Robert Stein v. hhgregg Inc.
873 F.3d 523
| 6th Cir. | 2017Background
- hhgregg paid retail sales staff solely by commission but advanced weekly "draws" to bring pay up to minimum wage (or 1.5x minimum for overtime weeks); draws were calculated weekly and varied with commissions.
- Draws were typically recouped by deducting from future commissions; policy language also stated employees remained liable to "immediately pay" any unpaid deficit upon termination.
- Plaintiffs Stein and Beck (current and former hhgregg sales employees) sued as a collective/class, alleging FLSA violations (minimum wage, overtime, willfulness), off-the-clock work, and an unjust enrichment state claim.
- The district court dismissed all federal claims, relying on DOL opinion letters and finding the policy lawful; plaintiffs appealed.
- The Sixth Circuit reversed in part: it held (1) the §207(i) retail overtime exemption did not apply on the pleadings, (2) recouping draws from future unpaid commissions is lawful, but (3) holding employees liable for repayment after termination (clawback of wages already paid) plausibly violates the FLSA, and (4) allegations that managers encouraged off-the-clock work and thus deprived employees of pay were sufficient to survive dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §207(i) retail/service overtime exemption bars claims | Plaintiffs: exemption doesn't apply because regular rate isn't shown to exceed 1.5x minimum on pleadings | hhgregg: employees are paid so exemption applies | Court: exemption not shown on pleadings; district court erred to apply it |
| Whether recouping draws from future commissions violates the FLSA "free and clear" rule | Plaintiffs: draws are effectively loans/kickbacks and reduce wages already paid | hhgregg: DOL guidance permits crediting draws against future unpaid commissions | Court: deductions from future unpaid commissions lawful; not an unlawful kickback |
| Whether policy requiring repayment upon termination (post-termination clawback) violates FLSA | Plaintiffs: policy allows employer to reclaim wages already paid on termination, violating "free and clear" rule | hhgregg: claimed it has not enforced and will not enforce such clawbacks; policy language is harmless | Court: policy language itself plausibly violates FLSA because it can require repayment of wages already delivered; claim survives dismissal |
| Whether alleged managerial encouragement of "off-the-clock" work and related practices state minimum-wage/overtime claims | Plaintiffs: managers tolerated/encouraged underreporting hours to avoid larger draws, causing unpaid time and improper overtime pay | hhgregg: any underreporting merely shifts pay between weeks and does not deprive employees overall | Court: allegations suffice—employer may not shift pay between weekly pay periods; off-the-clock allegations plausibly state minimum-wage and overtime claims |
Key Cases Cited
- Skidmore v. Swift & Co., 323 U.S. 134 (1944) (agency interpretations merit persuasive weight based on consistency and reasoning)
- Christensen v. Harris County, 529 U.S. 576 (2000) (informal agency interpretations not entitled to Chevron deference)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (framework for deference to agency regulations)
- Myers v. Copper Cellar Corp., 192 F.3d 546 (6th Cir. 1999) (persuasive authority of DOL Field Operations Handbook considered by Sixth Circuit)