Opinion ID: 4561630
Heading Depth: 3
Heading Rank: 1

Heading: Making Sales

Text: We begin with whether Plaintiffs’ duties constitute “making sales” as defined by 29 C.F.R. § 541.500. The procedures for solicitation that Plaintiffs were required to follow started with offering an application or customer agreement for Just Energy’s services and then assisting potential customers to complete the form. A signed agreement did not finalize the transaction for Just Energy products, but Plaintiffs were mandated to cease all involvement in the process after the application was prepared and the verification call was initiated. Plaintiffs had to leave the customer’s premises at the beginning of the call or face the possibility of termination. No. 18-4058 Hurt, et al. v. Commerce Energy, Inc., et al. Page 9 From the other side, each customer had to successfully complete the verification call and pass a credit check. Even then, Just Energy retained, and frequently exercised, ultimate discretion on whether to finalize or refuse the application. At trial, the jury found that Just Energy did not satisfy its burden to demonstrate that Plaintiffs were outside salespeople and found Defendants liable for violating the FLSA and the OMFWSA. The district court denied their motions for directed verdict and judgment as a matter of law, finding that there was sufficient evidence to support the jury’s determination that the outside sales exemption did not apply to Plaintiffs. Just Energy argues that because Christopher’s detailers were considered outside salespeople when they obtained “non-binding commitments” from physicians to prescribe their drugs, 576 U.S. at 147, “authority to bind” should not be a component of the test for “making sales.” But the Court found that the pharmaceutical detailers in Christopher were exempt from the FLSA because: [o]btaining a nonbinding commitment from a physician to prescribe one of respondent’s drugs is the most that [the detailers] were able to do to ensure the eventual disposition of the products that respondent sells. This kind of arrangement, in the unique regulatory environment within which pharmaceutical companies must operate, comfortably [fits under the exemption]. Id. at 165 (footnote omitted and emphasis added). Christopher addressed the specific parameters of work in the unique regulatory environment of the pharmaceutical industry. Its conclusion that pharmaceutical detailers who cannot obtain binding commitments are “making sales” does not necessarily apply to other industries. We, and other circuits, have recognized the unique factual setting and the limitations of Christopher in resolving outside sales exemption claims in other industries. In Killion v. KeHE Distributors, LLC, we explained the path followed by the Court through the “unique regulatory environment” governing pharmaceutical companies and found Christopher to be of “limited import.” 761 F.3d 574, 583–84 (6th Cir. 2014). We reversed summary judgment that had applied the exemption to sales representatives of a food distributor because, though the plaintiffs entered orders from individual stores, the account managers controlled the volume and placed restrictions on the orders allowed. Id. at 584. Similarly, the Fifth Circuit in Meza v. Intelligent No. 18-4058 Hurt, et al. v. Commerce Energy, Inc., et al. Page 10 Mexican Mktg., Inc. noted that Christopher “offers little guidance as to how a court determines if a driver is a deliveryman or a salesman for FLSA purposes” because it dealt with pharmaceutical sales representatives. 720 F.3d 577, 586 (5th Cir. 2013). The unique regulatory environment of the pharmaceutical industry makes evident why Christopher’s holding does not readily transfer to other industries. Both drug companies and their detailers are prohibited from selling prescription drugs directly to patients: the ultimate discretion to complete a sale rests elsewhere—with a prescribing physician. Christopher, 567 U.S. at 150 & n.4. No such regulatory environment prevents direct energy sales. Just Energy sales had requirements of its own making, such as third-party verifications for all potential customers based on its individual settlement agreement with Ohio PUCO, but no regulations prohibited direct sales or required Just Energy itself to retain full discretion to finalize a sale. Plaintiffs’ lack of authority to finalize the transactions is significant when reviewing the facts under a “functional, rather than formal, inquiry . . . in the context of the particular industry in which the employee works.” Id. at 161. The fact that Just Energy retained discretion to finalize the sale is not merely a technicality immaterial to the analysis. Id. at 149. Plaintiffs’ customer agreements, sometimes referred to as “applications,” were rejected frequently by Just Energy, and Plaintiffs often were not told the reason for the rejection, though it directly impacted if and how much they were paid. Once the verification phone call began, these Ohio Plaintiffs had no ability to personally follow-up, answer questions and assuage concerns, or confirm the transaction with the customer. No regulatory environment prohibited the solicitors from controlling and completing the sale directly to customers. The dissent analogizes the nonbinding agreements here to the nonbinding sales of products that are subject to supply availabilities and customer return policies, or bulk orders that must be completed by purchasing retailers. Even assuming that the salespeople in these situations qualify for the exemption under the FLSA, they are distinguishable from Plaintiffs here because Just Energy itself, not the purchasers as part of a regulation or policy, controls the finalization of sales. Plaintiffs could not finalize customer agreements and complete sales due to Just Energy’s choice to retain ultimate discretion and to require certain solicitation procedures at its Ohio workplace. No. 18-4058 Hurt, et al. v. Commerce Energy, Inc., et al. Page 11 In Killion, we reversed summary judgment in favor of the distributor because a jury could conclude that the plaintiffs did not actually make sales. 761 F.3d at 584–85. Similarly, Plaintiffs here communicated with potential customers, convinced them to try Just Energy products, and inputted their information onto the agreement. But Just Energy retained discretion over completion of sales, just as the account managers in Killion could restrict and control the volume of orders. It was appropriate for the jury and now this court to consider Just Energy’s retention of discretion over completion of sales as a factor in determining whether Plaintiffs were making sales. Our conclusion is supported by Clements v. Serco, Inc., where the Tenth Circuit held that mere soliciting or inducing applications is not making sales, especially if the employer retains discretion and implements other requirements to complete the transaction. 530 F.3d 1224, 1229 (10th Cir. 2008) Though the Clements court noted that the “touchstone for making a sale . . . is obtaining a commitment,” id. at 1227, it found that civilian military recruiters are not outside salespeople because they “could only lay the groundwork. It was the Army—and only the Army—who could enlist a recruit,” id. at 1229. Plaintiffs’ jobs are comparable to those of the civilian recruiters in Clements because they “could only lay the groundwork” but not complete the sale. Finally, Just Energy argues that this case should be controlled by Flood v. Just Energy Marketing Corp., in which the Second Circuit considered FLSA and state law claims by door-to-door solicitors against the same parent entity, Just Energy, and affirmed summary judgment in favor of Just Energy. 904 F.3d 219 (2d Cir. 2018). Just Energy argues that here too “making sales” must focus on “whether the employee has obtained a commitment to buy the employer’s product.” Id. at 232. But Flood’s emphasis on the commitment to buy is grounded in its factual setting, and, as Christopher establishes, other factors must also be considered.1 1Appellants also cite as supplemental authority two Department of Labor opinion letters finding the outside sales exemption applicable to two specific factual scenarios. The DOL there applied an analysis that is consistent with our discussion of Christopher and other precedent above, which governed our analysis in the factual setting of this case. No. 18-4058 Hurt, et al. v. Commerce Energy, Inc., et al. Page 12 Based on Flood, our dissenting colleague concludes that our decision is wrong because these cases present an all or nothing proposition: either all employees of the topmost parent corporation, Just Energy, receive FLSA protection or none should. But that ignores the fact-intensive inquiry required by and the employee-protective purpose of the FLSA and the OMFWSA. It also ignores the distinct parties in the cases: here, Commerce Energy of Ohio, Inc.; in Flood, Just Energy New York Corp. It is true that both cases share defendants—the same ultimate parent corporation, Just Energy, sits atop the complex structure of subsidiaries— so there will be some overlap in method or procedures. But how the New York subsidiary chooses to operate its worksite does not tell us how the Ohio subsidiary must necessarily operate its worksite. And a suit brought in Ohio against the Ohio subsidiary may find its workplace operation to be covered by FLSA protections without creating a circuit split, even if the workplace operation of the New York subsidiary is exempt. A comparison of these two cases shows that no circuit split exists. Flood involved a separate group of licensed Just Energy subsidiaries that operated in New York at a worksite that functioned very differently from Plaintiffs’ worksite. There, if a solicitor convinced a potential buyer to fill out the customer agreement, the third-party verification call was initiated and the solicitor waited outside the customer’s immediate presence. Id. at 225. If the verifier provided a confirmation number to the customer, the solicitor reengaged with the customer at this “critical point of the sale,” and added the number to the agreement. Id. The solicitor was told “to confirm the program details” and “ensure that the customer has no further questions.” Id. The solicitor then “close[d] the sale by giving the customer all the paperwork.” Id. He was “the last person to sell a customer,” and no one else made sales after him. Id. Here, the evidence at trial shows that the procedures governing the interaction between the door-to-door solicitors and the customers were significantly different at the Ohio workplace. The Ohio affiliate of Just Energy did not allow Plaintiffs to “close the sale,” or provide confirmation and answers to customer questions or concerns at the “critical point of the sale.” Plaintiffs’ contact with the customers ended upon initiating the verification call, on pain of termination. Customers were instructed to direct any questions or concerns to Just Energy’s No. 18-4058 Hurt, et al. v. Commerce Energy, Inc., et al. Page 13 customer service. Wage issues, which the minimum wages requirements of the FLSA seek to address, also highlight the distinctions between the workplaces. The lead plaintiff in Flood earned more than $70,000 in commissions per year, was eligible to earn residual payments, and received incentive awards for travel around the world. Flood, 904 F.3d at 226. In contrast, testimony revealed that one Ohio plaintiff made only $1,200 over three or four months, while another made only $196 while working 12- to 14-hour days, six to seven days a week for about two months. And others testified to making nothing at all, even after working 11- to 12- hour days, six to seven days a week for several weeks. Of the 3,840 total individuals with compensation data available in the trial spreadsheets, 69% of the individuals made under $1,000 in total compensation and 62% of the individuals made under $500. In sum, Plaintiffs had significantly less control over their work, sale methods, and compensation than the New York solicitors. Flood is distinct both in its procedural posture and in the factual setting that controlled whether solicitors were in fact authorized or allowed to make sales. Flood does not control the outcome of this case. This appeal challenges the determination of the jury following trial that Defendants are liable to Plaintiffs under the FLSA. Based on the evidence before it, the jury found that Plaintiffs were not “making sales” and were not exempt outside salespeople. This decision accords with the language of the FLSA and the regulations of the DOL. Our precedent and that of our sister circuits also support this conclusion. Viewing the entire record in the light most favorable to Plaintiffs, as we must, we cannot say that reasonable minds could have come to only one conclusion—a decision in favor of Defendants that Plaintiffs were “making sales.” Therefore, the district court properly denied Just Energy’s motions for judgment as a matter of law and for directed verdict.