Lalli v. General Nutrition Centers, Inc.
814 F.3d 1
| 1st Cir. | 2016Background
- From Aug 2009–Jan 2013 Lalli worked as a GNC store manager in Massachusetts; he received a guaranteed weekly salary plus non-discretionary weekly sales commissions and overtime premiums for hours >40.
- GNC calculated overtime using the fluctuating workweek (FWW): (salary + weekly commissions) ÷ hours worked = regular hourly rate, then paid an extra 50% of that rate for overtime hours.
- Lalli sued under the FLSA and Massachusetts law, alleging FWW is inapplicable because his weekly pay varied due to commissions (i.e., salary was not a fixed amount).
- The district court dismissed; it held an employer may use FWW when a fixed salary is combined with performance-based commissions if the regulations’ conditions are met.
- The First Circuit reviewed de novo and affirmed, holding that combining a fixed salary (per §778.114) with weekly commissions (per §778.118) does not invalidate the FWW calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FWW may be used when weekly pay varies due to performance-based commissions | Lalli: FWW requires a truly fixed weekly amount; variable commissions defeat §778.114’s fixed-salary requirement | GNC: Salary portion was fixed for hours worked; commissions are separate and may be included in the regular-rate calculation under §778.118 | Held: FWW may apply; fixed salary requirement refers to salary for hours worked, not total weekly compensation, and commissions can be added to the regular-rate calculation |
| Whether O’Brien v. Town of Agawam bars combining salary with other pay components | Lalli: O’Brien’s language (straight-time pay) shows any extra pay included in regular rate removes FWW eligibility | GNC: O’Brien concerned time-based premiums (contractual overtime, shift differentials), distinguishable from performance commissions | Held: O’Brien is distinguishable; it prohibits time- or hour-based premiums but does not reach performance-based commissions |
| Effect of DOL’s April 2011 bulletin rejecting a proposed change to §778.114 | Lalli: DOL’s rejection implies §778.114 cannot co-exist with bonuses/commissions | GNC: Bulletin addressed hour-based bonuses/premiums, not performance commissions | Held: Bulletin addressed hour-based pay and did not disturb courts’ distinction; it does not preclude performance-based commissions under §778.114 |
| Whether commissions tied to sales are effectively time-based and thus incompatible with §778.114 | Lalli: Sales may correlate with hours; commissions therefore vary with hours and defeat fixed salary | GNC: Commissions vary with productivity, not with particular hours worked; they are not hour-based premiums | Held: Court adopts uniform distinction: time-based premiums (night/weekend/shift pay) invalidate FWW; performance-based commissions do not when salary covers straight-time for hours worked |
Key Cases Cited
- Walling v. Youngerman-Reynolds Hardwood Co., 325 U.S. 419 (Describes regular rate concept and salary-treated-as-straight-time under FLSA)
- Overnight Motor Transp. Co. v. Missel, 316 U.S. 572 (Explains dividing fixed weekly salary by actual hours to get weekly regular rate)
- O'Brien v. Town of Agawam, 350 F.3d 279 (1st Cir.) (applies §778.114 four-factor FWW test; distinguishes hour-based premiums from fixed salary)
- Wills v. RadioShack Corp., 981 F. Supp. 2d 245 (S.D.N.Y.) (distinguishes time-based bonuses from performance-based commissions when evaluating FWW)
- Valerio v. Putnam Assocs. Inc., 173 F.3d 35 (1st Cir.) (noting state wage law parallels FLSA obligations)