Opinion
CASE No. 1:22-cv-455
2024-02-02
Brad TOOKER and Debra Hahn, individually and on behalf of all others similarly situated, Plaintiffs, v. BLUEJAY SOLUTIONS, INC., and e2open, LLC, Defendants.
Helen Coleman, Rachhana Srey, Nichols Kaster & Anderson PLLP, Minneapolis, MN, for Plaintiffs. Alan Lin, Desiree Brutocao, Edward Mason Smith, Cornell Smith Mierl Brutocao Burton, LLP, Austin, TX, Michael D. Almassian, Keller & Almassian PLC, Grand Rapids, MI, for Defendant BlueJay Solutions Inc. Edward Mason Smith, Cornell Smith Mierl Brutocao Burton, LLP, Austin, TX, for Defendant e2open, LLC.
Helen Coleman, Rachhana Srey, Nichols Kaster & Anderson PLLP, Minneapolis, MN, for Plaintiffs.
Alan Lin, Desiree Brutocao, Edward Mason Smith, Cornell Smith Mierl Brutocao Burton, LLP, Austin, TX, Michael D. Almassian, Keller & Almassian PLC, Grand Rapids, MI, for Defendant BlueJay Solutions Inc.
Edward Mason Smith, Cornell Smith Mierl Brutocao Burton, LLP, Austin, TX, for Defendant e2open, LLC.
OPINION AND ORDER
ROBERT J. JONKER, UNITED STATES DISTRICT JUDGE.
INTRODUCTION
This is a collective action wage-and-hour case in which Plaintiffs Tooker and Hahn, former Logistics Coordinator (LC) employees of Defendant BlueJay, allege the company improperly treated them as exempt from federal overtime laws and thus deprived them of their overtime wages in violation of the Fair Labor Standards Act ("FLSA"). They, and nineteen other opt-in plaintiffs, sue BlueJay and Defendant e2open, LLC, which has since acquired BlueJay.
On December 12, 2022, the Court granted Plaintiffs' motion for court-authorized notice (ECF No. 34). The Court subsequently approved a notice to the prospective opt-in plaintiffs and there are presently a total of twenty-one plaintiffs in this suit. Since then, both sides have filed motions relating to FLSA certification, the administrative exemption, and damages. Plaintiffs have also filed a motion for corrective notice. The Court heard argument on the motions on November 17, 2023, and ruled from the bench on some of them. Specifically, the Court denied the motions relating to FLSA certification and reserved
ruling on the evidentiary issues until the final pretrial conference. The Court denied the portions of the motions for summary judgment relating to liquidated damages and willfulness, and took the remainder of the motions under advisement. What is left for decision are the summary judgment issues regarding the administrative exemption and the fluctuating workweek calculation with respect to damages. Also pending for decision is the motion for corrective notice.
For the reasons that follow, the Court denies the motion for corrective notice. The Court also concludes that Plaintiffs are entitled to summary judgment in their favor on FLSA administrative classification. The Court further determines there are disputed fact issues that preclude summary judgment on the fluctuating workweek calculation of damages.
BACKGROUND
The summary judgment record from both sides details the organizational structure of BlueJay and e2open, and traces the events surrounding the classification decision leading to this lawsuit. Defendant BlueJay Solutions, which has since been acquired by Defendant e2open, LLC, provide logistics products and services for its customers. (Minner Decl. ¶ 3, ECF No. 99-3, PageID. 1274). BlueJay's Transportation Management System ("TMS") is one of the on-demand applications offered by BlueJay and e2open to their customers. (Id. at ¶ 4). The TMS application manages the "order to cash" lifecycle of shipments for customers. (Minner Dep. 35, ECF No. 95-4, PageID. 752; Minner Decl. ¶ 4, ECF No. 99-3, PageID. 1274-1725). "Order to cash" means that the software manages a shipment from when a customer places an order through payment to the carrier.
In addition to the TMS software application, Defendants offer the option to purchase an add on service called "Logistics as a Service ("LaaS"). Customers who purchase LaaS are assigned a team of employees that assist the customers in executing their daily shipments. In this, LaaS functions as an outsourced third-party transportation department of the customer. (Minner Decl. ¶¶ 5-7, ECF No. 99-3, PageID. 1275). This case involves approximately fourteen LaaS customer accounts.
There is an LaaS team for each customer account. At the top of the team hierarchy is a Director who reports to the LaaS Vice President. (ECF No. 95-9, PageID.799). Each Director is assigned a certain number of customer accounts and is primarily engaged in overseeing the strategy of how to handle an account. (Minner Dep. 12, ECF No. 95-4, PageID.747; Ordaz Dep. 41, ECF No. 95-6, PageID.781). The next tier consists of Logistics Analysts, Logistics Managers, and Carrier Specialists. (ECF No. 95-9, PageID.799). Each of these positions has separate responsibilities. Logistics Analysts, for example, are involved in data collection and software development. (ECF No. 95-12, PageID.810-811). Carrier Specialists serve as the primary point of contact with the carriers transporting a customer's order. (ECF No. 95-13, PageID.813-814). Logistics Managers perform a management role, and have customer facing responsibilities as well. (Loudin Dep. 15-16, ECF No. 95-8, PageID.790). They manage the Logistics Coordinators and also assist the customer by, among other things, updating the customer on market conditions that inform business decisions. (Minner Dep. 19, ECF No. 95-4, PageID.749).
Logistics Coordinators are at the bottom in the hierarchy. Their primary responsibility is handling the day-to-day shipments for LaaS customers using the TMS software. This further entails building, tendering, and tracking the loads in their assigned customer's shipments. (Minner
Decl. ¶ 6, ECF NO. 32-1, PageID.251). Defendants have classified Logistics Coordinators as exempt employees, meaning they are not required to pay overtime for hours worked in excess of forty hours a week. This lawsuit followed.
CORRECTIVE NOTICE
The Court begins with Plaintiffs' motion for corrective notice, which seeks to reopen the opt-in period based on an internal email that was sent to BlueJay's LaaS employees long before the Court approved the Notice in this case. Plaintiffs' motion lacks merit.
By way of background, Plaintiffs filed this lawsuit on May 20, 2022. (ECF No. 1). A little less than a month later, on June 17, 2022, and before Defendants filed an Answer, Defendant's Vice President of Logistics as a Service, Matt Anderson, sent a company email to the Logistics Coordinators. The email began: "Team, please see below detail on pending litigation against the company. As noted in the detail below, if you have any questions, please reach out to your HR business partner." (ECF No. 103-5, PageID. 1500). The email proceeded to state that "a former employee recently brought a lawsuit against the company alleging he was not paid properly in his role as a Logistics Coordinator." (Id.). Mr. Anderson continued that "[i]n our litigious society, suing companies with "Logistics Coordinator" positions is becoming big business for plaintiff law firms." (Id.). In addition to other assurances, Mr. Anderson promised the LCs that the company had "proactively reviewed our Logistics Coordinator position several times with our external employment lawyers to make sure we classified this role correctly under the law." (Id.).
Defendants became aware of the email after the close of discovery and produced it to plaintiffs. This motion followed. Plaintiffs contend that the message was misleading, false and discouraged currently employed LC's participation in this case. On that basis they seek to provide a supplemental thirty-day period to afford the putative plaintiffs who were employed as LCs when this email was sent, an opportunity to opt-in to the collective action.
"Because of the potential for abuse [in class actions], a district court has both the duty and the broad authority to exercise control over a class action and to enter appropriate orders governing the conduct of counsel and parties." Gulf Oil Co. v. Bernard, 452 U.S. 89, 100, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981). "But this discretion is not unlimited, and indeed is bounded by the relevant provisions of the Federal Rules." Id. "[T]he same concerns and justifications for judicial oversight apply" to both class actions brought under Rule 23 and those cases, like the one here, brought under Section 216 of the FLSA. Crosby v. Stage Stores, Inc., 377 F. Supp. 3d 882, 888 (M.D. Tenn. 2019). "To warrant a Court approved corrective notice,... the moving party[] bears the burden of showing that the Defendants' communication was in some way coercive, misleading, or improper." Jackson v. Papa John's USA, Inc., No. 1:08-CV-2791, 2009 WL 650181, at *3 (N.D. Ohio Mar. 10, 2009).
The Court sees no reason to reopen the opt-in period. "[P]re-certification communications with potential collective action members are generally permitted." Gerlach v. Wells Fargo & Co., No. C 05-0585 CW, 2006 WL 824652, at *6 (N.D. Cal. Mar. 28, 2006) (citing Gulf Oil, 452 U.S. at 100, 101 S.Ct. 2193). And so there was nothing untoward, in and of itself, with sending the June 17, 2022, email. Plaintiffs' objections to the tenor of the email overread the document. Beyond that, the sequence of events here does not support the request for relief. On January 9, 2023, many months after the email had been
sent, the Court approved a notice to the potential plaintiffs. (ECF No. 37). Among other things, that Notice expressly stated that "[e]mployers are prohibited from retaliating against any employee for participating in an FLSA lawsuit." (ECF No. 35-1, PageID.320). The Court does not see what would be accomplished by a Corrective Notice that has not already been done by the original notice in this action. Plaintiffs insist that the email must have had a discouraging effect because a smaller proportion of current employees have joined this action than former employees. The Court is not persuaded. There are any number of reasons why current employees may be less likely to join a FLSA collective action. For one thing, current employees may like their employer more than former employees do, and may also believe a promotional career track is more important to them than any potential recovery in litigation. Accordingly, the Court concludes that Plaintiffs have not met their burden of demonstrating that the opt-in period should be reopened.
ADMINISTRATIVE EXEMPTION
The FLSA generally requires employers to pay employees no less than time and a half for hours over forty worked in a workweek. 29 U.S.C. § 207(a)(1). However, the statute exempts from the overtime pay requirement "any employee employed in a bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213(a)(1). The key legal determination regarding Plaintiffs' FLSA claim is whether they were exempt administrative employees. Both sides move for summary judgment in their favor on this question. The Court determines that Defendants' argument lacks merit and that Plaintiffs have demonstrated they are entitled to summary judgment in their favor on the application of the administrative exemption to this case.
1. Summary Judgment Standard
Summary judgment should be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Parks v. LaFace Records, 329 F.3d 437, 444 (6th Cir. 2003) (citing FED. R. CIV. P. 56(c)). A genuine issue of material fact exists if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In deciding a motion for summary judgment, the Court views the evidence and draws all reasonable inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). But that does not mean that any amount of evidence, no matter how small, will save a nonmoving party from losing on a motion for summary judgment. Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007).
When cross-motions for summary judgment are filed, the court must "evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Taft Broad. Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991) (quoting Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1391 (Fed. Cir. 1987)). "[I]f the moving party also bears the burden of persuasion at trial, the moving party's initial summary judgment burden is 'higher in that it must show that the record contains evidence satisfying the burden of persuasion and that the evidence is so powerful that no reasonable jury would be free to disbelieve it.'" Cockrel v. Shelby Cnty. Sch. Dist., 270 F.3d 1036, 1056 (6th Cir. 2001) (quoting Moore's Federal Practice). 2. Legal Standards and Analysis
"An employer may raise a plaintiff's status as an exempt employee as an affirmative defense to claims brought under the FLSA." Orton v. Johnny's Lunch Franchise, LLC, 668 F.3d 843, 846 (6th Cir. 2012). "The employer bears the burden of establishing the affirmative defense by a preponderance of the evidence, and the employer satisfies this burden only by providing 'clear and affirmative evidence that the employee meets every requirement of an exemption.'" Id. (quoting Thomas v. Speedway SuperAmerica, LLC, 506 F.3d 496, 501 (6th Cir. 2007)). The summary judgment record reflects no genuine issue of material fact for trial but that the defense cannot meet its burden. Consequently, Plaintiffs are entitled to summary judgment in their favor here.
For the administrative exemption to apply, an employee must (1) be compensated on a salary fee basis of not less than $684 per week; (2) have as his or her primary duty "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) have his or her "primary duty include[] the exercise of discretion and independent judgment with respect to matters of significance." 29 C.F.R. § 541.200(a)(1)-(3). There is no dispute that Plaintiffs' employment satisfies the first element of the administrative exemption. The parties disagree, however, about whether Plaintiffs' employment satisfies the other two elements.
The first step is to determine Plaintiffs' primary duty. Schaefer v. Indiana Michigan Power Co., 358 F.3d 394, 400 (6th Cir. 2004). At this stage courts "focus on evidence regarding the actual day-to-day activities of the employee rather than more general job descriptions contained in resumes, position descriptions, and performance evaluations." Id. (citing Ale v. Tennessee Valley Authority, 269 F.3d 680, 688-89 (6th Cir. 2001). The regulations state that the term "'primary duty means the principal, main, major or most important duty that the employee performs." 29 C.F.R. § 541.700(a). "Factors to consider when determining the primary duty of an employee include, but are not limited to, the relative importance of the exempt duties as compared with other types of duties; the amount of time spent performing exempt work; the employee's relative freedom from direct supervision; and the relationship between the employee's salary and the wages paid to other employees for the kind of nonexempt work performed by the employee." Id. "Employees who spend more than 50 percent of their time performing exempt work 'will generally satisfy the primary duty requirement." Id. at § 541.700(b). "Time alone, however, is not the sole test[.]"
Here, the uncontroverted record evidence is that Plaintiffs' primary duties as Logistics Coordinators was to use the TMS software to carry out the day-to-day shipment tasks for their assigned customers. These tasks, furthermore, entailed building, tendering, and tracking the customer's shipments. Logistics Coordinators spend most of their time performing these tasks. (Ordaz Dep. 62-63, ECF No. 95-6, PageID.785). The first task—building loads—requires Logistics Coordinators to use the TMS FreightBuilder tool to pull up customers' orders to build a load to tender out to carriers. (Dewald Dep. 33-34, ECF No. 106-3, PageID. 1622-1623). The next step is to tender the load that was built at the first step to a carrier who will transport the load. After a carrier has accepted a load, the final step is to track the load through to delivery. This primarily entails simple problem solving by communicating with the customer and carrier though emails. For example, when an issue arises with a carrier, the Logistics Coordinator
will reach out to the customer for direction and then respond to the carrier. (Jacobs Dep. 61-62, ECF No. 95-21, PageID.853-854).
Defendants insist that there is more to it than that, and that the Logistics Coordinator's responsibilities include a great deal of complex problem solving and independent work, which foreshadows their argument on the third element of the exemption test. (Miner Decl. ¶ 15, ECF No. 99-3, PageID. 1277). But in the end, Defendants do not identify anything apart from using the TMS software to carry out the day-to-day shipment tasks that could be construed as a Logistics Coordinator's primary duty. See Defs. Br. 14, ECF No. 99-1, PageID.1244 (stating that "Plaintiff's primary duties as LCs involve planning, managing, and executing the transportation and supply chain network needs for their customers in their assigned region.").
A. "Directly Related to the Management or General Business Operations of the Employer or the Employer's Customers."
The parties do not dispute that Plaintiffs' primary duty—using the TMS software to carry out day-to-day shipment tasks—involves the performance of office or non-manual work. But the parties disagree that this primary duty was "directly related to the management or general business operations of the employer or the employer's customers" which is required to meet the second element under 29 C.F.R. § 541.200(a)(2).
Based on Department of Labor regulations, courts generally resolve this issue with an "administrative-production dichotomy, under which production employees (whose job it is to generate the product or service the business offers to the public) will not qualify for the exception." Foster v. Nationwide Mut. Ins. Co., 710 F.3d 640, 644 (6th Cir. 2013) (citing Schaefer, 358 F.3d 394, 402 (6th Cir. 2004)). An opinion letter from the Department of Labor further states that the "'production versus administrative' dichotomy is intended to distinguish 'between work related to the goods and services which constitute the business marketplace offerings and work which contributes to 'running the business itself.'" DOL Wage & Hour Div. Op. Ltr., 2010 WL 1822423, at *3 (Mar. 24, 2010) (quoting Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1127 (9th Cir. 2002). Applying this test, the summary judgment record shows beyond genuine dispute that the Logistics Coordinators fall plainly on the production side of the dichotomy. They are the workers at the company that are generating the day-to-day services customers pay for when they purchase LaaS rather than rely on the TMS software to handle the logistics themselves. The Logistics Coordinators are not engaged in any work or management functions aimed at the functional business operations of BlueJay or e2open; rather, they are engaged almost exclusively in providing services the business sells as LaaS.
Applicable regulations from the Department of Labor provide that:
[t]he phrase "directly related to the management or general business operations" refers to the type of work performed by the employee. To meet this requirement, an 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.
Work directly related to management or general business operations includes, but is not limited to, work in functional areas such 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. Some of these activities may be performed by employees who also would qualify for another exemption.
An employee may qualify for the administrative exemption if the employee's primary duty is the performance of work directly related to the management or general business operations of the employer's customers. Thus, for example, employees acting as advisers or consultants to their employer's clients or customers (as tax experts or financial consultants, for example) may be exempt.
29 C.F.R. § 541.201(a)-(c).
Defendants point out, however, that for the administrative exemption to apply, it is not necessary that they prove the Logistics Coordinators work on the management or general business operations of BlueJay or e2open. It is enough that their duties relate to the "management or general business operations of ... the employer's customers." 29 C.F.R. § 541.200(a). And applying the administrative-production dichotomy, Defendants reason, there can be no question that the Logistics Coordinators' primary job duties directly related to the management or general business operations of their customers. The Court disagrees.
The summary judgment record shows that Plaintiffs' duties fall squarely into activities that are part of the output of the Defendants' business, not the running of the customers' operations. To be sure, the customers needed logistics to get their own products to market. But in buying LaaS, the customers effectively outsourced that function to Defendants. Because the customers bought the LaaS service package, they no longer had or needed their own logistics department. The Logistics Coordinators were not managing and could not manage this function for a customer's business operation because the customer's business no longer had such a function once they decided to outsource to Defendants and purchase LaaS. Defendants' own Logistics Coordinators then used Defendants' own TMS system to produce the service product that Defendants offered to their customers for an extra price. Logistics Coordinators, for example, utilized the FreightBuilder component of the TMS system to build a shipping load for Defendants' customers. FreightBuilder pulled up orders the same way regardless of account. (Zervas Dep. 24-25, ECF No. 95-19, PageID.837). And once a Logistics Coordinator learned that system, they should be able to build a load on any account. (Id. at 27). Likewise, when issues arose after a carrier accepted a load, Logistics Coordinators communicated between the customer and carrier via email. The Logistics Coordinators themselves did not make decisions on how to address the problem. (Jacobs Dep. 61-62, (ECF No. 95-21, PageID.853-854); Tooker Dep. 31 (ECF No. 95-22, PageID.859)). There is no genuine issue of fact but that Defendants cannot demonstrate that Plaintiffs' primary duty was related to assisting with the management of the business of the Defendants or their customers.
B. Exercise of discretion and independent judgment with respect to matters of significance.
Furthermore, the summary judgment record demonstrates that Plaintiffs' primary duties lacked the requisite exercise or discretion and independent judgment necessary for the administrative exemption to apply. In evaluating whether this element has been met, courts assess the following considerations:
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.
Alvarez v. Key Transp. Serv. Corp., 541 F. Supp. 2d 1308, 1313 (S.D. Fla. 2008) (citing 29 C.F.R. § 541.201(b).
Plaintiffs contend with evidentiary support that they did not make independent judgments on any matters of significance when using the TMS system in the LaaS department. Defendants' contention to the contrary lacks merit. To be sure, the TMS and LaaS are valuable tools that result in movement of products worth a lot of money. But the whole point of the TMS system was to automate tasks and streamline decision making. (Minner Dep. 68, ECF No. 95-4, PageID.757). Of course human interaction is still required. But as detailed above that interaction, on the part of Logistics Coordinators at least, was circumscribed by the TMS system and Defendants' policies. When issues arose, Logistics Coordinators acted as middlemen, merely delivering the messages between customer and carrier back and forth. Nothing in the record demonstrates the type of higher-level decision making necessary to meet this element. To the contrary, the record demonstrates that the work of Logistics Coordinators was essentially the same work performed by summer interns.
Accordingly, the Court concludes that Plaintiffs are entitled to summary judgment in their favor on this element as well. And for all these reasons, therefore, Plaintiffs are entitled to summary judgment in their favor regarding the application of the administrative exemption.
C. Defendants' Cases are Distinguishable
The summary judgment record of this case leaves no genuine dispute for trial: Plaintiffs are not covered by the administrative exemption as a matter of law on this record. This is not to say, however, that employees handling shipments, transportation logistics and supply chain issues can never be covered by the administrative exemption. Defendants reference several cases in which the administrative exemption was found to apply to employees who worked in these areas. But Defendants' cases are not on all four corners with this case involving the LaaS and type of service that Defendants offered their customers. Indeed, the cases actually highlight why the Plaintiffs in this case are not covered by the exemption.
In Wade v. Werner Trucking Co., No. 2:10-CV-270, 2014 WL 1091707, at *1 (S.D. Ohio Mar. 18, 2014), for example, truckers in the defendant company were overseen by a group of fleet coordinators and managers. The plaintiffs, who were employed as fleet coordinators and managers, sued under the FLSA for lost overtime wages. In examining whether the administrative exemption applied to the plaintiffs, the court noted the wide range of authority that the fleet coordinators and managers had. Many had supervisory and disciplinary authority over the truckers. Id. at *16. Additionally, they had authority to make
judgments when unexpected events arose. As noted, the authority of the Logistics Coordinators in this case was much more circumscribed by the TMS system.
In Kennedy v. Ryder Integrated Logistics, Inc., No. SA13CA157FBHJB, 2014 WL 12873036 (W.D. Tex. Sept. 11, 2014) a magistrate judge determined that the administrative exemption applied to a Senior Logistics Analyst whose duties included collecting data and performing statistical analysis; mapping and documenting processes; and recommending continuous improvement opportunities—all of which involved advanced problem-solving skills. The plaintiff admitted that this work was directly related to the general business operations of his employer's customer and further admitted he exercised his own initiative and knowledge regarding certain decisions pertaining to the delivery of products for the customer. As with Wade, then, the job duties pertained to much more complex decision making that more closely aligns to LaaS Logistics Managers than the Logistics Coordinators had in using the TMS system. The Court is satisfied, therefore, that the administrative exemption does not apply to the Logistics Coordinators in this case.
DAMAGES
The final outstanding matter is that of damages. Because the Court has found that the administrative exemption does not apply to them, Plaintiffs request the Court find as a matter of law that Plaintiffs should be awarded overtime damages at the time and a half rate specified in Section 207(a)(1). Defendants contend that a proper back-pay calculation only entitles Plaintiffs an extra one-half-pay, not the full one-and-a-half-pay requested by Plaintiffs because of the fluctuating workweek regulation. 29 C.F.R. § 778.114(a).
Defendants invoke the fluctuating workweek method and argue that Plaintiffs' salaries already compensated them for all the hours they worked, including any overtime, and so only a half-time payment is needed to compensate them for the full one-and-a-half time for those hours. In support, Defendants point to guidance from the Department of Labor that states this fluctuating workweek method can be used to compute overtime compensation in an appropriate case. The parties agree that the fluctuating workweek applies where (1) the employee's work hours fluctuate; (2) the employee receives a fixed salary that does not vary with the number of hours worked; (3) the employee's salary is sufficiently high that he or she does not make less than the minimum wage in any given week; and (4) the employee and the employer have a clear and mutual understanding that the fixed salary will be paid regardless of the number of hours worked. See 29 C.F.R. § 778.114(a). They disagree on whether those conditions are met here.
Plaintiffs contend that the fluctuating workweek does not apply here because the parties did not have a "clear and mutual understanding" that the Plaintiffs' fixed salary would be compensation for the hours worked each workweek. Their argument is two-fold. First, Plaintiffs contend that since they were misclassified as exempt, they could not as a logical and legal matter have had an agreement with their employer over how overtime would be calculated. Second, Plaintiffs argue that as a matter of fact there was no agreed schedule on the number of hours worked. Plaintiffs contend that when they were hired they were promised a forty-hour workweek when in reality they worked much longer.
The Court has not found any controlling authority that categorically bars use of a fluctuating workweek in misclassification cases. Nor have Plaintiffs identified such authority. The regulation itself is silent on
the matter. But Urnikis-Negro v. Am. Fam. Prop. Servs., 616 F.3d 665, 666 (7th Cir. 2010), is instructive. The Seventh Circuit Court of Appeals determined that "section 778.114(a) itself does not provide the authority for applying the [fluctuating workweek] method in a misclassification case." Id. The court of appeals determined that the provision "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. But even so, relying on the Supreme Court's decision in Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L.Ed. 1682 (1942), which endorsed the fluctuating workweek method, the court of appeals determined it was appropriate for the district court to use the fluctuating workweek method in the misclassification case. The same rationale opens the door to use of the method here if the facts support it.
In Urnikis-Negro, the employee and employer had never "discuss[ed] the number of hours [the employee] would be expected to work when [the company] hired her." Id. at 667. The district court determined, however, that the employee "understood that her [fixed weekly] salary was to cover whatever time she was called upon to work in a given week." Id. Since the employee's salary was "intended to compensate her not for 40 hours per week or some other fixed number of hours, but for any and all hours that she worked in a given week" it was "Missel [and its endorsement of the fluctuating workweek] which dictate[d] how the regular rate of pay must be calculated." Id. at 681.
As in Urnikis-Negro, the record here includes evidence from which a reasonable fact-finder could similarly find a factual predicate supporting the fluctuating workweek test. On the other hand, the record could also support a reasonable factfinder's finding to the contrary. "Ultimately, the 'employee's regular rate of pay is a factual issue, which requires a threshold determination whether the salary was intended to compensate for a fixed number of hours, or alternatively for all hours worked." Devine v. Ne. Treatment Centers, Inc., No. CV 20-02417, 2021 WL 4803819, at *6 (E.D. Pa. Oct. 14, 2021) (quoting Seymour v. PPG Indus., Inc., 891 F. Supp. 2d 721, 733 (W.D. Pa. 2012)). "[I]f the employee's 'salary was for a fixed number of hours, the employees are entitled to time-and-a-half for overtime work, but 'if the salary was for all time worked, the employees are only entitled to the half-time [rate], because they already received payment for straight time on their overtime hours.'" Id. (quoting Seymour, 891 F. Supp. 2d at 733).
A factual issue exists here that precludes summary judgment for either side on this issue.
CONCLUSION
ACCORDINGLY, IT IS ORDERED that Plaintiffs' motion for corrective notice (ECF No. 103) is DENIED.
IT IS FURTHER ORDERED Plaintiffs' motion for partial summary judgment (ECF No. 95) is GRANTED to the extent the Court determines the FLSA's administrative exemption does not apply to Plaintiffs. Defendants' motion for summary judgment (ECF No. 99) is DENIED to the extent that it seeks a contrary ruling.
IT IS FURTHER ORDERED that in accordance with the Court's November 17, 2023, Order following oral argument, and this Opinion and Order, neither side is entitled to summary judgment on the remainder of the motions relating to liquidated damages, willfulness, and the application of the fluctuating workweek. There
are disputed factual issues on these points that will need to be addressed at trial.