Lead Opinion
Serco, Inc. (“Serco”) appeals the district court’s ruling on summary judgment that civilian military recruiters employed by the company are entitled to overtime compensation under the Fair Labor Standards Act (“FLSA”). We conclude that because Serco’s employees did not obtain commitments from recruits, they were not engaged in sales. They therefore do not fall under FLSA’s “outside salesmen” exemption. The employees, Gary Clement and David Gerber (“Employees”), cross-appeal the district court’s calculation of back-pay based on the “fluctuating workweek” approach, and ask this court to remand for calculation under the “time-and-a-half’ method. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm the district court’s summary judgment ruling and its calculation of back-pay.
I. Factual Background
The United States Army contracted with Serco
The parties describe the Employees’ duties differently. The Employees characterize their jobs as cold-calling individuals to inform them about opportunities to serve in the U.S. Army or U.S. Army Reserves. The Employees testified that they spent most of their time in Serco’s office making phone calls to prospective recruits. Serco, on the other hand, cites to deposition testimony and affidavits describing the nature of the job as one in which the Employees were expected to be
Once a recruit expressed interest, the Employees set up an initial interview and administered pre-screening math and English tests to determine if the recruit met the minimum requirements for enlistment. If the requirements were met, the Employees maintained contact with the recruit and engaged in other follow-up activities, such as obtaining background checks, court records, birth certificates, health records, and other documents required for enlistment.
The Employees had no authority to enlist a recruit. Instead, recruits were enlisted at a Military Entrance Processing Station (“MEPS”), owned and operated by the United States. At the MEPS, a recruit first underwent a physical exam. If she passed, she interviewed with U.S. Army officials and decided whether to enlist. Recruits also met with guidance counselors to discuss the various jobs available to the recruit. Recruits spent an entire day at the MEPS, usually starting at six o'clock in the morning and ending at three or four o'clock in the afternoon. A recruit could only sign an Oath of Enlistment in the Armed Forces of the United States at the MEPS. The Employees, although unable to enlist a recruit, often drove their recruits to the MEPS, and then returned at the end of the day to give them a ride home.
After a recruit enlisted, the Employees met with recruits regularly. They provided additional training and often made telephone calls to the recruits to reinforce their decision to join the U.S. Army or U.S. Army Reserves. The goal of this continued contact was to keep the recruits enthused about their decision to enlist.
Serco paid the Employees a starting salary of $600.00 per week. The Employees’ salaries were nominally increased in February 2003. Additionally, Serco paid a commission if the Employees reached established quotas for recruits who enlisted and reported to their assigned training center. The Employees kept time cards which were submitted to a supervisor at the end of each week or pay period. Clements worked 480 overtime hours and Gerber worked 596.5 overtime hours. Serco, however, did not pay either employee overtime.
II. Analysis
Congress enacted the FLSA in order to improve “labor conditions detrimental to the maintenance of the minimum standard of living necessary for the health, efficiency, and general well-being of workers.” 29 U.S.C. § 202(a). To further this remedial aim, the FLSA requires employers to pay time and one-half to employees who work more than forty hours a week and who are not exempt. 29 U.S.C. § 207(a)(2)(C). The FLSA exempts employees who are classified as “outside salesmen” from the overtime-pay requirement. 29 U.S.C. § 213(a)(1). Congress delegated authority
Exercising the delegated authority, the Secretary promulgated 29 C.F.R. § 541.500, defining “outside salesman” as any employee:
(a) Who is employed for the purpose of and who is customarily and regularly engaged away from his employer’s place or places of business in:
(1) Making sales within the meaning of section 3(k) of the Act; or
(2) Obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
(b) Whose hours of work of a nature other than that described in paragraph (a)(1) or (2) of this section do not exceed 20 percent of the hours worked in the workweek by nonexempt employees of the employer: Provided, that work performed incidental to and in conjunction with the employee’s own outside sales or solicitations, including incidental deliveries and collections, shall not be regarded as nonexempt work.
29 C.F.R. § 541.500 (2003).
We review the grant of a summary judgment motion de novo, viewing all evidence and reasonable inferences in the light most favorable to the nonmoving party. Fye v. Okla. Corp. Comm’n,
Serco argues the district court erred by concluding the Employees were not outside salesmen because they did not have the authority to “close the sale.” The inability of the Employees, Serco contends, to accompany recruits into the MEPS and obtain their commitment, by way of signing the Oath of Enlistment, is not dispositive. No one other than the Employees “sold” the Army to the recruits. We disagree. Although the Employees engaged in sales training and “sold” the idea of joining the Army to potential recruits, it did not engage in sales work as defined by the Department of Labor regulations.
The touchstone for making a sale, under the Federal Regulations, is obtaining a commitment. This can be done by making a sale or obtaining an order or contract for
This manufacturer’s representative may perform various types of promotional activities such as putting up displays and posters, removing damaged or spoiled stock from the merchant’s shelves or rearranging the merchandise. Such persons can be considered salesmen only if they are actually employed for the purpose of and are engaged in making sales or contracts. To the extent that they are engaged in promotional activities designed to stimulate sales which will be made by someone else the work must be considered nonexempt.
Id. § 541.504(b)(2). The regulation further explains, “the test is whether the person is actually engaged in activities directed toward the consummation of his own sales, at least to the extent of obtaining a commitment to buy from the person to whom he is selling. If his efforts are directed toward stimulating the sales of his company generally rather than the consummation of his own specific sales his activities are not exempt.” Id. (emphasis added); see also id. § 541.503 (explaining sales work includes “any other work performed by the employee in furthering his own sales efforts”).
This concept is illustrated in Wirtz v. Keystone Readers Serv., Inc.,
Although a civilian military recruiter is in many ways unlike a student selling magazines door to door, the parallels between these two cases lead us to conclude the Employees likewise engaged in promotional work, paving the way for someone else — the United States Army — to make the sale. Sereo contests this characterization, arguing no one at the MEPS could have “sold” the recruit on joining the Army. Even when viewing the evidence in the light most favorable to Serco, the record does not support this contention. It was only at the MEPS that a recruit could pass the needed physical to enlist, choose a suitable job, and sign an oath to enlist. Before a recruit arrived at the MEPS, no “order or contract” had been obtained; the Employees merely cultivated “a list of persons who seem[ed] receptive to the idea” of joining the Army. Wirtz,
Ordinarily, an individual who regularly performs recruitment for a college is not engaged in making sales of the college’s services, or obtaining contracts for its services. Rather, college recruitment activity appears analogous to sales promotion work, since, like a promotion person who solicits customers for a business, the college recruiter is engaged in identifying qualified customers, i.e., students, and inducing their application to the college, which in turn decides whether to make a contractual offer of its educational services to the applicant.
Opinion Letter from Dept. of Labor, Wage and Hour Div. (Feb. 19, 1998),
Serco argues its employees, however, are more akin to the “field representatives” in Nielsen v. DeVry, Inc.,
Although the Employees’ job duties appear quite similar to those of the field representatives in DeVry, they differ in an important aspect. Unlike the field representatives, who could offer a prospective student admission to DeVry, Serco’s civilian military recruiters could only lay the groundwork. It was the Army — and only the Army — who could enlist a recruit. Thus, the Employees operated more like the college recruiters described in the Department of Labor’s opinion letters than DeVry’s field representatives. Because the Employees were not engaged in sales, as defined by the Department of Labor’s regulations, they were not “outside salesmen.” We therefore affirm the district court.
The FLSA requires eligible employees to be compensated at one and one-half their hourly wages for overtime hours worked. 29 U.S.C. § 207(a)(1). Where, however, certain conditions are met, the rate is reduced to “half time.” 29 C.F.R. § 778.114 (2003). This is referred to as the “fluctuating workweek” method. Pursuant to the Department of Labor’s regulations, the fluctuating workweek method is to be used when “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.” Id. § 778.114(a). Under this kind of compensation structure, the salary “is intended to compensate the employee at straight time rates for whatever hours are worked in the workweek.” Id. Thus, regardless of the fluctuating nature of the hours an employee may work, be it forty or sixty, the salary is intended to pay for all hours worked. In contrast, an employee who is compensated on an hourly basis is entitled to overtime calculated by the time-and-a-half method.
By its own terms, § 778.114 applies only if there is “a clear mutual understanding of the parties” that the fixed salary is compensation for however many hours the employee may work in a particular week, rather than for a fixed number of hours per week. The district court found the parties had such an understanding, and therefore calculated back pay pursuant to the fluctuating workweek method. The Employees cross-appeal this ruling and ask this court to hold the Employees are entitled to back pay calculated pursuant to the time-and-a-half formula.
The Employees contend § 778.114 requires that the “clear mutual understanding” must extend to how overtime premiums would be calculated. The parties initially agreed that no overtime would be paid; thus, no agreement as to the payment of overtime ever existed. The regulation, however, “calls for no such enlarged understanding.” Valerio v. Putnam Assoc. Inc.,
We agree with the district court that the parties had this clear and mutual understanding. The plaintiffs stated in deposition testimony that they were hired on a
The Employees point to two pieces of evidence to suggest such an understanding did not exist. First, Clements testified that Serco’s manager, Steve Hixon, stated the Employees “would be paid a salary of $600.00 per week and that this would work out to $15.00 per hour.” A close examination of this statement, however, reveals that Clements testified that his understanding was that the Employees’ effective rate of pay was $15.00 an hour, not that the Employees would be paid by the hour. The Employees, in subsequent affidavits, expressed that they understood Hixon’s statements to mean they would be compensated for forty hours of work a week. This testimony does not create a disputed material fact. The existence of a clear and mutual understanding “may be based on the implied terms of one’s employment agreement if it is clear from the employee’s actions that he or she understood the payment plan in spite of after-the-fact verbal contentions otherwise.” Mayhew,
Based on the fluctuating workweek method, the district court awarded Clements $3,006.82 in back pay and Gerber $3,651.02. We affirm this award.
IV. Conclusion
For the foregoing reasons, we affirm the district court.
Notes
. The original contract was signed by Resource Consultants, Inc. On December 31, 2006, Resource Consultants was merged into Serco. Serco was then substituted for Resource Consultants in this litigation.
. Serco included two government documents discussing military recruiting and portions of the Army-Serco contract in their appendix. These materials were not before the district court. As such, we decline to consider them in our review. See United States v. Kennedy,
. The regulations governing the "outside salesman" exemption were amended on August 23, 2004. The prior regulations, however, govern this case and all citations to the C.F.R. herein refer to the 2003 version of the regulations.
. We note it is possible that even if Serco's employees had obtained commitments from recruits, they would still not qualify as outside salesmen. A good argument can be made that "sales” in this context is used in the metaphorical sense only; instead, the Em
The inclusion of the word "services” is not intended to exempt persons who, in a very loose sense, are sometimes described as selling "services.” For example, it does not include persons such as servicemen even though they may sell the service which they themselves perform. Nor does it include outside buyers, who in a very loose sense are sometimes described as selling their employer’s "service” to the person from whom they obtain their goods. It is obvious that the relationship here is the reverse of that of salesman-customer.
29 C.F.R. § 541.501(e) (2003). In a loose sense, the Employees were selling the Army’s services; they were promoting the idea of a military career. The Army, however, appears to be the customer, paying for the services of the recruits who enlist. The parties do not raise this argument and we decline to sua sponte decide the case on this ground.
Concurrence Opinion
concurring.
I agree with the majority that the plaintiffs here were not “outside salesmen” because they did not have the authority to complete the transaction of signing recruits up for the Army. The more fundamental reason the plaintiffs must prevail, however, is that the activity of recruiting employees is not “sales” within the meaning of the Fair Labor Standards Act. The governing regulations define the term “outside salesman” as an employee “engaged away irom his employer’s place, or places, of business” in “making sales” or “obtaining orders or contracts for services.” 29 C.F.R. § 541.500. A recruiter does not sell goods or services or obtain orders or contracts for goods or services. Rather, the recruiter purchases (or in this case, engages in promotional activities leading to the purchase of) services from the recruit. A recruiter is more like a buyer than a seller.
Presumably, the majority does not place primary reliance on this rationale, see Maj. Op. 1229-30 n. 4, because in their briefs in this Court the appellees focused on other legal arguments. I have no quarrel with that, but the opinion should not be misconstrued as implying that recruiters would be “salesmen” if they had the authority to finalize the enlistments. Even if the plaintiffs in this case had accompanied the recruits into the recruiting station and signed the final paperwork on behalf of the Army, this would not make them “salesmen.” To be a salesmen, the employee’s job must be to sell. Hiring, or recruiting for hire, is not sales.
. A college recruiter is different. A college recruiter persuades prospective students to