaps reflect customary and regular work away from campus if it were in fact performed
customarily and regularly, but here Kaplan has made no showing as to the frequency or
regularity of Freeman's work. On that score it must be remembered that Freeman worked only a
total of 55.5 hours for Kaplan, 20% of which is 11.1 hours. Without any guidance from the
record about how "regularly" Freeman performed her off-campus work, there is just no basis
upon which to conclude that Freeman's (estimated) 11 off-campus hours of work over the course
of more than one academic year occurred "customarily and regularly," rather than being
"occasional," "isolated or one-time tasks." Freeman could have racked up those few hours of
work in the course of more than a year by (for example) running two one-off promotional events
and sending a few emails. Of course, she might instead have run weekly 15-minute sales events.
But the point is that the record says only how much total time Freeman spent working
off-campus. It says precious little about how that time was distributed -- whether it was
customary and regular or occasional and infrequent. Given the record's silence on that central
question, inferences must be drawn in favor of Freeman, so that Kaplan's motion must be denied
for that reason as well.
Conclusion
Freeman has raised an issue of material fact as to whether she had a "primary duty [of]
making sales" while she was employed as a head rep. Furthermore, the record as it stands leaves
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no doubt that Loyola was a "place of business" for Kaplan within the meaning of Reg.
§§ 541.500 and 541.502. Finally, there is a dispute of fact as to whether Freeman "customarily
and regularly" engaged in the "primary duty [of] making sales" away from Loyola. For those
reasons, Kaplan's Dkt. No. 28 motion -- imperfectly characterized as one seeking summary
judgment -- must be and is denied.
In retrospect, this Court is left with major misgivings about having allowed the parties to
cabin that motion as they have, imposing such a major burden of time and effort on this Court
and its excellent law clerk Michael Schorsch to address and resolve only one corner in the wide
panoply of issues posed by this case -- issues that comprise not only such questions as those
referred to briefly in nn. 8 and 14 but, far more importantly, such questions as whether the
pittance of time and effort that Freeman devoted to her brief stint as a student rep makes her a
suitable representative for a class or collective group of Kaplan student reps, or whether creating
a more limited head rep group representation by Freeman would satisfy the other legal
requirements for class or collective representation, or whether -- this list could go on at great
length, but this opinion will not do so lest its listing might mistakenly be regarded as exhaustive.
Lawyers for both sides are ordered to appear for a status hearing at 9:15 a.m. October 2, 2015 to
determine the best way to go forward.
__________________________________________
Milton I. Shadur
Senior United States District Judge
Date: September 25, 2015
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