Carrera et al v. E.M.D. Sales, Inc. et al
Filing
219
MEMORANDUM OPINION. Signed by Chief Judge James K. Bredar on 3/19/2021. (hmls, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
FAUSTINO SANCHEZ CARRERA,
et al.,
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Plaintiffs
v.
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EMD SALES, INC., et al.,
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Defendants
CIVIL NO. JKB-17-3066
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MEMORANDUM OPINION
Plaintiffs Faustino Sanchez Carrera, Magdaleno Gervacio, and Jesus David Muro, current
and former sales representatives at E.M.D. Sales, Inc. (“EMD”), claim that Defendants EMD and
EMD Chief Executive Officer (“CEO”) Elda M. Devarie failed to pay them overtime wages as
required by the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. (the “FLSA” or the “Act”). 1
Plaintiffs seek back wages, liquidated damages, costs and reasonable attorney’s fees, and a
permanent injunction to prevent Defendants from continuing to violate the FLSA. (Second Am.
Compl. at 6–7, ECF No. 169.) Defendants argue that Plaintiffs are subject to the FLSA’s outside
sales exemption, which exempts employees from overtime pay so long as (1) their primary duty is
making sales and (2) they generally work outside of the office in furtherance of those sales. 29
C.F.R. § 541.500(a).
The Court held a bench trial in this matter from March 1 through March 11, 2021. Upon
consideration of all the evidence presented, the Court finds that Defendants are jointly and
1
Plaintiffs initially also named E&R Sales and Marketing Services, Inc. (“E&R”) as a defendant in this case. The
Court granted E&R’s motion for summary judgment (see ECF Nos. 114, 115), and accordingly, only EMD and Ms.
Devarie remain as defendants.
severally liable to Plaintiffs for Defendants’ failure to pay overtime wages. Plaintiffs are entitled
to liquidated damages because Defendants failed to demonstrate good faith or reasonable grounds
for believing that their conduct was in accordance with the FLSA. However, Plaintiffs did not
demonstrate that Defendants’ violation of the Act was willful, and as a result, Plaintiffs’ claim is
subject to the FLSA’s standard two-year statute of limitations. The Court denies Plaintiffs’ request
for a permanent injunction against Defendants. In light of these rulings, the parties are directed to
meet and confer and file a joint submission—to the extent they are able—briefing the Court
regarding (1) damages, (2) pre- and post-judgment interest, and (3) costs and reasonable attorney’s
fees by March 26, 2021.
I.
Key Findings of Fact 2
Founded by Ms. Devarie in 1995 and incorporated in 1997, EMD distributes Latin
American, Caribbean, and Asian food products to chain and independent grocery stores in the
Washington, D.C. metropolitan area. As a direct store delivery vendor, EMD delivers its products
directly to stores and provides supplementary services, including stocking and conditioning
shelves, at those stores. In addition to Ms. Devarie, EMD’s employees include about thirty-five
sales representatives, seven key account managers, Marketing Manager Roberto Devarie, and
Sales Director Freddy Urdaneta. Ms. Devarie also owns E&R Sales and Marketing Services, Inc.,
a separate company that provides EMD with merchandising services after EMD delivers products
to its customers. Mr. Carrera and Mr. Gervacio are current sales representatives at EMD, and Mr.
Muro was a sales representative at EMD until August 2017.
Plaintiffs testified that they regularly work—or worked, in Mr. Muro’s case—around sixty
hours per week as sales representatives. EMD assigns each of its sales representatives a sales route
2
An official transcript of the proceedings at trial is not yet available. Accordingly, in summarizing its findings of
fact, the Court draws from its internal record of the testimony and evidence presented.
2
comprised of both chain and independent stores and a personal digital assistant (“PDA”) device,
which allows them to place orders for EMD products. EMD does not track the hours that sales
representatives work, and based on Defendants’ stipulation to Plaintiffs’ Exhibits 7, 8, and 9,
Defendants apparently do not dispute Plaintiffs’ testimony about their hours. Sales representatives
are not paid an hourly wage. Instead, pursuant to collective bargaining agreements negotiated by
the United Food and Commercial Works Union, Local 400 (the “Union”) and EMD, sales
representatives’ compensation is based entirely on commissions on sales of EMD products. (See
Pl. Exs. 82, 83.)
By all accounts, sales representatives spend most of their time outside of EMD’s main
office servicing stores on their routes, but the parties dispute whether sales representatives’
primary duty is to make sales of EMD products. Plaintiffs testified that sales representatives’
primary responsibility is essentially inventory management, with daily tasks including re-stocking,
replenishing depleted products, removing damaged and expired items from the shelves, and issuing
credits to the serviced stores for removed items. By contrast, Ms. Devarie and other members of
EMD’s management emphasized that the main responsibility of sales representatives is to sell
EMD products.
Being a sales representative, Mr. Urdaneta explained, requires leveraging
relationships with store managers and knowledge about stores to make sales of additional products.
Ms. Devarie and Mr. Urdaneta both framed their testimony in aspirational terms—emphasizing
that the main limitation on sales representatives’ ability to sell is their own initiative. Even so, Ms.
Devarie acknowledged that she does not know how sales representatives allocate their time across
the various stores on their routes.
Sales representatives are subject to minimal oversight by EMD.
One of the few
mechanisms by which EMD provides its sales representatives with regular feedback is through a
3
color-coding system on the PDA devices—which indicates a sales representative’s performance
based on orders placed for EMD products—on a scale from green (high) to red (low). Mr.
Urdaneta testified that Mr. Gervacio and Mr. Carrera are both generally between green and yellow,
and that when Mr. Muro was employed by EMD, he was generally between yellow and red. Sales
representatives may also be subject to suspension for failing to service their stores, according to
the testimony of members of EMD’s management.
A core issue in the parties’ dispute is whether sales representatives can make their own
sales of EMD products at chain stores, which comprise at least half of Plaintiffs’ business, based
on the testimony of Ms. Devarie, Plaintiffs, and other sales representatives. EMD establishes its
business relationships with chain stores at the highest levels of its organization, through meetings
between key account managers or members of EMD’s management and chain store corporate
category buyers. At these meetings, EMD representatives persuade chain stores to buy their
products and negotiate quantity, price, and other terms. These initial meetings are critical for a
couple of reasons, according to the testimony of chain store corporate representatives. First, they
allow vendors to introduce new items to chain stores, which cannot sell items that have not been
entered into the store’s inventory system and received a stock keeping unit (“SKU”) number.
Second, these meetings allow vendors to negotiate product placement in a chain store’s
merchandising plan, which is highly detailed and set by corporate representatives.
The testimony of current and former chain store corporate category buyers and store
managers served by EMD, including Walmart, Safeway, Giant Food, and Shoppers Food,
established that chain store managers are given “planograms,” 3 which are detailed diagrams
indicating where to place items on shelves, and plans for non-planogrammed movable displays.
3
Walmart’s “modulars” are synonymous with “planograms.”
4
Both in policy and practice, store managers are not permitted to deviate from the planogram or
order additional displays, according to Cynthia Volk, a former category buyer at Giant Food, and
Christopher Krawchuk, a former category manager at Safeway. Walmart store manager Jigsa
Eshete and Giant Food store manager Stephen Ramsawaksingh likewise testified that they are not
empowered to grant requests to place products in spaces beyond those in the planogram or requests
for additional movable displays.
Accordingly, the testimony of Mr. Eshete and Mr.
Ramsawaksingh suggests that chain store managers would not be receptive to solicitations by
EMD sales representatives to buy additional products beyond the plan set forth by corporate.
For their part, Defendants contend that there are abundant opportunities for sales
representatives to make their own sales in chain stores. For instance, EMD sales representative
Mayra Palma testified that the goal of a sales representative at a chain store is to make additional
sales beyond what EMD’s management has already negotiated, and EMD sales representative Juan
Pablo Barreno testified that he has been successful in negotiating additional shelf space for EMD
products at Giant Food, Walmart, and Shoppers Food. Likewise, EMD sales representative Maria
de Lourdes explained that she always tries to negotiate for more space at chain stores. Defendants
also rely on the de bene esse deposition testimony of Tanjulan Major, a former buyer at Walmart
for Prep Sauces and Dressings, who testified that although Walmart store managers are not
supposed to make changes to the modular plan, sometimes they do. Ms. Major highlighted the
impracticality of chain store corporate representatives monitoring store managers’ compliance
with modular plans, explaining that she did not have control over 4,700 Walmart stores nationwide.
The Court accredits this testimony as establishing that in some instances, at certain stores, there
may be some divergence between corporate policy and practice such that chain store managers
may not always follow planograms and plans for movable displays.
5
By contrast, EMD’s relationship with independent stores is much less structured and
generally involves fewer levels of the corporate hierarchy. Sales representatives are encouraged
to open new accounts and to increase both the type and quantity of EMD products sold by existing
accounts. In fact, Mr. Muro testified that he recalled adding an independent store as an EMD client
by stopping by that store on his sales route.
However, Mr. Muro testified that, although
independent store managers were not subject to the same ordering restrictions as chain store
managers, he was often unsuccessful at selling to independent stores because they lacked the
storage space to buy in bulk from EMD.
II.
The Fair Labor Standards Act
The primary purpose of Congress in enacting the FLSA was “to protect all covered workers
from substandard wages and oppressive working hours.” Barrentine v. Arkansas-Best Freight
Sys., Inc., 450 U.S. 728, 739 (1981). Pursuant to the Act, employers must “compensate employees
for hours in excess of 40 per week at a rate of 1 ½ times the employees’ regular wages.”
Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 147 (2012) (citing 29 U.S.C § 207(a)).
Several categories of employees, including outside salespersons, are exempt from the
FLSA’s overtime requirements. 29 U.S.C.A. § 213. The rationale underlying the outside sales
exemption is that an outside salesman is unrestricted in the hours he works, and accordingly, is
free to earn as much or as little as his ability and ambition allow. See Jewel Tea Co. v. Williams,
118 F.2d 202, 207–08 (10th Cir. 1941). Further, practically speaking, the outside salesman “is not
subject to the personal supervision of his employer, and his employer has no way of knowing the
number of hours he works per day. To apply hourly standards primarily devised for an employee
on a fixed hourly wage is incompatible with the individual character of the work of an outside
salesman.” Id. at 208.
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The term “outside salesman” is not defined by statute; instead, Congress “delegated
authority to the [Department of Labor (DOL)] to issue regulations” defining the term. Christopher,
567 U.S. at 147. The Supreme Court has identified three regulations that are “directly relevant”
to the outside salesman exemption: the general regulation, the sales regulation, and the promotionwork regulation. Id. at 148. The general regulation states that an outside salesman is an employee:
(1) Whose primary duty is: (i) making sales . . . 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.
29 C.F.R. § 541.500. In other words, “an outside salesman is any employee whose primary duty
is making any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other
disposition.” Christopher, 567 U.S. at 148. The parties in this case dispute both whether Plaintiffs
make sales within the meaning of the FLSA, and if so, whether making sales is Plaintiffs’ primary
duty.
The sales regulation provides that the FLSA’s definition of “sales” “include[s] the transfer
of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible
property.” Id. at 148–49 (quoting 29 C.F.R. § 541.501(b)).
“[T]he promotion-work regulation identifies ‘[p]romotion work’ as ‘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.’” Id. at 149 (quoting 29 C.F.R. §
541.503(a)). “Promotional work that is actually performed incidental to and in conjunction with
an employee’s own outside sales or solicitations is exempt work,” but “promotional work that is
incidental to sales made, or to be made, by someone else is not exempt outside sales work.” 29
C.F.R. § 541.503(a) (emphases added). Relevant to the case at hand, the DOL provides the
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following example of an individual whose work would not qualify as exempt under the outside
salesman exemption:
Another example is a company representative who visits chain stores, arranges the
merchandise on shelves, replenishes stock by replacing old with new merchandise,
sets up displays and consults with the store manager when inventory runs low, but
does not obtain a commitment for additional purchases. The arrangement of
merchandise on the shelves or the replenishing of stock is not exempt work unless
it is incidental to and in conjunction with the employee’s own outside sales.
Because the employee in this instance does not consummate the sale nor direct
efforts toward the consummation of a sale, the work is not exempt outside sales
work.
29 C.F.R. § 541.503(c) (emphasis added). Accordingly, for Plaintiffs’ work of re-arranging,
restocking, and removing products at chain stores to qualify as exempt, it must be incidental to
their work of directly making sales.
The DOL defines a “primary duty” as “the principal, main, major or most important duty
that the employee performs.” 29 C.F.R. § 541.700(a). As the DOL has explained:
Determination of an employee’s primary duty must be based on all the facts in a
particular case, with the major emphasis on the character of the employee’s job as
a whole. Factors to consider when determining the primary duty of an employee
include, but are not limited to, the relative importance of the exempt duties as
compared with other types of duties; the amount of time spent performing exempt
work; the employee’s relative freedom from direct supervision; and the relationship
between the employee’s salary and the wages paid to other employees for the kind
of nonexempt work performed by the employee.
Id. “The amount of time spent performing exempt work can be a useful guide in determining
whether exempt work is the primary duty of an employee.” 29 C.F.R. § 541.700(b). If an
employee spends more than half of his or her time “performing exempt work,” he or she “will
generally satisfy the primary duty requirement.” Id.
The Sixth Circuit has also identified 29 C.F.R. § 541.504, titled “Drivers who sell,” as a
relevant regulation when determining whether food product salespersons are subject to the FLSA’s
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outside sales exemption. Killion v. KeHE Distribs., LLC, 761 F.3d 574, 582 (6th Cir. 2014). This
regulation identifies relevant factors:
[A] comparison of the driver’s duties with those of other employees engaged as
truck drivers and as salespersons; possession of a selling or solicitor’s license when
such license is required by law or ordinances; presence or absence of customary or
contractual arrangements concerning amounts of products to be delivered;
description of the employee’s occupation in collective bargaining agreements; the
employer’s specifications as to qualifications for hiring; sales training; attendance
at sales conferences; method of payment; and proportion of earnings directly
attributable to sales.
29 C.F.R. § 541.504(b). This Court will consider these factors in evaluating whether Plaintiffs
qualify as outside salespersons and, consequently, are exempt from the FLSA’s protection.
III. Analysis
Plaintiffs brought suit against Defendants for failure to pay overtime wages under the
FLSA. (See Second Am. Compl. ¶ 17, ECF No. 169.) To succeed on a FLSA claim, a plaintiff
must (1) establish that he was employed by the defendant, (2) demonstrate that he worked overtime
hours for which he was not properly compensated, and (3) prove the amount and extent of his
overtime work as a matter of just and reasonable inference. Davis v. Food Lion, 792 F.2d 1274,
1276 (4th Cir. 1986) (citing Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946)).
Upon such a showing by Plaintiffs, the burden shifts to Defendants “to come forward with evidence
of the precise amount of work performed or with evidence to negative the reasonableness of the
inference to be drawn from the employee’s evidence.” Anderson, 328 U.S. at 687–88.
Apparently, the parties do not dispute that Plaintiffs established the three elements of a
FLSA claim. The parties agree that all three Plaintiffs have at one time been employed by EMD
as sales representatives and that Defendants do not pay sales representatives overtime wages.
Additionally, the Court finds that Plaintiffs bear their burden of establishing both that they worked
overtime hours without proper compensation as well as the amount and extent of such overtime
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work as a matter of just and reasonable inference. Indeed, at trial Defendants stipulated to
Plaintiffs’ Exhibits 7, 8, and 9, which detail the hours that each Plaintiff worked per week for the
relevant time period. The Court construes Defendants’ stipulation as confirming the accuracy of
Plaintiffs’ representations with respect to how many hours they worked per week. Even to the
extent that Defendants do not stipulate to the accuracy of these figures, however, the Court finds
that Plaintiffs’ evidence regarding the amount and extent of their overtime is accurate because
Defendants submit nothing to rebut Plaintiffs’ evidence.
A. The Outside Sales Exemption
Defendants argue that they are not required to pay Plaintiffs overtime wages because
Plaintiffs constitute outside salespersons and are thus exempt from the Act’s overtime wage
requirement. Defendants bear the burden of demonstrating the applicability of the FLSA’s outside
sales exemption by clear and convincing evidence. See Jones v. Va. Oil Co., 69 F. App’x 633, 636
(4th Cir. 2003). Indeed, in pleading an exemption to the FLSA, “the employer bears not only the
burden of proof, but also the burden on each element of the claimed exemption.” Martin v. Indiana
Michigan Power Co., 381 F.3d 574, 578 (6th Cir. 2004) (internal citation omitted).
In order to determine whether Plaintiffs are outside salespeople for purposes of the FLSA,
the Court considers (1) whether Plaintiffs make sales in their roles as sales representatives, and (2)
whether making sales is Plaintiffs’ primary duty.
The Supreme Court has explained that the Act’s definition of “sales” is broad and
encompasses all “arrangements that are tantamount, in a particular industry, to a paradigmatic sale
of a commodity.”
Christopher, 567 U.S. at 164.
In Christopher v. SmithKline Beecham
Corporation, the Supreme Court determined that pharmaceutical sales representatives constitute
outside salespersons for purposes of the FLSA upon a finding that their primary duty is to
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“[o]btain[] a nonbinding commitment from a physician to prescribe one of respondent’s drugs.”
Id. at 165. Other courts have explained, however, that “[t]he unique regulatory environment of
the pharmaceutical industry makes evident why Christopher’s holding does not readily transfer to
other industries.” See, e.g., Hurt v. Commerce Energy, Inc., 973 F.3d 509, 519 (6th Cir. 2020).
This Court finds Killion v. KeHE Distributors, LLC instructive. 761 F.3d 574 (6th Cir.
2014). In that case, the Sixth Circuit found that the district court erred in determining that the
plaintiffs were outside salespeople as a matter of law, where the plaintiffs were at the bottom of a
four-tiered structure of employees involved in selling the defendant’s products at chain stores. Id.
at 584. The plaintiffs were responsible for determining the quantities of products to order as well
as writing and transmitting orders for subsequent delivery. Id. As in the case at bar, the plaintiffs
in Killion “presented substantial evidence that the [defendant’s] account managers actually control
the volume through ‘plan-o-grams’ and restrictions on reordering,” and that the plaintiffs were
generally not able to order products beyond what had already been arranged by the defendant’s
account managers. Id. The court found that in such circumstances, “[t]he fact that the plaintiffs
hit the order buttons on their electronic devices . . . is not enough to magically transform their jobs
from inventory management to ‘sales.’” Id.; see also Hurt v. Com. Energy, Inc., 973 F.3d 509,
518 (6th Cir. 2020) (quoting Christopher, 567 U.S. at 149) (cautioning that “exempt status should
not depend on technicalities, such as ‘whether it is the sales employee or the customer who types
the order into a computer system and hits the return button’ or whether the order is filled by a
jobber rather than directly by the employer”)).
Further, the Killion court found that, even assuming the plaintiffs made their own sales,
selling was not the plaintiffs’ primary duty because “it appear[ed] that the vast majority of the
plaintiffs’ time [was] spent stocking and cleaning shelves.” Killion, 761 F.3d at 585. Further,
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memoranda produced by the defendant’s management indicated that those plaintiffs’
responsibilities included ordering products; stocking products; maintaining backroom conditions;
removing expired products from the shelves; reconciling invoices; and reviewing products that
went out of stock. Id. The Sixth Circuit found that, “[f]rom this broad range of responsibilities
alone,” a fact-finder could conclude that the plaintiffs’ primary duty was not making sales. Id.
1. Making Sales
Upon consideration of the evidence in this case, the Court finds that, although Defendants
established by clear and convincing evidence that Plaintiffs make sales at independent stores,
Defendants do not carry the same burden with respect to whether Plaintiffs make their own sales
at chain stores. The Court concludes that merely submitting orders on PDA devices to fill
planogrammed space or to stock displays that were already negotiated by EMD’s management and
chain stores’ corporate representatives does not constitute a sale for purposes of the FLSA. On
the other hand, a Plaintiff would make his own sale if he placed an order for EMD products beyond
the scope of such high-level negotiations—either by selling a new type of product or by selling
products outside of the spaces already negotiated by EMD’s management. Defendants concede
that chain store managers are never able to sell new types of products without first clearing them
with their corporate offices and receiving the requisite SKU number. However, Defendants point
to the testimony of other sales representatives, EMD’s management, and Ms. Major to support
their argument that sales representatives regularly sell additional products beyond the planograms
and displays negotiated by EMD’s management at chain stores. This proof is rebutted by the
testimony of other chain store corporate representatives, including Ms. Volk from Giant Food and
Mr. Krawchuk from Safeway, and store managers, such as Mr. Eshete from Walmart, who all
testified that chain stores’ corporate offices afford store managers no leeway to stray from the
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planogram or to set up unsanctioned displays. Based on all this evidence, the Court finds that
Defendants have demonstrated that there is a possibility—but not clear and convincing evidence—
that sales representatives can make their own sales at chain stores.
2. Primary Duty
Although Defendants established that Plaintiffs do make their own sales at independent
stores and might make some of their own sales at chain stores, Defendants have failed to
demonstrate by clear and convincing evidence that Plaintiffs’ primary duty as sales representatives
is making sales at either chain stores or independent stores. By contrast, consideration of all the
evidence presented in this case suggests that sales representatives are tasked primarily with
executing the terms of sales that were previously made by EMD’s management and key account
managers. The Court accredits Plaintiffs’ testimony with demonstrating that sales representatives
are primarily occupied with keeping shelves full, keeping shelves clean, and placing orders
promptly. The fact that sales representatives are subject to suspension for failure to carry out these
duties further illustrates that EMD regards servicing stores as a key responsibility of sales
representatives.
Indeed, EMD’s commission scheme for sales representatives does not
differentiate between orders placed to fill chain store space previously negotiated by EMD’s
management and orders for space beyond what was negotiated by EMD’s management. This
suggests that, although EMD would undoubtedly welcome the efforts of its sales representatives
to sell products beyond the planogrammed spaces in chain stores, such efforts are ancillary to sales
representatives’ primary responsibility: ensuring that EMD receives the full benefit of the bargain
obtained by EMD’s key account managers and management.
Further, Plaintiffs’ stocking and shelf-conditioning efforts do not constitute exempt work
for purposes of the promotion-work regulation. See 29 C.F.R. § 541.503(a). Rather, as the Court
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noted previously, see supra Part III.A.1, these responsibilities appear to be incidental to sales that
were already negotiated and executed by EMD’s key account managers or management.
At independent stores, the Court finds that, although making sales could theoretically be
the primary duty of some sales representatives, Defendants did not demonstrate by clear and
convincing evidence that this is Plaintiffs’ primary duty. In any event, based on Plaintiffs’
testimony, the Court finds that they spend or spent the bulk of their time at chain stores.
Accordingly, even if Defendants had proven by clear and convincing evidence that making sales
is Plaintiffs’ primary duty at independent stores, this would not suffice to establish that Plaintiffs’
overall primary duty as EMD sales representatives is to make sales.
B. Liquidated Damages
The FLSA permits recovery of both unpaid wages and “an additional equal amount as
liquidated damages.” 29 U.S.C. § 216(b). When a plaintiff prevails on a FLSA claim, awarding
liquidated damages is “the norm.” Mayhew v. Wells, 125 F.3d 216, 220 (4th Cir. 1997). A court
may refuse to order liquidated damages only if the defendant meets his burden of demonstrating
“to the satisfaction of the court that the act or omission giving rise to such action was in good faith
and that he had reasonable grounds for believing that his act or omission was not a violation of the
[FLSA].” 29 U.S.C. § 260. Courts “place a ‘plain and substantial burden’ upon the employer” to
make this statutory showing. Mayhew, 125 F.3d at 220 (quoting Brinkley-Obu v. Hughes Training,
Inc., 36 F.3d 336, 357 (4th Cir. 1994)). Determining whether an employer exercised good faith or
had reasonable grounds for his belief that he was not in violation of the FLSA is an objective
inquiry, 29 C.F.R. § 790.22, and “establishing either element is sufficient to satisfy the statute,”
Calderon v. GEICO Gen. Ins. Co., 809 F.3d 111, 132 (4th Cir. 2015).
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In order to demonstrate good faith, an employer may not simply show “ignorance of the
prevailing law or uncertainty about its development.” Lockwood v. Prince George’s Cnty., 58 F.
Supp. 2d 651, 658 (D. Md. 1999), aff’d Lockwood v. Prince George’s Cnty., 217 F.3d 839 (4th
Cir. 2000) (Table). Rather, an employer must “first take active steps to ascertain the dictates of
the FLSA and then move to comply with them.” Id.; see also Garcia v. Frog Island Seafood, Inc.,
644 F. Supp. 2d 696, 712 (E.D.N.C. 2009) (quoting Roy v. Cnty. of Lexington, 141 F.3d 533, 548
(4th Cir. 1998)) (“The good faith defense requires that an employer provide adequate proof that it
did not take an ‘ostrichlike’ approach to the FLSA by ‘simply remain[ing] blissfully ignorant of
FLSA requirements.’”). Courts consider contextual factors that indicate an employer’s objective
good faith, including “the complexity of the issues, the history of the collective bargaining
agreements, and the fact that the [defendant’s] compensation practice has been known to the parties
for many years and the subject of bargaining.” Koelker v. Mayor and City Council of Cumberland,
599 F. Supp. 2d 624, 638 (D. Md. 2009).
The Court finds that Defendants have failed to carry their “substantial burden” of
demonstrating good faith or objectively reasonable grounds. Defendants point to the fact that
Plaintiffs’ commission-based compensation structure was negotiated by the Union, that Ms.
Devarie relied on the advice of two accountants regarding the FLSA, and that she reviewed
material from the DOL to establish that Defendants acted in good faith. Defendants’ failure to
investigate the actual daily tasks of sales representatives, however, is dispositive to finding that
Defendants acted in good faith or had reasonable grounds to believe that they were in compliance
with the FLSA.
The Court determined that Ms. Devarie’s testimony regarding sales
representatives’ duties was aspirational in nature and revealed her lack of knowledge as to what
sales representatives’ daily responsibilities actually entail. Without having a concrete sense of
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Plaintiffs’ daily schedules, Defendants could not have objectively reasonable grounds for believing
that sales representatives are covered by the FLSA’s outside sales exemption. See 29 C.F.R. §
790.22. Accordingly, Plaintiffs are entitled to an award of liquidated damages under 29 U.S.C. §
216(b).
C. Statute of Limitations
The standard statute of limitation for a FLSA claim is two years, but it is extended to three
years for “a cause of action arising out of a willful violation.” 29 U.S.C. § 255(a). To demonstrate
willfulness, Plaintiffs bear the burden of proving that Defendants had actual or constructive notice
“of the existence and general requirements of the FLSA.” Chao v. Self Pride, Inc., 232 F. App’x
280, 287 (4th Cir. 2007) (unpublished opinion). A violation is willful if an employer “either knew
or showed reckless disregard for the matter of whether its conduct was prohibited by the statute.”
McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988).
Mere negligence or
unreasonableness, without evidence of recklessness, does not establish willfulness. Desmond v.
PNGI Charles Town Gaming, L.L.C., 630 F.3d 351, 358 (4th Cir. 2011) (internal citation omitted).
Instead, a party demonstrates willfulness by “choosing to remain ignorant of legal requirements or
by learning of those requirements and disobeying them.” Self Pride, 232 F. App’x at 287.
Although the Court finds that Defendants’ failure to investigate sales representatives’ daily
job responsibilities was unreasonable, see supra Part III.B, Plaintiffs do not demonstrate that such
failure rose to the level of knowledge or reckless disregard such that Defendants’ FLSA violation
was willful. See Desmond, 630 F.3d at 358. The Court reaches this finding after careful
consideration of the full trial record, and especially the testimony of Ms. Devarie, who was
impermissibly but credibly uninformed on the topic of how the FLSA applied to her business. Her
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error was one of neglect, not recklessness or willful misbehavior. As a result, Plaintiffs’ claims
are subject to the FLSA’s standard two-year statute of limitations.
IV. Permanent Injunction
In their Second Amended Complaint, Plaintiffs also sought a permanent injunction barring
Defendants from committing further violations of the FLSA. (Second Am. Compl. at 7.) Plaintiffs
did not raise this issue at the trial, but even if they had, the Act does not provide for “a private right
of action to enjoin wage-and-hour violations and, to the contrary, grants all such authority to the
Department of Labor.” Mich. Corrs. Org. v. Mich. Dep’t of Corrs., 774 F.3d 895, 903 (6th Cir.
2014).
Accordingly, the Court denies Plaintiffs’ request for a permanent injunction against
Defendants.
V.
Damages, Pre- and Post-Judgment Interest, and Costs and Reasonable Attorney’s Fees
In light of these rulings, the parties are directed to meet and confer and file a joint
submission—to the extent they are able—briefing the Court regarding (1) damages, (2) pre- and
post-judgment interest, and (3) costs and reasonable attorney’s fees. The parties’ submission with
respect to damages must include discussion of the time period during which damages should be
awarded, the formula to be applied in calculating Plaintiffs’ damages, and the amount of damages.
Such briefing should reflect the Court’s findings that Defendants are liable for liquidated damages,
see supra Part III.B, and that Plaintiffs’ claims are subject to the FLSA’s standard two-year statute
of limitations, see supra Part III.C. The briefing must be confined to the evidence presented in
Plaintiffs’ Exhibits 7, 8, and 9, to which Defendants stipulated. The parties shall file such joint
submission by March 26, 2021.
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VI. Conclusion
For the foregoing reasons, an Order shall enter finding that Defendants are liable to
Plaintiffs under the Act, Plaintiffs are entitled to an award of liquidated damages, and Plaintiffs’
claim is subject to the FLSA’s standard two-year statute of limitations. The Court denies Plaintiffs’
request for a permanent injunction against Defendants. In light of these rulings, the parties are
directed to meet and confer and file a joint submission—to the extent they are able—briefing the
Court regarding (1) damages, (2) pre- and post-judgment interest, and (3) costs and reasonable
attorney’s fees by March 26, 2021.
DATED this 19th day of March, 2021.
BY THE COURT:
/s/ JAMES K. BREDAR
James K. Bredar
Chief Judge
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