Hantz v. Prospect Mortgage, LLC, Civil Action No. 1:13cv1435 (E.D. Va. Feb. 5, 2014); Cougill v. Prospect Mortgage, LLC, Civil Action No. 1:13cv1433 (E.D. Va. Jan. 14, 2014). Plaintiff Ronald Hantz worked as a mortgage loan officer at Prospect Mortgage from January 24, 2007, until October 16, 2009. Plaintiff Allison Cougill worked as a mortgage loan officer at Prospect from October 29, 2007, until October 3, 2011. Prospect is a California business that offers consumer lending products.
In October 2010, several former mortgage loan officers filed a collective action against Prospect in the United States District Court for the Eastern District of California under the Fair Labor Standards Act (“FLSA”). That case was styled Sliger v. Prospect Mortgage, LLC. The Sliger plaintiffs alleged that Prospect had misclassified them as exempt employees under the FLSA, and therefore improperly failed to pay them minimum wage and overtime. Hantz and Cougill had each “opted-in” to the case, meaning that they had joined the prospective class of plaintiffs.
In January 2013, the California court “decertified” the plaintiffs as a class, which meant that the California plaintiffs could no longer proceed in a single lawsuit. As a consequence, Hantz’s and Cougill’s participation in the California suit came to an end without the court ever having decided the merits of their claims. Hantz and Cougill, along with several other former loan officers based in Virginia, filed a new lawsuit as a joint action in the United States District Court for the Eastern District of Virginia. On November 21, 2013, the Virginia district court granted Prospect’s Motion to Sever and ordered the case to proceed as six separate actions.
Hantz and Cougill’s separate actions each alleged that Prospect had misclassified them as exempt employees, resulting in lost minimum wage and overtime compensation. In each case, Prospect had claimed that Hantz and Cougill were “outside sales” employees, and were therefore exempt from overtime pay. Prospect filed a Motion for Summary Judgment in each case based, in large part, on the deposition testimony of each plaintiff. In Hantz’s case, Prospect won the motion and, in Cougill’s case, Prospect lost.
In order to examine what the court did in the two cases, we must first look at the outside sales exemption. The FLSA requires an employer to pay minimum wage and overtime compensation to employees who work more than forty hours a week. Nevertheless, workers employed as “outsides salespersons” are exempt from these requirements. The applicable Department of Labor regulation defines an outside salesperson as an employee:
(1) Whose primary duty is (a) making sales or (b) 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
(2) Who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.
For the first part of this definition, the “primary duty” part, the FLSA defines “sale” or “sell” to include “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” Furthermore, the regulations that go along with the FLSA define the term “primary duty” to mean “the principal, main, major or most important duty that the employee performs.” The regulations indicate that the amount of time spent performing exempt sales work is is an important aspect to consider, but the amount of time spent doing outside sales does not, by itself, prove or disprove whether outside sales is an employee’s primary duty. Determining an employee’s primary duty requires consideration of all of the facts in a specific case, with the major emphasis on the character of the employee’s job as a whole.
As for the second part of the definition, the applicable regulations state that “the phrase ‘customarily and regularly’ means a frequency that must be greater than occasional but which, of course, may be less than constant.” This includes “work normally and recurrently performed every workweek,” but does not embrace “isolated or one-time tasks.” A separate regulation further clarifies that “promotional work that is actually performed incidental to and in conjunction with an employee’s own outside sales or solicitations is exempt work.” The term “away from the employer’s place of business” is addressed in yet another regulation, which provides:
An outside sales employee must be customarily and regularly engaged “away from the employer’s place or places of business.” The outside sales employee is an employee who makes sales at the customer’s place of business or, if selling door-to-door, at the customer’s home. Outside sales does not include sales made by mail, telephone or the Internet unless such contact is used merely as an adjunct to personal calls. Thus, any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales is considered one of the employer’s places of business.
In the Hantz opinion, the Court noted that the phrase “customarily and regularly” was not the same thing as a “majority of the time” or, indeed, any given percentage of an employee’s weekly working hours. Reading the statute and the regulation together, in the Cougill opinion, the Court said, “Properly synthesized, the above regulations provide that where an employee’s primary duty is sales, the employee is accurately classified as exempt if he or she performs such primary duty away from a fixed site, and performs such duty, including any incidental promotional work, on a greater than occasional basis.”
In both Hantz’s case and Cougill’s case, both former employees admitted that the primary duty of their jobs was to sell mortgage loans, and so the court did not need to spend much time in analyzing whether the first part of the “outside sales” definition applied. Accordingly, the only remaining question in each case was whether the plaintiff “customarily and regularly” engaged in exempt sales activities away from Prospect’s office.
Proving the exemption was Prospect’s burden and, in each case, Prospect sought to carry that burden by relying on each plaintiff’s deposition testimony.
Although some of Cougill’s testimony supported Prospect’s claim, a significant portion was either ambiguous or entirely contrary. Prospect pointed to a statement that Cougill had made to the effect that she spent 15 to 20 hours a week working outside that office. On further examination, though, Cougill was unable to account for activities that would add up to that amount of time. And, to the contrary, Cougill testified that she spent “99.9 percent” of her time inside the office. She also testified that the overwhelming majority of her sales came from referral sources who she maintained contact with via phone and email while in the office. Aside from a few sporadic lunches, she rarely met face-to-face with these business contacts. Her interaction with potential customers was similarly intermittent and limited. The Court found that such testimony supported Plaintiff’s contention that her outside activities were not performed often enough to be customary and regular.
In contrast, Hantz had testified in his deposition that he spent a significant amount of time each week outside the office engaged in sales related activities. His undertakings included meeting with realtors and distributing fliers and attending open houses to network with potential customers. In particular, Hantz had testified that his sales model was based heavily on home buyer seminars conducted outside the office. This outside activity, the Court found, was sufficient to trigger the exemption. Although Hantz also worked considerable hours inside the office, it was the nature of the time spent outside the office, rather than the amount of time, that drove the Court’s conclusion. A weighty portion of the indispensable components of Hantz’s sales efforts – the Court pointed to the seminars – were concentrated in the outside period. This evidence, taken as a whole, supports a finding that Hantz was “customarily and regularly” engaged in outside sales activity under the exemption.
In reaching this conclusion, the Court rejected Hantz’s argument that the exemption was inapplicable because he had not made a single sale to a borrower at the borrower’s home or place of business. The Court found that because Hantz had conducted substantial incidental work and solicitations outside of the office, it did not matter that the actual moment of sale occurred inside Prospect’s office. That portion of the regulation, quoted above, that defines an outside sales employee as “an employee who makes sales at the customer’s place of business or, if selling door-to-door, at the customer’s home,” was not, in the Court’s opinion, mandatory and did not limit the application of the exemption to only that group of employees.
In a comparison of these two cases, the similarities are greater than the differences. Two employees with the same job title worked for the same employer and presumably performed very nearly the same function. Both cases were decided by the same judge on the same question of law and, in large part, relying on the same precedent. That question was, essentially, whether the employee’s sales and promotional work occurred away from the workplace on a “more than occasional” basis. “More than occasional” is not easily quantified, but in these two cases, it appeared that the difference between more than occasional and less than occasional lay in the seminars that Hantz conducted as a means of drumming up business.
Footnote: Ms. Cougill’s case was tried to a jury on February 4 and 5, 2014. The jury found that Prospect had proved that Ms. Gougill was an exempt outside sales employee and entered a verdict for Prospect.