Opinion ID: 3064666
Heading Depth: 2
Heading Rank: 4

Heading: Explanation of Our Request

Text: The question whether PSRs are exempt under California’s outside salesperson and administrative exemptions is the central issue in multiple class action lawsuits in the Ninth Circuit as well as in other circuits. In addition to the three cases pending before the Ninth Circuit, at least four other class action suits have been filed in federal court in the Central District of California. See Yacoubian v. Ortho-McNeil Pharm., Inc., No. 07-00127 (C.D. Cal. Feb. 6, 2009); Delgado v. Ortho-McNeil, Inc., No. 07-00263 (C.D. Cal. Feb. 6, 2009); Rivera v. Schering Corp., No. 08-1742 (C.D. Cal. Aug. 14, 2008); Brody v. Astrazeneca Pharm., LP, No. 06-6862 (C.D. Cal. June 11, 2008). In addition, a class-action arising under California law has been filed in federal court in the Southern District of New 1 On appeal, this case was consolidated with two other cases pending before the Ninth Circuit, Barnick v. Wyeth, 07-56684, and Menes v. Roche, 08-55286, both raising nearly identical state law claims. Respecting the California Supreme Court’s limited resources, for the purposes of this certification order, we request that the California Supreme Court resolve only the questions presented in D’Este’s claim. If the California Supreme Court decides these questions, we will resolve the remaining cases in light of the California Supreme Court’s answers to the certified questions. D’ESTE v. BAYER CORP. 5197 York. See In re Novaris Wage & Hour Litig., No. 06-1794, 2009 WL 63433 (S.D.N.Y. Jan. 12, 2009). In light of the scope of the pending litigation regarding the classification of PSRs under California Labor Code section 1171, we respectfully submit that the questions we pose are worthy of a decision by the California Supreme Court. See Cal. Rules of Court 8.548(a). The answers given by the California Supreme Court will dispose of the three pending appeals currently before the Ninth Circuit, as well as guide the decisions in the other federal cases applying California law.
In order to assist the California Supreme Court in evaluating our request, we briefly explain why we believe there is no controlling precedent or clear state court guidance on the question whether PSRs are exempt under the outside salesperson exemption. Section 510 of the California Labor Code requires employers to compensate non-exempt employees for overtime work. See Cal. Labor Code § 510(a). However, section 1171 of the California Labor Code exempts an employee who is “employed as an outside salesman” from that requirement. See Cal. Labor Code § 1171. The IWC’s Wage Orders 4-2001 and 1-2001 define “outside salesperson” as someone whose job involves “selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.” 8 Cal. Code Regs., tit. 8, §§ 11010, subd. 2(J); 11040, subd. 2(M). The regulations do not further define these key terms, the IWC provides no authoritative guidance regarding how these regulations apply to PSRs, and the California Supreme Court has not construed the particular terms “selling” and “obtaining orders” so as to be instructive in this case. In the absence of any authoritative state construction, we turned first to the plain language of section 1171 and Wage 5198 D’ESTE v. BAYER CORP. Orders 1-2001 and 4-2001. In our view, neither the plain language of the statute nor the language of the interpretive orders answer the question whether a PSR is an outside salesperson. As noted above, the IWC’s Wage Orders 4-2001 and 1-2001 define “outside salesperson” as someone whose job involves “selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.” 8 Cal. Code Regs., tit. 8, §§ 11010, subd. 2(J); 11040, subd. 2(M) (emphasis added). D’Este claims that the ordinary meaning of “selling” is the transfer of property for consideration. Similarly, D’Este argues that “obtaining orders or contracts” means acquiring a written direction to deliver property or obtaining a contractual agreement to exchange property for consideration. In other words, D’Este contends that outside salespersons must consummate their own sales, and, because PSRs do not, they are not outside salespersons. Bayer argues that the plain language of the wage order does not require employees to consummate their own sales. Bayer contends that the exemption covers employees who engage in any part of the multiple-step process of selling or obtaining orders, and therefore does not require that the salesperson have the capacity to close a sale or receive a completed order. According to Bayer, D’Este is involved in selling because she is involved in the sales process and engaged primarily in “sales activities.” See Walsh v. Ikon Office Solutions, Inc., 148 Cal. App. 4th 1440, 1454 (Cal. Ct. App. 2007) (referring to cold calls, client visits, and face-to-face contacts as “sales activities”). Moreover, Bayer argues that D’Este is also involved in “obtaining orders” because she influences doctors to write prescriptions, which are “orders” under California law. See Cal. Bus. & Prof. Code § 4040(a) (defining a prescription as “an oral, written, or electronic transmission order” that is “given individually for the person . . . for whom ordered” and “[i]ssued by a physician” or other medical personnel). In reviewing these arguments, we have concluded that the plain language of the regulation is susceptible to both inter- D’ESTE v. BAYER CORP. 5199 pretations. The California Supreme Court’s guidance that “exemptions from statutory mandatory overtime provisions are narrowly construed,” Ramirez v. Yosemite Water Co., 20 Cal. 4th 785, 794 (1999); accord Nordquist v. McGraw Hill Broad. Co., 32 Cal. App. 4th 555, 562 (Cal. Ct. App. 1995), does not provide clear direction regarding which of the two interpretations the California Supreme Court would determine to be correct. We have also considered whether federal interpretations of the parallel exemption under the Fair Labor Standards Act, 29 U.S.C. § 213(a)(1), provide any guidance in interpreting California’s outside sales exemption. The California Court of Appeal has held that “[b]ecause the California wage and hour laws are modeled to some extent on federal laws, federal cases may provide persuasive guidance.” Nordquist, 32 Cal. App. 4th at 562. However, “where the language or intent of state and federal labor laws substantially differ, reliance on federal regulations or interpretations to construe state regulations is misplaced.” Ramirez 20 Cal. 4th at 798; accord Morillion v. Royal Packing Co., 22 Cal. 4th 575, 594 (2000). In Ramirez, the California Supreme Court noted that the IWC’s interpretation of the outside sales exemption does not closely track the language of the analogous federal regulations defining an outside salesperson. Ramirez, 20 Cal. 4th at 796. Compare 29 C.F.R. § 541.500(a) (2004) (defining outside salesperson as “any employee whose primary duty is making sales . . . or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and [w]ho is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty”) (internal formatting altered and emphasis added), with 8 Cal. Code Regs. § 11040 subd. 2(M) (“any person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities”) (emphasis added); see gen5200 D’ESTE v. BAYER CORP. erally Cal. Div. of Labor Standards Enforcement, Opinion Letter, Outside Salesman (July 14, 1994), available at http://www.dir.ca.gov/dlse/opinions/1994-07-14.pdf. Therefore, interpretations of the federal outside sales exemption under the Fair Labor Standards Act, including federal regulations and case law, may be of limited assistance. See Ramirez, 20 Cal. 4th at 797 (“By choosing not to track the language of the federal exemption and instead adopting its own distinct definition of ‘outside salespersons,’ the IWC evidently intended to depart from federal law and to provide, at least in some cases, greater protection for employees.”). Given the importance of correctly interpreting the outside salesperson exemption under California law, and the lack of authoritative guidance, we respectfully request that the California Supreme Court provide us with a ruling on this issue.
In the alternative, or if the California Supreme Court determines that the outside salesperson exemption is not applicable to PSRs, we ask the California Supreme Court to answer our second question regarding the applicability of two key sections of the administrative exemption to pharmaceutical sales representatives. Wage Order No. 4-2001 provides a detailed multi-element definition of “persons employed in an administrative capacity,” which delineates the scope of the administrative exception. At issue in this case is: (1) whether, under California law, D’Este was engaged in work that “directly related to management policies or general business operations of his/her employer or his employer’s customers”; and (2) whether she “customarily and regularly exercise[d] discretion and independent judgment.” 8 Cal. Code Regs., tit. 8, § 11040, subd. 1(A)(2)(a)(I), 1(A)(2)(b); accord Combs v. Skyriver Commc’ns, Inc., 159 Cal. App. 4th 1242, 1254 (Cal. Ct. App. 2008). D’ESTE v. BAYER CORP. 5201 In determining whether D’Este was engaged in work that is “directly related to management polices or general business operations,” we are guided by Wage Order 4-2001, which provides that “[t]he activities constituting exempt work and non-exempt work shall be construed in the same manner as such terms are construed in the following regulations under the Fair Labor Standards Act effective as of the date of this order: 29 C.F.R. Sections 541.201-205 . . . .” 8 Cal. Code Regs., tit. 8, § 11040 subd. 1(A)(2)(f); accord Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1129 (9th Cir. 2002). The applicable federal regulation, 29 C.F.R. § 541.205(b) (1998), explains that the “administrative operations of the business include the work performed by so called white-collar employees engaged in ‘servicing’ a business.” This work includes “promoting sales.” In addition, an employee must “perform work of substantial importance to the management or operation of the business.” The parties dispute whether D’Este was “promoting sales” and whether she was engaged in “work of substantial importance to the management or operation of the business” as a matter of California law. No California case has addressed this issue. Nor is there any clear state guidance on the second question, whether a PSR in D’Este’s position “customarily and regularly exercise[d] discretion and independent judgment.” 8 Cal. Code Regs., tit. 8, §11040, subd. 1(A)(2)(a)(1), 1(A)(2)(b). The California Court of Appeal has held that an employee who merely relies on “skills and knowledge” does not qualify for this exemption. Nordquist, 32 Cal. App. 4th at 563. In order to exercise “discretion and independent judgment,” the employee must be involved in making decisions related to “matters of consequence,” and which are of “real and substantial significance to the policies or general operations of the business of the employer or the employer’s customers.” Id., see also Combs, 159 Cal. App. 4th at 1254. In this case, the record establishes that D’Este had significant autonomy and decisionmaking authority with respect to designing and implementing a strategy for influencing doc5202 D’ESTE v. BAYER CORP. tors’ prescribing behavior and hospitals’ decisions regarding their formularies. On the other hand, D’Este’s discretion was substantially constrained by Bayer’s control over the message and target audience. Neither the language of the exemption nor the case law clearly answers the question whether, under California law, D’Este exercised “discretion and independent judgment” in this context. The one directly applicable federal case decided prior to the adoption of Wage Order 4-2001, Cote v. Burroughs Wellcome Co., 558 F.Supp. 883, 887 (E.D. Pa. 1982), found that PSRs do exercise such responsibility. Accordingly, we respectfully urge the California Supreme Court to address the applicability of the administrative exemption to PSRs, which is an important issue of first impression.