P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

N o. 09- 3545

A D R IA N E . P A R K E R , In d iv id u a lly and on beha l f of a l l ot her s s i m i l ar l ys i tuat ed

v. NUTRI S YST EM , I NC.

DE L OR I S WYNN, A d m inistratri x o f th e E stat e o f A d ri an E

. P ark er; DONAL D J

. WI L S ON; F RA NK L

. S T E P HE NS , I V; M O N I CA TH O M PSO N ; SEN Y A SA U N D ER S,

A p p e llan ts (P u rs u a n t to R u le 1 2 (a ), F e d . R . A p p . P .) (P u rs u a n t to R u le 4 3 (a )( 1 ), F e d . R . A p p . P .)

O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e E a ste rn D istric t o f P e n n sy lv a n ia ( D

. C

. N o. 2- 08- cv- 01508) D istri ct Ju d g e: H o n o rab le H arv eyB artl e, II I2 A r gued J une 21, 2010 B e f o re : S M IT H , F IS H E R a n d C O W E N , C i r cui tJudges

.

( Fi l ed: Sept ember7, 2010) Shanon J

. C ar s on ( A r gued) E ll en T

. N o tew are B er ger& M ont ague 1622 L ocus tSt r eet Phi l adel phi a, PA 19103 R . A n d re w S a n til lo Pet erD

. W i nebr ake T h e W ineb rak e L aw F irm 715 T w i ni ng O ffi ce Cent er T w i ni ng O ffi ce Cent er , Sui t e 211 D r es her , PA 19025 C o u n se l fo r Ap

p e lla n ts Sar ah E. B ouchar d ( A r gued) K ather i ne E. K enny Jonathan S

. K rause M or gan, L ew i s & B ocki us 1701 M arketSt r eet Phi l adel phi a, PA 19103 C ouns el f orAppel l ee Paul L

. Fr i eden L aur a M os kow i t z ( A r gued)3 U ni t ed St at es D epart m entof Labor O ffi ce of t he Sol i ci t or N

- 2716 2 0 0 C o n s t i tu t i o n A v e n u e , N

. W. W as hi ngt on, D C 20210 C ouns el f orA m i cus C ur i ae, Secr etar y of Labor D avi d A

. B or gen G ol ds t ei n, D emchak, B al l er , B or gen & D ar dar i an 300 L akes i de D r i ve, Sui t e 1000 O akl and, C A 94612 C ouns el f orA m i cus C ur i ae, N a tio n a l E m

p loy m e n t L a w

y e rs A s s o c ia tio n ., C om i t é D e Apoyo A Los Tr abaj ador es A grí colas, C om m un i t

y L ega lServi ces, C or nel lLabor Law C l i ni c, Fr i ends of Farm w orkers, Jun t os, N ati on al Law

yers G ui ld Labor and Em

pl oym ent

C om m i t t ee, Souther n P over t

y Law C ent er, The Sugar L a w C e n ter, a n d

W o rk in gH a n d s L eg a l C lin ic

OPI NI ON O F THE COURT

F IS H E R , C i r cui tJudge

. T h is a p p e a l ar ise s f

ro m a n o rd e r o f

th e D istric t C o u rt, en tered Ju ly3 0 , 2 0 0 9 , g ran ti n g A p p ell ee N u tr iS y stem , Inc

. ’sD el or i s W ynn has bee n s ubs t i tut ed as l ead pl ai nt i ff 1 p u rsua n t t o F ed era l R u le of A p p ell ate P roc ed u re 4 3 (a)(1). 4 (“N utr i S y st em ”) m oti on for sum m aryj ud gm ent on A pp el l ants ’ cl ai m s for pas t over t i m e paym ent s bas ed on vi ol at i o n s o f t he F a i rLa b o rS t a n d a r d s Act ( “ F LS A” o rt h e “ Ac t ” ) , 2 9 U. S

. C. § 2 0 1 , et

s eq. W e m u st de cide w h ethe r th e D istri ct C o u rt 1 corr ect l yconcl uded thatNutr i Sy s t e m’ s me thod of compensa t i ng i t s cal l

- cent erempl oy ee s const i tut ed a c om m i s s i on undert he F L S A so th a t N u trisy ste m w a s e x e m p t f ro m p a y in g A p p e llan ts over t i m e. Fort he r eas ons ar t i cul at ed bel ow , w e agr ee w i t h t he D i s t r i ct C our t t hat N ut r i Sy s t em’s compensa t i on pl an q ual i fi ed as a comm i s s i on and af fi r m i t s rul i ng. I. A. T h e f act s i n this case are un dis pu t ed. N utr i S y st em i s a p rov ider o f w eigh t l o ss an d w eigh t m an ag em en t pro d u cts. It m ark ets an d sell s it s p rep ac k ag ed m ea ls directl yto cu stom ers f o r p e r s o n a l u s e . I t s c o r e p r o d u c t i s a 2 8

- d a y mea l pr og r a m. N ut r i Sy s t em offer s s ever al var i et i es of t he m eal pl an depe ndi ng on cus t om er s ’ needs

. I n 2008, N ut r i Sy s t em offer ed pl ans under t w o m e t h o d s o f

s h i p p i n g , r e g u l a ro ra u t o - s h i p , a td i f f e r e nt p ric e s: a m e n ’s re g u lar 2 8 -d a yp lan f o r $ 3 7 1 .5 0 , o r $ 3 1 9 .9 5 ; a w o m e n ’s r e g u lar 2 8

- d a y m e a l p lan f o r $ 3 4 2 .3 6 , o r $ 2 9 3 .7 2 ; a w om en’ s orm en’ s s i l ver 28- daypl an ( forol dercus t om er s ) for $ 3 4 2 .3 6 , o r $ 2 9 3 .7 2 ; a w o m e n ’s o r m e n ’s d iab e tic-f rie n d ly 2 8 -da y p lan fo r $ 3 4 2

. 3 6 , o r $ 2 9 3

. 7 2 ; an d a w o m en ’s o r m e n ’s5 veget ar i an 2 8

- daypl an for$342. 36, or$293. 72. U ndert he r egul ar m ethod, t he cus t om er r ece i ves onl y a 28- days hi pm ent and t hen m ustaffirm at ivel yrequestadd i t i on al shi pm ents
. U nder t he aut o- s hi p m ethod, a cus t om er s i gns u p to rec ei ve aut om at i c m ont hl y s hi pm ent s of food and i s char g ed by N u triS y ste m o n a m o n th lyb a sis . C u sto m e rs a re p e rm itt e d to canc el t he aut o- s hi p pl an af t ert he fi r s tm ont h. N u triS y ste m c u sto m e r s typ ica llyp lac e th e ir o rd e rs v ia tel eph on e or t he i nternet. T he pho ne cal l s are fi el ded a t a N ut r i Sy s t em cal l cent eri n H or s ham, Penns y lvani a, w hi ch em p loy s ap p ro x im ately2 3 0 sales a sso ciates. U n d er a N ut r i Sy s tem s al es pol i cy , s al es as s oci at es ar e pr ohi bi t ed fr om r emai ni ng i dl e form or e than fi ve mi n ut es w hi l e aw ai t i ng an i nbound cal l

. B efor e the fi ve- m i nut e mar k i s r eac hed, an asso ciate m u st origina te an o u tbo u n d sales call. T h ese ca ll s are gener al l yt o peopl e w ho fi ll ed o u t pr ofi l es on t he company w ebs i t e butfai l ed t o pl ace an o rde r ort o cus t om er s w ho pr evi ous l ypl ace d or der s but w hos e cr edi t car ds w er e dec l i ned. N ut r i Sy s t em sal es as s oci at es ar e as s i gned t o s i x di ffe r ent w o rk s h i f

ts : 7 :0 0 a .m . to 3 :3 0 p .m ., 9 :0 0 a .m . to 5 :3 0 p .m ., 1 1 :0 0 a .m . to 7 :3 0 p .m ., 1 :3 0 p .m . to 1 0 :0 0 p .m ., 3 :3 0 p .m . to 1 2 :00 a.m . , an d 1 1 :00 p . m . to 7 :30 a.m . (th e “ o v ern igh t shift”). Si nce J anuary 2007, s al es as s oci at es , exce pt t hos e w or ki ng t he overni ghts hi ft , have been per m i t t ed t o w or k extr a hour s dur i ng a w eek i f i n t he p recedi ng w eek theyexce eded the ave r age “s al es dol l ar s per cal l , ” a fi gur e t he com pany cal cul at es bas ed on t he r evenue t he sal es as s oci at es gener at e and t he ca l l s t heym ake eac h w eek.6 I n M ar ch 2005, N ut r i Sy s t em impl ement ed the compensa t i on s cheme fors al es as s oci at es ati s s u e i n t hi s cas e. U ndert he pl an, s al es as s oci at es re cei ve the gr eat erof ei t her t hei rhour l y pay or t hei rfl at
- r at e paym ent s pers al e foreac h pay p eriod

. T h e h o u rl y rate is $ 1 0 p er h o u r f o r th e firstfo rtyh o u rs p e r w e e k , an d $ 1 5 p e r h o u r f o r o v e rtim e . T h e f

lat ra tes p e r sa le a re $ 1 8 f

o r e a c h 2 8 -d a y p ro g ra m so ld v ia a n in c o m in g c a ll dur i ng dayt i m e hours , $25 for eac h 28- day pr ogr am s ol d on an i ncomi ng cal l dur i ng eveni ng orw eeke nd hour s , an d $40 for ea ch 28- daypr ogr am sol d on an outbound cal l ordur i ng t he overni ghts hi ft

. T hes e fl atr at es do notvarybas ed on the cos tof the m ea l plan to the co n su m er. T he majori t yof the s al es as s oci at es ar e compens at ed bas ed on thes e fl atr at es , nott hei rhour l yearni ngs . U ndert he c o m p e n s a t i o n p l a n , s a l e s a s s o c i a t e s d o n o tr e c e i v e o v e r t i me compensa t i on w hen t hey ar e pai d t he fl at r at es forthe s al es m a d e . T h e re is n o c h a n g e to th e f lat ra tes w h e n a sa les a ss o c iate w or ks m or e than fort yhour s i n one w eek. B. A dr i an Parker , a form ers al es as s oci at e, s ued N u triS y ste m f

o r v io latio n s o f

th e F L S A a n d th e P e n n sy lv a n ia M i ni m um W age A ct( “PM W A ”) , 43 Pa. C ons . St at
. § 333. 101, et s eq. , on behal f of hi m s el f and others sim il ar l ys i tuat ed ( col l ect i vel y“A ppel l ant s ”)

. Par ker as s er t ed hi s FL SA cl ai m as a c o l l e c t i v e a c t i o n u n d e r2 9 U

. S

. C. § 2 1 6 ( b ) a n d h i s P MWA cl ai m as a cl as s act i on under Feder al R ul e of Ci vi l Pr ocedur e 23.A p p e llan ts a rg u e th a t th e D istric t C o u rt a b u se d its 2 d iscreti o n in d ec li n ing to ex erc ise su p p lem ent al j ur i s di ct i on over t h e s t a t e c l a s s a c t i o n c l a i ms . Be c a u s e we a f f i r m t h e Di s t r i ct C our t ’ s gr ant of sum m ary j udgm ent i n favor of N ut r i Sy s t em as to th e f e d e ra l cla im s a g a in st it, w e n e e d n o t ad d re ss th e p ro p rie ty of the D i s tr ict C o ur t ’ s deci s i on w i t h r egar d t o i t s j ur i s di ct i on overt he s t at e l aw cl ai m s . T he D i s t r i ct C our t w as fr ee t o decl i ne to e x e rc ise su p p lem e n tal ju risd ictio n b e c a u s e it “d ism iss e d a ll c l a i m s o v e rwh i c h i t[ h a d ] o r i g i n a l j u r i s d i c t i o n . ” 2 8 U. S

. C. § 1 3 6 7 (c)(3). 7 In a Ju ly2 5 , 2 0 0 8 o rd e r, th e D istric t C o u r t d e c lin e d to exerci se supplem ental j uri sdi ct i on o ver Parker’ s PM W A cl ass ac ti o n claim

. O n S ep te m b e r 26 , 2 0 0 8 , the D istri ct C o u rt

2 condi t i onal l ygr ant ed Par ker ’ s m ot i on t o pr ocee d as a col l ect i ve act i on forhi s FL SA cl ai m s , and s eventy -eightpl ai nt i ffs opt ed i n. N ut r i Sy s t em m oved for s um m ary j udgm entagai ns tl ead pl a i nt i ff Pa r ke r and t he fi r s tfo urop t
- i n p l a i nt i ff s i n the FLSA c o llec tiv e a c tio n . N u triS y ste m in f o rm e d th e D istric t C o u rt it w oul d m ove fors um m aryj udgm entagai ns tt he r emai ni ng pl ai nt i ffs i f the courtfound i n i t s favor

. Par ker al s o m oved for s um m aryj udgm entagai ns t N ut r i Sy s t em. O n J ul y30, 2009, t he D istri ct C o u rtg ran ted N u tr iSy stem ’s m o ti o n fo r sum m ary j ud gm ent and d enied Pa rker ’s

. A p p ell an ts f

il ed a ti m ely n o ti ce o f a p p ea l. T h e S ec retary of L a bo r has fi l ed a b ri ef as am i cus cur i ae i n s uppor tof A ppel l ant s ’ pos i t i on.8 II. T he D i stri ctC ou rthad j uri sdi ct i on ov er A pp el l ants ’ F LS A c l a i m p u r s u a n tt o 2 8 U

. S. C. § 1 3 3 1 a n d 2 9 U. S

. C. § 2 1 6 ( b )

. W e h a v e a p p e l l a t e j u r i s d i c t i o n u n d e r 2 8 U. S

. C. § 1291. W e r evi ew a di s t r i ctcour t ’ s gr ant of s um m aryj udgm ent d e n o v o . Levy v

. St er l i ng H oldi ng C o. , 544 F. 3d 493, 501 ( 3d C i r. 20 08 ). S um m ary j ud gm ent i s approp ri at e “i f t he p l eadings, depos i t i ons , ans w er s t o i nt err ogat or i es , and adm i s s i ons on fi l e, t ogetherw i t h t he af

fi davi t s , i f any , s how t hatt her e i s no genui ne i s s ue as t o any m at er i al fac t and t hatt he movi ng par t yi s ent i t l ed to a ju d g m en t as a m att er o f law

. ” F ed

. R

. C iv. P. 56 (c). III

. T he di s p u t e i n t h i s c a s e c e n t e r s o n t h e l i mi t e d i s s u e of w hetherN ut r i Sy stem ’ s m ethod of compensa t i ng i t s s al es a s s o c i a t e s re p re s e n ts “ c o m m is s io n s o n g o o d s o r s e rv ic e s ,” w h ic h tur ns on w hethert he “e arni ngs r es ul t [] fr om t he ap p li ca ti o n o f a b o n a fid e co m m issi o n rate. ” 2 9 U

. S

. C

. § 2 0 7 (i ). W e conc l ude thatN ut r i Sy s t em’s compensa t i on pl an es t abl i s hes a “bona fi de com m i s s i on r at e” and i s t her efor e a “ comm i s s i on” u n d e rt h e F L S A. A

. B ackgr ound T he FL SA r equi r es t hatempl oy er s payt hei rempl oy ees o n e a n d o n e-h alf ti m es th eir regu lar rat e o f p ayfo r an yh o u rs w o rke d in ex ce ss of fo rty h o u rs p er w ee k

. 2 9 U

. S

. C

. § 2 0 7 (a). T he A ctcont ai ns an exc ept i on t o t he overt i m e r equi r ement s for9 empl oy ees w or ki ng i n r et ai l or s ervi ce es t abl i s hm ent s . Sect i on 7(i ), t he “ret ai l com m i ssi on excep t i on , ” provides:

N o empl oy ers hal l b e deemed t o have vi ol at ed s ubs ect i on ( a) of t hi s s ect i on by empl oy i ng anyempl oy ee of a r et ai l ors ervi ce es t abl i s hm entfor a w or kw eek i n exce s s of the appl i cabl e w or kw eek s peci fi ed t her ei n, i f ( 1) t he regul ar r at e of payof suc h em ploy ee i s i n ex cess o f o n e a n d o n e -h a lf

tim e s th e m in im u m h o u rly ra te a p p lica b le to h im u n d e r se c tio n 2 0 6 o f th is t i t l e, and ( 2) m or e t han hal f hi s compensa t i on for a r epr es ent at i ve per i od ( notl es s t han one mont h) rep rese n ts co m m issi o n s o n g o o d s o r serv ices. In det erm i ni ng t he proport i on of compensa t i on r epr es ent i ng comm i ssi ons , al l earni ngs r es ul t i ng fr om t he appl i cat i on o f a bona fi de comm i s s i on r at e s h all b e dee m ed comm i s s i ons on goods or s ervi ces w i t hout r egar d t o w hether t he comput ed comm i s s i ons exce ed the dr aw orguar ant ee. 29 U

. S. C

. § 207( i )

. T he empl oy erhas t h e b u rden of demonst r at i ng t hati ti s el i gi bl e fort he r et ai l comm i s s i on e x c e p tio n . See Mi t chel lv. K y. F i n. C o. , 359 U

. S. 29 0 , 2 9 5

- 96 (1 9 5 9 ); Madis on v. R es . f orHu m a n D ev. , I

nc. , 233 F. 3d 175, 1 8 3 (3d C ir

. 2 0 0 0 ). H er e, t he part i es ag r ee thatunder§ 7( i ) , N ut r i Sy s t em qu al i fi es as a re tail es t abli shm ent and t hat i t s sal es ass ociat es’ r egul arr at e of pa y is m o re t han one a nd one- hal f t i m es t he10 fede r al m i ni m um w age; t he ques t i on w e fac e i s t he m eani ng of

“ c o m m is s io n s o n g o o d s o r s e rv ic e s .”

“‘ I n i nt erpr et i ng a s t atut e, t he C ourt l ooks fi r s tt o t he s t atut e’ s pl ai n m eani ng and, i f t he s t atut or yl anguage i s cl earand unambi gu o us , t he i nqui r ycomes t o an end. ’ ” Kauf m an v. A l l s t at e N

. J. I ns . C o. , 561 F. 3d 144, 155 ( 3d C i r . 2009) ( quot i ng C o n n . N a t’l B a n k

v . G e rm a in , 5 0 3 U .S . 2 4 9 , 2 5 3 -54 (19 9 2 )). W h e re th e sta tu to rylan g u a g e is u n a m b ig u o u s, th e c o u rt sh o u ld n o t co n s id e r st a tu to ry p u rp o s e o r l e g is la tiv e h is to ry. Se e AT& T, I n c . v . F. C. C. , 5 8 2 F

. 3 d 4 9 0 , 4 9 8 (3d C ir

. 2 0 0 9 ). I n d e t e r mi n i n g wh e t h e rl a n g u a g e i s u n a mbi g u o u s , we “r ead the s t atute i n i t s or di naryand natur al s ens e. ” H arvard Secur ed C r edi t ors Li qui dat i on Trus t v. I

. R

. S. , 568 F. 3d 444, 451 ( 3d C i r . 2 0 0 9 )

. A pr o v i s i o n i s a mbi g u o u s o n l ywhe r e t he di s put ed l anguage i s “r eas onabl ys us cept i bl e of di ffe r ent i nt erpr et at i ons . ” D obr ek v

. P helan , 4 1 9 F

. 3 d 2 5 9 , 2 6 4 (3d C ir

. 2 0 0 5 ). T he FL SA does notdefi ne t he t erm “comm i s s i on. ” T he p l a i n m e a n i n g o f t h e t e r m , a c c o r d i n g t o B l a c k ’ s L a w D i c t i o n a r y, i s “[a ] fee pai d to an ag ent orempl oy ee f ora part i cul ar t r ans act i on, us u[al l y ] as a per cent age of t he m o n eyr ece i ved fr om t he tr ans act i on. ” B l ack’s L aw D i ct i onary306 ( 9t h ed. 2009)

. Sect i on 7( i ) , how ever , req u ir es t hati n or dert o be a comm i s s i on, t he fe e pai d t o t he empl oy ee mustbe b ase d on a “bona fi de comm i s s i on r at e. ” T he “bona fi de comm i s s i on r at e” l a n g u a g e i s i mp r e c i s e a n d c a p a b l e o f a mb i g u i t y . T h e r e f o r e , we hol d t he pl ai n l anguage of § 7( i ) does notpr ovi de s uff ic i ent g u id a n c e to g o v e rn th e a p p lic a tio n o f th e s ta tu te in th is c a s e . C f.11 Mechm et v. Four Seas ons H

ot el s , Ltd. , 8 2 5 F .2 d 1 1 7 3 , 1 1 7 5 (7 th C ir. 1 9 8 7 ) (f

in d in g th a t “[ i] t w o u ld n o t b e se n sib le to tryto deci de [ a] cas e on the bas i s of di ct i onarym eani ngs , orfort hat m att er c o m m o n lega l usa g es, of the w o rd ‘c o m m issi o n . ’”). B eca us e w e ca nnotunl ock t he m eani ng of “c om m i s s i on” bas ed on the pl ai n l anguage i n t hi s cont ext , w e cons i der le g is la tiv e h is to ry a n d s ta tu to ry p u rp o s e . S e e In re L o rdA b b e tt Mut

. Funds Fee Li t ig. , 553 F. 3d 248, 254 ( 3d C i r . 2009) (“‘ W her e the s t atut or yl anguage does notexpr es s C ongr ess’s i n tent u n eq u ivo ca ll y , a c o u rttr ad it ion all yref ers to the l egi s l at i ve h isto ry a n d th e a tm o sp h e re in w h ich th e sta tu te w a s e n a c ted in an att empt t o det erm i ne t he congr es s i onal purpos e. ’ ”) ( quot i ng U ni t ed Stat es v. G r egg , 2 2 6 F

. 3 d 2 5 3 , 2 5 7 (3d C ir

. 2 0 0 0 )). F urther, i n li gh tof this sta tutoryam bigui t yw e m ust exami ne the D epart m entof Labor ’ s ( t he “D epart m ent ”) var i ous i nt erpr et at i ons of the s t atut e t o det erm i ne w hethert he D e p a rt m e n t is e n title d to d e f e re n c e . See Chevr on U

. S. A

. , I nc. v. N at ura l Res

. D ef

. C ounci l

, I nc. , 4 6 7 U

. S

. 8 3 7 , 8 6 5 (19 8 4 ). “I nt erpr et at i ons s uch as thos e i n opi ni on l et t er s – l i ke i nterpret at i on s con t ai ned i n poli cy st at em ents , agen cym anu al s, and enf or cementgui del i nes , al l of w hi ch l ack the fo rce of l aw

– d o n o t w a rra n t C hevr on - s t y l e def er ence . ” Chr is t e n s en v. H a rr is C o u n ty , 5 2 9 U

. S

. 5 7 6 , 5 8 7 (20 0 0 ). R athe r, interpr e ta ti o n s co n tai n ed in f o rm ats su ch as o p inion let ters are “ent i t l ed t o r es pect ” bas ed on an agenc yi nt erpr et at i on’ s pow er to p e rs u a d e . I

d. ( ci t i ng Ski dm or e v. Sw i f t& Co. , 323 U

. S. 134, 140 ( 1944) ( W e cons i der“the thor oughnes s evi d en ti n [the i nt er pr et at i on ’s] c o n side rati o n , the v ali d it y of [t he i nt erpr et at i on’ s ] r eas oni ng, [the i nt erpr et ati on’ s ] cons i s t ency12 w ith ea rl ier an d lat er p ron o u n ce m en ts, an d a ll tho se f ac tors w hi ch gi ve [the i nt erpr et at i on] pow ert o per s uade, i f l acki ng p o w e r to c o n tro l.”)); s e e a l s o Pa c ka r d

v . Pi t t s b u r g h Tr a n s p. C o. , 418 F. 3d 246, 253 ( 3d C i r . 2005)

. I n t hi s cas e, w e exa m i ne t he var i ous D epart m entopi ni on l et t er s addr es s i ng t he meani ng of comm i s s i on. B ot h s i des poi ntt o cour td ec is i ons t hat , t hey cl ai m , s uppor tt hei ri nt erpr et at i on of the t erm “comm i s s i on” u n d er se cti o n 7 (i ). A ppel l ant s s ubm i tt hatt o qual i fyas a comm i s s i on under § 7 (i ), the fee pai d t o an empl oy ee mustbe bas ed on the fi nal cos tt o t he cons um erand thatN ut r i Sy s t em’s pl an, t her efor e, w o u ld n o t q u a lifya s a c o m m iss io n b e c a u se th e f lat ra te p a ym e n ts a re b a se d n o t o n th e c o st to th e c o n su m e r, b u t o n b o th th e tim e th e sa le w a s co n su m m a ted a n d w h e th e r it w a s th e re su lt o f a n in c o m in g o r o u tg o in g c a ll. T h e D e p a rtm e n t su p p o rts A ppel l ant s ’ pos i t i on and ar gues t hatw e s houl d aff or d Skidm ore defe r ence t o i t s cons i s t entvi ew expr es s ed in v ar i ous opi ni on l et t er s t hatt o qual i fyas a comm i s s i on for purpos es of § 7( i ) t he paym en t m u s tbe “l i nked t o t he cos tof the pr oducts ol d or s e rv ic e s p ro v id e d to th e c u s to m e r.” (D e p ’t o f L a b o r B r. a t 2 1 .) N ut r i S y s t em, on t he otherhand, as s er t s t hati t s compensa t i on schem e qu al i fi es as com m i ssi on becau se th e sal es ass ociat es’ payvar i es acr os s pay per i ods , t hei r compensa t i on w as notl i nked to the n u m b e r o f h o u rs w o rke d , an d the p ay m en ts w ere p rop o rt ion al t o the c o st t o the c o n su m er.

B

. L eg isl ati v e H ist o ry C ongr es s enac t ed t he FL SA “t o pr ot ect al l cov er ed w orkers from subst and ard w ages an d o pp res si ve w orki ng ho urs,13 ‘ l abor condi t i ons [that ar e] detr i m ent al t o t he mai nt enanc e of the m i ni m um s t andar d of l i vi ng nece s s aryforheal t h, eff i ci encyand gener al w el l

- bei ng of w o r ker s . ’ ” B arrent i ne v. Ark. -Best Fr ei ghtSys

. , I

nc. , 4 5 0 U. S

. 7 2 8 , 7 3 9 ( 1 9 8 1 ) ( q u o t i n g 2 9 U. S

. C. § 202( a) )

. T he A ct w as des i gned “t o ens ur e thateac h empl oy ee c o v e re d b y th e A c t w o u ld re c e iv e ‘[ a ] fa ir d a y ’s p a y f o r a f a ir d ay ’s w o rk’ an d w o u ld be p rotec ted f rom ‘th e e v il o f o v erw o rk as w el l as underpay . ’ ” I d. ( quot i ng 81 C ong. R ec. 4983 ( 1937) (m essa g e o f P reside n t R o o sev elt )). T he l egi s l at i ve hi s t or y of t he over t i m e c o m pens at i on pr ovi s i ons o f the FL SA r evea l a thr eef ol d purpos e under l y i ng t hem: ( 1) t o pr eventw or ker s w ho, perhaps outof des per at i on, ar e w i l l i ng t o w or k abnor m al l y l ong hour s fr om t ak ing jobs aw ayfr om w or ker s w ho pr efe rs hor t erhour s , i ncludi ng uni on m ember s ; ( 2) t o s pr ead a vai l abl e w or k among a l ar gernum ber o f w o rk e rs a n d th e re b yre d u c e u n e m p lo ym e n t; an d (3 ) to compensa t e over t i m e w or ker s fort he i ncr eas ed r i s k of w o rkpl ace acc i dent s t heym i ghtfac e fr om exhaus t i on or o v e re x e rt io n . Mechm et , 825 F. 2d at11 7 5

- 76 ( 7t h C i r . 1987) ( c i t i ng H

. R. Rep. N o. 1452 , 75 t h Cong

. , 1s tSe s s . ( 19 37 ) ; S. R ep . N o . 8 8 4 , 7 5 th C o n g . , 1 st Se ss. ( 1 9 3 7 )).

C

. D epart m entof LaborI nt erpr et at i ons T he D epart m ent ’ s r egul at i ons s peci fi cal l yel abor at e on the p u rpo se o f § 7 (i ):

Sect i on 7( i ) w as enac t ed t o r el i eve a n e mp l o y e rf

r o m th e o b l i g a t i o n o f

p a y i n g o v e r t i me compensa t i on t o cer tai n empl oy ees of a r et ai l orW hi l e the D epart m entof Labor ’ s r egul at i ons do not 3 de f i n e c o mmi s s i o n , t h e yd o s p e c i f ywha ta b o n a fi de c o m m iss io n is n o t: 14 s ervi ce e s t abl i s hm entpai d w ho ll y ori n gr eat er parton t he b a sis of co m m i ssi on s. T hese empl oy ees ar e gene r al l yempl oy ed i n s o- cal l ed

“ b ig tick e t” d e p a rtm e n ts a n d th o se e sta b lish m e n ts orpar t s of es t abl i s hm ent s w her e comm i s s i on m ethods of pay m ent t r adi t i onal l y have be en us ed, t ypi cal l yt hos e dea l i ng i n furni tur e, beddi n g and hom e furni s hi ngs , fl oorcov ering , d rap eries, m ajor appl i ance s , m us i cal i ns t rum ent s , r adi os and tele v isio n , m e n ' s c lo th in g , w o m e n ’s r e a d yto w ear , s hoes , cor s et s , hom e i ns ul at i on, and var i ous hom e c u s t o m or d e r s . Th e r e ma yb e o t h er se g m e n ts in re taili n g w h e re th e p ro p o rtio n a te amount of comm i s s i on paym ent s w oul d be gr eat e n o u g h f o r e m p lo y e e s e m p lo y e d in su c h se gm ents t o co m e w i t hi n t he exe m pt i on. E ach s uch situ a tio n w ill b e e x a m in e d , w h e re e x e m p tio n is cl ai m ed, t o m ake c er t ai n t he empl oy ees t r eat ed as exemptfr om over t i m e compens at i on und er sec ti o n 7 (i ) are p rop erlyw ith in the statu tory excl us i on. 29 C

. F. R

. § 779. 414. A l t hough t he D epart m ent has notdefi ned “c om m i s s i on” i n i t s r egul at i ons , t he W age a nd H o u r D i vi s i on of the 3A comm i s s i on r at e i s not b o n a fi de i f the for m ul a forcomp u t i ng t he comm i s s i ons i s s uch t hat the em ploy ee, i n f a ct , al w ay s or al m ost al w ay s earns t he s ame fi xed a m ountof compensa t i on foreac h w or kw eek ( as w oul d be t he ca s e w her e th e c o mpu t ed comm i s s i ons s el dom orneverequal orexce ed the amountof the dr aw or guar ant ee)

. A not herexampl e of a comm i s s i on pl an w hi ch w oul d not be consi der ed as bona fi de i s o n e i n whi c h t h e e mpl o y e e r e c e i v e s a r e gul ar paym entcons t i tut i ng near l yhis e nt i r e ea r ni ngs w hi ch i s expr es s ed i n t erm s of a per cent age of t he s al es w hi ch the es t abl i s hm entordepart m entcan al w ay s be expe ct ed t o m ake w i t h onl ya s l i ght a d d it io n to h is w a g e s b a se d u p o n a g re a tly r educe d per cent age a ppl i ed t o t he s al es above the expec t ed quot a. 2 9 C

. F

. R

. § 7 7 9

. 4 1 6 (c). 15 D epart m entof Laborhas att em p te d t o expl ai n t he meani ng of t he t erm “comm i s s i on” undert he r et ail comm i s s i on exce pt i on thro u g h v ariou s o p inion let ters. T h e f o ll o w ing three let ters are m ostrel evan tt o o ur anal y si s. F ir st, the D ep artm en t op ined that alarm sy stem install ers w ho w er e compensa t ed bas ed on a per cent age of t he s al es pr i ce of the al arm s y s t ems t heyi ns t al l ed w ere pai d a comm i s s i on. H ow ever , i ns t al l er s w ho w er e pai d a fl atfee perins t al l at i on w er e notpai d a comm i s s i on and di d notfal l w i t hi n t he s cope of16 s ect i on 7( i )

. D ep’ tof LaborO p. L t r . , 1996 W L 1031770 ( A pr . 3, 1996)

. T he D epartm ent ’ s l et t erdoes notel abor at e on w hethert he i ns t al l er s w ho w er e p aid a per cent age of t he s al es pr i ce al so h ad the abi l i t yt o s el l upgr ades t o al arm s y s t ems onsi t e, t herebyi ncreasi ng t heircom m i ssi on s byi ncreasi ng t he co st t o t he c ons um er . Put di ffe r ent l y , i ti s uncl earfr om t he l et t er w hethert hes e i ns t al l er s ca n be cons i der ed “i n s al es . ” The D epa rt m en t bas ed it s d eterm ination o f w h at w as a “c om m i s s i on” s ol el yon t he fa ctt hatone compens at i on m ethod w as bas ed on a p e rc e n tag e o f c o st t o th e c o n su m e r an d th e o th e r w a s a f lat ra te w ith n o co n n ec ti o n to the co st t o the c o n su m er. I n a s econd l et t erconcerning hea l t h cl ub i ns t ruct i onal empl oy ees , t he D epart m entw as unabl e t o r eac h an opi ni on beca u se the empl oy ees – m ember s hi p s al es as s oci at es and per s onal t r ai ner s – appea r ed t o be compens at ed underm or e than one met hod. D ep’ tof Labor O p. L t r . , 2005 W L 3308624 ( N ov. 14, 2005)

. T he D epart m entdi d offe rt he empl oy ert he fol l ow i ng gui dance : Fl atfee s “pai d w i t houtr egar d t o t he val ue of th e s e r v i c e p e r f

o r me d d o n o tr e p r e s ent

‘ comm i s s i ons on goods ors ervi ces ’ forpurpos es of Sec[ t i on] 7 (i )

. ” Fi el d O per at i ons H andbook, 21h04( c)

. . . R ather , empl oy ees pai d a fl at fee

“ a re c o n sid e re d to b e c o m p e n sa ted o n a p iec e ra te basi s a nd no ton t he ba s i s of c omm i s s i on s. C o m m issi o n s, fo r pu rpo ses o f S ec [ti o n ] 7(i), us ual l ydenot es a per cent age of t he amount of m o n ies p aid o u t or rece ived

. ”

. . . M o reo v er, i ns t ruct i onal empl oy ees pai d a fl atfee perl es s on17 o rs e s s i o n t a u g h ta pp e a rl i k e l yt o e a r n t h e s a me a m o u n t e a c h w e e k , c o n tra ry to th e re q u ire m e n ts of 29 C

. F. R

. § 779. 416. I d. I n t he thi r d l et t er , conce r ni ng aut om obi l e det ai l er s and pai nt er s , t he D epart m entr el i ed on the sa m e above

- quot ed p a ss a g e f ro m th e W a g e a n d H o u r F ield O p e ra tio n s H a n d b o o k to det erm i ne the def

i ni t i on of comm i s s i on. D ep’ tof LaborO p. L t r . , 2006 W L 4512957 (June 29, 2006)

. T he det ai l er s and pai nt er s i n t hi s l et t er w er e pai d acc or di ng t o how m anyvehi cl es t heys ervi ce d eac h w eek. E ach ve hi cl e w as as s i gned a p red eterm ined n u m b er o f “ flag h o u rs” b ase d o n the e m p loy er’s expec t at i on of how l ong t he j ob w oul d t ake t o compl et e. E ach d e taile r o r p a in ter w a s a ss ig n e d a “ f lag ra te” o f p a y b a se d o n h is o r h er e x p erien ce an d ex p erti se. T h e d etail ers a n d p ainters w ere pai d bym ul t i pl y i ng t hei rfl ag r at e byt he fl ag hour s foreac h vehi cl e theys ervi ced, r egar dl es s o f how l ong i tactual l yt ook them to co m p let e a job

. U n d er this sy stem , the e m p loy ee s w ere encour aged t o w or k r api dl y and ef fi ci ent l y , and thei rpayvar i ed fr om w eek t o w eek. I n i t s l et t er , t he D epart m entconcl uded that t hi s paym entarr angementw as a c om m i s s i on beca us e “the amount of the paym entappea r s t o be r el at ed t o t he val ue of the s ervi ce pe r for m ed. ” I

d. D

. R el evantC as e Law T hi s C our thas notw ei ghed i n on t he ques t i on o f w hat qual i fi es as a comm i s s i on under§ 7( i )

. D eci s i ons on t he m eani ng of “c om m i s sion ” undert he r et ai l comm i s s i on18 e x c e p tio n a re , in f

a c t, s p a rs e . K l i nedi ns t v. Sw i f t I nvs . , I nc. , 260 F. 3d 1251, 1254 ( 11t h C i r . 2001) ( not i ng t hatt he m ea ni ng of comm i s s i on “i s an i s s ue thatfi nds l i t t l e i l l um i nati o n from t he s par s e ca s e l aw and the vague refer ence s i n s t atut es and r egul at i ons . ”)

. T her e do notappea rt o be dec i s i ons fr om ot her ci r cui t s t hat have cons i der ed w hether compensa t i ng cal l cent er empl oy ees w i t h fl atr at e paym ent s qual i fi es as bona fi de comm i s s i ons undert he r et ai l comm i ssion except i on. O f the l i m i t ed case law on t his i ssue, w e fi nd t he fo l l ow i ng case m ost i ns t ruct i ve. I n Y i v. Ster l i ngC oll isi on C enters , 4 8 0 F

. 3 d 5 0 5 (7th C ir

. 2007) , t he defenda nt s pai d t he pl ai nt i ff a ut o m echa ni cs under t he fol l ow i ng s cheme: [D efe ndantSter l i ng] cal cul at es t he numberof hour s nor m al l yr equi r ed t o do a gi ven type of r epai r( t hes e ar e ca l l ed “booke d hour s ”) and m ul t i pl i es t hatnum berbya dol lar f igur e. T he pr oductof t hi s m ul t i pl i cat i on i s t he l aborpr i ce of t he r epai r t o t he cus t om er . St er l i ng adds m at er i al cos t s t o t he l abor p ri ce t o come up w i t h a fi nal p ric e . A tea m o f

m e c h a n ic s is th e n a ss ig n e d to t he j ob. E ach mem berof the t eam keeps t r ack of the h o u rs he w o rks o n the jo b

. W h en it ’s co m p let ed an d the ho u rs o f th e tea m m em b ers a re ad d ed u p , S terl ing d eterm in e s ea ch m em b er’s comp ensat i on bym ul t i pl y i ng ( 1) t he number of boo ked hour s fort he j ob by( 2) t he r at i o of the t eam m ember ’ s actual hour s w or ked t o t he t ot al h o u rs w o rke d b ythe t ea m , an d then b y(3) a19 w ag e, pe r bo o k ed (no t actua ll y w o rke d ) ho u r, bas ed on the s ki l l orqual i t yof the i ndi vi dual t eam m em b er. I d. at509. I n cons i der i ng w hether t hat s y s t em of compensa t i on w as a comm i s s i on s y s t em w i t hi n t he meani ng o f t he s t atut e, J udge Posne r , w r i t i ng fort he Seventh C i r cui t , s t at ed: [t ] he es s enc e of a comm i s s i on i s t hati tbas es compensa t i on on s al es , for exampl e a pe r cent age of the s al es pr i ce, as w hen a r eal es t at e br oker r ece i ves as hi s compensa t i on a per cent age of t he pr i ce a tw hi ch the pr oper t yhe br okers is s ol d. A l t hough hi s i ncome i s l i kel yt o be i nfl uence d by t he numberof hour s a w eek thathe w o rks , t he r el at i on i s unl i kel yt o be a r eg u lar one. I n one w eek bus i nes s m aybe s low ; he maym ake no s al es and t hus have no i ncome fort hatw eek. T he nextw eek bus i nes s m aypi ck up and byw or ki ng over t i m e t hat w eek he m ay be abl e t o m ake up the i ncome he l os tbeca us e of s l ack busi nes s t he p rev iou s w ee k

. O v er a y ea r his h o u rs o f w o rk m a yb e sim ila r to th o se o f re g u lar h o u rly e m p lo y e e s. S o if h e h a d to b e p a id o v e rtim e , h is annual i ncome w oul d be hi ghert han thei r s even t hough he hadn’ tw or ked m o re hour s overt he c o u rse o f th e y e a r th a n th e y h a d . W e tak e th is to be t he r at i onal e for t he comm i s s i on exempt i on fr om t he FL SA ’ s over t i m e pr ovi s i on.20 I d. at508. T he S eventh C i r cui tnot ed thata comm i s s i on can be b ase d o n the fu ll p ri ce o f the g o o d o r se rvice so ld o r o n o n lyp art of the pr i ce, for exampl e t he pr i ce of t he l abor t hat goes i nt o t he g o o d o r s e rv ic e . I

d. at509- 10. T he courti n Yi concl uded that t he compens at i on pl an ati s s ue w as i ndeed a com m i s s i on under § 7 (i ). E . N u triS y ste m ’s C o m p e n sa tio n P lan a n d S e c tio n 7 (i)

1

. Skidm ore D efe r ence T he D epart m ent ar gues t hat w e s houl d aff or d Skidm ore defe r ence t o t he cons i s t entvi ew expr es s ed i n i t s var i ous opi ni on l et t er s t hatt o qual i fy as a comm i s s i on for purpos es of § 7( i ) , t he pay m en t m us tbe “l i nked t o t he cos tof the pr oducts ol d or s e rv ic e s p ro v id e d to th e c u s to m e r.” (D e p ’t o f L a b o r B r. a t 2 1 .) Putdi ffe r ent l y , to q u al i fyas a comm i s s i on, an i ncr eas e i n t he c o st to th e c o n su m e r m u st re su lt in a c o rre sp o n d in g in c re a se to th e a m o u n t o f

th e p a ym e n t m a d e to th e e m p lo y e e . ( See i d. at30 ( “H ad, fori ns t ance , N ut r i Sy s t em ut i l i zed f i xed paym ent s t hat v aried ac co rdin g to the d iffe ren ce s in the co st t o the c u stom er, th is w o u ld h a v e c o n s titu te d a c o m m is s io n u n d e r s e c tio n 7 (i ).” ).) A l t hough t he D epart m entm ayhave mor e “s peci al i zed exper i ence ” than w e do i n t he day

- t o- dayadmi ni s t r at i on of the F L S A , w e d o n o t fi n d that the o p inion le tte rs a t issue h ere pr ovi de s uffi ci ent l y t hor ough r eas oni ng, cons i s t ency , orfac tual s i m i l a ri tie s to th e in s ta n t c a s e to w a rr a n t d e f e re n c e . See Skidm ore , 323 U

. S. at140.21 T he w or k per for m ed by t he N ut r i Sy s t em sal es as s oci at es i s di s t i ngui s habl e fr om t he al arm i ns t al l erw ho w as p ai d a fl at fe e p er install ati o n . T h ere is n o ind icati o n in the D ep artm en t’ s l et t ert hatt he al arm i ns t al l er pai d a fl at fee w as r es pons i bl e for s el l i ng t he al arm ; r ather , he ors he w as o n ly“del i ver i ng” the pr oductt o t he cons um er . N ot hi n g in the l et t ers ugges t s t hat t her e w as an oppor tuni t y for t he i ns t al l er t o i ncr eas e t he s al es of h is em p loy er. A tar gum ent , t he D epart m entpoi nt ed t o t he hea l t h cl ub emp l oy ee l et t eras bei ng fac tual l ycl os es tand mosti ns t ruct i ve to th e in st a n t ca se . T h a t lette r, h o w e v e r, d id n o t f o rm a lly expr es s an opi ni on on t he compens at i on s cheme beca us e of the l ack of i nfor m at i on pr ovi ded byt he empl oy er . R ather , t he l et t er pr ovi ded onl ybr oad, gener al g u i dance byci t i ng t o t he D epart m ent ’ s W age a nd H o u r F i el d O per at i ons H andbook. D ep ’t o f L ab o r O p . L tr
. , 2 0 0 5 W L 3 3 0 8 6 2 4 (N o v . 1 4 , 2 0 0 5 ). T hi s br oad gui dance , w hi ch w as notappl i ed t o t he fa ct s i n t he lette r, is in su f

f icie n tly“ th o ro u g h ” to p e rsu a d e u s th a t a com m i ssio n m u stvarybased o n the end costt o co nsum ers . Fur t her , t he l et t er ’ s gui dance does not expl i ci t l y r equi r e thatan i ncr eas e i n t he cos tt o t he cons um er r es ul ti n an i ncr eas e i n t he comm i s s i on pai d t o the empl oy ee – the r equi r ementt he D epart m ent ur ges us t o adopt

. R ather , i ts t at es t hat“fl atfee s pai d w i t houtr egar d t o t he val ue of t he servi ce pe r for m ed do not r epr es entcomm i s s i ons on goods ors ervi ces forpurpos es of Sec[ ti on] 7( i ) , ” and “ [c] om m i s s i ons , forpurpos es of Sec[ t i on] 7( i ) , us ual l ydenot e[] a per centage o f th e a m o u n t o f m o n ies p a id out or r ece i ved. ” I

d. ( i nt ernal quot at i ons and ci t at i ons om i t t ed) ( emphasis in or i gi nal )

. T hi s l ack of a cons i s t entdefi ni t i on of22 comm i s s i on fur t herw ei ghs agai ns tt he per s uas i venes s of the D e p a rt m e n t’ s o p in io n le tte rs . See Ski dm ore , 323 U

. S. at140. U nli ke the com pen sat i on p lans of the op i nion l et t ers , Nutr i Sy s t e m’ s p a yme n t s t o e mpl o y e e s a r e b a s e d o n c ons um er pr efe r ence and the abi l i t yof the s al es as s oci at e t o persuade a cus t om ert o pur chas e a meal pl an. U nli k e the al arm i ns t al l er w ho i s p aid a fl atfee peri ns t al l at i on, t he numberof ca l l s t he s al es as s oci at e m akes pl ay s no par t i n det erm i ni ng the num ber o f a dd i t i on al pay m ents he r ecei ves. T he num ber of cal l s o n ly i ncr eas es an as s oci at e’ s chanc es of m aki ng a s al e and r ece i vi ng t he ad d it ion al paym ent
. R ather , t he ext ernal fac t or s of s al es abi l i t yand cu stom erpr efe r ence , w hi ch ar e notpr es enti n t he D epart m ent ’ s opi ni o n le t t er s di s cus s ed supra , di ct at e w hether N ut r i Sy s t em’s s al es as s oci at es are pai d t he addi t i onal compensa t i on. In su m , w e d o n o t f

in d th e D e p a rtm e n t’s f a c tu a lly di s t i ngui s habl e opi ni on l et t er s and br oad gene r al gui dance su f f icie n tlyth o ro u g h o r c o n sis ten t to w a rra n t d e f e re n c e in th is c a s e . See i d. 2. Per cent age of C os tt o C ons um er F urther, w e declin e to ado pt a t estt hat r equ i res a comm i s s i on, under§ 7( i ) , t o be s t r i ct l y bas ed on a per cent age of t he end c os tt o t he cons um er . W hi l e the var i ous defi ni t i ons di s cus s ed supra su g g e st th a t a c o m m iss io n is typ ica lly cal cul at ed a s a p ercent age of s al es pr i ce – f

orexampl e a r eal es t at e br oker r ece i ves 10% of a hous e’ s s al e pr i ce ora p aint s al es m en r ece i ves 20% of hi s s al es – bot h the D epart m entandT he D epart m ent ’ s ow n r egul at i ons pr ovi de gui dance on 4 w hat i s nota b o n a fi de c omm i s s i o n p l a n . 2 9 C. F

. R. § 779. 416( c)

. N ut r i Sy s t em’s pl an does not fal l i nt o ei t herof the exampl es gi ven i n t hatr egul at i on, and nei t herA pp e l l ant s nort he D epart m entar gue thatit d o es . N ut r i Sy s t em’s empl oy ees ’ pay can va r ygr eat l yacr os s payper i ods and t he pl an i s notbas ed on th e sa les N u triS y ste m e x p e c ts t o m a k e a s a w h o le, b u t ra th e r is t i ed preci sel y t o t he nu m ber o f sal es each sal es ass ociat e cl oses. 23 ot hercour t s have r ecogni zed thatt hi s st r i ctper cent age r el at i ons hi p i s not a r equi r ement for a comm i s s i on s cheme under § 7 (i ). See D ep’ tof LaborO p. L t r . , 2005 W L 3308624 (N o v . 1 4 , 2 0 0 5 ) (“C o m m issi o n s, fo r pu rpo ses o f S ec [ti o n ] 7(i), u su a lly d e n o tes a p e rc e n tag e .”) ( e m p h a sis a d d e d ); Yi , 480 F. 3d at508. T her efore, the f actt hatN ut r i Sy s t em’s pl an i s not cal cul at ed s t r i ct l yas a p erc ent age of s al e pr i ce doe s not d isqu ali fyitfro m b eing a c o m m issi o n u n d er § 7 (i ). 4

3. Pr opor t i onal i t yand Sal es A n u m b er o f fa ctors p ersu ad e u s tha t N u tr iSy stem ’s compensa t i on pl an es t abl i s h es a “bona fi de comm i s s i on r at e” and i s t her efor e a “ comm i s s i on” undert he FL SA

. W e conc l ude t hatw hen the fl at
- r at e paym ent s m ade t o an empl oy ee ba s ed on t hatempl oy ee’s sales ar e pr opor t i onal l yr el at ed t o t he cha r ges pas s ed on t o t he cons um er , t he paym ent s can be cons i der ed a b o n a f ide c o m m issi o n rate fo r th e p u rpo ses o f § 7 (i ). F irst, w e a g re e w ith th e D istric t C o u rt th a t th e p a ym e n ts m a d e to N u triS y ste m ’s s a les a ss o c iate s a re su f f icie n tlyT her e w as di s cus s i o n atar gum entdeal i ng w i t h t he 5 boundar i es of proport i onal i t y . W e, l i ke the D i s t r i ctC our t , need n o t def ine th e o u ter l im it s o f p rop o rt ion ali tyh ere a s w e a re s at i s fi ed thati texi s t s i n t hi s cas e.

24 pr opor t i onal t o t he co st t o t he cons um ert o qual i fyas c o m m is s io n u n d e r s e c tio n 7 (i ). See , e. g. , Yi , 4 8 0 F

. 3 d at 508; D ep ’to f L ab o r O p . L tr ., 2 0 0 6 W L 4 5 1 2 9 5 7 (Jun e 2 9 , 2 0 0 6 ). T her e i s onl ya s m al l di ffe r ence betw een the abs ol ut e dol l ar val ue of the thr ee f

l at
- r at e fee s pai d t o s al es as s oci at es ( $18. 00, $2 5. 00 , and $4 0. 00 ). T he v ari ance in t he flat -r at e fee as a p e r c e n t a g e o f t h e c o s tt o t h e c o n s u m e r , w h i c h r a n g e s f r o m 5 %- 1 4 % , is a ls o re la tiv e ly sm a ll. See A p p e n d ix I. T h e se re lativ e ly sm a ll d if f e re n c e s s u p p o rt th e p ro p o sitio n th a t p ro p o rtio n a lityto the c o st t o the c o n su m er e x ist s in th is ca se. T h e D istri ct C o u rt o ff ered an e xampl e i n defi ni ng pr opor t i onal i t y , w hi ch w e fi nd h elpf u l: “p rop o rt ion ali tyw o u ld n o t exist i f a n em p loy ee w ere paid the sam e do l l ar am ou nt forsel l i ng a $1 0 ri ng as a $1, 000, 000 r i ng. ” Thi s i s p lai n lynott he ca s e her e, as t he d if f e re n c e s in th e c o sts o f

th e m e a l p lan s a re re lativ e lysm a ll, w i t h fourof the fi ve meal pl ans cos t i ng t he s ame, $342. 36. T he m e n ’s p lan is s lig h tlym o re e x p e n siv e , $ 3 7 1 .5 0 , b e c a u se it cont ai n s mor e f

o o d

. Cus t o me r s c a n r e c e i v e a $ 5 0 d i s c o u n ton al l fi ve pr oduct s bys el ect i ng t he aut o- s hi p opt i on. 5 Second, i ti s per s uas i ve thatN ut r i Sy s t em’s pl an “ba s es compen sat i on on s al es , ” j us tas J udge Pos nerdes cr i bed i n Yi

. 48 0 F

. 3d at 51 0. U nd er t he plan, a fl atrat e fee is no tpaid unless a sa les a ss o c iate c o m p lete s a sa le. N u triS y ste m ’ s f lat ra te25 p a ym e n t is tied to b o th th e tim e th e sa le is m a d e a n d w h e th e r it i s bas ed o n an i ncomi ng orout goi ng cal l , r athert han bei ng a per cent age of

t he cos tt o t he consu m er. T he amount of the paym enti s bas ed on the val ue N ut r i Sy s t em w as r ece i vi ng fr om t he s al es as s oci at es ’ w or k. U nder t hi s pl an, N ut r i Sy s t em cr eat es an i ncent i ve for s al es as s oci at es t o be act i vel ym aki ng out goi ng cal l s and t o w or k l es s des i r abl e hour s, thu s al l ow i ng N ut r i Sy s t em t o oper at e atpeak e ffi ci encyar ound t he cl ock. T he s al es as s oci at es ’ compensa t i on i s al s o “dec oupl ed fr om actual t i m e w or ked, ” a char act er i s t i c bot h t he Seventh C i r cui t and the D epart m ent i dent i fi ed as a hal l m ark of “how co m m i s s i ons w or k. ” I

d. a t 5 0 9 ; s ee D e p ’ to f L a b o rO p . L t r . , 2 0 0 5 WL 3308624 ( N ov. 14, 2005) ( “The w hol e pre m i s e behi nd earni ng a c o m m iss io n is th a t th e a m o u n t o f sa les w o u ld in c re a se th e ra te o f p ay . ”) (interna l ci tat ion o m itted). T h ird , fr o m a p o licysta n d p o in t it is re a so n a b le to p e rm it N ut r i Sy s t em t o offe r d i ffe r entcomm i s s i ons dependi ng on t he t i m e of the s al e and w hethert he s al e w as t he r es ult o f an i ncomi ng orout goi ng cal l

. T hi s encour ages s al es s t aff t o t ake undes i r abl e s hi ft s and t o w or k har der t o cl os e a s al e on out goi ng cal l s . A ddi t i onal l y , N ut r i Sy stem offe r s var i ous s al es and pr om ot i ons , i ncl udi ng t he aut o- s hi p pr ogr am. H ad N ut r i Sy s t em b a s e d c o mmi s s i o n p u r e l y a s a p e r c e n t a g e o f t h e c o s t of t he g o o d s to c o n su m ers, i t w o u ld h av e c rea ted a d isi n ce n ti v e f o r a s al es as s oci at e t o encour age c ons um er s t o t ake advant age of the di scount s t hatr es ul tfr om t he aut o- s hi p m ethod. For exampl e, h a d N u triS y ste m d e c lar e d a 7 % c o m m iss io n o n a ll p ro d u c ts s ol d, a s ales associ at e w oul d earn a $26. 01 comm i s s i on on a m en’ s pl an undert he r egul ars hi ppi ng m ethod butonl ya $22. 04 comm i s s i on undert h e a u t o - s hi p m ethod. N ut r i Sy s t em offer s t he26 a u to -sh ip m e th o d a t a d isc o u n t b e c a u se th e c o m p a n yb e liev e s in t he end, t hi s s hi ppi ng m ethod w i l l gener at e the companygr eat er r e v e n u e . A sa les a ss o c iate , h o w e v e r, w o u ld p re f e r t o se ll a cons um era meal pl an under t he r egul ars hi ppi ng m ethod beca us e the as so ciate rec eive s a large com m i s s i on. N ut r i Sy s t em’s pl an el i m ina t es t hi s di s i ncent i ve bypr ovi di ng as s oci at es w i t h a fl at r at e comm i s s i on not di r ect l y t i ed t o t he end costt o co nsum ers . Fi nal l y , N ut r i Sy s t em’s pl an does not offe nd t he purpos es of the FL SA an d the overt i m e pr ovi s i ons di s cus s ed supra in Mechm et , 825 F. 2d at1175- 76, and Yi , 4 8 0 F .3 d a t 5 1 0 . F irst, t he A ppel l ant s ’ i ncome i n t he y ear s t hey w or ked atN ut r i Sy s t em r anged f r om appr oxi m at el y$40, 000 t o o v er$80, 000, and thus th e yw e re n o t th e lo w e r-in c o m e typ e e m p lo y e e s c o n tem p late d to be pr ot ect ed by t he over t i m e provi s i ons . Second, N ut r i Sy s t em em p loy ee s m u st a ch ieve ce rt ain s ales g o als t o w o rk h o u rs bey ond t hei rs chedul ed ei ght

- hour s hi ft s . For ci ng N ut r i Sy s t em t o payover t i m e i s unl i kel yt o i n d uce the hi r i ng of addi t i onal s al es as s oci at es beca us e the onl ys al es as s oci at es w or k ing an excess of f

ortyho urs pe r w eek are t he top sal es ass ociat es. T h ir d , h igh -pe rfo rm ing ca ll c e n ter w o rke rs co u ld w o rk m o re t han fort yhour s a w eek, t h e h ea lth r i s ks oracc i dent s t hatcan occur due t o fat i gue fr om l ong hour s ar e gener al l y no t present forcal l cent erempl oy ees as compar ed t o m anual l abor er s , and t hus t he over t i m e pr emi um i s notneede d t o compensa t e foran i ncr eas e i n dangerfr om w or ki ng w hen t i r ed.27 I V. Forthe fore goi ng r eas ons , w e w i l l aff i r m t he D i s t r i ct C our t ’ s gr ant of sum m ary j udgm ent t o N ut r i Sy s t em and deni al of sum m aryj ud gm ent t o the A pp el l ants
.28 Appe nd i x IP arker , etc. v. N

utr i Sys t em , I

nc. , N o. 09- 3545 C O W E N , C i r cui tJ udge, di s s ent i ng U nl i ke the m aj or i t y , I w oul d aff or d Skidm ore defe r ence t o t he D ep art m ent ’ s vi ew t hati n or dert o cons t i tut e a comm i s s i on forpurpos es of § 7( I ) , t he amountof compensa t i on pai d t o the empl oy ee mustbe pr opor t i onal l yr el at ed to the a m o u n t ch a rg e d to th e c u sto m e r. B e c a u se N u triS y ste m f a iled to demonst r at e the r equi s i t e proport i onal i t y , i t s compensa t i on pl an ca n n o t be c o n side red a b o n a f ide c o m m issi o n p lan u n d er § 7 (I)

. A s t h e m aj or i t yr ecogni zes , t he D epart m enthas i s s ued se v e r a l o p in io n lette rs c o n c e rn in g th e sc o p e o f th e re tail comm i s s i o n e x e mpt i o n . I n t h e ma j o r i t y ’ s v i e w, t h e s e o p i ni on l et t er s fai l t o “pr ovi de s uffi ci ent l yt hor ou g h r eas oni ng, cons i s t ency , orfac tual s i m i l ar i t i es t o t he i ns t antcas e t o w arr ant d e f e r e n c e . ” M a

j

. Typ e s c r i p tOp

. a t2 0

. I d i s a g r e e , a s i n my v iew , th e o p inion let ters clearlyref lect th e D ep artm en t’ s cons i s t entvi ew t hat , i n or dert o be c ons i der ed a c om m i s s i on under§ 7( I ) , ther e m us tbe a de gr ee of pr opor t i onal i t ybetw een th e p a ym e n t a n e m p lo y e e re c e iv e s a n d th e c o sts p a ss e d d o w n to th e c u s to m e r. F o r in stan ce , in the A p ri l 3, 19 9 6 , let ter co n ce rnin g alarm sy stem install ers, the D ep artm en t ex p lai n ed that, if t h e ins tal lers “w ere to b e compens at ed on a pe r cent age of t he s al es pr i ce of t he al arm s y s t ems t heyi ns t al l ed[, s ] uch a m ethod of paym ent w oul d cons t i tut e paym enton a com m i s s i on bas i s ; ” buti f the in sta llers w e re “ p a id a f lat f e e p e r in sta llatio n , [th e D e p a rtm e n t] w oul d notcons i ders uch a pa ym entt o be a c om m i s s i on paym ent
. ” D ep’ t of L aborO p. L t r . , 1996 W L 1031770 ( A pr . 3, 1 9 9 6 ). 12 Si m i l arly , i n i t s s ubs equentl et t eraboutheal t h cl ub in stru c tio n a l em p lo y e e s, th e D e p a rtm e n t m a d e c lea r th a t, w h ile i ns t ruct or s w ho w er e pai d a per cent age of t he cl ub’ s r evenue per l es s on w oul d qual i fyfor the exe m pt i on, i ns t ruct or s pai d a fl at fe e p er lesso n w o u ld n o t b ec au se “[ f]lat fee s p aid w ith o u t r eg ard t o t he value o f t he s ervi ce pe r for m ed do notr epr es ent ‘c o m m i s s i o n s o n g o o d s o r s e rv ic e s ’ f o r p u rp o s e s o f

[ § ] 7 (I ).” D ep’ tof LaborO p. L t r . , 2005 W L 3308624 ( N ov . 14, 2005) ( i nt ernal quot at i on m ar ks and ci t at i ons om i t t ed)

. I n t hatopi ni on lette r, th e D e p a r tm e n t w e n t o n to sta te th a t, i n g e n e ra l, “empl oy ees pai d a fl atfee ar e cons i der ed t o be compensa t ed on a piece ra te basi s and n ot on t he b asi s of co m m i ssi on s. C om m i ssi on s, f

or purpo ses of [§] 7(I ), usuall yden otes a per centage of t he amount of m oni es pai d outorr ece i ved

. ” I d. In th e th ird lette r, th e D O L d e ter m in e d th a t au to m o b ile det ai l er s and pai nt er s w ho w er e pai d undert he fl ag- r at e met hod w er e s ubj ectt o the comm i s s i on exempt i on beca us e the fl ag hour s t hatt he empl oy ers etfor e ach j ob corr es ponded t o t he l aborhour s ul t i m at el ychar ged t o t he cus t om er . D ep’ tof Labor O p . L tr ., 2 0 0 6 W L 4 5 1 2 9 5 7 (J u n e 2 9 , 2 0 0 6 ). Inso fa r a s thes e o p inion let ters ex p ress the D ep artm en t’ s con si st ent and reasonab l e po si t i on t hat § 7(I ) r equ i res a pr opor t i onal r el at i ons hi p betw een e m pl oy ee c om pens at i on and c u sto m e r c o sts , I w o u ld a f f o rd th e m a “ m e a su re o f re sp e c t”See a l so 29 C

. F. R. § 7 7 9. 413( a) ( 4) ( des cr i bi ng a 1 “[s ] t r ai ghtcomm i s s i on” as “a fl at per cent age on eac h dol l arof s al es [the empl oy ee] m akes ”) ; U

. S. D ep’ tof Labor , G l os s aryof C ur r entI ndus t r i al R el at i ons & W age Ter m s , B ul l et i n N o. 1438, at 15 ( 1 9 6 5 ) ( d e f i n i n g “ c o mmi s s i o n ear ni ngs ” as “[c ] om pens at i on t o s al es peopl e bas ed on a pr edet erm ine d p erc en tage o f th e v alue o f sales” ); U

. S

. D ep t’ o f L ab o r, G lossa ry of Curr e n t l y Us e d W a g e Te r ms , Bul l e t i n No. 9 8 3 , a t 4 ( 1950) ( defi ni ng “comm i s s i on earni ngs ” as “compens at i on to s al es p e rs o n n e l b a s e d o n a p e rc e n ta g e o f v a lu e o f s a le s ” ). 3 u n d er Skidm ore . See Fed. E xpr es s C or

p. v. H ol ow eck i , 552 1 U .S . 3 8 9 , 3 9 9 (2 0 0 8 ). A fter dec li n ing to def er t o th e D ep artm en t’ s i nterpret at i on of § 7(I ), t he m aj ori t yno nethel ess adop t s a defi n i t i o n t h a ti s c o n s i s t e n twi t h t h e Dep a r t me n t ’ s a p p r o ach, hol di ng t hat “w hen the fl at
- r at e paym ent s m ade t o an empl oy ee bas ed on t hat empl oy ee’ s s al es ar e pr opor t i onal l yr el at ed t o t he char ges pas s ed o n to the cons um er , t he paym ent s can be cons i der ed a bona f

ide comm i s s i on r at e fort he purpos es of § 7( I )

. ” M aj

. T ypes cr i ptO p. at23. T he maj or i t ythen conc l udes t hatN ut r i Sy s t em’s compensa t i on pl an me ets t hi s defi ni t i on b ec au s e th e p ay m en ts m ad e to its sales asso ciates a re
“ s u f f ic ie n tly p ro p o rt io n a l” to th e c o s t to th e c o n s u m e r. I d. W h il e I d o n o t object t o the m ajority ’s co n tent io n that § 7 (I) r equi r es a pr opor ti o n al r el at i ons hi p betw een e m pl oy ee compensa t i on and c u stom ercos t s , I cannotagr ee that N u triS y ste m h a s d e m o n stra ted su c h a p ro p o rtio n a l re latio n sh ip h e re . It is u n d isp u ted th a t N u triS y ste m ’s m e a l p lan s v a ryin pr i ce de pendi ng on t he t ype of m eal pl an the cus t om erchoos es4 and th e len g t h o f t he cu st om er’ s com m i t m ent. Iti s l i kew i se undi s put ed thatt he fl at
- r at e fee pai d t o a s al es as s oci at e does not varydependi ng on t he type of pl an t he cust om er choos es ort he l ength of the cus t om er ’ s comm i t m ent
. N ut r i Sy s t em cl ear l yhas notdemonst r at ed thatt he fl at
- r at e fe es ar e pr opor t i onal l yr el at ed t o t he cos tt o t he cus t om er . W hi l e nei t her t he pl ai nt i ffs nort he D epart m ents ugges t s t hata com m is s i on m us tbe bas ed on a s tr i ct p e rc e n tag e o f

th e e n d c o st to th e c o n su m e r, th e f lat-r a te pay m ents i n thi s case do n ot cor res po nd atal l w i t h the en d co st t o t he cons um er . R ather , t he fl at
- r at e paym ent s ar e bas ed on the t i m e t he s al e i s m ade a nd w hetheri tr es ul t s fr om an i ncomi ng or o u tg o in g c a ll. T h e f

a c t th a t N u tr iS y ste m c a n p e rf o rm m a th to por t r ayi t s fl at
- r at e fe es as per cent ages of cust om ercos t s does n o t tr a n s f

o rm th e f e e s in to c o m m is s io n s . Th e r e f o r e I a m u n a b l e t o a g r e e wi t h t h e ma j o r i t y and w o u ld re v e rs e a n d re m a n d f o r f u rt h e r p ro c e e d in g s .