Klein v. Torrey Point Group, LLC
Filing
60
OPINION AND ORDER re: 31 MOTION for Summary Judgment filed by Torrey Point Group, LLC, 42 CROSS MOTION for Partial Summary Judgment Notice of Motion related to Documents 38, 39, 40 and 37 filed by William Klein, 41 MOTION for Discovery Notice of Motion to Compel Production of Documents and Information and for Sanctions related to Documents 36 and 37 filed by William Klein. For the reasons discussed herein: Regarding the primary duties prong of the administrative exemption, Defendant's motion for summary judgment and Plaintiffs motion for partial summary judgment are both DENIED. Regarding the independent judgment prong of the administrative exemption, Defendant's motion for summary judgment is GRANTED and P laintiff's motion for partial summary judgment is DENIED. Defendant's motion for summary judgment on Plaintiff's commission claim is DENIED. Plaintiff's motion for partial summary judgment that he may receive post-termination comm issions for sales booked before his termination is GRANTED. The disposition of this claim offers no conclusion with respect to what duties Plaintiff was obliged to perform to "earn" commissions, nor what commission payments, if any, are act ually owed Plaintiff. Defendant's motion for summary judgment on Plaintiff's bonus claim is DENIED. Defendant's motion for summary judgment on Plaintiff's severance claim under ERISA is GRANTED. Defendant's motion for summar y judgment on Plaintiff's quantum meruit claim is GRANTED. Plaintiff's motion for summary judgment regarding the proper method of calculating overtime damages is DENIED. Plaintiff's motion to compel production is GRANTED IN PART AND D ENIED IN PART, as detailed and limited above. Plaintiff's motion for sanctions is DENIED. Plaintiff's motion for costs and fees associated with his motion to compel is DENIED. Defendant is ORDERED to produce the documents identified above within 30 days of the signature date of this Opinion and Order. The parties should observe the requirements of the Stipulated Protective Order in this case insofar as any documents produced in accordance with this Opinion and Order are subject to suc h protections. The parties are encouraged to confer independently to develop appropriate measures to protect from publication information associated with non-parties to this action. In the event the parties cannot come to agreement regarding appropri ate protective measures, Defendant may submit a letter to the Court proposing such measures as it deems appropriate. The Clerk of Court shall terminate the motions pending at docket entries 31, 41, and 42. (Signed by Judge Katherine Polk Failla on 10/23/2013) (mro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------X
:
WILLIAM KLEIN,
:
:
Plaintiff,
:
v.
:
:
:
TORREY POINT GROUP, LLC,
:
:
Defendant. :
:
---------------------------------------------------- X
12 Civ. 1190 (KPF)
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge:
Plaintiff William Klein brings this employment action alleging that
Defendant Torrey Point Group, his former employer, failed to make required
overtime, severance, commission, and bonus payments to him in violation of
the Fair Labor Standards Act (“FLSA”), the New York Labor Law (“NYLL”), and
various common-law causes of action. Pending before the Court are
Defendant’s motion for summary judgment with respect to all claims, Plaintiff’s
cross-motion for partial summary judgment, and Plaintiff’s motion to compel
production and for sanctions. For the reasons set forth in the remainder of this
Opinion, the Court (i) grants in part and denies in part Defendant’s motion for
summary judgment; (ii) grants in part and denies in part Plaintiff’s motion for
summary judgment; (iii) grants in part and denies in part Plaintiff’s motion to
compel production; and (iv) denies Plaintiff’s motion for sanctions and/or costs
and fees.
FACTUAL BACKGROUND
A.
Plaintiff’s Employment with Defendant
The following facts are undisputed or, with respect to the issues on
which a party has moved for summary judgment, construed in the light most
favorable to the non-movant. 1 Defendant Torrey Point Group, a software and
hardware reseller and consulting firm, hired Plaintiff William Klein as an Inside
Account Manager on February 1, 2011. (Def. 56.1(a) ¶ 1; Pl. 56.1(b) ¶ 1). The
job offer that Plaintiff ultimately accepted was memorialized in an offer letter
(the “Offer Letter”), which incorporated by reference a written job description
that, inter alia, set forth a detailed list of “Primary Responsibilities.” (See
Ditlow Decl. Exh. A).
A separate spreadsheet encapsulated the compensation plan for
Plaintiff’s position. (Compl. Exh. A 4). Plaintiff was compensated with an
annual salary of $55,000, or $4,583.33 per month, supplemented by a bonus
and commissions based “on gross profits on paid revenues … secured by”
1
The facts throughout are drawn from the Complaint (“Compl.”) and its exhibits (“Compl.
Exh.”), Defendant’s Statement of Undisputed Facts in Support of Its Motion for
Summary Judgment (“Def. 56.1(a)”), Plaintiff’s Response to Defendant’s Statement of
Undisputed Facts (“Pl. 56.1(b)”), Plaintiff’s Statement of Undisputed Facts in Support of
His Motion for Partial Summary Judgment (“Pl. 56.1(a)”), Defendant’s Response to
Plaintiff’s Statement of Undisputed Facts (“Def. 56.1(b)”), the Declaration of Lindsey
Ditlow (“Ditlow Decl.”) and its attached exhibits (“Ditlow Decl. Exh.”), the Declaration of
Steve Jackson (“Jackson Decl.”), Plaintiff’s deposition (“Klein Dep.”), the deposition of
Plaintiff’s supervisor during his employment, Justin Young (“Young Dep.”), Defendant’s
Memorandum of Law in Support of Its Motion for Summary Judgment (“Def. Br.”),
Plaintiff’s Memorandum of Law in Opposition to Defendant’s Motion for Summary
Judgment (“Pl. Opp.”), the Affirmation of Robert Rotmil, Esq., in Opposition to
Defendant’s Motion for Summary Judgment (“Rotmil Aff.”), Plaintiff’s Memorandum of
Law in Support of His Motion for Partial Summary Judgment (“Pl. Br.”), Defendant’s
Memorandum of Law in Opposition to Plaintiff’s Motion for Partial Summary Judgment
(“Def. Opp.”), Plaintiff’s Memorandum of Law in Support of his Motion to Compel (“Pl.
Compel Br.”), Defendant’s Memorandum of Law in Opposition to Plaintiff’s Motion to
Compel (“Def. Compel Opp.”), and Plaintiff’s Reply Memorandum of Law in Support of
His Motion to Compel (“Pl. Compel Reply Br.”).
2
Plaintiff. (Def. 56.1(a) ¶¶ 3, 4, 7; Pl. 56.1(b) ¶¶ 3, 4, 7). No provision was made
for the payment of overtime. (Def. 56.1(a) ¶ 18; Pl. 56.1(a) ¶¶ 23, 24).
Plaintiff began his employment on February 7, 2011. (Def. 56.1(a) ¶ 10;
Pl. 56.1(b) ¶ 10). His duties involved supporting the sales efforts of Chris Kolb,
one of Defendant’s Senior Account Managers, and his “Primary
Responsibilities” were enumerated as follows:
•
Provide price quote assistance, product sourcing, OEM [original
equipment manufacturer] communication, customer credit
applications for external sales team members in field
•
Facilitate communication between operations/finance and
external sales team members
•
Track product delivery dates, shipments, engineering needs,
quality performance and communicate these to the customer
and internal business units
•
Manage and maintain pipeline opportunities, CRM [customer
relationship management], sales reports data for all sales team
members
•
Support communication between sales team and our clients
•
Explore new OEM vendor partnerships and assist in the
development of these new product sales strategies
•
Single point of contact for sales team and help troubleshoot
issues in the field as they arise
•
Assist in the development and presentation of training materials
for external sales team members
•
Develop & Maintain communication (both internal and external)
channels
•
Review sales orders, purchase orders, NSP’s and verify all
aspects meet minimum margin requirements while submitting
to finance for approval
3
•
Support the sales team to help plan events, customer visits and
general customer marketing initiatives
•
Sell and maintain accounts on an as needed basis
•
Organize sales and marketing materials to support customer
presentations by sales team
•
Respond to RFP’s [requests for proposals], RFI’s [requests for
information] and general corporate paperwork
•
Run reports of sales team results to goal each week in Sales
Force
(Ditlow Decl. Exh. A).
Plaintiff’s employment was terminated approximately eight months after
it began, on October 5, 2011. (Def. 56.1(a) ¶ 19; Pl. 56.1(b) ¶ 19). Thereafter,
Defendant provided Plaintiff with a separation agreement (the “Separation
Agreement”) that conditioned the payment of two weeks’ severance pay on
Plaintiff’s execution of a general release of all claims against Defendant. (Def.
56.1(a) ¶¶ 20, 22, 23; Pl. 56.1(b) ¶¶ 20, 22, 23). Plaintiff refused to agree to
this release. (Def. 56.1(a) ¶ 21; Pl. 56.1(b) ¶ 21).
B.
The Instant Litigation
Plaintiff brought this action on February 16, 2012, seeking what he
alleges are the overtime, severance, bonus, and commission payments
rightfully owed, as well as pleading a quantum meruit claim. (Dkt. #1).
Defendant moved for summary judgment with respect to all claims on July 18,
2013. (Dkt. #31).
On July 23, 2013, Plaintiff filed a cross-motion for partial summary
judgment with respect to (i) the FLSA administrative exemption, (ii) the proper
4
way to determine the amount of the allegedly owed overtime payments, and
(iii) the propriety of Plaintiff seeking commissions based on customer payments
received after his termination. (Dkt. #42). Plaintiff also filed a separate motion
to compel discovery and for sanctions. (Dkt. #41). Plaintiff then filed his
opposition to Defendant’s motion for summary judgment on August 1, 2013.
(Dkt. #49).
On August 2, 2013, Defendant opposed Plaintiff’s motion to compel
production and for sanctions (Dkt. #54), as well as Plaintiff’s cross-motion for
partial summary judgment (Dkt. #58). Plaintiff then filed a reply supporting
his motion to compel and for sanctions on August 5, 2013. (Dkt. #59).
DISCUSSION
A.
Applicable Law
1.
Summary Judgment Generally
Under Fed. R. Civ. P. 56(a), summary judgment may be granted only if all
the submissions taken together “show[] that there is no genuine issue as to any
material fact and the movant is entitled to judgment as a matter of law.” See
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247-48 (1986). The moving party bears the initial burden of
demonstrating “the absence of a genuine issue of material fact.” Celotex, 477
U.S. at 323. A fact is “material” if it “might affect the outcome of the suit under
the governing law,” and is genuinely in dispute “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Anderson,
477 U.S. at 248; see also Jeffreys v. City of New York, 426 F.3d 549, 553 (2d
5
Cir. 2005) (citing Anderson, 477 U.S. at 248). The movant may discharge this
burden by showing that the nonmoving party has “fail[ed] 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.” Celotex, 477
U.S. at 322; see also Selevan v. N.Y. Thruway Auth., 711 F.3d 253, 256 (2d Cir.
2013) (finding summary judgment appropriate where the non-moving party
fails to “come forth with evidence sufficient to permit a reasonable juror to
return a verdict in his or her favor on an essential element of a claim” (internal
quotation marks omitted)).
If the moving party meets this burden, the nonmoving party must “set
out specific facts showing a genuine issue for trial” using affidavits or
otherwise, and cannot rely on the “mere allegations or denials” contained in the
pleadings. Anderson, 477 U.S. at 248, 250; see also Celotex, 477 U.S. at 32324; Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009). The nonmoving party
“must do more than simply show that there is some metaphysical doubt as to
the material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 586 (1986) (internal quotation marks omitted), and cannot rely on “mere
speculation or conjecture as to the true nature of the facts to overcome a
motion for summary judgment,” Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 12 (2d
Cir. 1986) (quoting Quarles v. General Motors Corp., 758 F.2d 839, 840 (2d Cir.
1985)). Furthermore, “[m]ere conclusory allegations or denials cannot by
themselves create a genuine issue of material fact where none would otherwise
exist.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (quoting Fletcher v.
6
Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995) (internal quotation marks and
citations omitted)).
2.
The FLSA’s Overtime Requirement and the
Administrative Exemption
The FLSA mandates that employers pay time-and-a-half per hour when
employees work more than 40 hours per week. 29 U.S.C. § 207(a). This
requirement is subject to several exemptions, including one for “administrative”
employees. Id. § 213(a)(1). 2 According to Department of Labor (“DOL”)
regulations, an employee who makes more than $455 per week 3 — such as
Plaintiff here — is an administrative employee if two separate requirements are
satisfied. First, the employee’s “primary duty” must consist of “the
performance of office or nonmanual work directly related to management
policies or general business operations of his employer.” Id. § 541.200(a)(2).
Second, the employee must exercise “discretion and independent judgment” in
executing his duties. Id. § 541.2(a)(3).
“Primary duty,” under the DOL regulations, “means the principal, main,
major or most important duty” of the employee, as determined based on factors
such as “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
2
Plaintiff’s pleads both FLSA and NYLL violations, but the NYLL incorporates by
reference the FLSA’s exemptions. See Reiseck v. Universal Commc’ns of Miami, Inc., 591
F.3d 101, 105 (2d Cir. 2010). The following discussion focuses on the FLSA, but should
be taken to apply to Plaintiff’s claims under the NYLL with equal force.
3
29 C.F.R. § 541.200(a)(1).
7
kind of nonexempt work performed by the employee.” 29 C.F.R. § 541.700.
This exemption, as with all FLSA exemptions, is to be construed narrowly.
Schwind v. EW & Associates, Inc., 357 F. Supp. 2d 691, 704 (S.D.N.Y. 2005)
(citing Reich v. New York, 3 F.3d 581, 586-87 (2d Cir. 1993)). The question of
what an employee’s duties are “is one of fact, but the question of whether those
activities” fall into an FLSA exemption is a question of law. Chenensky v. New
York Life Ins. Co., No. 07 Civ. 11504 (WHP), 2010 WL 2710586, at *2 (S.D.N.Y.
June 24, 2010) (citing Icicle Seafoods v. Worthington, 475 U.S. 709, 714
(1986)).
The Secretary of Labor, via interpretive regulations, has provided a
helpful explanation of how to identify duties “directly related to management
policies or general business operations.” They are duties “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). Illustratively,
they include, without limitation, such duties as:
tax; finance; accounting; budgeting; auditing; insurance; quality
control; purchasing; procurement; advertising; marketing;
research; safety and health; personnel management; human
resources; employee benefits; labor relations; public relations;
government relations; computer network; internet and database
administration; legal and regulatory compliance; and similar
activities.
Id. § 541.201(b).
The requirement that administrative employees exercise “discretion and
independent judgment” focuses on “matters of significance” and generally
8
refers to “the comparison and the evaluation of possible courses of conduct,
and acting or making a decision after the various possibilities have been
considered.” 29 C.F.R. § 541.202(a). Identifying factors include, but are not
limited to:
whether the employee has authority to formulate, affect, interpret,
or implement management policies or operating practices; whether
the employee carries out major assignments in conducting the
operations of the business; whether the employee performs work
that affects business operations to a substantial degree, even if the
employee's assignments are related to operation of a particular
segment of the business; whether the employee has authority to
commit the employer in matters that have significant financial
impact; whether the employee has authority to waive or deviate
from established policies and procedures without prior approval;
whether the employee has authority to negotiate and bind the
company on significant matters; whether the employee provides
consultation or expert advice to management; whether the
employee is involved in planning long- or short-term business
objectives; whether the employee investigates and resolves matters
of significance on behalf of management; and whether the
employee represents the company in handling complaints,
arbitrating disputes or resolving grievances.
Id. § 541.202(b). Employees may exercise sufficient independent judgment
“even if their decisions or recommendations are reviewed at a higher level” and
“may consist of recommendations for action rather than the actual taking of
action.” Id. § 541.202(c).
B.
Application
1.
Material Issues of Fact Exist Regarding Whether Plaintiff Was
an Exempt Administrative Employee
Defendant principally moves for summary judgment on the basis that
Plaintiff was an administrative employee and, as such, was exempt from FLSA
overtime requirements. Plaintiff cross-moves for summary judgment on the
9
same issue, arguing that he was not an administrative employee. As explained
below, summary judgment for either party is inappropriate here because of
issues of material fact relating to the nature of Plaintiff’s primary duties.
However, Defendant has demonstrated, as a matter of law, that the work
performed by Plaintiff satisfies the independent judgment prong of the
administrative exemption.
Before turning to the merits of this dispute, the Court must address a
threshold question regarding the admissibility of evidence. Plaintiff submits
that Defendant has failed to provide admissible evidence supporting its claim
that he was exempt from the FLSA’s overtime requirements. (Pl. Opp. 4-7).
However, Plaintiff apparently contests only three elements of Defendant’s
factual statement that are implicated by the administrative exemption
argument. 4 First, though his own deposition testimony identified the process
of developing quotes as “complex” (Def. 56.1(a) ¶ 13), Plaintiff contends that his
judgment was subject to approval and “checks and balances” (Pl. 56.1(b) ¶ 13).
Second, though Plaintiff testified that he managed accounts and worked
independently (Def. 56.1(a) ¶ 14), he contends that he did so subject to the
input of his supervisor (Def. 56.1(b) ¶ 14). Finally, Plaintiff disputes
Defendant’s characterization of his daily work as being “not subject to day-today direct supervision” (Def. 56.1(a) ¶ 15), claiming instead that his regular
4
Plaintiff also contests the admissibility of certain evidence offered by Defendant in
support of its motion for summary judgment regarding Plaintiff’s commission and
bonus claims. Those evidentiary issues are addressed infra in the relevant sections of
this Opinion.
10
electronic and telephonic communications with his supervisors amounted to
direct supervision (Pl. 56.1(b) ¶ 15).
Though Plaintiff’s objections do suggest that the facts Defendant
presents in its 56.1(a) Statement are subject to dispute, Plaintiff has not
attacked the validity of the underlying evidence adduced in support of these
three assertions — viz., Plaintiff’s own deposition testimony. Nor does the
section of Plaintiff’s opposition setting out his argument regarding the
inadmissibility of Defendant’s evidence make any reference to other evidence
relevant to the administrative exemption. (Pl. Opp. 4-10). Accordingly, with
respect to the administrative exemption, there is no valid dispute over the
admissibility of evidence supporting the relevant portion of Defendant’s 56.1
Statement.
a.
Material Issues of Fact Preclude Summary Judgment
Regarding Plaintiff’s Primary Duties
Defendant contends that Plaintiff was ineligible for FLSA-mandated
overtime payments because his primary duty was “directly related to the
servicing” of Defendant’s business and its customers, and as such “was vital to
[Defendant’s] general business operations.” (Def. Br. 8). Plaintiff denies this
contention and, in his cross-motion, insists that his primary duty was to
provide sales support. (Pl. Br. 4). Because issues of material fact remain, the
Court denies both motions with respect to the primary duty prong of the
administrative exemption.
There is no dispute that Plaintiff’s pay exceeds the regulatory minimum
of $455 per week, leaving the Court to determine the nature and legal
11
character of his duties and the scope of his discretion in their exercise. The
border of the administrative exemption is “‘not a clear one’” outside the
manufacturing context, and must be determined in each case based on “what
[a] particular employee’s primary duties actually were.” Kadden v. VisuaLex,
LLC, 910 F. Supp. 2d 523, 540 (S.D.N.Y. 2012) (quoting Davis v. J.P. Morgan
Chase & Co., 587 F.3d 529, 532 (2d Cir. 2009)). As the Third Circuit held in
Martin v. Cooper Elec. Supply Co., 940 F.2d 896, 904-05 (3d Cir. 1991), 5
“servicing” a business as contemplated by the administrative exemption
regulations refers to activities other than those directly related to the core of
the business itself — here, as in Martin, the “production” of sales. Thus, for
example, in Amendola v. Bristol-Myers Squibb Co., 558 F. Supp. 2d 459, 476-77
(S.D.N.Y. 2008), representatives of a pharmaceutical manufacturer who
promoted drugs to physicians were subject to the administrative exemption
because their work — educating physicians about the employer’s products —
was directly related to the employer’s general business operations, while
distinct from the core business of producing the drugs themselves.
There is a material issue of fact precluding summary judgment in favor of
either party with respect to the “primary duty” prong of the administrative
exemption. Defendant insists, and the job description cited above reflects, that
Inside Account Managers performed numerous administrative duties, including
developing order options and price quotes for customers, booking orders and
5
The Second Circuit adopted the reasoning of Martin with respect to the “servicing”
element of the primary duty prong of the administrative exemption in Reiseck, 591 F.3d
at 107.
12
handling post-sale logistics and follow-up customer issues, and developing and
enhancing vendor relationships. (Def. Br. 8; Ditlow Decl. Exh. A). However,
the testimony of Plaintiff’s supervisor during his employment with Defendant,
Justin Young, both supports and undermines Defendant’s characterization of
Plaintiff’s job duties. Young testified, for instance, that Plaintiff’s primary duty
was to support outside salesperson Chris Kolb in making sales. (Young Dep.
28:10-29:9). Young also testified that Plaintiff’s duties encompassed all the
tasks identified in the job description, including developing and enhancing
vendor relationships and promoting marketing events and trade shows. (Young
Dep. 34:3-35:2, 38:12-39:17; Young Decl. ¶¶ 7-8).
Plaintiff maintains that his primary duty was solely to support Kolb’s
sales efforts. (Pl. Br. 8). Plaintiff’s deposition testimony, however, reflects both
sides of the dispute. Plaintiff testified that his duties primarily focused on
“helping [the outside salesperson] off-load aspects of his day so that he could
be available for other sales calls.” (Klein Dep. 38:20-23). Yet Plaintiff also
acknowledged that discharging these duties entailed “interactions with the
vendors, providing quotes that [the outside salesperson] would supply to his
customers and that [he] would supply to our customers.” (Klein Dep. 38:2439:3).
If indeed Plaintiff’s primary duties included tasks related to vendor
relations, customer communications and support, and order logistics, a jury
could find that Plaintiff’s duties were directly related to Defendant’s general
business operations and distinct from its sales activities. See, e.g., Schaefer-
13
LaRose v. Eli Lilly & Co., 663 F. Supp. 2d 674, 690-91 (S.D. Ind. 2009), aff'd,
679 F.3d 560 (7th Cir. 2012). If, in contrast, Plaintiff simply provided
dedicated sales support to a single outside salesperson and did not devote any
significant portion of his time to non-sales activities, a jury could find that he
was involved in “producing” the sales that are the core of Defendant’s business
and not in “servicing” that business in an administrative capacity. See, e.g.,
Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1126 (9th Cir. 2002) (discussing
the difference between “work related to … the business’ marketplace offerings”
and running the business itself). Neither party has demonstrated the absence
of material factual disputes regarding whether Plaintiff’s duties satisfy the
regulatory requirements for the administrative exemption and thus summary
judgment is denied for both parties.
b.
There Is No Material Issue of Fact That Plaintiff
Exercised Discretion and Independent Judgment
Under any account of the facts as presented here, Plaintiff exercised
sufficient discretion and independent judgment in his employment to satisfy
the independent judgment element of the administrative exemption.
Accordingly, the Court grants Defendant’s motion for summary judgment and
denies Plaintiff’s motion for partial summary judgment with respect to the
independent judgment prong.
Courts analyze the scope of judgment exercised by employees under the
factors set forth in 29 U.S.C. § 541.202(b) and listed in Subsection A.2 supra.
The factors are illustrative, but neither exclusive nor inclusive, and courts have
often found that a given employee exercised discretion and independent
14
judgment sufficient to satisfy the requirement even when only a few of the
factors were met. See, e.g., Difilippo v. Barclays Capital, Inc., 552 F. Supp. 2d
417, 424 (S.D.N.Y. 2008) (listing cases).
Defendant asserts that Plaintiff performed extensive analyses of
historical and customer data, created alternative proposals for customers to
consider, and developed complex price quotes requiring significant independent
analysis. (Def. Br. 9). Plaintiff’s opposition devotes a single paragraph to this
issue, relying on the elaborate process Plaintiff was obliged to follow when
developing a sales order to suggest that Plaintiff exercised little discretion in his
duties. (Pl. Opp. 12). Plaintiff further argues that he had no opportunity to
exercise independent judgment, relying on his supervisor’s testimony that
Plaintiff was obliged to seek approval for orders below minimum margin
requirements and that pricing was determined by the outside salesperson
whom Plaintiff supported. (Pl. Br. 9-10).
But as the regulations note, an employee’s decisions need not enjoy “a
complete absence of review” to be classified as discretionary, 29 C.F.R.
§ 541.202(c), and “the fact that [a plaintiff’s] decisions or recommendations
frequently required supervisor approval [do not] render her actions nondiscretionary.” Savage v. UNITE HERE, No. 05 Civ. 10812 (LTS), 2008 WL
1790402, at *10 (S.D.N.Y. Apr. 17, 2008). Nor does the existence of “an
employer’s detailed instructions” necessarily mean that an employee subject
thereto has no discretion in executing those instructions. Amendola v. BristolMyers Squibb Co., 558 F. Supp. 2d 459, 476 (S.D.N.Y. 2008) (collecting cases).
15
On the other hand, key factors illustrating that an employee does possess the
requisite independence to satisfy the administrative exemption include “an
employee’s discretion to set her own schedule and to tailor communications to
a client’s individual needs.” Id. (citing Reich v. John Alden Life Ins. Co., 126
F.3d 1, 14 (1st Cir. 1997)).
Plaintiff testified that he worked from home and determined his own
schedule, including, for example, when and how to eat his daily lunch. (Klein
Dep. 42:5-23). More importantly, Plaintiff acknowledged that he was
responsible for analyzing the particular needs of individual customers, the
history of other sales to those customers, and the options available from
different vendors to generate an array of possible product solutions; that this
required “run[ning] down a lot of information”; and that developing these
sometimes “very complex” quotes required both “independent judgment” and
“independent analysis.” (Klein Dep. 40:13-41:6; 52:19-20; 53:24; 54:2-13).
The fact that Plaintiff’s independence was subject to “checks and balances”
does not, as the regulations plainly indicate, automatically render his
employment duties insufficiently independent for § 541.202 purposes.
In short, Plaintiff’s own testimony makes plain that he exercised
independent judgment in his employment with Defendant. Defendant’s motion
for summary judgment is granted, and Plaintiff’s motion for partial summary
judgment is denied, with respect to the judgment prong of the administrative
exemption.
16
2.
Material Issues of Fact Preclude Summary Judgment for
Defendant on Plaintiff’s Commission Claim, Though Plaintiff Is
Entitled as a Matter of Law to Post-Termination Commissions
Rightfully Earned
a. Material Issues of Fact Remain Regarding What Duties Were
Required to Earn Commissions
Defendant also moves for summary judgment on the basis that Plaintiff
did not earn the commissions he seeks here. As issues of material fact remain,
Defendant’s motion is denied.
Defendant contends that under its “commission plan, a commission is
‘earned’ when the account executive has completed all of the work necessary to
fulfill the customer’s order, has ensured that the customer has been billed
properly, and the customer has paid.” (Def. Br. 2). Defendant presents the
Declaration of Steve Jackson, its Director of Finance (the “Jackson
Declaration”), to support its assertion that the compensation plan prescribed
these procedural requirements to “earn” a commission. (Jackson Decl. ¶ 7).
Plaintiff, in response, contests the admissibility of the Jackson Declaration,
arguing that the Declaration fails to aver that Jackson was working for
Defendant at the time of Plaintiff’s employment; that the Declaration is made
on personal knowledge; or that Jackson has competence to testify on the
matters stated in his Declaration. (Pl. 56.1(b) ¶¶ 5, 9).
“The controlling rule of evidence is Rule 602, which states, in relevant
part, ‘[a] witness may not testify to a matter unless evidence is introduced
sufficient to support a finding that the witness has personal knowledge of the
matter.’” Folio Impressions, Inc. v. Byer California, 937 F.2d 759, 763 (2d Cir.
17
1991) (quoting Fed. R. Evid. 602). Applying Rule 602 here requires
determining “whether a reasonable trier of fact could believe the witness had
personal knowledge.” Id. Though Defendant failed to submit any documentary
evidence of such a requirement in the compensation plan, a reasonable factfinder could conclude that the Defendant’s Director of Finance would possess
personal knowledge regarding the conditions for making commission payments
to its employees. Accordingly, the Jackson Declaration is admissible with
respect to these issues.
That such evidence is admissible, however, does not mean that it carries
the day for summary judgment purposes. Defendant insists that commissions
were only “earned” when the entire process of completing a customer’s order
was fulfilled. Yet the Offer Letter that Defendant drafted and Plaintiff signed
makes no reference to such conditions on payment of commissions. On the
contrary, the commission section of the Offer Letter notes only that
commissions “shall be deemed earned thirty days after receipt of payment by
the customer” and “shall be paid at the next month ending after it has become
earned.” (Compl. Exh. A 1). Such a requirement also does not appear in the
compensation plan attached to and incorporated by reference in the Offer
Letter. (Compl. Exh. A 4). Nor does the job description anywhere indicate that
completion of some subset of the duties it identifies is mandatory before
earning commission payments. (Ditlow Decl. Exh. A). The Offer Letter does,
however, contain a merger clause that precludes reliance on any agreements
other than those memorialized in the Offer Letter itself and the final form of
18
any referenced documents. (Compl. Exh. A 3). Based on the factual record
supplied here, Defendant has failed to demonstrate the absence of a legitimate
factual dispute that commissions were, as a policy, payable only on fulfillment
of specific duties Plaintiff failed to perform. Defendant’s motion for summary
judgment on this issue is denied.
b.
There Are No Material Issues of Fact Regarding Whether
Plaintiff May Seek Post-Termination Commissions He
Rightfully Earned
Plaintiff, in turn, moves for summary judgment that he is entitled to
commissions “earned” after his termination that were based on bookings before
his termination. Defendant does not contest this argument and, as no issue of
material fact remains, Plaintiff’s motion is granted. Granting this element of
Plaintiff’s motion for partial summary judgment does not, however, have any
effect on the underlying factual issue that remains, as discussed in Subsection
B(1)(a) supra: what set of duties Plaintiff was obliged to perform to “earn” his
commission. That question remains for the fact-finder to determine.
Plaintiff contends that he has a legal right to receive commissions that
were “earned,” as defined in the Offer Letter, after his employment was
terminated, and that the alternative would amount to a forfeiture of wages in
violation of New York public policy. (Pl. Br. 19-27). Defendant apparently does
not dispute this legal observation, observing that it has never maintained that
Plaintiff’s claim regarding unpaid commissions was barred due to the timing of
his termination. (Def. Opp. 14-15). The Court will treat this element of
Plaintiff’s motion as unopposed. Consequently, Plaintiff’s motion “may properly
19
be granted only if the facts as to which there is no genuine dispute,” Champion
v. Artuz, 76 F.3d 483, 486 (2d Cir. 1996) (per curiam), show that “the movant is
entitled to judgment as a matter of law,” Fed. R. Civ. P. 56(a).
New York State courts have validated plaintiffs’ claims for posttermination commissions when the employment agreement “was silent or
ambiguous as to whether the employee could obtain post-termination
commissions, the agreement was drafted by the employer, and the doctrine of
contra proferentem dictated that the silence or ambiguity should be construed
against the drafter.” Firtell v. Update, Inc., No. 604290/2006, 2007 WL
2756965, at *2 (N.Y. Sup. Ct. Sept. 20, 2007) . While “not as strong” as when a
contract expressly provides for post-termination commissions, Yudell v. Ann
Israel & Associates, Inc., 669 N.Y.S.2d 580, 581 (1998), an ambiguous contract
can nonetheless allow for post-termination “retrospective commissions,” that
is, for commissions earned after termination but generated by work done by
the employee during his employment, as distinguished from “prospective
commissions for the indefinite future.” Arbeeny v. Kennedy Executive Search,
Inc., 71 A.D.3d 177, 183 (N.Y. App. Div. 2010).
Here, the relevant clause of the Offer Letter — drafted, it bears noting, by
Defendant (Def. 56.1(a) ¶ 2) — provides only that commissions will be based on
“gross profits on paid revenues earned in the territory and secured by
Employee,” and that they “shall be deemed earned thirty days after receipt of
payment by the customer.” (Compl. Exh. A 1). This provision is silent with
respect to whether employees who secured revenues during their employment
20
may receive commissions based on those revenues even after their employment
is terminated. Consonant with the principles of New York law set out above,
Plaintiff thus has a right to all commissions based on revenues he secured
during his employment. Plaintiff’s partial motion for summary judgment is
granted with respect to post-termination commissions based on work booked
during his employment. Again, the Court offers no conclusion regarding what
was required to “earn” commissions, as issues of material fact remain
regarding that underlying issue.
3.
Material Issues of Fact Remain Regarding Defendant’s
Bonus Plan
Defendant seeks summary judgment on Plaintiff’s claim that he is owed a
$10,000 bonus that was triggered when Plaintiff’s sales team secured sales
that generated more than $1.54 million in gross margins. (Def. Br. 14-5; Def.
56.1(a) ¶ 7). Material issues of fact preclude summary judgment here.
Defendant contends that its bonus plan provided that bonuses would
only be paid “after the end of the year,” and only to individuals currently
employed at the time bonuses were paid. (Def. Br. 15). To substantiate its
claim, Defendant again relies on the Declaration of Steve Jackson, its Director
of Finance, regarding the structure of its bonus plan, as well as Plaintiff’s own
deposition testimony that he was informed that his bonus would be paid “after
the end of the year.” (Jackson Decl. ¶¶ 10-11; Klein Dep. 140:10-140:22). As
noted above, Plaintiff contests the admissibility of the Jackson Declaration. (Pl.
56.1(b) ¶¶ 5, 9). A reasonable fact-finder could believe with little strain,
however, that Defendant’s Director of Finance would possess personal
21
knowledge regarding how, when, and to whom Defendant made bonus
payments, and the Declaration is accordingly admissible with respect to these
issues.
Yet again, determination of the evidence’s admissibility is not the end of
the summary judgment inquiry. Neither the Offer Letter signed by Plaintiff at
the beginning of his employment nor its attached compensation plan makes
any provision for when bonuses were to be paid, and neither document
specifies that employment at a certain time was a necessary precondition for
payment. On the contrary, the only condition explicitly indicated in the
materials outlining the conditions of Plaintiff’s employment was the
requirement of generating more than $1.54 million in gross margins. (Compl.
Exh. A 4). And while Plaintiff testified at his deposition that he was told that
bonuses were paid “at the end of the year or after the end of the year,” he noted
that that policy was unwritten and unexplained. (Klein Dep. 140:19-22). Put
simply, there is no evidence suggesting, much less confirming, that Plaintiff
was ever told that bonuses were only payable to individuals employed at a
specific future date. Under New York law, an employer is free to change the
terms of at-will employment (like Plaintiff’s here, see Compl. Exh. A 3)
prospectively, subject to the employee’s right to leave such employment if the
new terms are unacceptable; significantly, however, an employer may not
“retroactively change the terms of the employment agreement he entered into
with that employee.” Dreyfuss v. eTelecare Global Solutions-US, Inc., No. 08
Civ.1115 (RJS), 2010 WL 4058143, at *4 (S.D.N.Y. Sept. 30, 2010) (citing
22
Gebhardt v. Time Warner Entm’t-Advance/Newhouse, 726 N.Y.S.2d 534, 535
(App. Div. 2001)).
Defendant has failed to show the absence of a genuine issue of material
fact that Plaintiff, during his employment, was subject to a bonus plan that
required him to remain employed at a certain time in order to receive a bonus
payment. Defendant’s motion for summary judgment regarding Plaintiff’s
bonus claim is therefore denied.
4.
No Severance Plan Existed and Summary Judgment Must Issue
Against Plaintiff’s ERISA Claim
Defendant moves for summary judgment on Plaintiff’s claim to be owed
severance under ERISA. (Def. Br. 11-12). Plaintiff apparently does not contest
the substance of this element of Defendant’s motion, as his brief makes no
reference to it. Instead, Plaintiff’s counsel submitted an affirmation in
opposition to Defendant’s motion for summary judgment, in which counsel
argued that Defendant’s motion was procedurally barred for failure to request
leave to move for summary judgment on this issue either in Defendant’s March
15, 2013 pre-motion letter or at the pre-motion conference held on June 7,
2013. (Rotmil Aff. ¶ 3). Though Defendant should have complied with the
Court’s Individual Rules and “described the grounds for the proposed motion”
in the required pre-motion submissions, see Individual Rules of Practice in
Civil Cases 3.A, available at http://www.nysd.uscourts.gov/cases/
show.php?db=judge_info&id=799, the Court will not reject an otherwise
meritorious element of a motion that was itself filed in accordance with the
Individual Rules.
23
In the same document, Plaintiff’s counsel offered to withdraw Plaintiff’s
severance claim should the Court decide to address it. (Rotmil Aff. ¶ 5). Given
this unusual posture, the Court will treat this element of Defendant’s motion
as unopposed. See Champion, 76 F.3d at 486.
Plaintiff pled in his Complaint that Defendant maintained a severance
plan, governed by ERISA, under which he was entitled to two weeks’ pay as
severance. (Compl. ¶¶ 30-34). Defendant argues to the contrary that it has
never maintained a severance plan (Jackson Decl. ¶ 14), and that the offer of
severance made in the Separation Agreement was no more than consideration
for Plaintiff’s consent to the Separation Agreement’s terms, including in
particular its general release of claims. (Def. Br. 11-12). 6 Plaintiff objects to
the admissibility of the Jackson Declaration but, as above, a reasonable factfinder could conclude that Defendant’s Director of Finance had personal
knowledge of whether Defendant maintained a severance plan. The Jackson
Declaration is thus admissible with respect to this issue.
Under ERISA, a “participant or beneficiary” in an employee welfare and
benefit plan may bring an action to recover benefits due to him under the
terms of that plan. 29 U.S.C. § 1132(a)(1)(B). Here, however, no plan exists.
The Second Circuit has provided useful, though not exclusive, factors to
determine when employer undertakings constitute a “plan” and thus invoke
ERISA protections: “whether the employer’s undertaking or obligation requires
managerial discretion in its administration, … whether a reasonable employee
6
Plaintiff acknowledges that he failed to sign the Separation Agreement. (Def. 56.1(a)
¶ 21; Pl. 56.1(b) ¶ 21).
24
would perceive an ongoing commitment by the employer to provide benefits, …
[and] whether the employer was required to analyze the circumstances of each
employee’s termination separately in light of certain criteria.” Tischmann v.
ITT/Sheraton Corp., 145 F.3d 561, 566 (2d Cir. 1998). Here, Defendant made
no commitment to ongoing provision of benefits, but only a one-time lump-sum
payment; any employee discharged under the Separation Agreement would
receive a payment or not based only on their consent to the Agreement and on
no other circumstance; and management exercised no discretion whatsoever in
administering payments. The severance payment here was not a benefit plan.
Defendant’s motion for summary judgment on Plaintiff’s ERISA claim is
granted.
5.
Plaintiff’s Quantum Meruit Claim Is Barred By the Existence of
an Express Contract Between the Parties
Defendant moves for summary judgment on Plaintiff’s quantum meruit
claim. (Def. Br. 15-16). Again, Plaintiff does not appear to contest the
substance of this element of Defendant’s motion, as his brief omits reference to
it. Plaintiff’s counsel, as with the severance claim discussed above, argued in
an affirmation that this element of Defendant’s motion was procedurally barred
for failing to seek leave to move for summary judgment on this claim. (Rotmil
Aff. ¶ 3). Once again, the Court concludes it is appropriate to reach this
element of Defendant’s motion for summary judgment. Plaintiff’s counsel also
offered to withdraw Plaintiff’s quantum meruit claim should the Court decide to
address it. (Rotmil Aff. ¶ 5). The Court will again treat this element of
Defendant’s motion as unopposed.
25
In New York, a claim for quantum meruit is a quasi-contract claim. See
Goll v. First Tennessee Capital Mkts., No. 05 Civ. 7890 (HB), 2006 WL 2135801,
at *3 (S.D.N.Y. Aug. 1, 2006). Quantum meruit claims only exist where there is
no express agreement between the parties. “The existence of a valid and
enforceable written contract governing a particular subject matter ordinarily
precludes recovery in quasi contract for events arising out of the same subject
matter.” Valley Juice Ltd., Inc. v. Evian Waters of France, Inc., 87 F.3d 604, 610
(2d Cir. 1996) (quoting Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 521
N.Y.S.2d 653, 656 (1987)). Since the parties contracted in the Offer Letter
regarding the basis for commission payments, Plaintiff’s quantum meruit claim
cannot survive. See DeSantis v. Deutsche Bank Trust Co. Americas, Inc., 501 F.
Supp. 2d 593, 600-01 (S.D.N.Y. 2007) (holding that a quantum meruit “claim
only exists … where there is not an express agreement between the parties”).
Defendant’s motion for summary judgment on Plaintiff’s quantum meruit
claim is granted.
6.
Summary Judgment Is Unavailable Regarding the Appropriate
Method of Calculating Overtime Damages
Plaintiff moves for summary judgment regarding the appropriate method
for calculating the amount of overtime payments owed, in the event liability is
established. (Pet. Br. 11-18). The Court concludes that, though the DOL
regulations codifying the “fluctuating workweek” cannot apply in the context of
a misclassified employee, the proper method for calculating overtime damages
depends on a factual question still at issue here, and so summary judgment is
not appropriate.
26
Preliminarily, Defendant contests the propriety of this element of
Plaintiff’s motion, arguing that the calculation of damages is a “damages
theory,” rather than the “‘claim or defense’” contemplated by Rule 56. (Def.
Opp. 9 (quoting Fed. R. Civ. P. 56(a))). In point of fact, courts regularly
entertain summary judgment practice with respect to the appropriate manner
of calculating damages in the event the eventual fact-finder establishes
liability. See, e.g., Costello v. Home Depot USA, Inc., No. 11 Civ. 953 (JCH),
2013 WL 2097422, at *3-8 (D. Conn. May 13, 2013); Martinez v. Hilton Hotels
Corp., No. 10 Civ. 7688 (JLC), 2013 WL 1087211, at *14-16 (S.D.N.Y. Mar. 15,
2013); Ahle v. Veracity Research Co., 738 F. Supp. 2d 896, 918-19 (D. Minn.
2010); In re Texas EZPawn Fair Labor Standards Act Litig., 633 F. Supp. 2d
395, 399 (W.D. Tex. 2008). The Court will also do so here.
a. Calculation Methodologies and Missel
Plaintiff seeks to establish that the calculation method termed the
fluctuating workweek (“FWW”) is not appropriate in the context of an alleged
misclassification under the FLSA. By way of background, the FWW method
arose from an early Supreme Court case considering the application of the
FLSA’s overtime provisions “to an employee working irregular hours for a fixed
weekly wage.” Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 573 (1942).
There, the Supreme Court held that “pay by the week, to be reduced by some
method of computation to hourly rates” was an appropriate way to execute the
FLSA’s protections, albeit one not contemplated by the statute itself. Id. at
579. In other words, employers may pay covered employees on the basis of set
27
amounts per period though the number of hours worked per period may vary:
comparing the hourly rate between periods would yield irregular rates of pay,
but within the period the rate remained, the Court concluded, “regular in the
statutory sense inasmuch as the rate per hour does not vary for the entire
week.” Id. at 580.
The Missel Court made clear, however, that the resulting rate could not
fall below the minimum hourly wage set by the FLSA, nor could the FWW
method be used to obviate the FLSA’s time-and-a-half overtime requirements.
To pass muster under the FLSA, employment contracts must thus include a
“provision for additional pay in the event the hours worked required minimum
compensation greater than the fixed wage,” id. at 581. That is, a covered
employee must, under federal law, receive at least minimum wage for all
straight-time hours worked each week up to 40, and time-and-a-half for all
overtime hours worked each week in excess of 40.
In Missel, the employee received a single, flat wage in exchange for all the
hours he worked, irrespective of whether he worked significantly more than the
maximum straight-time hours per week under the statute. The question was
how a court, in such a circumstance, should calculate the employee’s effective
regular wage per hour to determine the appropriate overtime premium that
should have been paid. The Supreme Court ruled that, when considering an
employee earning a flat wage for fluctuating work hours, it was appropriate to
determine “the employee's regular rate of pay for a given week … by dividing
the fixed weekly wage by the total number of hours worked in that week.”
28
Urnikis-Negro v. Am. Family Prop. Servs., 616 F.3d 665, 681 (7th Cir. 2010)
(citing Missel, 316 U.S. at 580). If the employee worked overtime hours in that
week, he should receive an overtime bonus amounting to 50% of his effective
regular wage multiplied by the total number of overtime hours. In other words,
if an employee subject to the FLSA’s 40-hour workweek requirement receives a
flat weekly wage of $500 and works in a given week for 50 hours, his effective
wage for that week is $500 / 50 = $10.00 per hour. He is owed a bonus of 50%
of his effective wage for each hour of overtime he worked that week, or 10 *
($10.00 * 0.50) = $50 in total overtime premiums.
The FWW method favors employers significantly more than the
traditional time-and-a-half pay scheme, inasmuch as “the longer the hours[,]
the less the rate and the pay per hour.” Missel, 316 U.S. at 580. In the
example above, traditional time-and-a-half compensation would require the
employer to treat the $500 wage as pay for the standard 40-hour workweek,
meaning that the employee’s effective wage was $500 / 40 = $12.50 per hour.
The employer would then pay the employee at 150% of that wage for each hour
of overtime worked, or 10 * ($12.50 * 1.50) = $187.50 in total overtime
premiums. Under the FWW method, the employee would earn $137.50 less
than he would have earned under the time-and-a-half overtime calculation.
29
b. Post-Missel DOL Regulations
The DOL promulgated regulations that sought to codify the proper way to
perform this alternative method of overtime calculation. 7 O’Brien v. Town of
Agawam, 350 F.3d 279, 287 n.15 (1st Cir. 2003). The relevant regulation
provides:
An employee employed on a salary basis may have hours of work
which fluctuate from week to week and the salary may be paid him
pursuant to an understanding with his employer that he will
receive such fixed amount as straight time pay for whatever hours
he is called upon to work in a workweek, whether few or many.
Where 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,
such a salary arrangement is permitted by the Act if the amount of
the salary is sufficient to provide compensation to the employee at
a rate not less than the applicable minimum wage rate for every
hour worked in those workweeks in which the number of hours he
works is greatest, and if he 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. § 778.114(a). This regulation is carefully drafted to ensure that the
FWW method does not permit employers to manipulate pay scales so as to
escape the FLSA’s overtime requirements. Critically, by its plain terms, the
method applies only when “(1) the parties clearly agree that the fixed salary
constitutes adequate straight-time payment (i.e., compensation ‘apart from
overtime premiums’) for all hours worked and (2) the employee receives extra
compensation of at least half his regular rate of pay, in addition to the fixed
7
Though not eligible for deference under Chevron, U.S.A., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837 (1984), see United States v. Mead, 533 U.S. 218, 230-31 (2001), these
interpretive rules are nonetheless longstanding expressions of the agency’s
understanding and worthy of receiving the deference commanded by their
persuasiveness, see Skidmore v. Swift & Co., 323 U.S. 134 (1994).
30
salary, for overtime hours during the weeks when he works overtime.” Hunter
v. Sprint Corp., 453 F. Supp. 2d 44, 59 (D.D.C. 2006) (emphases in original). In
other words, the DOL regulation may not be invoked “unless the employee
clearly understands that the salary covers whatever hours the job may demand
in a particular workweek” and receives that salary irrespective of his actual
working hours. 29 C.F.R. § 778.114(c).
c. Application of the Floating Workweek Method to
Misclassified Employees
This history reveals two distinct questions. The first is whether the DOL
regulations are appropriately invoked in the context, as putatively here, of an
employee whom his employer “misclassified” as exempt from overtime
requirements and who never received overtime payments. The Court concludes
that the DOL regulation, on its own terms, may not be used to calculate
overtime payments in the context of a misclassified employee. Section 778.114
contains clear legal requirements for its application: the employee must receive
a fixed salary for a given period; his hours must actually fluctuate throughout
that period; the employee and his employer must have a “clear mutual
understanding” that the fixed salary is compensation apart from overtime
premiums for whatever hours he works in that period; and the employee must
also receive extra compensation in the form of overtime premiums, paid during
his employment.
When an employee is misclassified as exempt from overtime
requirements during his employment, neither of the two conclusive conditions
of the regulation can be met. First, for an employee misclassified as exempt
31
from overtime requirements, there cannot have been a clear mutual
understanding that his salary was compensation “apart from overtime
premiums,” as the regulation demands: on the contrary, the understanding
between the parties was based on the erroneous premise that the employee was
not eligible for overtime premiums at all. Second, a misclassified employee did
not, by definition, receive any overtime premiums during his employment. The
regulation explicitly requires that employees receive contemporaneous overtime
payments during their employment. The regulation cannot apply to
misclassified employees. See, e.g., Blotzer v. L-3 Commc'ns Corp., No. 11 Civ.
274 (TUC) (JGZ), 2012 WL 6086931, at *10 (D. Ariz. Dec. 6, 2012); Hasan v.
GPM Investments, LLC, 896 F. Supp. 2d 145, 151 (D. Conn. 2012). 8
The Court acknowledges that, though the Second Circuit has never
commented on the FWW method, several Circuit Courts of Appeals have
reached different conclusions from that reached here. It is respectfully
submitted, however, that they have done so without appreciating the critical
difference between employees contesting the adequacy of past overtime
payments actually distributed pursuant to the FWW method, and employees
8
The DOL released an opinion letter in 2009 concluding that § 778.114 should be used
to determine damages for misclassified employees. Wage & Hour Div., U.S. Dep’t of
Labor, Retroactive payment of overtime and the fluctuating workweek method of
payment, Opinion Letter FLSA 2009-3, 2009 WL 648995 (Jan. 14, 2009). This opinion
letter is only “‘entitled to respect’” insofar as it has the “‘power to persuade.’”
Christensen v. Harris Cnty., 529 U.S. 576, 587 (2000) (quoting Skidmore, 323 U.S. at
140). The conclusion in the 2009 DOL letter is facially at odds with the text of the
regulation it purports to interpret. It also cites for authority two cases, Clements v.
Serco, Inc., 530 F.3d 1224, 1230 (10th Cir. 2008), and Valerio v. Putnam Associates Inc.,
173 F.3d 35, 40 (1st Cir. 1999), each of which appears to have misinterpreted the
underlying regulation. The Court concludes that the DOL opinion letter is not
persuasive and will not defer to its guidance.
32
contesting their past classification as exempt from overtime payments at all. In
Bailey v. Cnty. of Georgetown, 94 F.3d 152 (4th Cir. 1996), for example, the
Fourth Circuit approved the past application of the DOL regulations to
compensate police deputies who had actually received overtime payments. The
deputies contested the propriety of the method because they denied reaching a
“clear mutual understanding” regarding how their overtime payments would be
calculated. The Fourth Circuit rejected this argument, concluding that
because the parties had reached an understanding that employees would
receive a given salary for straight time in addition to overtime payments, a
detailed understanding of how those payments were calculated was not
required. Id. at 155-57. This conclusion comports with the language of the
statute.
Other, subsequent Circuit decisions applying the same reasoning to the
context of misclassified employees appear to have been less faithful to the
statutory text. See, e.g., Clements v. Serco, Inc., 530 F.3d 1224, 1230 (10th Cir.
2008); Valerio v. Putnam Associates Inc., 173 F.3d 35, 40 (1st Cir. 1999); Roy v.
Cnty. of Lexington, S. Carolina, 141 F.3d 533, 547 (4th Cir. 1998). These
decisions all rely on Bailey to conclude that the “understanding” required by
the regulation can be satisfied by an agreement that made no provision for
overtime payments at all. But that was not Bailey’s conclusion, nor does the
regulation’s plain language permit such an outcome. Careful attention to the
context — here, a misclassified employee, as distinguished from an employee
who actually received contemporaneous overtime payments — shows that the
33
DOL regulations can only be invoked prospectively, not retrospectively: an
employee who believed, based on his employer’s erroneous misclassification,
that he was not entitled to overtime cannot have reached an understanding
regarding what overtime payments he was owed, nor did he actually receive
contemporary overtime payments during his employment. The DOL
regulations cannot apply in this context.
This conclusion does not, however, answer the second question: whether
damages for overtime payments in the case of a misclassified employee should
be determined based on the FLSA time-and-a-half provision, or based on the
FWW calculation method originally set out in Missel (which the DOL
regulations sought to codify). After all, overtime damages must be calculated
somehow, and that calculation — regardless of whether the underlying
employment agreement violated the FLSA by failing to provide overtime for a
covered employee — must begin by determining the employee’s regular rate of
pay. The choice is between two assumptions: either the employee agreed to be
paid a lump sum per week for 40 hours of work and no more, or the employee
agreed to be paid a lump sum per week, no matter how many hours he worked.
If the former, the effective wage would be the flat wage divided by 40 hours,
and the employee would be owed 150% of that wage for each hour of overtime;
if the latter, the effective wage would be the flat wage divided by the total hours
worked, and the employee would be owed a 50% premium of that wage for each
hour of overtime.
34
The Court concludes that, when an employee has been misclassified as
exempt from overtime protections and the parties have mutually agreed that a
flat weekly wage would compensate the employee for all his hours, no matter
their number, Missel provides the correct method to calculate overtime
damages: the effective wage should be calculated by dividing the flat wage by
the total hours worked. The Seventh Circuit’s analysis Urnikis-Negro v. Am.
Family Prop. Servs., 616 F.3d 665 (7th Cir. 2010), is instructive. In that
decision, the Seventh Circuit also concluded that the DOL regulations could
not apply in the context of a misclassified employee. Id. at 678-79 (concluding
that the rule’s requirement of “contemporaneous receipt of a premium apart
from … fixed wages” is an essential precondition for application of the
regulations). Confronting the proper way to calculate damages, the Seventh
Circuit observed that applying the time-and-a-half method of calculation
implicitly requires assuming that the employee “received no pay at all for his
overtime (i.e., neither straight-time pay nor an overtime premium).” Id. at 679.
But the nature of the agreement between an employee and his employer is a
factual matter for the fact-finder to determine. Either the employee entered
into such an agreement, assuming that he would not work more than 40 hours
per week or accepting that such work hours would be uncompensated; or the
employee agreed that his salary was compensation for all hours worked, no
matter how many. Only a factual determination resolving that issue can
establish the proper method to calculate the employee’s “regular” wage and the
corresponding overtime premiums that are owed.
35
This Court cannot agree with the Urnikis-Negro decision in its totality,
however, because the decision ultimately goes further than its reasoning can
support. Though that Court acknowledged that the damages outcome in
misclassification cases should be driven by a factual inquiry into the actual
agreement between the parties, it then surprisingly came to a categorical
conclusion that Missel should apply whenever an employee was paid a fixed
salary, routinely worked substantial overtime hours, and never received
overtime payments regardless of his work hours. 616 F.3d at 681. This
conclusion is not justified by the underlying reasoning. On the contrary, a
nuanced determination of the understanding between a given employee and his
employer must determine what damages calculation is appropriate in each
circumstance.
The Court holds that when, as Plaintiff contends was the case here, an
employee was misclassified as exempt from overtime payments and accepted a
position with the understanding that his salary was compensation for 40 hours
of work and no more — e.g., that the employee would work no more than 40
hours per week, or agreed to work additional hours for no pay at all — then the
traditional time-and-a-half method of calculating overtime would be
appropriate. In the alternative, as Defendant insists was true of Plaintiff’s
employment, if an employee reached a clear understanding that his
compensation was payment for all hours worked per week, no matter their
number, then the method prescribed in Missel would govern. See, e.g.,
Rushing v. Shelby Cnty. Gov’t, 8 F. Supp. 2d 737, 745 (W.D. Tenn. 1997)
36
(holding that, when “the parties agreed that the plaintiffs’ salaries would cover
all hours worked,” the Missel calculation should apply); Zoltek v. Safelite Glass
Corp., 884 F. Supp. 283, 287 (N.D. Ill. 1995) (“Because the parties agreed that
Zoltek was to be compensated on a salaried basis, with no additional payment
for overtime hours, the calculation of his ‘regular rate’ of pay is governed by the
formula described in [Missel].”).
The Court cannot grant summary judgment here because the underlying
facts regarding what Plaintiff agreed to do to earn his salary remain in dispute.
Plaintiff submits that he was never informed or asked about working more than
40 hours a week. (Pl. 56.1(a) ¶¶ 15, 18). Defendant counters that Plaintiff was
informed that his position required working as long as was required to generate
sales. (Def. 56.1(a) ¶¶ 16, 17; Def. 56.1(b) ¶¶ 15, 16). In the face of this
factual dispute, summary judgment cannot issue. Only an eventual factual
determination regarding what the parties mutually understood regarding
Plaintiff’s employment can provide the basis for a conclusion regarding how
overtime damages should be calculated.
7.
Plaintiff’s Motion to Compel Is Granted in Part and Denied in
Part, But No Sanctions Will Be Imposed Against Defendant
Plaintiff moves to compel Defendant to produce certain documents, the
relevance of which Defendant contests. (Pl. Compel. Br. 16). Plaintiff also
seeks, in the event Defendant should not produce these documents, an order
deeming certain facts regarding Defendant’s revenues established, and an
order directing Defendant to pay Plaintiff’s costs associated with the motion to
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compel, including attorney’s fees. As detailed herein, the motion will be
granted in part.
a.
Applicable Law
Under Rule 26, “[p]arties may obtain discovery regarding any
nonprivileged matter that is relevant to any party’s claim or defense.” Fed. R.
Civ. P. 26(b)(1). Parties may “move to compel disclosure and for appropriate
sanctions” in the event that another party fails to comply with its discovery
obligations. Fed. R. Civ. P. 37(a)(3)(A).
b.
Plaintiff Is Entitled to Some, But Not All, of the
Materials He Seeks
Plaintiff seeks production of materials in seven distinct categories. (Pl.
Compel Br. 16). Defendant objects to all these requests as irrelevant to
“whether Plaintiff performed all the work necessary to earn the commissions he
seeks.” (Def. Compel Opp. 6). Some of the items Plaintiff seeks are relevant,
but some are not. In this regard, Defendant predicates its objections on the
notion that documents relating to individuals other than Plaintiff can never be
relevant. The Court disagrees with that categorical position, and will direct
Defendant to produce documents related to other individuals if and to the
extent that those documents are also relevant to Plaintiff’s claims.
Plaintiff seeks “Torrey Point’s 2011-2012 Compensation Plan applicable
to members of Kolb Sales team.” (Pl. Compel Br. 16). Plaintiff has failed to
demonstrate, however, that the compensation plans applicable to other
individuals are relevant to his claims regarding whether the terms of his own
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compensation plan were honored. The motion is denied with respect to this
category of documents.
Plaintiff also seeks “all commission statements issued to Chris Kolb,
Edward McLellan, Chris Donlin, from October 1, 2011 to date, with redactions
of any customer revenues and commissions that are not related to pretermination booked orders.” (Pl. Compel Br. 16). Plaintiff contends that
Defendant’s overall compensation plan required payment of commissions that
were not paid. Records of what commissions were paid to other individuals,
and when, may be relevant to this claim. However, Plaintiff has not adequately
alleged that the commission statements of all individuals identified in this
request would be relevant.
The parties agree that Plaintiff devoted a substantial amount of time to
supporting outside salesperson Chris Kolb’s sales efforts (Def. 56.1(a) ¶ 12; Pl.
56.1(b) ¶ 12; Pl. 56.1(a) ¶ 11; Def. 56.1(b) ¶ 11), and commission statements
relating to Kolb are thus relevant to Plaintiff’s commission claim. Defendant, in
turn, relies heavily on work done by Chris Donlin as a defense to Plaintiff’s
commission claim. (Def. Br. 13-14). As such, Donlin’s commission statements
are also relevant to Plaintiff’s commission claim. Plaintiff’s only support for his
request for Edward McLellan’s commission statements, however, is an
assertion that Plaintiff “performed limited tasks in support of Edward
McLellan” prior to Plaintiff’s termination. (Pl. Compel Reply Br. 2). On this
meager proffer of relevance, the Court cannot conclude that McLellan’s
commission statements are relevant to Plaintiff’s commission claim.
39
Accordingly, the motion is granted in part with respect to this category of
documents, limited to Kolb’s and Donlin’s commission statements, and denied
as to McLellan’s commission statements.
Plaintiff seeks “monthly sales reports for Chris Kolb and the Chris Kolb
Sales team from February 2011 through October 2011.” (Pl. Compel Br. 16).
The parties agree that Plaintiff devoted a substantial amount of time to
supporting Kolb’s sales efforts (Def. 56.1(a) ¶ 12; Pl. 56.1(b) ¶ 12; Pl. 56.1(a)
¶ 11; Def. 56.1(b) ¶ 11), and Kolb’s sales reports are relevant to Plaintiff’s
commission and bonus claims. The motion is granted with respect to this
category of documents.
Plaintiff seeks “redacted copies of Mr. Young’s commission reports that
listed Chris Kolb, Ed McLellan, and Will Klein’s opportunities from February
2011 to date.” (Pl. Compel Br. 16). Young testified that he received
commissions based on the opportunities of account managers, broken down by
account manager. (Young Dep. 159:14-160:23). Such commission reports are
relevant to Plaintiff’s overtime and bonus claims insofar as they relate to
Plaintiff himself or individuals Plaintiff supported. The motion with respect to
this category of documents is granted with respect to Young’s commission
reports reflecting opportunities attributable to Kolb and Plaintiff; for the
reasons set out above, it is denied with respect to commissions attributable to
McLellan.
Plaintiff seeks “a closed/won report updated to date and listing what
revenues defendant received and gross margins defendant realized from
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opportunities booked by Chris Kolb and Ed McClellan while plaintiff was
employed, with revenues, margin and commission columns totaled.” (Pl.
Compel Br. 16). This request apparently seeks nothing more than a more
complete and better labeled version of the “Chris Kolb closed won report”
Defendant has already produced. (Pl. Compel Br. 11-12). Accordingly, the
motion with respect to this document is granted, limited to Kolb; it is denied
with respect to any reporting based on McLellan’s activities.
Plaintiff seeks “copies of purchase orders, and invoices for each
opportunity listed on T-75-76.” (Pl. Compel Br. 16). These pages from
Defendant’s production constitute the document elsewhere referred to as the
“Chris Kolb closed won report” (Pl. Compel Br. 11-12), an updated and
extended version of which the Court has ordered to be produced above.
Purchase orders and invoices relating to these transactions are relevant to
Plaintiff’s commission claim. Defendant has not objected that this production
would be unduly burdensome or costly. The motion with respect to this
category of document is granted.
Plaintiff seeks “all documentation relating to any order that defendant
claims was unbooked that was listed in Exhibit T-4.” (Pl. Compel Br. 16).
Exhibit T-4 is a summary financial table reflecting Defendant’s sale prices and
gross margins. (Pl. Compel Br. 6). Defendant in part relies on alleged
unbooking of sales as a defense against Plaintiff’s commission claim. (Def. Br.
13). Such documents are thus relevant to Defendant’s defense. The motion
with respect to this category of document is granted.
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Plaintiff seeks “all other documentation that would explain the difference
between the approximately $9,369,000” of orders booked and $1,972,000 of
expected gross margins, and the amounts reflected in Exhibit T-4.” (Pl. Compel
Br. 16). This request is not independently relevant to any of Plaintiff’s claims
or Defendant’s defenses, and Plaintiff makes no effort to justify it. The motion
with respect to this category of documents is denied.
c.
The Court Will Not Impose Prospective Discovery
Sanctions on Defendant
Plaintiff also seeks sanctions under Rule 37(b)(2)(A)(i)-(iv). (Pl. Compel
Br. 16-17). Rule 37(b) provides sanctions for failure to comply with a discovery
order. The sanctions Plaintiff seeks are prospective in nature, deeming certain
disputed facts established in the event Defendant fails to comply with the
Order the Court now issues with respect to the production of certain
documents. The Court will not impose future, conditional sanctions at this
time. In the event Defendant fails to comply with this Order, Plaintiff is of
course free to seek appropriate sanctions if he so chooses.
d.
The Court Will Not Award Costs and Fees to Plaintiff
Plaintiff also seeks costs and fees associated with his motion to compel.
(Pl. Compel Br. 18-19). Rule 37 provides that, if a motion to compel discovery
is granted, “the court must … require the party or deponent whose conduct
necessitated the motion, the party or attorney advising that conduct, or both to
pay the movant’s reasonable expenses incurred in making the motion,
including attorney’s fees,” unless the nondisclosure was “substantially
justified” or other circumstances make such an award unjust. Fed. R. Civ. P.
42
37(a)(5)(A), (A)(i)-(ii). Substantial justification for refusing discovery is
determined according to “an objective standard of reasonableness and does not
require that the party have acted in good faith.” Bowne of New York City, Inc.
v. AmBase Corp., 161 F.R.D. 258, 262 (S.D.N.Y. 1995) (citing Pierce v.
Underwood, 487 U.S. 552, 565 (1988)).
“Conduct is substantially justified if there was a genuine dispute or if
reasonable people could differ as to the appropriateness of the contested
action.” Underdog Trucking, L.L.C. v. Verizon Servs. Corp., 273 F.R.D. 372, 377
(S.D.N.Y. 2011) (internal quotation marks omitted). A responding party’s
refusal to produce documents on the basis that they are irrelevant can provide
substantial justification unless such a position “involves an unreasonable,
frivolous or completely unsupportable reading of the law.” Comprehensive
Habilitation Servs., Inc. v. Commerce Funding Corp., 240 F.R.D. 78, 87 (S.D.N.Y.
2006) (quoting Bowne, 161 F.R.D. at 265). Though Defendant’s relevancy
argument has proved unavailing, it was not without substance. Accordingly
Plaintiff’s motion for costs and fees is denied.
CONCLUSION
For the reasons discussed herein:
Regarding the primary duties prong of the administrative exemption,
Defendant’s motion for summary judgment and Plaintiff’s motion for partial
summary judgment are both DENIED.
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Regarding the independent judgment prong of the administrative
exemption, Defendant’s motion for summary judgment is GRANTED and
Plaintiff’s motion for partial summary judgment is DENIED.
Defendant’s motion for summary judgment on Plaintiff’s commission
claim is DENIED.
Plaintiff’s motion for partial summary judgment that he may receive posttermination commissions for sales booked before his termination is GRANTED.
The disposition of this claim offers no conclusion with respect to what duties
Plaintiff was obliged to perform to “earn” commissions, nor what commission
payments, if any, are actually owed Plaintiff.
Defendant’s motion for summary judgment on Plaintiff’s bonus claim is
DENIED.
Defendant’s motion for summary judgment on Plaintiff’s severance claim
under ERISA is GRANTED.
Defendant’s motion for summary judgment on Plaintiff’s quantum meruit
claim is GRANTED.
Plaintiff’s motion for summary judgment regarding the proper method of
calculating overtime damages is DENIED.
Plaintiff’s motion to compel production is GRANTED IN PART AND
DENIED IN PART, as detailed and limited above.
Plaintiff’s motion for sanctions is DENIED.
Plaintiff’s motion for costs and fees associated with his motion to compel
is DENIED.
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Defendant is ORDERED to produce the documents identified above
within 30 days of the signature date of this Opinion and Order. The parties
should observe the requirements of the Stipulated Protective Order in this case
insofar as any documents produced in accordance with this Opinion and Order
are subject to such protections. The parties are encouraged to confer
independently to develop appropriate measures to protect from publication
information associated with non-parties to this action. In the event the parties
cannot come to agreement regarding appropriate protective measures,
Defendant may submit a letter to the Court proposing such measures as it
deems appropriate.
The Clerk of Court shall terminate the motions pending at docket entries
31, 41, and 42.
SO ORDERED.
Dated:
October 23, 2013
New York, New York
_________________________________
KATHERINE POLK FAILLA
United States District Judge
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