Best Ohio Overtime Lawyer Answer: Am I exempt from overtime pay? Do I have to prove that I’m entitled to overtime? What can I get if I sue my boss for not paying me and my paycheck is short?
One of the more frequent issues our wage and hour attorneys tackle centers around how people are getting compensated at work. (See Should Tipped Workers Be Paid Overtime?; How Do I Prove That I Was Not Paid Overtime?; and No Overtime For So Called “Independent Contractors”?). And, with the recent changes in overtime regulations, we are expecting even more questions about compensation. (See How Do the New Overtime Rules Affect Me?). Once our overtime law lawyers inform an employee that their employer potentially violated the Fair Labor Standards Act (“FLSA“), the next question is almost always, “How much can I get?” While you are of course entitled to the wages not paid, there is a chance you may be entitled to liquidated damages as well. Liquidated damages under the FLSA are designed to compensate employees for the delay in the payment of the wages due to the employee.
Although liquidated damages are available, they are not guaranteed simply by asserting claims that your employer violated the FLSA. If an employer can prove that the delay for payment was in good faith and was reasonable, liquidated damages will not be available. For example, in hearing Jennifer Beauford v. ActionLink, LLC, the United States District Court, E.D. Arkansas, Western Division, had the opportunity to explore what an employer must do to meet this burden of proof. The Court initially turned to Chao v. Barbeque Ventures, LLC, an Eighth Circuit Court of Appeal case, to reiterate that the burden on an employer to prove both good faith and objective reasonableness is a difficult one, with liquidated damages being the norm and single damages being the exception. The Court looked to the Charo decision again to say that for an employer to prove good faith delay, it “must show that it took affirmative steps to determine the requirements of the Fair Labor Standards Act, but nevertheless violated those requirements.”
In Beauford, the first question was whether the employees were misclassified as exempt employees. The Court made clear that the burden is on the employer to prove that an employee is exempt from overtime pay:
The FLSA requires employers to compensate employees for hours worked in excess of forty per week at a rate of one and one-half times the employee’s regular rate of compensation. 29 U.S.C. § 207(a). This overtime requirement does not apply to “any employee employed . . . in the capacity of outside salesman,” “as such terms are defined and delimited from time to time by [Department of Labor] regulations.” Id. § 213(a)(1); see Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156, 183 L. Ed. 2d 153 (2012). Both sides have moved for summary judgment on the issue of whether ActionLink’s brand advocates are employed in the capacity of outside salesmen, as defined by the regulations. An exemption from the FLSA’s overtime requirements is an affirmative defense for which the employer bears the burden of proof. See, e.g., Fast v. Applebee’s Intern, Inc., 638 F.3d 872, 882 (8th Cir. 2011). FLSA exemptions are construed narrowly. See, e.g., Reich v. Delcorp, Inc., 3 F.3d 1181, 1186 (8th Cir. 1993).
The Court then held that these employees were not properly classified as exempt as outside salespeople:
The regulations define the term “employee employed in the capacity of an outside salesman” in relevant part as “any employee . . . [w]hose primary duty is . . . making sales within the meaning of [29 U.S.C. § 203(k)] . . . and [w]ho is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.” 29 C.F.R. § 541.500. The parties do not dispute that ActionLink’s brand advocates are customarily and regularly engaged away from ActionLink’s place or places of business, so the relevant question is whether a brand advocate’s primary duty is making sales within the meaning of 29 U.S.C. § 203(k).
Twenty-nine U.S.C. § 203(k) statesthat the term “sale” “includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” 29 U.S.C. § 203(k); see also 29 C.F.R. § 541.501(b). A “sale” is not limited to the actual title transfer of the property at issue. Christopher, 132 S. Ct. at 2169. The use of the terms “includes,” “any,” and “other disposition” demonstrates that the definition of “sale” encompasses transactions that might not be considered sales in a technical sense and accommodates various methods of selling commodities. Id. at 2170-71. Accordingly, the term “other disposition” includes “those arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a commodity.” Id. at 2171-72.
The FLSA exempts an employee employed in the capacity of an outside salesman, 29 U.S.C. § 213(a)(1), which indicates that courts should use a functional, rather than formal, inquiry into determining whether employees fit into the exemption – an inquiry “that views an employee’s responsibilities in the context of the particular industry in which the employee works.” Christopher, 132 S. Ct. at 2170. Using this functional approach and its interpretation of “other disposition,” the Court in Christopher found that pharmaceutical sales representatives, also known as “detailers,” had “making sales” as their primary duty and therefore were employees employed in the capacity of outside salesmen. Id. at 2172. These detailers did not consummate sales in the sense of transferring title; instead, they provided information to physicians about the company’s products and sought commitments from the physicians to prescribe those products. Id.
… brand advocates do not bear the same “external indicia of salesmen” that provided further support for the holding in Christopher. Among other external indicia regarding sales experience and minimal supervision, the detailers in Christopher received incentive compensation that exceeded twenty-five percent (for petitioner Christopher) and thirty percent (for petitioner Buchanan) of their gross pay. Cf. Christopher, 132 S. Ct. at 2164, 2172-73 (detailers received incentive pay based on sales volume or market share in their territories); Campanelli, 765 F. Supp. 2d at 1194 (retail sales representatives were not paid commissions to compensate for overtime). While ActionLink seeks to hire persons with sales experience to work as brand advocates, and while it evaluates brand advocates in part on “sell-through performance targets,” brand advocates are not rewarded with incentive compensation.
The Court then held that the employer’s efforts to squeeze these employees into the administrative exemption also failed:
The plaintiffs have also moved for partial summary judgment on ActionLink’s contention that brand advocates are subject to the administrative exemption. The FLSA’s overtime requirement does not apply to “any employee employed in a bona fide . . . administrative . . . capacity.” 29 U.S.C. § 213(a)(1). The regulations define “employee employed in a bona fide administrative capacity” as any employee
(1) Compensated on a salary or fee basis at a rate of not less than $455 per week . . . exclusive of board, lodging or other facilities;
(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.
29 C.F.R. § 541.200(a). According to the regulations, “[t]he term ‘primary duty’ means the principal, main, major or most important duty that the employee performs.” Id. § 541.700(a). The parties agree that brand advocates satisfy the first element of the definition. The plaintiffs argue that ActionLink cannot prove that brand advocates satisfy the second or third elements.
As to the definition’s second element, ActionLink does not argue that brand advocates’ primary duty is directly related to the management or general business operations of ActionLink, but rather that their primary duty is directly related to the general business of LG, ActionLink’s customer. The regulations explain that to meet the “directly related to the management or general business operations” requirement, “an employee must perform work directly related to assisting with the running or servicing of the business”…
Brand advocates are given a fixed list of stores that they are required to visit and which they cannot decline to visit, unlike the representatives in Alden and Schaefer-LaRose. At each store that they visit, they are required to complete a Call Report that includes a six-page to-do list. See Document #45-5. They are often given scripts to use in presentations to staff at the retail stores they visited. While it is true that the brand advocates have some discretion in developing store-specific strategies, using a monthly budget of $275 for promoting LG sales, deciding how to teach retail sales associates how to recommend LG products to customers, and setting their own schedules, those kinds of decisions do not rise to the level of significance required to meet the third element of the definition of “employee employed in a bona fide administrative capacity.” See Novartis, 611 F.3d at 157 (sales representatives who were free to decide in what order to visit physicians’ offices, how to gain access to those offices, how to allocate promotional budgets, and how to allocate samples still were not exercising discretion or independent judgment in matters of significance); Campanelli, 765 F. Supp. 2d at 1196 (“[D]eciding the order of stores to visit, how much time to spend in a store, or which of the sales tools defendant provides to use are not matters of sufficient significance to trigger the administrative exemption”).
After the employees prevailed on summary judgment, the next question that arose was whether liquidated damages were appropriate. The Court addressed this in a separate opinion. In this case, the payroll manager and COO of ActionLink took what they believed were affirmative steps to determine the requirements of the FLSA. Those steps included having several people discuss if brand advocates where exempt from the overtime requirements of the FLSA and conducting a roundtable discussion with the COO, members of ActionLink’s HR department, and some members from ActionLink’s executive team. At the roundtable discussion, the payroll manager printed out and circulated documents from the Department of Labor (DOL) website and also received a document from a third party human resources company that defined the different exemptions under the FLSA. Outside of the roundtable, the COO contacted several pharmaceutical sales representatives, who they believed were exempt from overtime and closely matched the roles of brand advocates, to see exactly how similar the two positions were. After all of these actions, the COO made the determination that brand advocates were not entitled to overtime under the FLSA.
Despite ActionLink’s belief and the steps it took in making its determination, the Court ruled that ActionLink had not met the burden of good faith required to prevent the availability for liquidated damages. The Court based this primarily on ActionLink not obtaining a professional opinion and basing its determination on a class of people, pharmaceutical sales representatives, which had not been firmly minted as exempt from overtime. Our wage theft lawyer’s favorite part of this opinion was rejecting the excuse that comes out of every teenager caught red-handed by his or her parents – “but everyone else is doing it!”:
Nor does ActionLink’s explanation that everyone in the industry treated brand advocates as outside salesmen suffice to make its conduct objectively reasonable. ActionLink does not participate in a large, widespread industry with numerous competitors who have independently come to the same conclusion regarding the exempt status of a category of employees, nor does it participate in an industry with a lengthy history such that silence by the Department of Labor might be considered acquiescence in the proposition that brand advocates were exempt outside salesmen. Rather, the industry in which ActionLink competes is a small one, with few competitors, all of whom know one another, and all of whom know what the others are doing. Document #191 at 37-38. In the context of an industry such as this, the fact that “everyone is doing it” carries little weight with respect to whether the decision to do what everyone else was doing was objectively reasonable.
As mentioned above, the burden on an employer to prove both good faith and objective reasonableness is a difficult one, with liquidated damages being the norm and single damages being the exception. Chao, 547 F.3d at 941-42. ActionLink has not met that high burden.
Circumstances like these are why it is important to contact a qualified wage and hour attorney if you feel you are not being paid in violation of the FLSA. Our wage theft law firm has plenty of experienced lawyers that will be able to evaluate and prosecute your claim.
If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at the Spitz law firm today for a free and confidential initial consultation. The wage and hour lawyers at the Spitz law firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, call 866-797-6040.
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