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Northern District Finds Factual Determination of Outside Salesperson Exemption Unsuited for Class Treatment

In Certification, Class Notice, Collective Action, FLSA, Opt-in, Outside Salesperson, Overtime, Uncategorized on October 8, 2010 at 5:37 am
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The Northern District of California granted defendant’s motion to decertify a conditional FLSA class in Wong v. HSBC Mortgage Corporation (USA), No. C-07-2446 MMC, 2010 WL 3833952 (N.D. Cal. Sept. 29, 2010).  Plaintiff HSBC loan officers, allege that HSBC improperly classified them as exempt under the Federal Labor Standards Act (“FLSA”), and, consequently, violated the FLSA by failing to pay them overtime compensation. Id. *1. The Court granted plaintiffs’ motion for an order conditionally certifying, for purposes of the FLSA, a class of persons who, as of May 7, 2004, had been employed by HSBC as loan officers within the United States. Id. Notice of the action was sent to the class, and 120 class members filed consent forms, joining the action as plaintiffs.  Id.

Decertification Motion

HSBC argued that individualized factual determinations will be necessary regarding HSBC’s affirmative defense that plaintiffs are/were properly classified as “outside” salespersons and, consequently, are exempt under the FLSA. Id. *2 (citing 29 U.S.C. § 213(a)(1) (providing “maximum hour requirements” in FLSA do not apply to “any employee employed … in the capacity of outside salesman”)).

With respect to the outside salesperson exemption, the court stated the standard as follows:

An “outside” salesperson is an employee whose “primary duty” is “making sales” or “obtaining orders or contracts for services,” and who is “customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.” See 29 C.F.R. § 541.500(a). The Ninth Circuit has recently recognized that “[o]ften, [the outside salesperson exemption] will militate against certification because … it requires a fact-intensive inquiry into each potential plaintiff’s employment situation,” given that “courts must … ask where the individual employees actually spent their time.” See In re Wells Fargo Home Mortgage Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir.2009) (internal quotation and citation omitted). The Ninth Circuit has further recognized, however, that “centralized rules, to the extent they reflect the realities of the workplace, suggest a uniformity among employees that is susceptible to common proof.” See Id. at 958-59. For example, “[a] centralized policy requiring employees to be at their desks for 80% of their workday would change this individual issue into a common one.” See Id. at 959. By contrast, where a plaintiff seeking to certify a class of employees classified as outside salespersons is unable to show the existence of “company-wide policies governing how employees spend their time” or “uniformity in work duties and experiences that [would] diminish the need for individualized inquiry,” class certification would be inappropriate, given the need to hold “mini-trials with respect to each [class member’s] actual work performance.” See Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 947 (9th Cir.2009).

Id. *2.

Even though the above-cited Ninth Circuit opinions arose in the context of Rule 23 class actions, the court found them instructive with respect to the question of whether the instant class members are “similarly situated” for purposes of the FLSA. Id. (citing Colson v. Avnet, Inc., 687 F. Supp. 2d 914, 927-28 (D. Ariz. 2009) (finding Ninth Circuit’s Rule 23 cases “instructive” for purposes of determining whether putative FLSA class members were “similarly situated”); Johnson v. Big Lots Stores, Inc., 561 F. Supp. 2d 567, 572 (E.D. La. 2008) (finding appellate decision made in “context of Rule 23” provided “guidance” in resolving issues presented in FLSA action; observing, “[t]here are strong parallels between a Rule 23 collective action in that both litigation devices operate to resolve the claims of many individuals based on representative evidence”)).

Absence of Evidence of a Centralized Practice or Policy

HSBC argued that it does not have a centralized rule, practice, or policy requiring loan officers to work in particular locations and/or for particular periods of time when performing their primary duty of selling HSBC’s financial products. Id. *3.  It offered the declaration of its Senior Vice President to support its argument.  Id. Plaintiffs offered no contrary evidence and themselves offered, for other purposes, testimony from HSBC managers that no such rule, practice, or policy exists at the local level. Id.

The court noted that while the need to make factual findings as to the applicability of the outside sales exemption “does not automatically preclude certification of a class”, here “plaintiffs have not shown the existence of a centralized rule, practice, or policy requiring loan officers to work in particular locations and/or for particular lengths of time, when performing their primary duty of selling HSBC’s financial products.” Id. *4. The court found that “plaintiffs [have not] shown how resolution of the applicability of the outside sales exemption to any given class member can be determined other than by examining the particular circumstances of each such individual member’s ‘employment situation.’” Id. (citing In re Wells Fargo, 571 F.3d at 959). In sum, the court concluded that the “trier of fact will be required to determine ‘where the individual employees actually spent their time.’” Id. (internal citation omitted).

Thus, the court granted HSBC’s motion to decertify the conditional class and dismissed the claims alleged on behalf of all plaintiffs other than the four named plaintiffs.

Judges and Attorneys

District Judge Maxine M. Chesney.

Matthew C. Helland and Paul J. Lukas of Nichols Kaster LLP appeared on behalf of plaintiffs.

George J. Tichy, Michelle R. Barrett, and Rachelle L. Wills appeared on behalf of HSBC.

By CHARLES JUNG

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