Lalli v. General Nutrition Corporation, 1st Cir. (2016)

7/25/2019 Lalli v. General Nutrition Corporation, 1st Cir. (2016)

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United States Court of AppealsFor the First Circuit

No. 15- 1199

J OSEPH LALLI ,

Pl ai nt i f f , Appel l ant ,

v.

GENERAL NUTRI TI ON CENTERS, I NC.

and GENERAL NUTRI TI ON CORP. ,

Def endant s, Appel l ees.

APPEAL FROM THE UNI TED STATES DI STRI CT COURTFOR THE DI STRI CT OF MASSACHUSETTS

[ Hon. Mi chael A. Ponsor , U. S. Di st r i ct J udge]

Bef ore

Kayat t a, St ahl , and Bar r on,Ci r cui t J udges.

Mat hew P. J asi nski , wi t h whomWi l l i amNar wol d and Mot l ey Ri ceLLC wer e on br i ef , f or appel l ant .

Rober t W. Pr i t char d, wi t h whom Al l i son R. Br own and Li t t l erMendel son, P. C. wer e on br i ef , f or appel l ee.

Febr uar y 12, 2016


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STAHL, Circuit Judge. Fr om August 2009 t hr ough J anuary

2013, Pl ai nt i f f - Appel l ant J oseph Lal l i ( "Pl ai nt i f f " or "Lal l i " )

was empl oyed by Gener al Nut r i t i on Cent er s, I nc. and Gener al

Nut r i t i on Cor p. ( col l ect i vel y, "Def endant s" or "GNC") as a st or e

manager . Lal l i chal l enged hi s compensat i on ar r angement under t he

Fai r Labor St andards Act ( "FLSA") , 29 U. S. C. 201- 219, and t he

Massachuset t s Mi ni mumFai r Wage Law ( "St at e Wage Law") , Mass. Gen.

Laws ch. 151, 1- 22. Upon GNC' s mot i on, t he di st r i ct cour t

di smi ssed t he compl ai nt . Lal l i now appeal s t hat deci si on. For

t he r easons set f or t h bel ow, we af f i r m.

I. Facts & Background

The f act s of t he case ar e qui t e st r ai ght f or war d. GNC

sel l s heal t h and wel l ness pr oduct s t hr ough company- owned st ores

t hr oughout t he Uni t ed St ates. Lal l i was a st ore manager at a GNC

st or e i n Massachuset t s. As a st or e manager , Lal l i ear ned a

guarant eed weekl y sal ary regardl ess of t he hour s worked t hat week

and a non- di scr et i onary sal es commi ssi on t hat var i ed based upon

t he amount of el i gi bl e sal es at t r i but ed t o hi m f or t hat week.

Whenever Lal l i worked over f or t y hour s i n a gi ven week, he was

al so pai d an over t i me pr emi um f or each hour worked i n excess of

t he f or t y hour s. I n cal cul at i ng Lal l i ' s over t i me, GNC used a

" f l uct uat i ng workweek" ( "FWW") met hod t o cal cul ate hi s over t i me


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pay r at e. Under t hi s method, GNC woul d ( 1) add t ogether bot h ( a)

t he guarant eed sal ary f or t he week and (b) t he commi ssi ons earned

t hat week; ( 2) di vi de the t otal wages by t he number of hour s t he

empl oyee l ogged f or t hat week; and ( 3) pay an addi t i onal 50% of

t he resul t i ng per hour r at e f or any hour wor ked i n excess of f or t y

hour s t hat week.

On December 31, 2013, Lal l i f i l ed a t wo- count compl ai nt

al l egi ng vi ol at i ons of t he FLSA and t he St at e Wage Law. Lal l i

al l eged t hat GNC' s met hod of cal cul at i ng over t i me vi ol at ed t he

st at ut es, ar gui ng t hat t he FWWcal cul at i on met hod l awf ul l y appl i es

onl y when a busi ness pays a f i xed amount f or t he week. Because

t he commi ssi on ear ni ngs var i ed f r om week to week, Lal l i al l eged

t hat GNC di d not pay hi m a " f i xed" amount . One mont h l at er , GNC

moved t o di smi ss t he compl ai nt f or f ai l ur e t o st at e a cl ai m. The

di st r i ct cour t al l owed the mot i on, concl udi ng t hat an empl oyer may

use t he FWW met hod t o assess over t i me pay rat es even when an

empl oyee' s weekl y pay var i es as a r esul t of per f ormance- based

commi ssi ons. Lal l i t hen f i l ed t he i nst ant appeal .


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II. Analysis

The FLSA1 r equi r es empl oyer s t o compensat e empl oyees f or

each hour worked i n excess of f or t y hour s dur i ng a workweek "at a

r at e not l ess t han one and one- hal f t i mes t he r egul ar r at e at whi ch

[ t hey ar e] empl oyed. " 29 U. S. C. 207( a) ( 1) . " [ T] he r egul ar r at e

r ef er s t o t he hour l y r at e act ual l y pai d t he empl oyee f or t he

normal , non- overt i me workweek f or whi ch he i s empl oyed. " Wal l i ng

v. Younger man- Reynol ds Hardwood Co. , 325 U. S. 419, 424 ( 1945) .

I f an empl oyee i s pai d a f i xed sal ary each week

r egar dl ess of t he hour s wor ked, t he empl oyer cal cul at es t he

"r egul ar r at e" each week by di vi di ng t he weekl y wages by t he hour s

wor ked t hat par t i cul ar week. Over ni ght Mot or Transp. Co. v.

Mi ssel , 316 U. S. 572, 580 n. 16 ( 1942) . " [ T] hough week by week t he

r egul ar r at e var i es wi t h t he number of hour s wor ked, " i t i s

" r egul ar i n the st at ut or y sense i nasmuch as t he rat e per hour does

not var y f or t he ent i r e week. " I d. at 580. The empl oyer t hen

mul t i pl i es t he r egul ar r at e by 50% t o pr oduce t he addi t i onal

over t i me compensat i on t hat must be pai d f or every hour worked

beyond f or t y t hat week. O' Br i en v. Town of Agawam, 350 F. 3d 279,

1 The par t i es agr ee t hat t he FLSA and t he Stat e Wage Lawr equi r ement s ar e essent i al l y i dent i cal . We see no r eason t oquest i on t hi s pr emi se. See Val er i o v. Put nam Assocs. I nc. , 173F. 3d 35, 40 ( 1st Ci r . 1999) .


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287 ( 1st Ci r . 2003) . Onl y an addi t i onal "hal f " i s r equi r ed t o

sat i sf y t he st at ut e because the "t i me" i n "t i me- and- a- hal f " has

al r eady been compensat ed under t he sal ary ar r angement . 2 I d. at

288.

Al l of t hese pr i nci pl es ar e echoed and i l l ust r at ed i n

t he i nt er pr et i ve bul l et i ns i ssued by t he Depar t ment of Labor

( "DOL") . I n 29 C. F. R. 778. 109, t he DOL l ays out t he gener al

r ul e f or cal cul at i ng over t i me pay:

The " r egul ar r at e" under t he Act i s a r at e perhour . The Act does not r equi r e empl oyer s t ocompensat e empl oyees on an hour l y rat e basi s;t hei r ear ni ngs may be determi ned on a pi ece-r at e, sal ar y, commi ssi on, or ot her basi s, buti n such case t he over t i me compensat i on due t oempl oyees must be comput ed on t he basi s of t hehour l y r at e der i ved t her ef r om . . . . The

2 "The appl i cat i on of t he pr i nci pl es above st at ed may be

i l l ust r at ed by t he case of an empl oyee whose hour s of work do notcust omar i l y f ol l ow a r egul ar schedul e but var y f r om week t o week,whose t ot al weekl y hour s of work never exceed 50 hour s i n aworkweek, and whose sal ary of $600 a week i s pai d wi t h theunder st andi ng t hat i t const i t ut es t he empl oyee' s compensat i on,except f or overt i me pr emi ums, f or what ever hour s ar e worked i n t heworkweek. I f dur i ng t he cour se of 4 weeks t hi s empl oyee works 40,37. 5, 50, and 48 hour s, t he r egul ar hour l y r at e of pay i n each oft hese weeks i s $15. 00, $16. 00, $12. 00, and $12. 50, r espect i vel y.Si nce t he empl oyee has al r eady r ecei ved st r ai ght - t i me compensat i onon a sal ar y basi s f or al l hour s wor ked, onl y addi t i onal hal f - t i mepay i s due. For t he f i r st week t he empl oyee i s ent i t l ed t o bepai d $600; f or t he second week $600. 00; f or t he thi r d week $660( $600 pl us 10 hour s at $6. 00 or 40 hour s at $12. 00 pl us 10 hour sat $18. 00) ; f or t he f our t h week $650 ( $600 pl us 8 hour s at $6. 25,or 40 hour s at $12. 50 pl us 8 hour s at $18. 75) . " 29 C. F. R. 778. 114( b) .


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r egul ar hour l y rat e of pay of an empl oyee i sdet er mi ned by di vi di ng hi s t ot al r emuner at i onf or empl oyment . . . i n any workweek by t het otal number of hour s act ual l y worked by hi m

i n t hat workweek f or whi ch such compensat i onwas pai d.

Sect i on 778. 109 t hen st at es t hat " [ t ] he f ol l owi ng sect i ons gi ve

some exampl es of t he pr oper method of determi ni ng t he regul ar r at e

of pay i n par t i cul ar i nst ances. "

Two "exampl es" of compl i ant pay st r uct ures war r ant

par t i cul ar l y cl ose at t ent i on her e. Sect i on 778. 114 descr i bes what

t o do when an empl oyee r ecei ves a " [ f ] i xed sal ar y f or f l uct uat i ng

hours. " Accor di ng t o t he DOL, an empl oyee may be empl oyed on a

sal ar y basi s and have hour s " whi ch f l uct uat e f r om week t o week" i f

t he sal ar y i s pai d "pur suant t o an under st andi ng wi t h hi s empl oyer

t hat he wi l l r ecei ve such f i xed amount as st r ai ght t i me pay f or

what ever hour s he i s cal l ed upon t o work i n a workweek, whether

f ew or many. " 29 C. F. R. 778. 114( a) . "Wher e t her e i s a cl ear

mut ual under st andi ng . . . t hat t he f i xed sal ar y i s compensat i on

. . . f or t he hour s worked each workweek, whatever t hei r number ,

. . . such a sal ar y ar r angement i s per mi t t ed by t he Act " i f t he

r esul t i ng r egul ar r at e i s suf f i ci ent t o pr ovi de compensat i on above

t he mi ni mum wage r at e. I d. As i n Mi ssel , t he r egul ar r at e "i s

det ermi ned by di vi di ng t he number of hours worked i n the workweek


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i nt o t he amount of t he sal ar y. " I d. "Payment f or over t i me hour s

at one- hal f such r at e i n addi t i on t o t he sal ar y sat i sf i es t he

over t i me pay r equi r ement because such hour s have al r eady been

compensat ed at t he st r ai ght t i me r egul ar r at e. " I d. ( emphasi s

added) .

I n O' Br i en, we r est at ed t hese condi t i ons i n a f our -

f act or t est :

( 1) t he empl oyee' s hour s must f l uct uat e f r om

week t o week;

( 2) t he empl oyee must r ecei ve a f i xed sal aryt hat does not var y wi t h t he number of hour sworked dur i ng t he week ( excl udi ng over t i mepremi ums) ;

( 3) t he f i xed amount must be suf f i ci ent t opr ovi de compensat i on every week at a r egul arr at e t hat i s at l east equal t o t he mi ni mumwage; and

( 4) t he empl oyer and empl oyee must shar e a"cl ear mut ual under st andi ng" t hat t he empl oyerwi l l pay t hat f i xed sal ar y r egar dl ess of t henumber of hours wor ked.

350 F. 3d at 288. I f t he empl oyer uses t he FWW method, i t must

sat i sf y a f i f t h f act or i n or der t o compl y wi t h t he FLSA' s over t i me

r equi r ement : " t he empl oyee [ must ] r ecei v[e] a f i f t y per cent ( 50%)

over t i me pr emi um i n addi t i on t o t he f i xed weekl y sal ar y f or al l

hour s worked i n excess of 40 dur i ng t he week. " See Wi l l s v.


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Radi oShack Corp. , 981 F. Supp. 2d 245, 255 ( S. D. N. Y. 2013)

( emphasi s added) .

Sect i on 778. 118, on t he ot her hand, descr i bes what t o do

when an empl oyee r ecei ves a " [ c] ommi ssi on pai d on a wor kweek

basi s. " As an adj acent sect i on poi nt s out : "Commi ssi ons . . .

must be i ncl uded i n t he r egul ar r at e. Thi s i s t r ue r egar dl ess of

whet her t he commi ssi on i s t he sol e sour ce of t he empl oyee' s

compensat i on or i s pai d i n addi t i on t o a guar ant eed sal ar y[ . ] " 29

C. F. R. 778. 117. "When t he commi ssi on i s pai d on a weekl y basi s,

i t i s added t o the empl oyee' s ot her ear ni ngs f or t hat wor kweek .

. . and t he t ot al i s di vi ded by t he t otal number of hour s wor ked

i n t he wor kweek t o obt ai n t he empl oyee' s r egul ar hour l y rat e f or

t he par t i cul ar wor kweek. " I d. 778. 118. As wi t h t he over t i me

pr emi um pr ovi ded under sect i on 778. 114, wher e an empl oyee' s

compensat i on arr angement al r eady account s f or t he "t i me" i n "t i me-

and- a- hal f , " t he empl oyee who earns a commi ss i on on a workweek

basi s "must t hen be pai d ext r a compensat i on at one- hal f of t hat

r ate f or each hour worked i n excess of t he appl i cabl e maxi mumhour s

st andar d. " I d. ( emphasi s added) .

I n t he i nst ant case, Def endant s empl oyed a pay st r uct ur e

t hat combi nes t he exampl e set out i n sect i on 778. 114 ( a f i xed

weekl y sal ary regardl ess of hour s worked) wi t h t he exampl e set out


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i n sect i on 778. 118 ( commi ssi ons pai d weekl y) . 3 Because each

el ement r ef l ect s a permi ss i bl e compensat i on scheme, one mi ght

suspect Def endant s t o be on sol i d f oot i ng. I nst ead, Pl ai nt i f f

cont ends t hat t wo r i ght s make a wr ong, and t hat t he commi ss i on

component of t he pay ar r angement t akes t he pay scheme as a whol e

out si de t he exampl e pr ovi ded i n sect i on 778. 114. The di st r i ct

cour t r ej ect ed t hi s cont ent i on, and we revi ew i t s det er mi nat i on de

novo. Rui vo v. Wel l s Far go Bank, N. Am. , 766 F. 3d 87, 90 ( 1st

Ci r . 2014) .

We agr ee wi t h t he di st r i ct cour t and hol d t hat t he

payment of a per f ormance- based commi ss i on does not f orecl ose t he

appl i cat i on of sect i on 778. 114 wi t h r espect t o t he sal ar y por t i on

of t he pay st r uct ur e at i ssue.

Lal l i was pai d a f i xed sal ar y f or what ever hour s he

worked, and Lal l i ' s ear ned commi ssi ons wer e added t o hi s r egul ar

r at e cal cul at i on. GNC t hen pai d Lal l i a 50% pr emi um on t op of t he

r egul ar r at e f or al l over t i me hour s wor ked. Based on t he pl ai n

l anguage of t he f eder al r egul at i ons at i ssue, GNC' s compensat i on

3 Pl ai nt i f f appear s t o t act i cal l y avoi d i nvoki ng t he wor d"sal ar y" at var i ous poi nt s i n hi s pl eadi ngs and paper s. Thedi st r i ct cour t f ound t hat Pl ai nt i f f was pai d a sal ar y andcommi ssi ons, and Pl ai nt i f f seems t o i mpl y t hat he was sal ar i ed i nhi s br i ef i ng. We f i nd no r eason t o i mbue a cl ear r ecor d wi t hambi gui t y on t hi s poi nt and pr oceed accor di ngl y.


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ar r angement woul d seem t o pass must er . Pl ai nt i f f demur s, poi nt i ng

f i r st t o our deci si on i n O' Br i en and next t o t he DOL' s i nt er pr et i ve

bul l et i ns. We t ur n t o O' Br i en f i r st .

I n O' Br i en, t hi s Ci r cui t consi der ed whet her t he pay

scheme est abl i shed i n a col l ect i ve bar gai ni ng agr eement ( "CBA")

bet ween a t own and i t s pol i ce of f i cer s sat i sf i ed t he f i xed sal ar y

r equi r ement of 29 C. F. R. 778. 114( a) . 350 F. 3d at 286- 90. Under

t he CBA, of f i cer s wor ked f our shi f t s ever y si x days, each shi f t

bei ng ei ght hour s. I d. at 282. Of f i cer s r ecei ved 1/ 52 of a year l y

"base sal ary" each week r egardl ess of how many hours t hey worked

t hat week. I d. at 283.

The CBA al so i ncl uded cont r act ual over t i me and shi f t -

di f f er ent i al pay. For t he f or mer , an of f i cer woul d r ecei ve

cont r act ual l y st i pul at ed over t i me pay at a r at e of t i me- and- a- hal f

f or each hour wor ked i n excess of ei ght hour s on any gi ven shi f t ,

whet her or not t he of f i cer was ent i t l ed t o over t i me under t he FLSA

at t he end of t he week. 4 I d. at 282. For t he l at t er , an of f i cer

4 For exampl e, an of f i cer who wor ked t hr ee ei ght - hour shi f t sand one t en- hour shi f t i n a gi ven week woul d be ent i t l ed t o t wohour s of cont r act ual over t i me at a r at e of one and one- hal f t her egul ar r at e, but because t he of f i cer di d not wor k i n excess off or t y hour s dur i ng the workweek t her e woul d be no ent i t l ement t oFLSA over t i me. O' Br i en, 350 F. 3d at 282 n. 6.


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woul d recei ve an addi t i onal $10 per week f or any week i n whi ch t he

of f i cer wor ked a ni ght t i me shi f t . I d. at 283 n. 7.

Thi s Ci r cui t hel d t hat bot h t he cont r act ual over t i me and

t he shi f t di f f er ent i al meant t hat t he of f i cer s di d not r ecei ve a

" f i xed amount as st r ai ght - t i me pay" f or whatever hour s t hey worked.

I d. at 289. For t hi s r eason, t he compensat i on scheme di d not meet

t he second, "f i xed sal ar y" condi t i on of sect i on 778. 114' s f our -

f act or t est f or cal cul at i ng over t i me. I d. at 289- 90.

Pl ai nt i f f poi nt s t o some of O' Br i en' s br oader l anguage

i n an at t empt t o ext end i t s hol di ng t o the ci r cumst ances bef or e

us. Thi s at t empt f ai l s. O' Br i en exami ned t wo f or ms of

compensat i on t hat wer e r ul ed t o be i ncompat i bl e wi t h sect i on

778. 114. Nei t her of t hese f orms of compensat i on i s bef ore us, and

bot h ar e di st i ngui shabl e f r om t he commi ssi ons at hand.

Wi t h r espect t o cont r act ual over t i me, we not ed t hat " t he

of f i cer s r ecei ve[ d] mor e or l ess st r ai ght - t i me pay dependi ng on

how many cont r act ual overt i me hour s t hey work[ ed] each week. " I d.

at 289. Thi s was i nconsi st ent wi t h sect i on 778. 114, whi ch cl ear l y

st ates t hat " t he sal ary may be pai d [an empl oyee] pur suant t o an

under st andi ng wi t h hi s empl oyer t hat he wi l l r ecei ve such f i xed

amount as st r ai ght t i me pay f or whatever hour s he i s cal l ed upon

t o work i n a wor kweek, whet her f ew or many. " ( emphasi s added) .


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Unl i ke i n O' Br i en, t he empl oyee her e recei ved a f i xed sal ar y t hat

di d not var y based on t he number of hour s worked. Thus, O' Br i en

i s i napposi t e on t hi s poi nt .

Wi t h r espect t o shi f t - di f f er ent i al pay, however , t he

compensat i on var i ed "even wi t hout r ef erence t o t he number of hour s

wor ked. " I d. at 288. Rat her , t he compensat i on var i ed wi t h t he

t ype of hours worked because ni ght t i me hour s were more val uabl e

t han dayt i me hour s. I d. The O' Br i en cour t hel d t hat t hi s t oo

"does not f i t t he 778. 114 mol d" and made qui ck work of t he

pr ovi si on, poi nt i ng out t hat mer el y assur i ng a l evel of "f i xed

mi ni mum" compensat i on i s not suf f i ci ent t o pl ace a pay scheme

wi t hi n sect i on 778. 114. I d.

Al t hough t he t own pur port ed t o pay a "base sal ary, " t he

sal ar y coul d not act ual l y be cal l ed "f i xed" wi t h r espect t o t he

hour s worked because t he compensat i on f or t hose hour s var i ed f r om

week t o week. Si mpl y put , one cannot have a " f i xed sal ary" based

on al l hour s wor ked i f al l hour s wor ked do not f al l wi t hi n t hat

f i xed sal ar y. Ther ef or e, because t he shi f t - di f f er ent i al pay was

par t of t he of f i cer s' sal ar y, i t "r equi r e[ d] t he l ar ger concl usi on"

t hat t he of f i cer s di d not r ecei ve a f i xed sal ar y "as st r ai ght t i me

pay f or whatever hour s [ t hey wer e] cal l ed upon t o work i n [ t he]


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wor kweek. " I d. at 289, 288 ( ci t i ng 29 C. F. R. 778. 114) ( emphasi s

added) .

Pl ai nt i f f t r i es t o dr aw a br oader l esson f r omt he O' Br i en

l anguage and ar gues t hat any addi t i onal f or m of compensat i on that

must be f act ored i nt o an empl oyee' s r egul ar r at e r emoves t he pay

scheme as a whol e f r om t he pur vi ew of sect i on 778. 114 because

empl oyees must r ecei ve a "f i xed amount " f or st r ai ght - t i me l abor

each week. See i d. at 289. Thi s i s based on O' Br i en' s use of t he

t er m "st r ai ght - t i me pay, " whi ch r ef er s t o pay f or nor mal , non-

over t i me hour s. See Manni ng v. Bos. Med. Ct r . Corp. , 725 F. 3d 34,

55 ( 1st Ci r . 2013) .

Thi s vi ew, whi l e t enabl e, i s ul t i mat el y unpersuasi ve

because i t i nf l at es t he i mpor t of a si ngl e sent ence i n our deci si on

t o f i nd answer s t o quest i ons that wer e not asked t her e. Unl i ke i n

O' Br i en, t he sal ar y her e r emai ns f i xed r egar dl ess of t he number or

t ype of hour s worked. Onl y t he commi ssi ons var y. Ret ur ni ng t o

t he DOL' s own l anguage, i t i s evi dent t hat " [ t ] he r egul at i on does

not expr essl y pr ecl ude payment of such bonuses. " Swi t zer v.

Wachovi a Corp. , No. CI V. A. H- 11- 1604, 2012 WL 3685978, at *3 ( S. D.

Tex. Aug. 24, 2012) .


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Sect i on 778. 114, by i t s pl ai n l anguage, r equi r es a f i xed

sal ary f or hour s worked, not a f i xed t otal amount of compensat i on

f or t he week:

An empl oyee empl oyed on a sal ar y basi s mayhave hour s of work whi ch f l uct uate f r om weekt o week and t he sal ar y may be pai d hi mpursuantt o an under st andi ng wi t h hi s empl oyer t hat hewi l l r ecei ve such f i xed amount as st r ai ghtt i me pay f or what ever hour s he i s cal l ed upont o wor k i n a wor kweek, whet her f ew or many.( emphasi s added) .

The " f i xed amount as st r ai ght - t i me pay" r ef er r ed t o i n O' Br i en,

350 F. 3d at 288, i s t he same "f i xed amount as st r ai ght t i me pay"

r ef er r ed t o i n t he t ext above, 29 C. F. R. 778. 114( a) . Thi s, i n

t ur n, r ef er s t o t he " f i xed sal ar y" ot her wi se ment i oned t hr oughout

t he r egul at i on. See i d. And t he t er m "sal ar y, " of cour se, cannot

be read so br oadl y as t o encompass al l f orms of compensat i on

compr i si ng t he r egul ar r at e. As t he di st r i ct cour t poi nt ed out ,

sect i on 778. 117 speaks of commi ssi ons bei ng pai d "i n addi t i on to

a guar ant eed sal ar y, " a phr ase t hat makes l i t t l e sense i f

commi ssi ons ar e al r eady par t of t he empl oyee' s sal ar y. Si mi l ar l y,

sect i on 778. 109 st at es t hat i t i s t he "t ot al r emuner at i on" ( except

st at ut or y excl usi ons) t hat must be i ncl uded i n t he regul ar - r at e

cal cul at i on, suggest i ng t hat di f f er ent t ypes of r emuner at i on


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( e. g. , sal ary pl us commi ssi ons) may be combi ned i n a compl i ant

compensat i on pl an.

The pr emi ums i n O' Br i en bet r ayed any cl ai m t hat t he

of f i cer s' sal ar y coul d be descr i bed as f i xed r egar dl ess of t he

hour s wor ked, even i f par t of t hat sal ar y ( t he so- cal l ed "base

sal ar y" ) di d not f l uct uat e. As bot h t he O' Br i en cour t and ot her

cour t s have not ed, t he regul at i on r equi r es t hat t he f i xed sal ar y

cover what ever hour s are worked, not merel y t hat " t he empl oyees

r ecei v[e] a mi ni mum sal ar y ever y week. " See Adeva v. I nt er t ek

USA, I nc. , No. CI V. A. 09- 1096, 2010 WL 97991, at *3 ( D. N. J . J an.

11, 2010) ; accor d O' Br i en, 350 F. 3d at 288 ( " [ I ] t i s not enough

t hat t he of f i cer s r ecei ve a f i xed mi ni mum sum each week. " ) .

I n t he i nst ant case, t he empl oyee was pai d on t he

combi nat i on of a sal ary basi s under sect i on 778. 114 and a

commi ss i on basi s under sect i on 778. 118. The empl oyee had "hours

of wor k whi ch f l uct uat e[ d] f r omweek t o week" and the "sal ar y [ was]

pai d hi mpur suant t o an under st andi ng . . . t hat he [ woul d] r ecei ve

such f i xed amount as st r ai ght t i me pay f or whatever hour s he [ was]

cal l ed upon t o wor k i n [ t he] wor kweek. " The f act t hat Lal l i was

gi ven addi t i onal commi ssi ons as st r ai ght - t i me pay f or what ever

el i gi bl e sal es he made does not det r act at al l f r om t he f act t hat


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he was gi ven hi s sal ar y as st r ai ght - t i me pay f or what ever hour s he

worked.

Pl ai nt i f f woul d have us r ewr i t e sect i on 778. 114 i n t he

f ol l owi ng manner t o be r est r i ct i ve r at her t han i l l ust r at i ve:

An empl oyee [ may be] empl oyed on a sal ar ybasi s . . . [ f or ] hour s of wor k whi ch f l uct uat ef r om week t o week . . . [ onl y i f ] t he sal ar y. . . [ i s] pai d hi m pursuant to anunder st andi ng wi t h hi s empl oyer t hat he wi l lr ecei ve [onl y] such f i xed amount as st r ai ghtt i me pay f or . . . [ t he wor kweek] .

We cannot , and shoul d not , i gnore t he pl ai n l anguage of t he

r egul at i on, especi al l y when doi ng so r uns count er t o t he st at ut e' s

i nher ent l y f l exi bl e nat ur e. See 149 Madi son Ave. Cor p. v. Assel t a,

331 U. S. 199, 203- 04 ( 1947) ( " I t was not t he pur pose of Congr ess

i n enact i ng t he [ FLSA] t o i mpose upon t he al most i nf i ni t e var i et y

of empl oyment si t uat i ons a si ngl e, r i gi d f or mof wage agr eement . " ) .

I n shor t , Lal l i ' s di ssecti on of O' Br i en mi st akes t he f or est f or

t he t r ees. GNC' s compensat i on st r uct ur e f i t s comf or t abl y wi t hi n

DOL r egul at i ons and nothi ng i n O' Br i en compel s us t o hol d

ot her wi se.

Not onl y i s i t t her ef or e unnecessary t o ext end O' Br i en

t o encompass commi ssi ons, i t woul d al so be i nappr opr i ate t o do so.

That i s because, under sect i on 778. 114, per f or mance- based bonuses

cannot be sai d t o vary based on t he hours worked absent unusual


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ci r cumst ances not pr esent her e. Al t hough bot h shi f t - di f f er ent i al

bonuses and sal es commi ssi ons may r el at e t o t he t ype of hour s

worked i n some br oad or concept ual sense ( i nsof ar as some par t s of

t he day may t ypi cal l y ent ai l mor e sal es t han ot her s) , a bonus f or

par t i cul ar hour s wor ked necessar i l y var i es by t he hour wor ked

wher eas a commi ssi on f or sal es onl y i nci dent al l y var i es by t he

hour worked.

When an empl oyee i s pai d a bonus f or worki ng a ni ght t i me

shi f t , hi s pay f l uct uat es as a di r ect r esul t of t he hour he i s

cal l ed upon t o wor k. Hi s compensat i on, by def i ni t i on, var i es wi t h

r espect t o t he par t i cul ar hour wi t hout r egar d t o whet her t hat hour

i s spent pr oduct i vel y or i dl y. Thus, any under l yi ng sal ar y coul d

not be cal l ed " f i xed" wi t h r espect t o "what ever hour s he i s cal l ed

upon t o work, " as requi r ed under sect i on 778. 114.

On t he ot her hand, when an empl oyee i s pai d a bonus f or

execut i ng a l ar ge number of sal es, hi s pay f l uct uat es as a di r ect

r esul t of t hose sal es. The r el at i ve ease wi t h whi ch t he sal es ar e

made may be i nci dent al l y rel ated t o t he hour s worked i n t heory,

but not necessar i l y r el at ed i n pr act i ce. Thi s di st i nct i on mat t er s.

An ef f i ci ent empl oyee may wel l make more sal es dur i ng a "t ypi cal l y

sl ow" per i od t han anot her empl oyee may make dur i ng a " t ypi cal l y


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busy" per i od. 5 Thus, t o hol d t hat a sal es commi ssi on var i es based

on t he hours wor ked under sect i on 778. 114 woul d cr amp t he

r egul at i on' s l anguage t o f i t a hypot het i cal st at e of af f ai r s. 6 The

poi nt bei ng t hat t he t i me- based bonuses i n O' Br i en ar e r eadi l y

di st i ngui shabl e f r om t he per f or mance- based bonuses her e.

Nor ar e we al one i n t hi s assessment . Al most 7 ever y cour t

t o have consi der ed whet her t he "f i xed weekl y sal ary" r equi r ement

i s br eached "by payi ng an empl oyee bonuses t i ed t o per f ormance

. . . [ has] hel d, or st at ed, t hat , so l ong as t he bonuses and

pr emi ums [ are] not t i ed t o t he number of hour s worked by t he

empl oyee, t hey [ ar e] consi st ent wi t h t hat r equi r ement . " Wi l l s,

5 Moreover , a "t ypi cal l y busy" per i od may end up unexpect edl ysl ow, wher eas a " t ypi cal l y sl ow" per i od may end up unexpect edl ybusy.

6 I n common par l ance, i f an empl oyee were pr omot ed f or t aki ngunpopul ar hours, he mi ght wel l be sai d t o have been promot ed "basedon t he hours he worked. " On t he ot her hand, i f an empl oyee werepr omot ed f or l eadi ng t he t eam i n sal es, i t woul d sound cur i ous ( orperhaps j i l t ed) t o say he was pr omot ed "based on t he hour s heworked. "

7 Ther e i s at l east one not - so- not abl e except i on. I n West v.Ver i zon Ser vs. Cor p. , t he di st r i ct cour t hel d t hat an empl oyervi ol at ed t he FWW r equi r ement s because t he pl ai nt i f f ' s hour l y r at ewas bel ow t he mi ni mumwage and because her hours di d not f l uct uat e.No. 08 Ci v. 1325, 2011 WL 208314, at *11 ( M. D. Fl a. J an. 21, 2011) .I n di cta, t he cour t t hen st at ed t hat pl ai nt i f f ' s "sal ar y was notf i xed because she had recei ved var i ous bonus payment s andcommi ssi ons. " I d. The cour t of f er ed no ci t at i ons or anal ysi s t osuppor t t hi s pr oposi t i on.


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981 F. Supp. 2d at 256- 57 ( ci t i ng Lance v. Scot t s Co. , No. 04 Ci v.

5720, 2005 WL 1785315 ( N. D. I l l . J ul . 21, 2005) ; Br ant l ey v.

I nspect orate Am. Corp. , 821 F. Supp. 2d 879 ( S. D. Tex. 2011) ;

Soderberg v. Nat ur escape, I nc. , No. 10 Ci v. 3429, 2011 WL 11528148

( D. Mi nn. Nov. 3, 2011) ; Swi t zer , 2012 WL 3685978) .

Meanwhi l e, "al most ever y cour t . . . ha[ s] hel d t hat

payi ng an empl oyee hours- based, or t i me- based, bonuses and

premi ums- such as ext r a pay f or hol i day, weekend, or ni ght work-

of f end[ s] 778. 114' s r equi r ement of a ' f i xed weekl y sal ar y. ' "

I d. at 255- 56 ( ci t i ng Ayer s v. SGS Cont r ol Ser vs. , I nc. ( Ayer s

I I ) , No. 03 Ci v. 9078, 2007 WL 3171342 ( S. D. N. Y. Oct . 9, 2007) ;

Br ant l ey, 821 F. Supp. 2d 879; Br uml ey v. Cami n Cargo Cont r ol ,

I nc. , No. 08 Ci v. 1798, 2010 WL 1644066 ( D. N. J . Apr . 22, 2010) ;

Adeva, 2010 WL 97991; Dool ey v. Li ber t y Mut . I ns. Co. , 369 F. Supp.

2d 81 ( D. Mass. 2005) ; O' Br i en, 350 F. 3d 279) . Thi s r ef l ect s a

cl ear and wel l - r easoned di st i nct i on bet ween t he t wo f or ms of

compensat i on. Because Lal l i ' s sal ary was not " based on t he t i me

or t ype of work assi gnment , " Br ant l ey, 821 F. Supp. 2d at 890, and

Lal l i ' s commi ssi ons wer e not t i ed t o the hour s wor ked, t he i nst ant

case f al l s wi t hi n t hi s per suasi ve l i ne of aut hor i t y.

Next , we t ur n our at t ent i on t o Pl ai nt i f f ' s second

argument r egardi ng sect i on 778. 114: t he i mpact of t he DOL' s Apr i l


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2011 bul l et i n. I n J ul y 2008, t he DOL pr oposed a change t o sect i on

778. 114 t hat woul d have made i t so "[ p] ayment of over t i me pr emi ums

and ot her bonus and non- over t i me pr emi um payment s wi l l not

i nval i date t he ' f l uct uat i ng workweek' met hod of over t i me payment

. . . . " 73 Fed. Reg. 43654, 43670 ( J ul y 28, 2008) . I n Apr i l

2011, t he DOL rej ect ed t hi s pr oposal because i t "bel i eve[ d] t he

pr i nci pl es f or i ncl udi ng bonuses i n t he r egul ar r at e di scussed i n

ot her sect i ons of t he r egul at i ons [ wer e] cl ear , [ and i t di d] not

f i nd t hat f ur t her cl ar i f i cat i ons or addi t i onal cross- r ef er ences

[ wer e] necessary i n [ 778. 114] . " 76 Fed. Reg. 18832, 18849 ( Apr .

5, 2011) . Accor di ng t o Pl ai nt i f f , t hi s r ej ect i on shows t hat

sect i on 778. 114 i s i nappl i cabl e whenever bonuses ar e i ncl uded i n

a pay scheme.

Pl ai nt i f f ' s i nvocat i on of t he DOL bul l et i n f ai l s f or

t he same r easons hi s i nvocat i on of O' Br i en i s l ef t want i ng. The

bul l et i n ci t es st r i ct l y t o hour s- based cases, empl oys hour s- based

exampl es, and t ai l or s i t s r easoni ng to concer ns r ai sed by hour s-

based bonuses and pr emi ums. The bul l et i n of f ers no gui dance

what soever on per f ormance- based commi ss i ons.

Wi t h r espect t o case aut hor i t y, t he DOL suggest s t hat

i t s r ej ect i on of t he pr oposed change i s consi st ent wi t h t he f eder al

cour t s' i nt er pr et at i on of t he r egul at i on. 76 Fed. Reg. at 18850.


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The cases ci t ed f or t hi s proposi t i on al l deal wi t h var i at i ons i n

compensat i on by t he number and t ype of hours worked. See i d.

( ci t i ng O' Br i en, 350 F. 3d 279 ( cont r act ual over t i me and ni ght -

shi f t pay) ; Adeva, 2010 WL 97991 ( day- of f pay, of f - shor e pay, and

hol i day pay) ; Dool ey, 369 F. Supp. 2d 81 ( weekend pay) ; Ayer s v.

SGS Cont r ol Ser vs. , I nc. ( Ayer s I ) , No. 03 CI V. 9078, 2007 WL

646326 ( S. D. N. Y. Feb. 27, 2007) ( sea pay and day- of f pay) ) . None

of t he per f ormance- based commi ssi on cases, on t he ot her hand, were

di r ect l y ci t ed or drawn i nt o quest i on. As such, t he DOL' s deci si on

t o l eave t he regul at i on al one means t hat t he bul l et i n woul d have

done not hi ng t o change the f eder al cour t s' exi st i ng " t r eat ment of

t hat preci se i ssue. " Wi l l s, 981 F. Supp. 2d at 252. 8

8 Some of t he per f ormance- based commi ss i on cases poi nt out

t hat t he pay schemes at i ssue pr edat ed t he DOL' s Apr i l 2011bul l et i n. See, e. g. , Swi t zer , 2012 WL 3685978, at *4- 5. Thi sseems t o us i mmater i al . The bul l et i n di d not addr ess per f ormance-based bonuses and r ej ect ed pr oposed changes t o the r ul e, t herebyl eavi ng t he st at e of t he l aw unchanged wi t h r espect t o suchcommi ssi ons. See Wi l l s, 981 F. Supp. 2d at 258 ( not i ng t hat t hepr e- Fi nal Rul i ng case l aw "i s i n f act qui t e r el evant " because "[ i ] tshows how cour t s have i nt erpr eted t he l anguage of 778. 114, whi ch,s i gni f i cant l y, t he Fi nal Rul i ng l ef t i nt act ") . I n short , t he rul eal r eady pr ohi bi t ed t he use of hour s- based bonuses i n conj unct i onwi t h t he FWW met hod and, cont r ar i wi se, al r eady per mi t t ed t he useof per f or mance- based bonuses pr i or t o the r ej ect ed pr oposal .Not hi ng changed. See 76 Fed. Reg. at 18850 ( "The Depar t ment doesnot bel i eve t hat i t woul d be appr opr i at e t o expand t he use of [ t heFWW] met hod of comput i ng over t i me pay beyond t he scope of t hecur r ent r egul at i on. Accor di ngl y, t he f i nal r ul e has been modi f i edf r om t he pr oposal t o r estor e t he cur r ent r ul e . . . . ") .


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I f anyt hi ng, t he DOL bul l et i n i ndi r ect l y appr oved of t he

devel opi ng di st i nct i on between t i me- based and per f ormance- based

bonuses. The bul l et i n ci t es Adeva among i t s l i st of cases showi ng

"t hat t he cour t s have not been undul y chal l enged i n appl yi ng t he

cur r ent r egul at i on t o addi t i onal bonus and pr emi um payment s. " 76

Fed. Reg. at 18850. I n Adeva, t he def endant s at t empt ed t o r el y

upon t he Lance deci si on t o support t hei r hour s- based bonuses, but

t he cour t f ound t he def endant s' compar i son t o the commi ssi on case

"mi spl aced. " Adeva, 2010 WL 97991, at *3 n. 2 ( ci t i ng Lance, 2005

WL 1785315) . The Adeva cour t di st i ngui shed t he hol di ng i n Lance,

not i ng that " [ t ] he case at bar does not deal wi t h the payment of

commi ssi ons, " and poi nt ed out t hat "commi ssi on f l uct uat i ons ar e

per mi ssi bl e under DOL r egul at i ons" per sect i ons 778. 117 and

778. 118.9

I d. Pr esumabl y, t he DOL r ead t he Adeva deci si on i n f ul l

bef or e ci t i ng i t wi t h f avor .

The l anguage and r easoni ng of t he bul l et i n f ur t her

conf i r m i t s sol e f ocus on hour s- based bonuses. The bul l et i n

9 The Lance deci si on deal t wi t h a pay scheme i nvol vi ng bot h asal ar y component and a commi ssi ons component . 2005 WL 1785315, at*2. The cour t f ound t hat t he pl ai nt i f f r ecei ved a f i xed sal ar y,and t hat t he f l uct uat i ons i n commi ssi ons di d not mean t hat t hesal ar y i t sel f was not "f i xed" f or pur poses of sect i on 778. 114.I d. at *4- 7. I nst ead, t he cour t poi nt ed t o sect i ons 778. 117 and778. 118 t o show t hat such a method of cal cul at i ng over t i me pay was"speci f i cal l y cont empl at ed and aut hor i zed by t he DOL. " I d. at *6.


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di scusses bonuses " f or cer t ai n act i vi t i es such as wor ki ng

undesi r abl e hour s, " 76 Fed. Reg. at 18849 ( emphasi s added) , and

r ai ses t he concer n t hat shi f t i ng compensat i on i nt o such bonus

payment s coul d "pot ent i al l y r esul [ t ] i n wi de di spar i t i es i n

empl oyees' weekl y pay dependi ng on t he par t i cul ar hour s worked, "

i d. at 18850 ( emphasi s added) . As di scussed above, t he

r el at i onshi p bet ween sal es and " t he par t i cul ar hour s wor ked" i s

i nci dent al at best , and we do not bel i eve t hat t he DOL woul d

consi der "doi ng your j ob" t o be an al t oget her di f f er ent "act i vi t y"

t han "doi ng your j ob wel l . "

I n sum, nei t her t he O' Br i en deci si on nor t he DOL' s Apr i l

2011 bul l et i n r each or answer t he par t i cul ar quest i on posed her e:

whet her a compensat i on st r uct ur e empl oyi ng a f i xed sal ar y st i l l

compl i es wi t h sect i on 778. 114 when i t i ncl udes addi t i onal ,

var i abl e per f ormance- based commi ssi ons. We hol d t hat i t does.

Cour t s have al most uni f orml y di st i ngui shed bet ween hour s- based

bonuses and per f ormance- based commi ss i ons i n eval uat i ng whet her an

empl oyee' s compensat i on st r uct ur e i s per mi ssi bl e under sect i on

778. 114, and we j oi n t hat l i ne of r easoni ng t oday. I n or der f or

t he DOL t o excl ude such agr eement s f r om t he regul at i on, i t woul d

have t o i nt er pr et sect i on 778. 114 cont r ar y to al most ever y cour t


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t o r ul e on t hi s quest i on, 10 and i t woul d have t o i gnor e t he pl ai n

l anguage of t he adj acent r egul at i ons gover ni ng commi ssi ons, whi ch

seem t o speci f i cal l y envi si on, and endor se, such agr eement s. We

do not t hi nk t he DOL has i nt er pr et ed, or woul d i nt er pr et , sect i on

778. 114 i n such a manner , and we do not r ead sect i on 778. 114 t o

i mpose any such r est r i ct i on.

GNC' s pay scheme epi t omi zes t he compensat i on

arr angement s i l l ust r ated i n sect i ons 778. 114 and 778. 118, and t he

mere combi nat i on of t hese t wo permi ss i bl e met hods does not r ender

t he f ormer i nappl i cabl e. We need go no f ur t her based on t he r ecord

bef ore us. 11

III. Conclusion

For t he f oregoi ng reasons, t he j udgment i s AFFI RMED.

10 See Wi l l s, 981 F. Supp. 2d at 263 ( " I t i s doubt f ul t hat DOLcan r ever se t he cour t s' uni f or mconst r uct i on of t he pl ai n l anguageof an i nt er pr et i ve r egul at i on wi t hout changi ng t he t ext of t hatr egul at i on, l et al one wi t hout gi vi ng not i ce of i t s i nt ent t o do soand an opport uni t y f or comment . " ) .

11 Because we hol d t hat t he pay scheme compl i es wi t h t he DOL' sr egul at ory exampl es, we need not separatel y anal yze t hearr angement under t he FLSA di r ect l y. See O' Br i en, 350 F. 3d at 287n. 15 ( " [ T] he par t i es l i mi t t hei r ar gument s t o whet her t hecompensat i on scheme . . . compor t s wi t h t he r egul at i on, and weconf i ne our sel ves to t he same quest i on. " ) . We do not mean t oi mpl y, however , t hat a pay scheme must f al l wi t hi n a r egul atoryexampl e i n order t o compl y wi t h t he st atut e.

Lalli v. General Nutrition Corporation, 1st Cir. (2016)

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Transcript of Lalli v. General Nutrition Corporation, 1st Cir. (2016)