Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-01423/USCOURTS-cand-3_15-cv-01423-6/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Denial of Overtime Compensation

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

JEREMY GORDON,

Plaintiff,

 v.

MODEL N, INC.,

Defendant. /

No. C 15-01423 WHA

ORDER RE CROSS-MOTIONS

FOR SUMMARY JUDGMENT

INTRODUCTION

In this individual wage-and-hour action alleging misclassification of overtime exempt

status, both sides move for summary judgment. For the reasons stated below and to the extent

stated below, defendant’s motion for summary judgment is DENIED, and plaintiff’s motion for

summary judgment is GRANTED IN PART AND DENIED IN PART.

STATEMENT

Defendant Model N, Inc., supplied revenue management software solutions that tracked

invoices, rebates, and charge-backs to clients in the life sciences and technology industry. From

March 2013 through January 2015, plaintiff Jeremy Gordon worked as the principal technical

education consultant for Model N.

Model N’s software was built on numerous software platforms for database management

and reporting. After Model N sold its software to customers it sent a team to set up the software

at the client’s work site, and Gordon later went to the work site to set up a training environment

and to teach customers how to use Model N’s software to best suit their needs.

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Gordon’s primary responsibilities included developing, preparing, and delivering

training to customers and employees regarding Model N’s software systems. In order to

provide an effective hands-on experience for trainees, Gordon used “classroom images and

environments,” which were virtual simulations of multi-computer systems that Gordon built

from previously-developed base virtual environments and the teaching materials in his training

classes. Gordon’s responsibilities included updating the training materials to correct

inaccuracies and add practice exercises, as well as re-building virtual environments with new

software releases. 

Gordon’s responsibilities also included tweaking aspects of the training materials and

virtual environments to account for idiosyncrasies of Model N’s customers and their respective

configurations of the software. These tweaks occurred both in advance and “on the fly.” 

Although some tweaks involved simply identifying which pre-made training modules to use

based on a given client’s software configuration, Gordon had autonomy to select the best

hypothetical scenarios to use in his training sessions in order to convey best practices based on

the client’s idiosyncrasies (Gordon Dep. at 30–31, 36, 40, 45, 85–86, 101–02; Simon Dep. at

20–21, 59–60).

Gordon had discretion in managing his own work hours and the manner of his

preparation for each training class (Gordon Dep. at 56; Simon Dep. at 30–31). Gordon also

exceeded the scope of his primary duties to spearhead projects such as an instructor’s guide, a

department-wide online database of knowledge relating to training, and a style guide to

standardize training materials (Gordon Dep. at 72–73, 76)

At all relevant times, Gordon’s annual salary exceeded one hundred thousand dollars. 

Although Model N paid Gordon’s salary without regard to hours worked, it required him to

track his billable hours in order to bill clients as well as his non-billable hours in order to

monitor productivity.

Gordon commenced this action on behalf of himself only (not on behalf of a putative

class) in March 2015, alleging that Model N improperly classified him as exempt from overtime

pay, seeking overtime wages under California and federal law accordingly. He also seeks

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waiting time penalties based on Model N’s failure to pay overtime wages after he was

terminated. He also claims he is entitled to penalties based on Model N’s improper wage

statements, although that claim is not at issue on the instant motions for summary judgment. 

This order follows full briefing and oral argument.

ANALYSIS

1. STATE LAW CLAIMS.

Section 510 of the California Labor Code requires employers to pay overtime to

employees for any work over eight hours in one work day or forty hours in one work week. 

Pursuant to Section 515(a), however, that requirement is subject to exemptions set forth by the

California Industrial Welfare Commission.

Model N contends Gordon was covered by the “administrative” exemption under

California law. 8 Cal. Code Regs. § 11040(A)(2). That exemption provides, in pertinent part:

A person employed in an administrative capacity means any

employee:

(a) Whose duties and responsibilities involve . . .

(I) The performance of office or non-manual work directly

related to management policies or general business

operations of his/her employer or his employer’s

customers;

***

(b) Who customarily and regularly exercises discretion and

independent judgment; and

***

(d) Who performs under only general supervision work along

specialized or technical lines requiring special training, experience,

or knowledge;

***

and

(f) Who is primarily engaged in duties that meet the test of the

exemption. 

***

(g) Such employee must also earn a monthly salary equivalent to

no less than two (2) times the state minimum wage for full-time

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employment. Full-time employment is defined in California Labor

Code Section 515(c) as 40 hours per week.

All agree that Gordon’s annual salary satisfied the limit of paragraph (g), and Gordon

does not dispute Model N’s contention that his job duties satisfied paragraph (d). Thus, the

only questions that need be addressed on this motion are whether Gordon’s work constituted

administrative work under paragraph (a)(I), whether he exercised discretion under paragraph

(b), and whether Gordon was “primarily” engaged in work meeting the requirements of the

exemption. This order addresses only paragraph (a)(I), inasmuch as the analysis thereunder is

dispositive.

Model N contends that Gordon’s work constituted “non-manual work directly related to

. . . general business operations of his . . . employer or his employer’s customers.” 8 Cal. Code

Regs. § 11040(A)(2)(a)(I). Specifically, it notes that Section 541.201(a) of Title 29 of the Code

of Federal Regulations (incorporated into California law under paragraph (f) of the

administrative regulation), provides that work directly related to general business operations

includes “running or servicing of the business, as distinguished, for example, from working on a

manufacturing production line or selling a product in a retail or service establishment.”

In Harris v. Superior Court, 53 Cal. 4th 170, 181 (2011), the California Supreme Court

held (citing 29 C.F.R. 541.205(a)) (emphasis in original):

Work qualifies as “directly related” if it satisfies two components. 

First, it must be qualitatively administrative. Second,

quantitatively, it must be of substantial importance to the

management or operations of the business. Both components must

be satisfied before work can be considered “directly related” to

management policies or general business operations in order to

meet the test of the exemption.

Harris further explained that qualitatively administrative operations “include work done by

‘white collar’ employees engaged in servicing a business,” which could include “advising

management, planning, negotiating, and representing the company.” Id. at 182. It further held

that the quantitative component considers whether the work is of “substantial importance.” 

Ibid.

Model N contends that Gordon’s primary focus was servicing Model N by training its

customers, in turn enabling Model N to provide the solutions its customers needed, and that as a

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trainer, he represented the company to its customers. Moreover, Gordon’s responsibility for

ensuring that Model N’s customers understood how best to use their implementation of Model

N’s software affected the customers’ own revenue tracking and reporting abilities. Model N

further contends Gordon’s work was of substantial importance because his ability to train

customers directly affected Model N’s primary source of revenue. 

Gordon responds that Eicher v. Advanced Business Integrators, Inc., 151 Cal. App. 4th

1363 (2007), forecloses Model N’s decision. That decision noted:

Federal and California authorities draw a distinction between

administrative employees, who are usually described as employees

performing work ‘directly related to management policies or

general business operations of his employer or his employer’s

customers, and production employees, who have been described as

those whose primary duty is producing the commodity or

commodities, whether goods or services, that the enterprise exists

to produce. Employees engaged in an activity that constitutes the

company’s primary purpose are likely production workers.

Id. at 1372–73 (citations omitted). There, the plaintiff’s duties related to the core “day-to-day

business of [the defendant].” Id. at 1373. Those duties entailed:

[I]mplementing the [defendant’s] product at customer venues and

supporting the customers, whether at the customer venues or in the

[defendant’s] office. While he was required to learn of the

customers’ management policies and business operations in the

course of his work, in order to ensure that the product met the

needs of the customers, he did so only to implement the software

in the most beneficial way for the customers and not to participate

in policy-making or alter the general operation of the business. 

[plaintiff’s] service in implementing the software merely

automated processes the customer had previously handled

manually.

Here, although Gordon never worked in the production of Model N’s software, he did work in

the production of an ancillary product — the training materials. To the extent he modified the

training materials at his own discretion, he did so based on the already-established needs of the

customers, not based on any responsibility in crafting Model N’s or its client’s business

strategy. To the extent his primary work enhanced revenues, that was due to his role as a

conduit for information that promoted use of Model N’s software, not as an employee focused

on the general business operations. 

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 Model N’s attempt to distinguish Eicher is unavailing. Rather than engage with the

actual analysis in Eicher, Model N simply argues that the training duties of the plaintiff therein

did not constitute the majority of his work. Although Model N is correct on that particular fact,

Eicher never addressed whether conducting training sessions could constitute administrative

work. Instead, that decision’s overall approach to the question suggests that Gordon’s work

contributed to a service that was ancillary to Model N’s bread and butter products, but he never

participated in “policy-making or alter[ing] the general operation of the business.” Ibid.

Gordon cites Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1128 (9th Cir. 2002), for a

similar proposition. There, our court of appeals held that a dispute of fact as to the true scope of

the plaintiff’s job duties precluded the district court’s finding of summary judgment. Although

the defendant’s evidence suggested that he managed accounts, developed warranty policies, and

advised the production department at a robotics testing company, which would constitute nonexempt work, the plaintiff contended he was simply a repairman who was seconded out to a

specific customer’s facility for a period of time. The plaintiff’s version of his job duties,

Bothell held, did not warrant the administrative exemption because he “did not engage in

running the business itself or determining its overall course or policies.” Ibid.

Model N again attempts to distinguish Bothell on its facts without engaging with its

analysis. Model N argues that Gordon was not a repairman, so Bothell is inapplicable, but

Bothell plainly contemplated that other positions would not constitute administrative work

particularly because they did not involve directing the general operations of the business.

Although Gordon’s work related to the heart of Model N’s business, and the service he

provided was essential to its success, his role in that work did not relate to the general

operations of the business. Instead, he provided training that enabled customers to use the

product sold by Model N and helped customers automate their revenue tracking. Model N has

failed to overcome Gordon’s showing that his job duties simply do not fall within the

administrative exemption. Thus, Gordon is entitled to summary judgment on his claim for

unpaid overtime wages.

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2. DAMAGES.

Gordon offers a summary of damages pursuant to FRE 1006, totaling $33,656.88. 

Gordon’s summary chart is based on Model N’s time records, which it required Gordon to keep

for both billable and non-billable hours (Tracy Decl., Exh. F). Model N does not challenge

Gordon’s claim for $33,656.88 in unpaid overtime if liability is found. Summary judgment is

therefore appropriate as to the amount of damages for Gordon’s claim for overtime wages.

Gordon also contends he is entitled to additional penalties of $13,096.80 under Section

203 of the California Labor Code which provides for penalties if an employer “willfully fails to

pay” wages due to an employee after the employee is discharged. In this context, willfulness

refers to an “intentional[] fail[ure] or refus[al] to perform an act which was required to be

done.” Amaral v. Cintas Corp. No. 2, 163 Cal. App. 4th 1157, 1201 (2008). “A ‘good faith

dispute’ that any wages are due occurs when an employer presents a defense, based in law or

fact which, if successful, would preclude any recovery on the part of the employee. The fact

that a defense is ultimately unsuccessful will not preclude a finding that a good faith dispute did

exist.” Ibid.

Gordon’s only proffered evidence that Model N intentionally failed to pay overtime

wages is its apparent “lack of any cognizable legal theory” in this action. Although this order

finds Gordon is entitled to summary judgment on his overtime claim, it does not find that Model

N’s positions in this suit were so meritless as to establish, as a matter of law, that it had no good

faith dispute that Gordon was exempt. Accordingly, summary judgment in favor of Gordon is

not appropriate as to the waiting time penalty claim.

3. OTHER CLAIMS.

Under the FLSA, an employee with total annual compensation of at least one hundred

thousand dollars is deemed exempt “if the employee customarily and regularly performs” one or

more of the exempt duties or responsibilities set forth in the regulations. 29 C.F.R. 541.601(a). 

“A high level of compensation is a strong indicator of an employee’s exempt status, thus

eliminating the need for a detailed analysis of the employee’s job duties.” 29 C.F.R.

541.601(c). Here, although Gordon is highly compensated, the foregoing analysis demonstrates

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that his work did not satisfy the administrative exemption under California law (which mirrors

the federal exemption). Thus, Model N is not entitled to summary judgment on that claim.

Gordon, however, did not seek summary judgment on his FLSA claim. Thus, this order

only denies Model N’s motion as to the FLSA claims. It does not grant summary judgment for

Gordon on his FLSA claims. 

Gordon offered to dismiss his FLSA claim as well as his claim for improper wage

statements (not raised in either party’s motion) so as to expedite the entry of judgment. The

Court will entertain a motion to voluntarily dismiss those claims (as well as the waiting time

penalty claim); however, it will not dismiss those claims based solely on Gordon’s statement in

his motion, inasmuch as this order only grants part of the relief he sought with his motion.

Any such motion must be filed by MONDAY, JUNE 13 AT NOON.

CONCLUSION

To the extent stated above, Gordon’s motion for summary judgment is GRANTED IN

PART AND DENIED IN PART, and Model N’s motion for summary judgment is DENIED. Gordon

offered to dismiss all outstanding claims in order to expedite entry of judgment. Inasmuch as

several claims, including Gordon’s waiting time penalty claim, remain unresolved, judgment

will not issue following this order. 

For now, all hearings and deadlines, including the pretrial conference, remain in place.

IT IS SO ORDERED.

Dated: June 9, 2016. 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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