*1 expert testimony agent in of an IRS case, pre- tax
complicated fraud affirmatively
venting Stadtmauer from ad-
mitting categories certain exhibits into during
evidence defense counsel’s cross- of Government
examination witnesses. reasons, affirm
For these the District judgment
Court’s conviction. PARKER, Individually E.
Adrian all behalf of others
similarly situated
v.
NUTRISYSTEM, INC. Wynn,
Deloris Administratrix of the Es- Parker;
tate of Adrian E. Donald J.
Wilson; Stephens, IV; Frank L. Mo- Thompson; Senya Saunders, Ap-
nica
pellants
(Pursuant 12(a), Rule P.) R.App.
Fed.
(Pursuant 43(a)(1), to Rule P.). R.App.
Fed.
No. 09-3545.
United States of Appeals, Court
Third Circuit.
Argued June 2010. Sept.
Filed:
Shanon J. (Argued), Carson Ellen T. Noteware, Berger & Montague, Philadel- PA, phia, Santillo, R. Andrew Peter D. Winebrake, Firm, The Winebrake Law Dresher, PA, Appellants. E. (Argued),
Sarah Bouchard Katherine Krause, Kenny, E. Jonathan S. Morgan, *2 PA, I. for Bockius, Philadelphia, & Lewis Appellee. A. (Ar- Frieden, Moskowitz Laura Paul L. undisputed. The in this case are facts of La- United States gued), NutriSystem weight a loss provider Solicitor, Washington, bor, of the Office It management products. and weight Curiae, Secretary La- DC, Amicus for prepackaged markets sells its meals bor. personal directly for use. Its to customers Goldstein, Demchak, A. Borgen, David product 28-day program. is a meal core CA, Dardarian, Oakland, Bailer, Borgen & NutriSystem offers several varieties Curiae, Employment National for Amicus plan depending meal on customers’ needs. A Association, De Apoyo Comité Lawyers 2008, NutriSystem plans offered Community Trabajadores Agrícolas, Los shipping, or auto- regular two methods of Clinic, Services, Labor Law Legal Cornell prices: regular ship, different a men’s Farmworkers, Juntos, National Friends of $371.50, $319.95; 28-day plan for or Employment Lawyers Guild Labor 28-day for regular plan meal women’s Center, Committee, Law Poverty Southern $293.72; $342.36, or men’s or women’s Center, Working Sugar The Law customers) (for 28-day plan silver older Legal Clinic. Hands $293.72; $342.36, or for or women’s diabetic-friendly 28-day plan for men’s SMITH, FISHER Before: $342.36, $293.72; or or and a women’s COWEN, Judges. Circuit $342.36, 28-day vegetarian men’s for method, the regular or Under $293.72. THE COURT OF OPINION ohly 28-day ship- the customer receives FISHER, Judge. request Circuit affirmatively ment and then must auto-ship shipments. additional Under an order of the appeal This arises from method, signs to receive up a customer Court, July District entered monthly shipments of food and automatic NutriSystem, Inc.’s Appellee granting by NutriSystem monthly on a charged summary (“NutriSystem”) motion to cancel permitted basis. are Customers past claims judgment Appellants’ month. auto-ship plan after the first payments based on violations overtime (“FLSA” typically place customers NutriSystem Act or Fair Labor Standards telephone the internet. “Act”), el their orders via seq.1 We U.S.C. NutriSys- are at a phone calls fielded the District Court must decide whether Horsham, Pennsylvania, tem call center correctly concluded approximately 230 sales as- employs em- which compensating its call-center method poli- NutriSystem a commission under sociates. Under ployees constituted cy, are from NutriSystem prohibited ex- sales associates the FLSA so that more than five minutes remaining idle for paying Appellants from overtime. empt below, awaiting while an inbound call. Before For the reasons articulated reached, an associate five-minute mark is Court that Nutri- agree with District call. originate must an outbound sales compensation plan qualified as a System’s generally people who ruling. These calls are and affirm its 43(a)(1). Wynn Procedure been substituted as lead 1. Deloris has pursuant Appellate plaintiff to Federal Rule filled out profiles company website plan, sation sales associates do not receive but place failed to an order or to custom- overtime compensation when are ers previously who placed orders but the flat rates for the sales made. There is whose credit cards were declined. change no to the flat rates when a sales *3 associate works forty more than
NutriSystem hours in sales associates are as- one week. signed to six different work shifts: 7:00 a.m. p.m., to 3:30 9:00 a.m. to p.m., 5:30
11:00 a.m. p.m., to 7:30 B. p.m. 1:30 to 10:00 p.m., p.m. a.m., 3:30 to 12:00 and 11:00 Parker, Adrian associate, former sales (the p.m. shift”). to 7:30 a.m. “overnight NutriSystem sued for violations 2007, January Since associates, sales ex- FLSA and the Pennsylvania Minimum cept working overnight shift, those Wage Act (“PMWA”), 43 Pa.Stat.Ann. permitted have been to work extra hours 333.101, § seq., et on behalf of himself and during a if week in preceding week similarly others situated (collectively “Ap- they exceeded average “sales dollars pellants”). Parker asserted his FLSA call,” per figure the company calculates claim as collective action under U.S.C. based on the revenue the sales associates 216(b) § and his PMWA claim as a class generate and the calls they make each action under Rule Federal of Civil Proce- week. dure 23. In March NutriSystem implement- In a July order, the District ed compensation scheme as- Court declined to exercise supplemental sociates at issue in this case. Under jurisdiction over Parker’s PMWA class ac- plan, sales associates greater receive the tion claim.2 On September 2008, the either hourly their pay or their flat-rate District Court conditionally granted Par- payments per sale for pay period. each ker’s motion to proceed as a collective The hourly rate is per $10 hour for the claims, action for his FLSA seventy- and forty first week, per hours per $15 eight plaintiffs opted in. hour for overtime. The flat rates sale are each 28-day program $18 sold via NutriSystem moved for summary judg- an incoming call during daytime hours, $25 against ment lead plaintiff Parker and the for each 28-day program sold on an incom- first four opt-in plaintiffs in the FLSA ing call during evening or hours, weekend collective action. NutriSystem informed for each $40 28-day program sold on the District Court it would move for sum- an outbound call or during the overnight mary judgment against the remaining shift. These flat rates do not vary based plaintiffs if the court found in its favor. on the cost of the meal plan to the consum- also Parker moved for summary judgment er. against NutriSystem. July On majority
The of the sales associates the District are granted Court compensated based on rates, these flat for summary motion judgment and denied their hourly earnings. Under the compen- Parker’s. Appellants argue that the District Court District regard Court's decision with abused its discretion declining to exercise jurisdiction its over state law claims. The supplemental jurisdiction over the state class District Court was free to decline to exercise action claims. Because we affirm the District supplemental jurisdiction because it "dis- grant Court’s summary judgment in favor all missed claims which original over it [had] of NutriSystem as to the federal claims jurisdiction.” 1367(c)(3). § 28 U.S.C. it, against we need not address the propriety for a timely ap- service establishment workweek notice
Appellants filed Secretary of Labor has filed speci- peal. applicable excess workweek Ap- support as amicus curiae therein, (1) brief regular pay rate of fied position. pellants’ in excess of such of one hourly the minimum rate one-half times II. under 206 of applicable him section jurisdiction had over The District Court title, more his than half pursuant to 28 claim Appellants’ FLSA representative peri- for a 216(b). We 1331 and 29 U.S.C. U.S.C. (not month) represents less than one od 28 U.S.C. appellate jurisdiction have commissions or services. *4 grant § 1291. We a district court’s review determining compensa- of proportion the summary Levy de v. judgment novo. of commissions, representing tion all earn- Co., 493, 544 501 Sterling Holding F.3d application the ings resulting from of (3d Cir.2008). Summary ap- is judgment rate bona fide commission shall be “if an- pleadings, depositions, the propriate goods deemed commissions on or ser- interrogatories, to and admissions swers regard vices whether the without affidavits, file, any, together the on with computed commissions exceed the draw genuine as to that there is no issue show guarantee. or moving par- that material fact and any of judgment as a matter ty is entitled to 207(i). employer § The 29 U.S.C. has 56(c). Fed.R.Civ.P. law.” demonstrating that eligible of it is burden exception. for the retail commission See III. Co., 290, Ky. Mitchell v. Fin. 359 U.S. 295- case dispute The in this centers (1959); 96, 756, 79 3 L.Ed.2d S.Ct. 815 NutriSystem’s of whether limited issue Inc., Dev., v. Human 233 Madison Res. for of its sales associ- compensating method (3d Cir.2000). 175, 183 F.3d goods on or represents ates “commissions Here, agree that under parties services,” on which turns whether 7(i), NutriSystem qualifies § as a retail of “earnings application from the result[] its sales and that associates’ fide commission rate.” 29 U.S.C. establishment a bona We conclude rate of is more than one and regular pay fide compensation plan establishes “bona wage; times the federal minimum one-half and is therefore a “com- commission rate” meaning is the question we face the FLSA. mission” under or services.” “commissions statute, interpreting “Tn the Court Background A. meaning plain first to looks the statute’s requires employers FLSA and, language statutory if the is clear employees their one and one-half pay inquiry to an unambiguous, comes any pay their rate of for regular times ” Co., Allstate Ins. end.’ v. N.J. Kaufman forty hours hours worked excess (3d Cir.2009) 144, (quoting F.3d 155 561 207(a). 29 The Act con week. U.S.C. Germain, 503 U.S. Nat’l Bank v. Conn. require exception tains an overtime 1146, 253-54, 249, 117 L.Ed.2d 112 S.Ct. or working in retail employees ments (1992)). statutory language 391 Where 7(i), the Section service establishments. court should not con- unambiguous, the exception,” is provides: “retail legislative statutory or histo- purpose sider to have employer No shall be deemed F.C.C., T, AT & Inc. v. 582 F.3d (a) ry. See by section violated this subsection (3d Cir.2009). 490, or 498 employee of a retail employing any 278 Further, determining language light statutory un- whether is ambi- guity Department examine we must statute
ambiguous, “read the in its (the “Department”) Labor’s various inter- ordinary natural sense.” Harvard Se- pretations statute to determine Liquidation cured Creditors Trust v. whether is entitled def- (3d Cir.2009). I.R.S., 444, F.3d 451 A 568 U.S.A., erence. Inc. v. Natu- See Chevron provision ambiguous where only is the dis- Council, Inc., 837, ral Res. 467 U.S. Def. “reasonably puted language susceptible 2778, (1984). 694 S.Ct. L.Ed.2d interpretations.” of different Dobrek v. “Interpretations such as those (3d Cir.2005). Phelan, 419 F.3d interpretations letters —like contained in The FLSA does not define the term statements, manuals, policy agency and en- plain meaning “commission.” The of the all guidelines, forcement of which lack the term, according Dictionary, Law Black’s force of law—do warrant Chevron- to an agent “[a] fee style deference.” Christensen v. Harris transaction, particular usu[ally] per- as a County, 529 U.S. 120 S.Ct. centage money received from the (2000). Rather, interpre- L.Ed.2d 621 Dictionary transaction.” Black’s Law 306 tations contained in opin- formats such as *5 (9th 7(i), however, ed. Section re- respect” ion letters are “entitled to based quires in a commission, order to on agency interpretation’s power be an to persuade. (citing Id. Skidmore v. paid employee fee to the must & be Swift Co., 161, 323 U.S. 65 S.Ct. 89 based on a “bona fide commission rate.” (We (1944) L.Ed. 124 consider “the thor- The “bona fide commission rate” language oughness interpretation’s] in [the evident imprecise capable and of ambiguity. consideration, the validity of interpre- [the Therefore, we plain language hold the of reasoning, interpretation’s] tation’s] [the 7(i) § not provide guidance does sufficient consistency with earlier later pro- and govern to application of the statute in nouncements, and all those factors which this case. Mechmet v. Four Seasons Cf. give interpretation] power [the to per- Ltd., Hotels, (7th 1173, 825 F.2d 1175 Cir. suade, lacking control.”)); power to see 1987) (finding that would not be “[i]t sensi- Co., also v. Packard Pittsburgh Transp. try ble to decide on to case the basis of [a] (3d Cir.2005). 246, 418 F.3d 253 In this dictionary meanings, or matter case, Department we examine the various common legal usages, of the word ‘commis- opinion letters addressing meaning of ”). sion.’ commission. Both to point sides court de- Because cannot unlock the meaning that, they claim, cisions support their in- plain of “commission” based on lan- terpretation the term of “commission” un- context, guage in this we consider legisla- der section tive history statutory and purpose. See In Appellants qualify submit that to as a re Lord Mut. Litig., Abbett Funds Fee 553 7(i), § commission under the fee to an (3d (“ 248, Cir.2009) F.3d 254 ‘Where the be must based on the final cost statutory language express does not Con- the consumer and that gress’s unequivocally, intent court tradi- therefore, plan, would qualify not as a tionally legislative history refers and commission because flat rate in atmosphere which the statute was consumer, are on the based not cost to the an enacted in attempt to determine the but on time both the the sale was consum- ”) congressional purpose.’ (quoting United mated it and whether was the result of an (3d Gregg, States v. F.3d incoming outgoing Depart- or call. The Cir.2000)). Appellants’ ment supports position and ar- workers for compensate def- overtime that we should afford Skidmore gues risk of accidents expressed workplace the increased its consistent view erence face from or overex- they might exhaustion qualify letters that to as various (7th Mechmet, 7(i) ertion. F.2d 1175-76 pay- of commission Cir.1987) (citing 75th H.R.Rep. No. of the “linked to the cost must be ment (1937); No. Cong., S.Rep. 1st Sess. to the product provided or services sold (1937)). 21.) Cong., 75th 1st Sess. Br. at (Dep’t Labor customer.” hand, asserts NutriSystem, on other Interpretations Labor C. as compensation qualifies that its scheme associates’ Department’s regulations specifical- because the sales 7(i): pay ly purpose across their com- elaborate pay periods, varies to the number of 7(i) was linked pensation to relieve an Section enacted worked, pro- the payments were hours employer obligation paying from the cost to portional to the consumer. overtime to certain em- a retail ployees of or service establish- Legislative History B. wholly greater part ment or in protect enacted the FLSA “to These em- Congress the basis commissions. ployees generally employed all covered workers from substandard are so- hours, ‘la oppressive working “big ticket” wages departments called parts conditions detrimental those of estab- [that are] bor establishments minimum standard of maintenance lishments where commission methods of health, efficiency used, living necessary for payment traditionally have been ” well-being furniture, Barren general typically dealing workers.’ those bed- *6 Inc., Sys., v. Ark.-Best 450 home Freight ding furnishings, tine floor cover- major 101 L.Ed.2d ing, draperies, S.Ct. musical appliances, U.S. (1981) 202(a)). instruments, television, (quoting radios 29 U.S.C. men’s shoes, designed clothing, wear, Act was “to ensure each women’s ready The to by corsets, insulation, receive covered the Act would home and various day’s pay day’s may fair for a fair work’ and custom home orders. There be ‘[a] protected segments retailing be ‘the evil of over would from other where the ” underpay.’ (quoting as well as Id. proportionate work amount of commission (1937) Cong. (message enough Rec. 4983 would great be Roosevelt)). employed segments employees President such Each exemption. to come within the legislative history The of the overtime examined, situation will be where such re- compensation provisions of the FLSA claimed, make certain exemption to purpose underlying them: veal a threefold employees exempt treated as from who, prevent perhaps workers out of to compensation overtime section are desperation, willing to work abnormal- 7(i) properly statutory are within away ly long taking jobs hours from from exclusion. hours, includ- prefer who shorter workers § 779.414. 29 C.F.R. members; (2) spread available ing union among larger Although Department a number workers has not de- work regulations,3 thereby unemployment; reduce fined “commission” in its regula- Labor’s A commission rate is not bona fide if 3. While commission, computing formula for the commissions they speci- not define do tions do fact, always employee, that the such fy a fide is not: what bona always amount almost earns the same fixed Wage Depart- and Hour Division of the Flat “paid regard fees without ment of attempted explain Labor has performed value of the service do not meaning of the term “commission” un- represent ‘commissions on or ser- der retail commission exception 7(i).” vices’ for of Sec[tion] through various letters. The fol- 21h04(c) Operations Handbook, Field lowing three letters are most relevant to Rather, ... employees paid a flat fee analysis. our “are compensated considered to be aon
First,
piece
Department opined
that alarm
rate basis and not on the basis of
who
compensated
installers
were
system
Commissions,
commissions.
pur-
percentage
price
the sales
based on
poses
7(i),
usually
Sec[tion]
denotes
systems they
alarm
installed
paid
were
percentage of the amount of
paid
monies
However,
a commission.
installers who
Moreover,
out or received.”
...
in-
paid
per
were
a flat fee
installation were
employees paid
structional
flat fee
paid
a commission and did not fall
lesson or session taught appear likely to
scope
within the
of section
Dep’t of
week,
earn the same amount each
con-
Ltr.,
Op.
(Apr.
Labor
Another of a wages commission upon greatly to his based reduced which would not be considered percentage applied as bona fide to the sales above the is one in expected which the quota. receives a regular payment constituting nearly 779.416(c). en- his 29 C.F.R. (2) rap- job by hours for the the ratio of the encouraged were work employees varied efficiently, pay and their idly and actual hours worked to team member’s letter, to week. In its from week team, by the the total hours worked payment concluded that (not by wage, then booked was a commission because arrangement worked) hour, actually based on the skill payment appears to be “the amount of quality of the individual team mem- per- the value of the service related to ber. formed.” Id. at Id. Law D. Relevant Case system considering whether weighed This Court has system compensation was a commission qualifies as a commission question of what statute, meaning Judge within the of the meaning Decisions on the Posner, Circuit, writing for the Seventh under the retail commission “commission” stated: are, fact, sparse. Klinedinst exception essence of a commission is that it [t]he Invs., Inc., 1251, 1254 260 F.3d v. Swift sales, compensation on for exam- bases Cir.2001) (11th (noting meaning that the of the ple percentage price, as “is an that finds little commission issue when a real estate broker receives as his sparse from the case law and illumination percentage price regu vague references statutes property he brokers is sold. which lations.”). to be deci appear There do not likely Although his income is to be influ- from other circuits that have consid sions by enced the number of hours a week compensating call center ered whether works, unlikely that he the relation is payments quali with flat rate employees bona fide commissions under regular fies as one. In one week be business limit Of the exception. retail slow; may may he make be no sales and issue, find the ed case law on this thus have no income for that week. The following case most instructive. may pick up by next week business working may overtime that week he be Centers, Sterling
In Yi v. Collision (7th Cir.2007), up the defendants able to make the income he lost F.3d 505 plaintiff auto mechanics under the previous of slack because business following scheme: year week. Over a his hours of work Sterling] calculates the num- may regular
[Defendant be similar to those of hour- normally to do a required ber of hours ly employees. So he had to be (these given type repair are called overtime, his annual income would be *8 hours”) multiplies “booked higher though than theirs even he hadn’t by figure. product number a dollar The worked more hours over the course of multiplication price the of this labor year the than had. We take this to repair Sterling to the the customer. be the rationale for the commission ex- price material costs to the labor to adds emption pro- from the FLSA’s overtime up price. with a final A team of come vision. job. the assigned mechanics is then at Seventh noted that Id. 508. The Circuit team track of keeps Each member the a commission can be based on the full job. the hours he works on the When only or service or on price good of the sold completed it’s and the hours of the team part price, example price of the for the up, Sterling members are added deter- goes good the into the or ser- labor compensation by mines each member’s in con- the number of booked vice. Id. at 509-10. The court Yi multiplying 282 letter, compensation plan however, that the at issue the instant That
eluded
case.
did
formally
express
opinion
was indeed a commission under
an
compensation scheme because of
lack
the
E.
Compensation
provided by
of information
employer.
7(i)
Plan and Section
Rather,
broad,
provided only
the letter
general guidance by citing to the Depart-
1. Skidmore Deference
Wage
ment’s
and Hour
Operations
Field
Department argues
The
that we should
Handbook.
afford Skidmore deference to the consis-
(Nov.
WL 3308624
This broad
expressed
opinion
tent view
in its various
guidance, which
applied
was not
to the
qualify
letters that to
as a
for
commission
letter,
in
insufficiently
facts
“thor-
7(i),
purposes
payment
must be
ough”
persuade
us that a product
“linked to the cost of the
sold or
vary
must
based on the end cost to con-
provided
(Dep’t
services
to the customer.”
Further,
guidance
sumers.
the letter’s
21.)
Br. at
differently,
Labor
Put
explicitly require
does not
that an increase
commission,
qualify as
an increase in the
in the cost to the consumer
in
result
an
cost to the consumer must result
in a
in
paid
increase
the commission
to the
corresponding increase to the amount of
requirement
the Depart-
—the
(See
payment
made to the employee.
urges
Rather,
ment
adopt.
us to
it states
(“Had,
instance,
id. at
NutriSystem
for
that “flat
paid
regard
fees
without
to the
utilized fixed
that varied accord-
performed
value of the service
rep-
do not
ing to the differences in the cost to the
resent commissions on
or services
customer,
this would have constituted a
7(i),”
purposes
Sec[tion]
“Com-
7(i).”).)
commission under section
missions,
7(1),
of Sec[tion]
Although
Department may
have
usually
a percentage
denote[ ]
of the
“specialized experience”
more
than we do amount of
paid
monies
out or received.”
day-to-day
administration of the
(internal
Id.
quotations and citations omit-
FLSA, we do not
opinion
find that
ted)
(emphasis
original). This lack of a
provide
letters at issue here
sufficiently consistent definition of commission further
thorough reasoning, consistency, or factual weighs against
persuasiveness
similarities to the instant case to warrant Department’s opinion letters. See Skid-
Skidmore,
deference. See
at
U.S.
more,
U.S.
At
Department pointed
the
ability
factors of
pref-
sales
and customer
employee
the health club
being
erence,
letter as
which
present
are not
in
De-
the
factually closest and
partment’s
most instructive to
supra,
letters discussed
made to an
based
payments
asso-
rate
NutriSystem’s sales
whether
dictate
employee’s
proportionally
that
sales are
on
compensa-
are
the additional
ciates
charges passed
to the
on to the
related
tion.
consumer,
payments
can be considered
sum,
Department’s
not find
we do
pur-
fide commission rate for the
a bona
opinion letters
factually distinguishable
7(i).
§
poses of
sufficiently
guidance
general
and broad
First,
agree
we
the District
with
Court
to warrant defer-
thorough or consistent
NutriSystem’s
that the
made to
See id.
ence
this case.
sufficiently
are
proportion-
sales associates
Percentage of Cost to Consumer
2.
qualify
al to the cost to the consumer to
as
7(i). See, e.g.,
commission under section
Further,
that
adopt
a test
we decline
Yi,
508; Dep’t
Op.
480 F.3d at
of Labor
7(i),
commission,
§
under
to be
requires a
(June
Ltr.,
WL
percentage
a
of the end
strictly based on
only a
There is
small difference between
the various
to the consumer. While
cost
the absolute dollar value of the three flat-
that a
supra suggest
definitions discussed
($18.00,
paid to
rate fees
sales associates
per-
calculated as a
typically
commission is
$40.00).
$25.00, and
The variance in the
example
real
centage
price
of sales —for
percentage
flat-rate fee as
the cost to
of a house’s
broker receives 10%
estate
consumer,
14%,
ranges
which
from
salesmen receives 20%
5%—
price
paint
sale
relatively
Appendix
is also
small. See
I.
of his sales—both
relatively
support
small differences
These
recognized that
other courts have
proportionality
that
proposition
relationship is not a re-
percentage
strict
to the consumer exists in this case.
cost
a commission scheme under
quirement for
example
offered an
The District Court
§
See
defining proportionality, which we find
(Nov.
2005) (“Commis-
WL 3308624
helpful: “proportionality would not exist
7(i),
sions,
usual-
of Sec[tion]
an
the same dollar
employee were
(emphasis add-
ly
percentage.”)
denotes a
selling
ring
as a
amount
$10
Therefore,
ed); Yi,
at
480 F.3d
508.
$1,000,000 ring.”
plainly
This is
not the
not calcu-
NutriSystem’s plan
fact that
is
here,
case
as the differences
the costs of
strictly
percentage
price
as a
of sale
lated
small,
plans
relatively
the meal
are
with
disqualify
being
it from
a commis-
does
plans costing
four of the five meal
7(i).4
sion
same,
plan
slightly
The men’s
$342.36.
$371.50,
Proportionality
and Sales
it
expensive,
more
because
con-
food. Customers can receive a
tains more
persuade
A number of factors
us
products by
on all five
select-
discount
$50
compensation plan es
ing
auto-ship option.5
fide commission rate”
tablishes a “bona
Second,
NutriSys-
it
persuasive
and is therefore a “commission” under
sales,”
plan
flat-
“bases
conclude that when the
tem’s
FLSA. We
whole,
precisely
Department’s
regulations provide
but rather is tied
4. The
own
make as
each sales associate
guidance on what is not a bona fide commis-
number
779.416(c). NutriSys-
plan.
closes.
sion
29 C.F.R.
plan
either of the
tem’s
does not fall into
argument dealing
examples given
regulation, and neither
5. There was discussion
in that
We,
proportionality.
Department argue
with the boundaries of
Appellants
that it
nor
Court,
vary
need not define the
NutriSystem’s employees' pay can
like the District
does.
proportionality
limits of
here as
are
greatly
pay periods and the
is not
outer
across
NutriSystem expects to
that it exists in this case.
on the sales
satisfied
based
*10
just
Judge
regular shipping
only
described Yi. 480
method but
a
as
Posner
$22.04
auto-ship
commission under the
method.
plan,
F.3d at 510.
a flat rate
Under
NutriSystem
auto-ship
offers the
method
a
fee is not
unless
sales associate
company
at a discount because the
believes
flat
a
rate
completes
sale.
end,
shipping
gen-
method will
payment
to both the time the sale is
is tied
the company greater
erate
revenue. A
on an incom-
made and whether it is based
associate, however,
prefer
sales
would
to
call,
being
rather than
ing
outgoing
plan
sell
consumer meal
under the
percentage of the cost to the consumer.
regular shipping method because the asso-
payment
based on
The amount of the
large
ciate receives a
commission. Nutri-
NutriSystem
receiving
the value
from
System’s plan eliminates this disincentive
the sales associates’ work. Under this
by providing associates with a flat rate
an
plan, NutriSystem creates
incentive for
directly
commission not
tied to the end
actively making
sales associates to be
out-
cost to consumers.
going calls and to work less desirable
Finally, NutriSystem’s plan
not of-
does
hours,
allowing NutriSystem oper-
thus
fend the
of the FLSA and the
peak efficiency
ate at
around the clock.
provisions
overtime
supra
discussed
The sales associates’
is also
Mechmet,
1175-76,
Yi,
825 F.2d at
worked,”
“decoupled from actual time
First,
at
Appellants’
F.3d
income
characteristic both the Seventh Circuit and
years they
in the
at NutriSystem
worked
identified as a hallmark of
$40,000
ranged
approximately
from
to over
509;
“how
work.”
commissions
Id.
see
$80,000,
not
thus
were
the lower-
age advantage consumers to take IV.
discounts that result from auto-ship example, NutriSystem method. For had reasons, foregoing For the af- we will declared a 7% products commission on all firm the District grant summary Court’s sold, a sales associate would earn a judgment NutriSystem $26.01 denial of commission on a summary judgment men’s under the Appellants. *11 a commis-
COWEN,
view that
order
constitute
Judge, dissenting.
Circuit
7(1),
purposes of
the amount of
sion for
afford
majority,
I would
Unlike
to the
must
Department’s
deference
Skidmore
*12
exemption,
paid
instructors
a flat fee
proportionally related to the amount
be
per
Because Nutri-
lesson would not because
fees
charged
“[f]lat
to the customer.
requisite
paid
regard
without
to the value of the
System failed to demonstrate
compensation plan
performed
represent
can-
service
do not
‘com-
proportionality, its
missions on
or services’ for purposes
considered a bona fide commission
be
7(1).”
7(1).
Ltr.,
Dep’t
Op.
§
of
of Labor
[§ ]
under
(internal
(Nov.
2005)
14,
such undisputed
It vary price depending on the plans
meal the customer
type plan of meal chooses length of the customer’s commit-
and the that the undisputed
ment. It is likewise associate does
flat-rate fee vary type depending length chooses or the of the cus-
customer NutriSystem clearly
tomer’s commitment. not demonstrated that the flat-rate
has related to the cost proportionally
fees are plain-
to the customer. While neither the Department suggests nor the that a
tiffs per-
commission must be based on strict consumer,
centage of the end cost payments
the flat-rate this case do not
correspond at all with the end cost to the Rather, the flat-rate
consumer.
are based on the time the sale is made and incoming it from an
whether results NutriSystem
outgoing call. The fact that portray math to its flat-rate perform
can percentages
fees as of customer costs does the fees into commissions.
not transform agree
Therefore I am unable to with the
majority and would reverse and remand proceedings.
for further