DEPALMA et al v. SCOTTS MIRACLE-GRO
OPINION. Signed by Judge Kevin McNulty on 6/10/2019. (as, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
DOMINICK DEPALMA, etc.,
Civ. No. 13-7740 (KM) (JAD)
THE SCOTTS COMPANY, LLC,
KEVIN MCNULTY, U.S.D.J.:
Now before this Court are motions for summary judgment by both sides
in this FLSA collective action. Defendant The Scotts Company, LLC (“Scotts”)
seeks an order that the administrative exemption from FLSA coverage applies
to the plaintiff sales managers. Plaintiffs seek an order that the executive and
administrative exemptions do not apply to the plaintiff sales managers. For the
reasons explained herein, I will deny both parties’ motions for summary
judgment on the FLSA employee-exemption issues. Scotts also seeks a ruling
that the FWW methodology is appropriate for the calculation of damages. That
portion of its motion, considered as a motion in limine, is granted.
Scotts has proffered a statement of some 1500 material facts, some of
them many paragraphs or even pages long. (DSOF (asserting 776 alleged
material facts); DR, pp. g8—27o (asserting 766 additional, allegedly material
For ease of reference, certain key items from the record will be abbreviated as
Plaintiffs’ Statement of Undisputed Material Facts
Defendant’s Response to PSOF
Defendant’s Statement of Undisputed Material Facts [DE 175]
Plaintiffs’ Response to PSOF
facts)). Plaintiffs have asserted some 60 material facts. (PSOF; DE 187).
submissions pose dozens of disputes of fact, some material and some clearly
not. I provide a broad background and highlight just a few of the material
disputes that stand in the way of summary judgment for either side.
Scotts is a multi-national lawn and garden supply company
headquartered in Marysville, Ohio. (DSOF, PR
40). Scotts sells its products to
retailers throughout the United States. (DSOF, PR
44). Those retailer-
customers range from large home centers, such as Lowe’s, Home Depot, and
Wal-Mart, to independent and local hardware stores, such as Ace Hardware.
(Id.). Scotts’ business development team negotiates and executes the sale of
Scotts products to the various retailers. (Id.).
Scotts’ field sales organization is divided into regions, which are divided
into districts, which are further divided into territories. (PSOF, DR
also DSOF, PR
45—48). Before 2016, there were five regions; in 2016—17 there
were four. (DSOF, PR
46—47). Each district has its own District Market
Manager (“DMM”). (DSOF, PR
the United States. (DSOF, PR
Scotts currently has 27 districts in
Each district is divided into from 8 to 12 territories. (DSOF, PR
Each contains, e.g., Lowe’s and Home Depot stores. (DSOF, PR
number of retail stores in each territory ranges from 7 to 26. (DSOF, PR
In each territory are Sales Managers, a category that includes the
plaintiffs to this action.4 (DSOF, PR
57, 58; see also PSOF, DR
The parties are reminded that “purpose behind [the L. Civ. R. 56.1] statement is
to clarify the issues for the Court, not to increase the burden before it.” Durkin v.
WabashNat, Civ. No. 10-2013, 2013 WL 1314744, at *6 (D.N.J. Mar. 28, 2013)
(Rodriguez, J.) (citing L. Civ. R. 56.1, Comment 2d.). To put it another way, the
function of such a statement is to assist the court in drafting an opinion, not to awe
Prior to 2016, the territories included Wal-Mart stores. (DSOF, PR
An employee’s “job title alone is insufficient to establish the exempt status of an
employee. The exempt or nonexempt status of any particular employee must be
determined on the basis of whether the employee’s salary and duties meet the
requirements of the regulations in this part.” 29 C.F.R. § 541.2. With that in mind, I
parties dispute whether the Sales Managers actually perform managerial
functions within their assigned territories. (See e.g., Id.). Each Sales Manager
reports to a DMM. (DSOF, PR
68). Plaintiffs assert that Sales Managers spend
the majority of their time doing merchandising work, which Scotts disputes.
17). The parties also dispute the amount of discretion granted to
Sales Managers. (See, e.g., PSOF, DR ¶j 23—27 (disputing Sales Managers’
control over product placement in stores); PSOF, DR
21 (disputing whether
Sales Managers choose merchandise or have management authority)).
M&Cs are the employees beneath Sales Managers. (DSOF, PR
M&Cs are responsible for merchandising Scotts’ products in retail stores by
placing them on designated shelves, building and constructing product
displays, and maintaining, organizing, cleaning, and replenishing shelf space.
40). The parties dispute whether the M&Cs’ responsibility for
merchandising is shared with Sales Managers. (Id.).
Plaintiffs characterizes M&Cs as seasonal and part-time employees;
Scotts asserts that some M&Cs work full-time. (PSOF, DR
2). The parties
dispute whether M&Cs log most of their hours during a busy spring season.
3). It remains unclear how many how many M&Cs work for the
company during and after the purported peak season. (PSOF, DR
The parties dispute how much time Sales Managers spent supervising
M&Cs. (DSOF, PR
59). Plaintiffs rely on spreadsheets allegedly containing the
names and hours of every M&C who worked with each Plaintiff (PSOF
Using the spreadsheets and payroll data provided by Scotts (see Lesser Decl.
18—20), Plaintiffs have created a summary chart of the time
Plaintiffs spent supervising two or more M&Cs. (Id.; Summary Chart, Ex. 16,
DE 181-16; see also PSOF, DR
7—9). Plaintiffs’ counsel, Seth R. Lesser, has
provided a declaration in support of the summary chart, explaining it as
note that the commonplace understanding of the title Sales Manager, La, one who
manages salespersons, does not seem to fit.
[The chart] [s]ummarize[esl Plaintiffs’ review of the M&C hour and
Plaintiffs studied the
payroll data produced by the defendant
data across a full six-year period from 2011-2016. Plaintiff
identified the total number of two-week pay periods worked by any
of the Discovery Opt-ins (as well as the pre-notice plaintiffs), plus
all the hours by any co-working M&C recorded during those same
pay periods. Plaintiffs found that, on average across the full six
years, the 25 SMs included in the review directed the work of twoor-more employees only 44% of the time (i.e., in only 44% of the
over 2500 two-week pay periods that the SMs worked did the
M&Cs under their direction collectively log 160 or more hours). As
well, across the six years, no individual SM directed the work of
two-or-more employees more than 65% of the time, and the
majority of SMs directed the work of two-or-more other employees
less than 50% of the time.
20) (referring to Chart, Ex. 16, DE 181-16)).
Scotts takes issue with the Plaintiffs’ use of the summary charts and
Lesser Declaration. (See e.g., PSOF, DR ¶‘ 7—9). In Section II.b.i.1.a, infra, I
conclude that Plaintiffs may rely on summary charts. Nevertheless, the amount
of time Plaintiff Sale Managers spent directing the work of two or more
employees remains a disputed issue of fact. (PSOF, DR ¶8—9).
b. Procedural history
I write for the parties and therefore assume familiarity with the
procedural history, including my (DE 66, 120, 217) and Judge Dickson’s (DE
107) previous opinions.
On December 20, 2013, Plaintiffs Depalma and Leszczynski, through
their counsel, filed a “Class Action Complaint and Demand for a Jury Trial.”
(DE 1). On February 4, 2014, Depalma and Leszczynski filed their “First
Amended Collective Action Complaint and Demand for Jury Trial.” (DE 5).
In April 2014, after the retirement of Judge Cavanaugh, this case was
reassigned to me. (DE 25). Although Magistrate Judge Hammer originally had
the case, it was soon reassigned to Magistrate Judge Dickson. (DE 31).
On March 31, 2016, I granted Plaintiffs’ motion for conditional
certification. (DE 66, 67). About two weeks later, I approved the form of the
parties’ proposed FLSA notice. (DE 70). By July 22, 2016, approximately 100
opt-ins had filed their consent forms. (See DE 72—l06).
On August 4, 2016, Judge Dickson granted Plaintiffs’ equitable tolling
motion and ordered that the statute of limitations for the collective action optins to be tolled from March 20, 2015 to April 11, 2016. (DE 109). Scotts
appealed (DE 110), and I affirmed Judge Dickson’s order. (DE 120, 121).
On November 12, 2018, Plaintiffs filed the motions that are now before
me. Scotts filed a motion for summary judgment as to all plaintiffs (DE 174);
Plaintiffs filed their own motion for summary judgment. (DE 177).
a. Legal standard
Federal Rule of Civil Procedure 56(a) provides that summan’ judgment
should be granted “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248, 106 5. Ct. 2505, 91 L.Ed.2d 202 (1986); Kreschollek v. S. Stevedoring Co.,
223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment,
a court must construe all facts and inferences in the light most favorable to the
nonmoving party. See Boyle v. County of Allegheny Pennsylvania, 139 F.3d
386, 393 (3d Cir. 1998). The moving party bears the burden of establishing
that no genuine issue of material fact remains. See Celotex Coip. v. Cat rett, 477
U.S. 317, 322—23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “[Wjith respect to an
issue on which the nonmoving party bears the burden of proof
on the moving party may be discharged by ‘showing’—that is, pointing out to
the district court—that there is an absence of evidence to support the
nonmoving party’s case.” Celotex, 477 U.S. at 325.
Several of the opt-ins have withdrawn (see DE 140—145), and several others
have been dismissed from the case (see DE 156, 164, 171).
Once the moving party has met that threshold burden, the non-moving
party “must do more than simply show that there is some metaphysical doubt
as to material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475
U.s. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The opposing party
must present actual evidence that creates a genuine issue as to a material fact
for trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (setting forth
types of evidence on which nonmoving party must rely to support its assertion
that genuine issues of material fact exist). “[U]nsupported allegations
pleadings are insufficient to repel summary judgment.” Schoch v. First Fid.
Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990); see also Gleason v. Nonvest
Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) (“A nonmoving party has created
a genuine issue of material fact if it has provided sufficient evidence to allow a
jury to find in its favor at trial.”). If the nonmoving party has failed “to make a
showing sufficient to establish the existence of an element essential to that
party’s case, and on which that party will bear the burden of proof at trial,
there can be ‘no genuine issue of material fact,’ since a complete failure of proof
concerning an essential element of the nonmoving party’s case necessarily
renders all other facts immaterial.” Katz v. Aetna Cas. & Stir. Co., 972 F.2d 53,
55 (3d Cir. 1992) (quoting Celotex, 477 U.S. at 322—23).
In deciding a motion for summary judgment, the courts role is not to
evaluate the evidence and decide the truth of the matter, but to determine
whether there is a genuine issue for trial. Anderson, 477 U.S. at 249, 106 S.
Ct. 2505. Credibility determinations are the province of the fact finder. Big
Apple BMW Thc. a BMWof N. Am., Thc., 974 F.2d 1358, 1363 (3d Cir.1992).
The summary judgment standard, however, does not operate in a
vacuum. “[Ijn ruling on a motion for summary judgment, the judge must view
the evidence presented through the prism of the substantive evidentiaty
burden.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S. Ct. 2505,
2513, 91 L. Ed. 2d 202 (1986). That “evidentiary burden” is discussed in the
When the parties file cross-motions for summary judgment, the
governing standard “does not change.” Clevenger v. First Option Health Plan of
N.J., 208 F. Supp. 2d 463, 468-69 (D.N.J. 2002) (citing Weissman v. US.P.S.,
19 F. Supp. 2d 254 (D.N.J. 1998)). The court must consider the motions
independently, in accordance with the principles outlined above. Goldwell of
N.J., Inc. v. KPSS, Inc., 622 F. Supp. 2d 168, 184 (D.N.J. 2009); Williams v.
Philadelphia Housing Auth., 834 F. Supp. 794, 797 (E.D. Pa. 1993), affd, 27
F.3d 560 (3d Cir. 1994). That one of the cross-motions is denied does not imply
that the other must be granted. For each motion, “the court construes facts
and draws inferences in favor of the party against whom the motion under
consideration is made” but does not “weigh the evidence or make credibility
determinations” because “these tasks are left for the fact-finder.” Pichler v.
UNITE, 542 F.3d 380, 386 (3d Cir. 2008) (internal quotation and citations
I am presented with both sides’ motions for summary judgment on the
issue of whether the plaintiffs to this action (“Sales Managers” or “SMs”) were
exempt employees under the FLSA. Plaintiffs move for summary judgment,
arguing that neither the executive nor administrative exemption applies. (DE
177-1). Defendant moves for summary judgment, arguing that the
administrative exemption applies. (DE 174-1 pp. 14—27). Defendant argues in
the alternative that, even if no exemption applies, Plaintiffs’ damages should be
calculated under a fluctuating-work-week method. (Id. pp. 27—30).
1. FLSA Exemptions
“The FLSA establishes federal minimum-wage, maximum-hour, and
overtime guarantees that cannot be modified by contract.” Davis v. Abington
Mcml Hasp., 765 F.3d 236, 241 (3d Cir. 2014) (quoting Genesis Healthcare
Corp. v. Symczyk, 569 U.S. 66, 69 (2013)). Generally, an employer must pay its
employees at least a minimum hourly wage for work performed and must pay
one and one-half times the employee’s regular wage for hours worked in excess
of forty hours per week. 29 U.S.C.
206, 207. Exempt from the coverage of
FLSA, however, are white-collar salaried employees, meaning “any person
employed in a bona fide executive, administrative, or professional capacity.” 29
213(a)(1). See also 29 C.F.R.
FLSA exemptions are to be given a fair (as opposed to narrow)
interpretation. Encino Motorcars, LLC v. Navarro, 138 5. Ct. 1134, 1142 (2018)
(quoting A. Scalia & B. Garner, Reading Law 363 (2012)). Employers bear the
burden to prove that an employee qualifies for an FLSA exemption. Mazzarella
v. Fast Rig Support, LLC, 823 F.3d 786, 790—91 (3d Cir. 2016); Martin v. Cooper
Elec. Supply Co., 940 F.2d 896, 900 (3d Cir. 199l).
The regulations expand on the distinction between blue collar and white collar
employees for purposes of this exemption:
The section 13(a)(1) exemptions and the regulations in this part do not apply to
manual laborers or other “blue collar” workers who perform work involving
repetitive operations with their hands, physical skill and ener’. Such
nonexempt “blue collar” employees gain the skills and knowledge required for
performance of their routine manual and physical work through
apprenticeships and on-the-job training, not through the prolonged course of
specialized intellectual instruction required for exempt learned professional
employees such as medical doctors, architects and archeologists.
The Third Circuit long held that exemptions to the FLSA are to be “narrowly
construed against the employers seeking to assert them and their application limited
to those establishments plainly and unmistakably within their terms and spirit.”
Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 900 (3d Cir. 1991) (citing Arnold u.
Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960)). See also e.g.,Mazzarella, 823 F.3d at
790-9 1 (“FLSA exemptions must be construed narrowly against the employer, and
Defendants “bear[ ] the burden of proving ‘plainly and unmistakably’ that the drivers
qualify for the MCA exemption.”) (citing Packard u. Pittsburgh Transp. Co., 418 F.3d
246, 250 (3d Cir.2005) ((citing Fdedrich v. U.S. Comput. Sews., 974 F.2d 409, 412 (3d
Cir.1992)) (citing Martin u. Cooper Elec. Supply Co., 940 F.2d 896, 900 (3d Cir. 1991))).
Encino, however, clearly overturns that former narrow-construction approach.
Encino, 138 S. Ct. at 1142; see also id. at 1147 n. 7 (Ginsburg, J., dissenting)
(objecting that the majority had “unsettle[dl more than half a century of our
precedent”). Thus, employers are no longer bound to prove that an exemption is
“plainly and unmistakably” within the statute. See Mosquera v. MTI Retreading Co.,
745 F. App’x 568, 570 (6th Cir. 2018) (stating the employee’s burden, but no longer
including that the exemption must be demonstrated “plainly and unmistakably”); see
1. Executive exemption
Plaintiffs move for summary judgment on the executive exemption,
arguing that Sales Managers did not “customarily and regularly” supervise two
or more employees, as required by 29 C.F.R.
541.100(a)(3). In opposition,
Defendant counters that there is at least an issue of fact as to whether the
Sales Managers are subject to the executive exemption, or in the alternative
that they are subject to the combination exemption.
An employee qualified under the executive exemption is one
(1) Compensated on a salary basis at a rate of not less than $455
(2) Whose primary duty is management of the enterprise in which
the employee is employed or of a customarily recognized
department or subdivision thereof;
(3) Who customarily and regularly directs the work of two or more
other employees; and
(4) Who has the authority to hire or fire other employees or whose
suggestions and recommendations as to the hiring, firing,
advancement, promotion or any other change of status of other
employees are given particular weight.
541.100(a). On these motions, subsection (a)(3) is the primary
focus. Under (a)(3), an employee must “customarily and regularly” direct the
work of two or more employees. “[Customarily and regularly” refers to
supervision that is more than “occasional” but may be less than “constant.” 29
54 1.701. A customary and regular activity “includes work normally
also Danny Flores, et aL u. City of San Gabriel, et aL, No. LACV124884JGBJECGX,
2018 WL 8017788, at .k3 (CD. Cal. Nov. 5, 2018) (considering, on a post-Encino
motion for reconsideration of a FLSA summary judgment ruling made pre-Encino,
that “[t]he narrow construction doctrine was a demanding test, under which employers
asserting exemptions bore the burden of showing that their claimed exemption was
plainly and unmistakably within their terms and spirits”). But see Carr v. Flowers
Foods, Inc., No. CV 15-639 1, 2019 WL 2027299, at *6 (E.D. Pa. May 7, 2019) (Stating,
in a post-Encino exemption case, that “FLSA exemptions must be construed narrowly
against the employer, and Defendants bear the burden of proving plainly and
unmistakably that the drivers qualify for [an] exemption”).
and recurrently performed every workweek; it does not include isolated or one
time tasks.” Id.
a. 29 C.F.R. § 541.100(a)(3)
The thrust of Plaintiffs’ argument against the executive exemption is that
the Sales Managers supervised the M&Cs for an inadequate amount of time to
satisfy 29 C.F.R. § 541.100(a)(3). In support, Plaintiffs cite depositions and the
declaration and summary chart submitted by Plaintiff’s Counsel, Seth R.
Lesser. (DE 177-1 pp. 7—11). The summary chart is purportedly based on data
provided by Defendant in discovery. (DE 196, p. 4, n. 3, p. 6). In particular,
Plaintiffs point to spreadsheets identifying the hours worked by M&Cs who
worked concurrently with the Plaintiffs. (See DE 181-14, l8l-15).
Defendant argues that Plaintiffs’ reliance on their counsel’s declaration
and summary chart is contrary to Federal Rule of Civil Procedure 56(c)(4),
Local Civil Rule 7.2(a), and Federal Rule of Evidence 701(c). (DE 182 pp. 7—10).
Fed. R. Civ. P. 56(c)(4) requires that declaration submitted in relation to a
motion “must be made on personal knowledge, set out facts that would be
admissible in evidence, and show that the affiant or declarant is competent to
testify on the matters stated.” Loc. Civ. R. 7.2(a), too, requires personal
knowledge, and states that any legal arguments or summations included in a
declaration “will be disregarded by the court and may subject the signatory to
the appropriate censure, sanctions or both.” In addition, Fed. R. Evid. 70 1(a)
states that, if a witness is not an expert, opinion testimony must be “rationally
based on the perceptions of the witness.” Fed. R. Evid, 701(c) provides a
distinction between lay and expert testimony: “While expert testimony ‘results
from a process of reasoning which can be mastered only by specialists in the
field,’ 70 1(c) demands that lay testimony be grounded on ‘process[esj of
reasoning familiar in everyday life.” Acosta v. Cent. Laundry, Inc., 273 F. Supp.
3d 553, 557 (E.D. Pa. 2017) (citing Notes to 2000 Amendments).
Because they are voluminous, Exhibits 14 and 15 were provided to the Court
on a flash drive.
Plaintiffs respond that the summary chart is allowed under Fed. R. Evid.
1006 because it summarizes the information contained in the voluminous but
independently admissible Exhibits 14 and 15. At the court’s discretion, see
Hutchins u. United Parcel Serv., Inc., 197 F. Appx 152, 59 (3d Cir. 2006) (citing
Fed. R. Evid. 1006; Pritchard v. Liggett & Myers Tobacco Co., 295 F.2d 292,
300—301 (3d Cir.1961)), a proponent may
use a summary, chart, or calculation to prove the content of
voluminous writings, recordings, or photographs that cannot be
conveniently examined in court. The proponent must make the
originals or duplicates available for examination or copying, or
both, by other parties at a reasonable time and place. And the
court may order the proponent to produce them in court.
Fed. R. Evid. 1006.
Here, I agree with Plaintiffs. It is true that some courts have exercised
their discretion to exclude summary charts under, for example, Loc. Civ. R.
7.2(a), but I am not bound to do so. See Hutchins, 197 F. App’x at 158—59. The
reasons for offering a summary are manifest. Exhibits 14 and 15 contain data
so voluminous that it was impractical even to file it electronically on the
docket. (See DE 181.44, 181-15 (spreadsheets range anywhere from 200 to
174,000 lines long).)
The proponent, counsel for the plaintiffs, has gained personal familiarity
with the underlying data furnished by Scotts; the underlying data would be
admissible in evidence; and the calculations, which involve little more than
arithmetic, are within the ken of a lay person. See Fed. R. Civ. P. 56(c)(4). (See
also Ex. 16, DE 181-16 (reflecting simple percentage calculations of the time
that an opt-in plaintiff managed 2 or more M&Cs)). As required by Fed. R. Evid.
1006, the underlying data are available to—indeed, were produced by—the
defendant. As contemplated by that Rule, the defendant may of course
challenge any perceived inaccuracies. If the summary remains the subject of
disagreement, it might be the subject of conflicting testimony, perhaps even
expert testimony, at trial. The background principle remains that the
underlying data in Exhibits 14 and 15 could be placed in evidence. (I set aside
the question of whether that would be an effective trial tactic.) The indicia of
admissibility, and the fact that the chart summarizes defendant’s own data,
persuade me that I may consider the chart, at least on summary judgment for
the purpose of determining whether there is a triable issue of fact.9
This is Scotts’ own information. Exhibits 14 and 15 are before the Court,
and a defendant cannot defeat summary judgment by stating that its own
documents are too voluminous or complex for the court to consider. For
purposes of this summary judgment motion, I will consider the summary chart.
That is not to say, however, that the chart disposes of the issues. There
are several disputes regarding the underlying data and analysis in the
summary chart. (Compare DE 181
20 (citing Ex. 16, DE 181-16), with
Nickerson Decl., DE 182-1.) Under Evidence Rule 1006, Scotts is entitled to
raise such objections. These disputes in themselves are significant enough to
give rise to issues of material fact that preclude summary judgment.
Defendant argues with some force that the “summary chart” is based on
incomplete data and that its analysis is flawed. First, Defendant’s expert
The essential task on a Rule 56 motion is to determine whether the parties
possess evidence that could be presented to ajury and that would create a triable
issue. Thus there is an analogy to the presentation of relevant hearsay statements in
summary judgment affidavits. On summary judgment, courts may consider such
statements where it appears that there will be a foundation for their admission:
The rule in this circuit is that hearsay statements can be considered on a
motion for summary judgment if they are capable of being admissible at
trial. In ruling on a motion for summary judgment, the court need only
determine if the nonmoving party can produce admissible evidence
regarding a disputed issue of material fact at trial. The proponent need
only ‘explain the admissible form that is anticipated.” Thus, in ruling on
Defendants’ motion for summary judgment, the district court should
have limited its inquiry to determining if the out-of-court statements
Plaintiffs were relying on were admissible at trial.
Fraternal Order of Police, Lodge I u. City of Camden, 842 F.3d 231, 238-39 (3d Cir.
2016) (internal citations omitted) (holding that out-of-court statements that plaintiffs
relied on were admissible at trial when “[p]laintiffs identified the out-of-court
and noted their availability to testify”); see also Fed. R. Civ. P. 56
(advisory committee notes to 2010 edition) (“The burden is on the proponent to show
that the material is admissible as presented or to explain the admissible form that is
disputes some of Mr. Lesser’s calculations. (See DE 182 p. 9 (citing Nickerson
DecI., DE 182-1)). Second, Defendant argues that the summary chart uses
incomplete or improperly formatted data. Specifically, Defendant says (1) the
chart is missing a plaintiff, Mr. Jonathan Bridges; (2) the chart arbitrarily
focuses on a 2-week pay period rather than individual work weeks; and (3) the
chart does not consider data dating from after 2016. (DE 182 p. 10). Plaintiffs
retort that the chart is relevant and that Defendants’ criticisms do not imply
that it cannot be considered. (DE 196 pp. 6—7).
The parties’ dispute over the contents and significance of the summary
chart, directly implicates the key issue of how many hours the Plaintiffs spent
supervising M&Cs. I will therefore deny both sides’ motions for summary
judgment on the issue of the executive exemption.
b. Special Master
Plaintiffs suggest a meritorious alternative to a battle of experts before a
jury. They request that the Court appoint a special master to review the time
records. See Perez v. RadioShack Corp., 386 F. Supp. 2d 979, 993 (N.D. Ill.
2005) (considering the appointment a special master to review time records to
identify affected class members).
I will direct that within seven days, counsel for the parties shall set up a
conference by telephone or in person with Magistrate Judge Dickson. The
object of the conference is to set up the appointment of a special master to
review the time records and to extract information from them concerning the
hours that Sales Managers spent supervising M&Cs in the relevant period. The
parties may propose additional areas of review in which the assistance of a
special master might be of use. In the conference, counsel may suggest
candidates for this appointment and propose procedures, but the Magistrate
Judge will have the authority to make the appointment and decide such
matters as the scope of the special master’s mandate and the allocation of
I will add the following comment. This case has been pending for far too
long. Referral to the Special Master is not an invitation to obstructionism, and I
will consult with the Special Master periodically to ensure that the parties are
striving in good faith to clarify, not obscure, the issues. If this case must be
tried, then so be it; the parties will be expected to render it trial-ready with
dispatch and efficiency.
2. Combination Exemption
In the alternative, Plaintiffs invoke the “combination exemption.”
The applicable regulation, 29 C.F.R.
§ 54l.100(afl2), sets forth the
“primary duty” requirement of the executive exemption. However, even if an
employee does not satisfy the executive exemption’s primary duty requirement,
the employee may qualify for a so-called “combination” exemption. 29 C.F.R.
§ 54 1.708 (“[Am employee whose primary duty involves a combination of
exempt administrative and exempt executive work may qualify for exemption.”).
That means that if an employee satisfies (a)(1), (a)(3) and (a)(4), but not (a)(2),
the employee may still qualify as exempt, if that employee satisfies the
combination primary-duty test. See IntraComm, Inc. v. Bajaj, 492 E.3d 285, 295
(4th Cir. 2007) (holding that
§ 54 1.708 creates an alternative method for
satisfying the primary duty test).
As discussed supra, the applicability of 29 C.F.R.
§ 541. 100(a)(3) remains
in dispute. I therefore will not reach the issue of the combination exemption at
3. Administrative exemption
Plaintiffs and Scotts have both moved for summary judgment on the
administrative exemption from ELSA coverage, which is distinct from the
executive exemption. Issues of fact also preclude summary judgment on the
issue of whether these Sales Managers fall under the administrative exemption.
The administrative exemption applies to an employee:
(1) Compensated on a salary or fee basis at a rate of not less than $455 per
(2) Whose primary duty is the performance of office or non-manual work
directly related to the management or general business operations of the
employer or the employer’s customers; and
(3) Whose primary duty includes the exercise of discretion and independent
judgment with respect to matters of significance.
§ 54 1.200(a).
While the parties’ submissions cover a range of issues,’° I here highlight
a dispute of material fact regarding subsection (a)(2). Section 541.200(a)(2)
requires that an exempt employee’s “primary duty” be “the performance of
office or non-manual work directly related to the management or general
business operations of the employer or the employer’s customers.”
I first look to the regulations for further insight on
§ 541.200(a)(2). In
order for an employee’s duties to be “directly related to the management or
general business operations,” the employee “must perform work directly related
to assisting with the running or servicing of the business, as distinguished, for
example, from working on a manufacturing production line or selling a product
in a retail or service establishment.” 29 C.F.R. 541.201(a).
An employee’s “primary duty” is the principal, main, major or most
important duty that the employee performs.” 29 C.F.R.
§ 54 1.700 (a).
“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.” Id. Factors to consider 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 employees salary and the wages paid
to other employees for the kind of nonexempt work performed by
See, e.g., US 184 pp. 25 28 (arguing that a Sales Manager’s primary duty does
not involve discretion and independent judgment with respect to matters of
significance, as required under § 541.200(a)(3)).
§ 54 1.700 (a). While time spent performing exempt work is a “useful
guide,” it is not the “sole test” of primary duty. 29 C.F.R. § 541.700 (b). Even
so, “employees who spend more than 50 percent of their time performing
exempt work will generally satisfy the primary duty requirement.” Id. On the
other hand, “if other factors support” that an employee meets the primary duty
requirement, then it is not necessary that the employee spends more than 50
percent of her time performing exempt duties. Id. See also Itterly v. Family
Dollar Stores, Inc., 606 F. App’x 643, 646 (3d Cir. 2015) (recognizing “that an
employee need not spend the majority of his time performing managerial tasks
in order to be considered exempt.”). Accordingly, courts apply a qualitative
standard, looking to “the relative importance of the [exempt] duties as
compared with the employee’s nonexempt duties,” and “whether the [exempt]
activities are critical to the successful operation of the enterprise.” Itterly v.
Family Dollar Stores, Inc., 606 F. App5c 643, 646 (3d Cir. 2015).
Defendants assert that the Sales Managers’ primary duty was managing
their territory (see DE 174-1 p. 19; DE 182 p. 19); Plaintiffs respond that their
primary duty was merchandising (DE 177-1 pp. 20—2 1; DE 184 pp. 15—16).
Plaintiffs state that they performed merchandising work a majority of the time,
and cite the testimony of certain plaintiffs that they spent 80%—90% of their
time on merchandising. (PSOF
¶ 17). Defendants dispute these facts and also
argue that they are not material to the Plaintiffs’ primary duties. (DR ¶ 17).”
Plaintiffs’ ¶ 17 briefly cites the depositions of 17 plaintiffs who each estimate
the percentage of their time spent on merchandising. Scotts’ response to this
paragraph—l5 pages long—leads off with an “objection” that Plaintiffs’ counsel
improperly elicited this testimony on cross-examination in an attempt to “undermine”
Scotts’ direct examination. It then quotes the same deponents, highlighting that they
were asked how much of “your” time was spent merchandising. Such answers, Scotts
points out, do not establish that others who did not testify had a similar workload.
Getting to the point, Scotts then cites contrary testimony to the effect that that
merchandising was not the primary duty of SMS: the declarations of Plaintiffs’
supervising DMMs, the prior declarations of some of the Plaintiffs, a string of
purportedly time-intensive, exempt activities that Plaintiffs testified to performing,
Plaintiffs’ annual performance evaluations, the job description of the Sales Manager
role, Plaintiffs’ resumes and Linkedln profiles, and Plaintiffs’ e-mails. (Id.). In addition,
To be sure, time spent on exempt work is not the “sole test” of a primary
activity, but it is surely probative. The primary duty test looks at the character
of the employees’job as a whole. The time spent on a particular activity,
whether exempt or non-exempt, is a useful tool in weighing that activity’s
importance in the balance. I therefore decline to award either side summary
judgment when there is a live factual dispute as to how much time the
Plaintiffs spent merchandising.
Scotts argues that if its motion on the administrative exemption is
denied, the Court should rule that damages should be calculated using the
fluctuating-work-week method (“FWW method”). (DE 174-1. pp. 27—30). In
opposition, Plaintiffs argue that the FWW method is inapplicable to exemption
misclassification cases, and, even if it is applicable, it is inappropriate given the
facts of this case. The damages issues need not be considered unless liability is
established. Still, because the liability case is necessarily structured in relation
to what is recoverable, guidance on damages should be of assistance to the
parties. I therefore treat this portion of Scotts’ motion as being in the nature of
a motion in Umine, and grant it on that limited and provisional basis.
Under the FLSA, employees who have agreed to work at a fixed weekly
salary, but whose hours vary week-to-week, are “assumed to have been paid
for all hours worked at their regular rate of pay, with excess overtime due for
hours worked over forty at one-half the regular rate of pay.” Banford v. Entergy
Nuclear Operations, Inc., 649 F. App’x 89, 90 (2d Cir. 2016). The Supreme
Court first upheld the use of the FWW method, albeit not in a misapplication
case, in Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942),
No problem is presented in assimilating the computation of
overtime for employees under contract for a fixed weekly wage for
regular contract hours which are the actual hours worked, to
Scotts asserts that, even while merchandising products, Plaintiffs are still in charge of
their work. (Id.). This surely suffices to create an issue of fact.
similar computations for employees on hourly rates. Where the
employment contract is for a weekly wage with variable or
fluctuating hours the same method of computation produces the
regular rate for each week. As that rate is on an hourly basis, it is
regular in the statutory sense inasmuch as the rate per hour does
not vary for the entire week, though week by week the regular rate
varies with the number of hours worked. It is true that the longer
the hours the less the rate and the pay per hour. This is not an
argument, however, against this method of determining the regular
rate of employment for the week in question. Apart from the Act if
there is a fixed weekly wage regardless of the length of the
workweek, the longer the hours the less are the earnings per hour.
Missel, 316 U.S. at 580 (internal quotations, footnotes omitted).
In 1968, the Department of Labor enshrined the FWW method in an
interpretive rule, 29 C.F.R.
§ 778.114. Under the rule, payment may be
remitted under the FWW method when: (1) “there is a clear mutual
understanding of the parties that the fixed salary is compensation (apart from
overtime premiums) for the hours worked each workweek, whatever their
number, rather than for working 40 hours or some other fixed weekly work
period”; (2) the salary the employee receives is no less than minimum wage “for
every hour worked in those workweeks in which the number of hours he works
is greatest”; and (3) the employee “receives extra compensation, in addition to
such salary, for all overtime hours worked at a rate not less than one-half his
regular rate of pay.” 29 C.F.R.
Every Circuit that has directly addressed the issue has determined that
the FWW method applies to exemption misclassification cases, some relying on
the implications of Missel, and others relying on
§ 778.114. See e.g., Desmond
v. PNGI Charles Town Gaming, L.L.C., 630 F.3d 351 (4th Cir. 2011) (relying on
MisseO; Umikis-Negro v. Am. Family Prop. Sen’s., 616 F.3d 665 (7th Cir. 2010)
(relying on MisseO; Clements v. Serco, Inc., 530 F.3d 1224 (10th Cir. 2008)
§ 778.114); Valerio v. Putnam Assocs. Inc., 173 F.3d 35,40 (1st Cir.
l99) (relying on § 778.1l4).12
Some courts applying § 778.114 hold that the parties must have had a “clear
mutual understanding” that a salary covers both fluctuating hours and payment of
In Umikis-Negro, the Seventh Circuit distinguished between Missel, on
which it relied, and Section 778.114(a), which it held “does not provide the
authoribr to apply the FWW method in a misclassification case.” 616 F.Sd at
666. While Section 778.114(a) provides a way for an employer to compensate a
nonexempt employee for fluctuating hours, it “looks forward rather than
backward,” id. at 678, and “it is not a remedial measure that specifies how
damages are to be calculated when a court finds that an employer has
breached its statutory obligations.” Id. Moreover, the court held, because the
rule was not issued pursuant to the usual notice and rulemaking procedures,
it is not owed full Chevron deference, although, it is still entitled to a “measure
of respect” from the judiciary. Id. at 675—676. Finally, Section 778.114 requires
that the parties mutually understand that the employee is paid for overtime
work, which is an impossible agreement to reach if the employer believes the
employee to be nonexempt and therefore not subject to overtime. Id. at 681.
Thus, the Seventh Circuit held, instead of Section 778.114(a), the authority to
calculate damages stems from Missel. Id. at 68 1—682. Other courts, however,
have found Section 778.114 applicable. See e.g., ValeHo v. Putnam Assocs. Inc.,
173 F.3d at 40.
What that means in practical terms is this: Under the FWW method, the
employee’s hourly rate for a given week will be calculated by dividing the fixed
weekly salary by the number of hours worked. Umikis-Negro, 616 F.3d at 681
(citing Missel, 316 U.S. at 579—580). That calculated hourly rate is considered
to be the agreed-upon amount for that week, so long as the calculation does
not yield a rate that is lower than the minimum wage. Id. at 680. For hours in
overtime. Thus, if § 778.114 applies, a misclassification case, by its very nature,
cannot involve an employer which understood that employees were paid for overtime.
See Costello v. Home Depot USA, Inc.. 944 F. Supp. 2d 199, 203—05 (D. Conn. 2013).
Case law within the Second Circuit is split on this issue. See Banford v. Entergy
Nuclear Operations, Inc., 649 F. App’x 89, 90 (2d Cir. 2016) (comparing Costello v.
Home Depot, supra (rejecting application of FWW method), with Klein v. Torrey Point
Grp., LLC, 979 F. Supp. 2d 417, 434—39 (S.D.N.Y. 2013) (finding FWW applicable in
misclassification cases based upon Misselfl.
excess of (usually) 40, additional overtime will be paid at one-half of that
calculated hourly rate.’3 A similar calculation would be performed under
Section 778.114. Id.; see also2Y C.F.R.
Following Missel, “employees and employers are free to agree to a
reduced hourly wage in exchange for a fixed weekly salary, provided the fixed
weekly salary covers all hours worked and meets minimum wage
requirements.” Desmond, 630 F.3d 351, 357 (4th Cir. 2011) (citing Missel, 316
U.S. at 580). Setting aside some complications, what Missel and section
778.114 essentially do is put a floor under the resulting wage. There is no fixed
limit on the number of hours to be worked, but the fixed salary cannot result
in a calculated hourly rate that is lower than the hourly minimum wage. It
follows that the additional 50% premium for overtime hours cannot come out
to less than half the hourly minimum wage. If the weekly salary divided by the
number of hours worked comes out to a figure higher than the hourly
Notably, the approach taken by the Court in Missel treats the fixed weekly wage
paid to the employee as compensation at the regular rate for all hours that the
employee works in a week, including overtime hours. The employer will
separately owe the employee a premium for the overtime hours, but because he
has already been compensated at the regular rate for the overtime hours by
means of the fixed wage, the employer will owe him only one-half of the regular
rate for those hours rather than time plus one-half.
Umikis-Negro, 616 F.3d at 675.
Assume, for simplicity, that minimum wage is $10 per hour, and that an
employee has agreed to a weekly salary of $700 for whatever hours are worked.
If the employee worked 35 hours in a particular week, the salary would be $700
and the calculated hourly rate would be 700/35, or $20 per hour.
If the employee worked 50 hours, the calculated hourly rate would be 700/50,
or $14 per hour. The agreed-upon base salary would still be $700 per week. For the 10
hours worked in excess of 40, however, the employee would be entitled to an overtime
premium at a rate of half of $14, i.e., $7 per hour.
If the employee worked 80 hours in a particular week, the calculated hourly
rate would be 700/80, or $8.75—less than my hypothetical minimum wage, and
therefore below the salary floor set by § 778.114(a) (requiring that the salary the
employee receives is no less than minimum wage “for every hour worked in those
workweeks in which the number of hours he works is greatest”).
minimum wage, then both the regular and overtime rate will be
Our Circuit, the Third, has not yet decided the issue. Lacking binding
authority, I am persuaded that the proper approach is that of Umikis-Negro,
616 F.3d at 672—80 and Desmond, 630 F.3d at 356—357. I hold that the Court
may apply the FWW method to calculate damages in an exemption
misclassification case. However, the FWW method applies only if the parties
had a “mutual understanding that the fixed weekly salary was compensation
for all hours worked each workweek and the salary provided compensation at a
rate not less than the minimum wage for every hour worked.” Desmond, 630
F.3d at 354.
Plaintiffs argue that issues of fact preclude summary judgment in Scotts’
favor because they and Scotts did not have the necessary “clear mutual
that the fixed salary is compensation (apart from overtime
premiums) for the hours worked each workweek, whatever their number.” 29
778.114. (The Plaintiffs make their argument based on the language
of Section 778.114, but the argument under Missel would be the same. See
supra.) That requirement flows from the recognition that employees may
bargain away a fixed per-hour rate in return for the security of a fixed weekly
salary, but will not be presumed to have done so. See Desmond, 630 F.3d at
357 (citing MisseO.
Scotts has brought forth evidence that, at least for some Plaintiffs, there
was the necessary “clear mutual understanding.” (See DSOF
that certain Plaintiffs testified that they understood their weekly salary would
compensate them for all hours worked in a week, regardless of how few or how
many)).’4 Plaintiffs respond that when they were hired, Scotts did not tell them
“they would have to work overtime for as many hours as they did.” (Id. (citing
Scotts’ former objection that evidence regarding some plaintiffs does not
necessarily apply to all plaintiffs (see pp. 16—17 & n.11, supra) is not manifest here.
34)). Further, Plaintiffs assert that they routinely complained that
their pay was not fair in relation to the hours worked. (Id. (citing PSDMF
I think the Plaintiffs misidentify the issue. The issue is not whether they
knew in advance the number of hours they would work each week. The
necessary “mutual understanding” or “agreement” concerns whether their
weekly salary would represent their compensation irrespective of the number of
hours worked in any particular week (with additional compensation for
overtime hours)—as opposed to, say, a fixed rate per-hour rate to be multiplied
by the number of hours actually worked. In some instances, Plaintiffs’
responding statement of facts also fails to cite to the record. (See PR
(stating, without citation, that the Plaintiffs understood they were salaried
employees, but “they did not agree or anticipate that the SM position would
routinely require them to work more than 60 hours a week”)).
I therefore rule in limine, subject to proofs at trial establishing liability
and the other prerequisites, that the FWW method is appropriate.
For the reasons set forth above, the motion (DE 177) for summary
judgment of Plaintiffs on FLSA employee-exemption issues is DENIED, and the
motion (DE 174) for summary judgment of Defendant Scotts on FLSA
employee-exemption issues is also DENIED. Scotts’ motion, insofar as it
addresses the FWW methodology for damages, is treated as a motion in limine
and on that limited basis is GRANTED.
An appropriate order follows.
Dated: June 10, 2019
United States District Judge
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