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Modeski v. Summit Retail Solutions, Inc.

United States District Court, D. Massachusetts

April 23, 2019

JOSEPH MODESKI, et al., on behalf of themselves and all similarly situated employees, Plaintiffs,
v.
SUMMIT RETAIL SOLUTIONS, INC., Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS

          F. Dennis Saylor, IV United States District Judge.

         This case concerns claims by “Brand Representatives” against their employer, defendant Summit Retail Solutions, for violations of the Fair Labor Standards Act (“FLSA”) and analogous laws of Maryland, New York, and Pennsylvania. Section 207 of the FLSA requires employers to compensate all non-overtime exempt employees at not less than one and one-half times their regular wage for each hour worked in excess of 40 hours per work-week. Only those who work in certain capacities, including outside salespersons, are exempt from that requirement. Plaintiffs contend that Summit improperly classified its Brand Representatives as overtime-exempt and thus denied them overtime compensation to which they were entitled. Section 216(b) of the FLSA further permits employees to bring collective actions on behalf of themselves and others who are similarly situated.

         Defendant has moved to dismiss the complaint. For the following reasons, the motion to dismiss will be denied.

         I. Background

         A. Factual Background

         The following facts are set forth as described in the complaint.

         Summit Retail Solutions, Inc. is a Delaware corporation with its principal place of business in Massachusetts. (Compl. ¶¶ 4-5). It does business throughout the eastern United States, including in Massachusetts, New York, Pennsylvania, and Maryland. (Id. ¶ 6). Summit provides marketing services to its clients, which include department stores, grocery stores, and wholesale retailers. (Id. ¶ 7).

         The marketing services are performed by Brand Representatives. (Id. ¶ 8). Brand Representatives are assigned to work at the location of Summit's clients. (Id. ¶ 32). Their primary responsibilities include “making sales pitches, performing product demonstrations[, ] and providing samples to customers.” (Id.). Other responsibilities include gathering products from inventory warehouses, transporting those products to client stores, and assembling and dissembling promotional displays. (Id. ¶¶ 35-36).

         Brand Representatives are assigned to particular geographic territories, which are called “pods.” (Id. ¶ 33). Each pod corresponds with “a cluster of retail stores” owned by Summit's clients. (Id.). Brand Representatives perform several day-long “shows” within their pods. (Id.).

         Between October 2014 and March 2017, lead plaintiff Joseph Modeski was employed as a Brand Representative and assigned to market products at retailers in Maryland, including BJ's, Costco, and Sam's Club. (Id. ¶ 9). Between March and September 2015, co-lead plaintiff Giovanni Zammito was employed as a Brand Representative and assigned to market products at retailers in New York, including BJ's. (Id. ¶ 10). Between January and August 2017, co-lead plaintiff Nathan Damboise was employed as a Brand Representative and assigned to market products at retailers in Pennsylvania and Maryland, including BJ's and Sam's Club. (Id. ¶ 11).

         Brand Representatives all worked the same schedule. (Id. ¶ 39). They were scheduled to work Thursdays through Sundays for 10 hours each day. (Id.). Specifically, they worked from 9:00 a.m. to 7:00 p.m. on Thursdays and Saturdays; from 10:00 a.m. to 8:00 p.m. on Fridays; and from 8:00 a.m. to 6:00 p.m. on Sundays. (Id.).

         Compensation could come in two forms: a base hourly wage and commissions. Brand Representatives were paid at a rate of $12 per hour. (Id. ¶ 41). Senior Brand Representatives were paid at a rate of $15 per hour. (Id. ¶ 42).[1] Brand Representatives were eligible for commissions if they reached certain sales goals. (Id. ¶ 48). To be eligible, “Brand Representatives were required to accrue a pre-determined percentage of sales that exceeded the sum of their weekly paychecks. The dollar volume of this percentage was based on the volume of sales generated from the products they marketed.” (Id. ¶ 47). “Whether or not [Brand Representatives] met their goals was determined on a week to week basis.” (Id. ¶ 48). “When the weekly percentage of sales . . . exceeded the sum of [Brand Representatives'] weekly paychecks, a predetermined amount generated from the sales was added to a ledger. That amount was categorized as a commission.” (Id. ¶ 49).

         However, “[i]f the weekly sales percentage generated from the marketed products failed to exceed the sum of the[] weekly paycheck[], the difference was subtracted from [the] Brand Representative's ledger.” (Id. ¶ 50). Brand Representatives were eligible for commissions only if their “ledger was positive at the end of the month.” (Id. ¶ 51). In addition, Brand Representatives “had to ensure that their ledgers never fell below negative three-hundred dollars. If their ledgers were under negative three-hundred dollars for too long, they could face disciplinary action, ” including being demoted or having their pay cut. (Id. ¶ 52). Moreover, if Brand Representatives “maintained a negative balance for three months in a row, ” they “could be terminated.” (Id.).

         The complaint alleges that Summit made it extremely difficult for Brand Representatives to earn commissions. For example, Summit would “routinely adjust[] the percentage of gross sales from a given product that would be counted toward earning a commission.” (Id. ¶ 54). In addition, Summit would assign Brand Representatives to stores “that made it nearly impossible to earn commissions” and to products that were “less desirable” to customers. (Id. ¶¶ 56-57). Given those factors, “it was impossible to prevent a negative balance” most weeks. (Id. ¶ 58). Therefore, “[t]o avoid being terminated . . . Brand Representatives would underreport their hours.” (Id. ¶ 53). The rationale was that the higher the Brand Representatives' total wage pay, the higher their sales targets and the more likely it would be they would end up with a negative ledger balance. (Id.).

         According to the complaint, one task that was rarely reported on the timesheets of Brand Representatives was “setting up inventory and promotional displays prior to . . . shifts.” (Id. ¶ 61). Brand Representatives would perform those tasks on days they were not scheduled to work. (Id. ¶ 62). Brand Representatives also spent time after their shifts putting away inventory and cleaning their work stations, which they would not report. (Id. ¶ 63). Similarly, Brand Representatives would not report time spent on mandatory conference calls, which were scheduled three to four times per week and could each last more than an hour. (Id. ¶ 64). Moreover, absenteeism was a chronic problem at Summit, requiring Brand Representatives to pick up extra shifts for which they were not compensated. (Id. ¶ 65).

         The complaint alleges that as a result, Brand Representatives would commonly work seven days per week and more than 50 hours per week. (Id. ΒΆΒΆ 66-67). Summit is alleged to have been aware of ...


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