Ling v. P.F. Chang's: Court Rules on Attorney Fee Award in Overtime and Meal Period Arbitration

In Ling v. P.F. Chang's China Bistro, Inc. (Cal.App. 3/25/16), Cynthia Ling sued P.F. Chang's for unpaid overtime and missed meal and rest periods, alleging that Chang's improperly classified her as an exempt employee while working as a floor manager. An arbitrator found that Ling was exempt as a floor manager, but also found that Chang's failed to provide her with meal periods during a brief training period. The arbitrator awarded Ling approximately $8,500 for missed meal periods and Labor Code section 203 waiting time penalties. Finding that Chang's was the prevailing party, the arbitrator awarded it $29,000 in costs under Code of Civil Procedure section 1032 and over $200,000 in attorney fees under Labor Code section 218.5.

The trial court corrected the award, holding that Ling was the prevailing party on her meal period claim and remanding to the arbitrator to award her fees, exclusive of those incurred solely in pursuing her unsuccessful overtime claim.

On remand, the arbitrator rejected Ling's fee request, relying on Kirby v. Immoos Fire Protection, Inc. (4/30/12) 53 Cal.4th 1244 (discussed here), but awarded Ling her costs as the prevailing party under CCP 1032(a)(4). The trial court confirmed the award, and both parties appealed. The Court of Appeal affirmed, holding as follows:

The trial court properly corrected the arbitrator's initial award because the arbitrator exceeded his powers by issuing an award that "contravened an explicit legislative expression of public policy."

Because plaintiff's missed meal periods claim (as it related to her service as a floor manager) and overtime claim required identical proof, the attorney's fees award for defending the 'factually inextricably intertwined' meal periods claim was effectively a fee award for defeating plaintiff's overtime claim, prohibited by section 1194.

The Court rejected Chang's argument that the Federal Arbitration Act (FAA) prohibited the trial court from remanding the attorney fee issue. Similar to the California Arbitration Act (CAA), the FAA provides for vacatur where an arbitrator exceeds his or her powers.

The Court rejected Ling's argument that the trial court should have vacated the initial award in its entirety, rather than merely correcting it. The trial court had no authority to vacate the award in its entirety and thus upset the arbitrator's ruling on the misclassification issue. 

The arbitrator did not exceed his authority in issuing his second award. 

The arbitrator was bound to follow Kirby and properly denied Ling attorney fees on her meal period claim. 

The arbitrator's denial of fees on the section 203 waiting time penalty claim did not deprive Ling of any unwaivable statutory right. An action for waiting time penalties based on failure to pay for missed meal periods is not an "action brought for the non-payment of wages" under section 218.5. 

Following Kirby, section 226.7 cannot support a section 203 penalty because section 203, subdivision (b) tethers the waiting time penalty to a separate action for wages. Because a section 203 claim is purely derivative of 'an action for the wages from which the penalties arise,' it cannot be the basis of a fee award when the underlying claim is not an action for wages.

The trial court erred in awarding Ling fees she incurred on her petition to vacate the first arbitration award. Neither the parties' agreement nor any statutory provision authorized any such award.

The opinion is available here. 

Martinez v. Joe’s Crab Shack Holdings: Court Reverses Order Denying Class Certification in Misclassification Action

In Martinez v. Joe's Crab Shack (2013) 221 Cal.App.4th 1148 (discussed here) the plaintiffs alleged that the defendants misclassified its salaried managers and assistant managers as exempt from California’s overtime requirements. The trial court denied certification, finding that the plaintiffs failed to establish typicality, adequacy of representation, predominance of common questions, and superiority of the class action mechanism. After the Court of Appeal reversed, the California Supreme Court granted review and remanded in light of its opinion in Duran v. US Bank N.A. (2014) 59 Cal.4th 1 (2014). On remand, the Court of Appeal once again reversed the trial court's decision, holding as follows: 

The trial court erred in finding that the plaintiffs’ claims were not typical of the class and that the plaintiffs would not be adequate class representatives because the plaintiffs' claims would be "vulnerable to the defense that each of them performed exempt tasks more than 50% of their work time." Slip op. at 12-13. Nor did the antagonism "voiced by general managers, who overwhelmingly opposed the litigation," necessarily indicate inadequacy of representation. On remand, the trial court could exercise its discretion to  create a general managers subclass or to exclude general managers entirely from the class. Slip op. at 13-14. 

"The theory of liability in this litigation—that, by classifying all managerial employees as exempt, [defendant] violated mandatory overtime wage laws—is, to paraphrase Brinker, 'by nature a common question eminently suited for class treatment.'" Slip op. at 18. Although such a theory of liability "has the potential to generate individual issues," considerations such as the employer's realistic expectations and the actual overall requirements of the job are "likely to prove susceptible of common proof." Slip op. at 20. Courts in such actions must analyze these common questions, rather than focusing on whether a particular employee was engaged in an exempt or non-exempt task at a given time. Slip op. at 21. Statistical sampling may prove helpful in analyzing these common questions, provided that the use of such sampling "accords the employer an opportunity to prove its affirmative defenses." Slip op. at 22. 

The Court concluded by recognizing that a number of appellate decisions have affirmed trial court decisions denying certification in misclassification actions. 

However, we understand from Brinker, Duran and Ayala that classwide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof. By refocusing its analysis on the policies and practices of the employer and the effect those policies and practices have on the putative class, as well as narrowing the class if appropriate, the trial court may in fact find class analysis a more efficient and effective means of resolving plaintiffs’ overtime claim.

Slip op. at 23. 

The opinion is available here. 

Rhea v. General Atomics: Employer May Deduct Vacation Pay from Exempt Employee for Partial Day Absences

In Rhea v. General Atomics (7/21/14) --- Cal.App.4th ---, the plaintiff filed a putative class action challenging the employer's policy of requiring exempt employees to use annual leave hours to cover partial day absences from work. The plaintiff alleged that under this policy, exempt employees were not being paid on a salary basis for purposes of California law and could not be exempt.

The trial court granted summary judgment for the defendant, and the plaintiff appealed. The Court of Appeal affirmed, holding as follows:

California law on the issue is patterned after federal law, which allows employers to deduct from pay "for absences of one or more full days occasioned by sickness or disability." Slip op. at 8. Under both California and federal law, when an exempt employee is absent from work for a partial day, an employer is prohibited from deducting monetary pay from the employee. Slip op. at 9. In Conley v. Pacific Gas & Electric Co. (2005) 131 Cal.App.4th 260, the Court of Appeal held that under California law, an employer may deduct vacation pay for partial day absences without destroying the exemption. Slip op. at 10-11.

California's law prohibiting the forfeiture of earned wages does not prohibit an employer from deducting leave pay for partial day absences. Slip op. at 11-18. Although vacation pay constitutes wages under California law, and although California law prohibits the forfeiture of vacation pay, requiring employees to use vacation pay to cover partial day absences does not constitute the forfeiture of wages. Slip op. at 13-15. Instead, requiring such use of vacation pay simply "affords an employer the right to control the terms under which vacation time may be exercised by employees." Slip op. at 15.

The deduction policy also does not constitute an "impermissible shifting of wages that an employee has already earned (i.e., Annual Leave benefits) to cover [the employer's] duty to pay wages for the period of the employee's partial-day absence." Slip op. at 19-20. Requiring an employee to use vacation pay does not mean that an employer has failed to pay all of the wages that it is obligated to pay during an employee's partial-day absence. Slip op. at 20.

Finally, California law does not prohibit use of vacation pay wages when a partial day absence is for less than four hours. Slip op. at 21-22.

The opinion is available here.

Peabody v. Time Warner Cable: Employer May Not Average Commission Wages Across a Monthly Pay Period and Must Apply Such Wages to the Pay Period in Which They Are Actually Paid

Susan Peabody filed suit against Time Warner Cable (TWC), alleging, in part: As an account executive for TWC, she worked an average of 45 hours per week and earned salary plus commissions based on her monthly sales; TWC paid her salary biweekly and paid commissions monthly; in those pay periods that included a commission payment, TWC paid Ms. Peabody more than one and one-half times the minimum wage; in those pay periods that did not include a commission payment, TWC paid Ms. Peabody less than one and one-half times the minimum wage, such that she did not qualify for the commissioned sales exemption.

The district court granted summary judgment for TWC, and Ms. Peabody appealed. The Ninth Circuit affirmed in part (as to a question not at issue here) and asked the California Supreme Court to decide the following question: whether an employer can average an employee’s commission payments over certain pay periods to satisfy the compensation requirements of California commission sales exemption. 

In its decision yesterday, the Supreme Court answered the question in the negative, holding as follows: 

Labor Code section 204 requires employers to pay wages no less than semimonthly, and Time Warner could not apply commission wages to a monthly, rather than semimonthly, pay period. Slip op. at 5-7. 

The commission sales exemption depends on the amount of wages actually paid in a given pay period, and Time Warner could not attribute the commission wages paid in one pay period to an earlier pay period. Slip op. at 7-9. 

The federal Fair Labor Standards Act's exemption for commissioned employees is not analogous to California law because the FLSA does not require employers to pay employees no less than semimonthly. Slip op. at 9. 

Peabody v. Time Warner Cable (7/14/14) --- Cal.4th ---, is available here. 

Williams v. Superior Court: Court of Appeal Reverses Decertification Order In Off-the-Clock Class Action

Williams v. Superior Court (Allstate Insurance Company) (12/6/13, mod. 12/24/13) 221 Cal.App.4th 1353, concerns facts very similar to those in Jones, which I discussed recently. The plaintiff sued his employer, Allstate, alleging that he and other insurance adjusters worked off the clock, performing tasks such as logging onto their work computers, but that they “hesitated to request overtime because they did not want to be perceived as ‘bad’ employees.” Slip op. at 3. 

The trial court originally certified an “off-the-clock” class, but granted Allstate’s motion for decertification after the United States Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes (2011) 131 S.Ct. 2541, 564 U.S. 277. Relying on evidence that not all adjusters worked off the clock and others worked only de minimis amounts of time, the trial court held that trial would result in Allstate presenting evidence of affirmative defenses to more than 200 individual claims, an unmanageable prospect. Slip op. at 6. The Court of Appeal reversed, noting as an initial matter: 

A certification motion does not invite the trial court to resolve disputed facts in a free-floating inquiry aimed at deciding the merits of the plaintiff’s claims. The trial court ordinarily must assume the claims have merit. Slip op. at 6, citing Brinker, at 1023 (resolution of merits must be postponed until after certification has been decided).  

The Court then held that Dukes’ discussion of affirmative defenses in a federal Title VII pattern and practice discrimination action did not apply to the present case. Slip op. at 8-14. In particular, the Court held that Rule 23(b)(2) of the Federal Rules of Civil Procedure, under which the Dukes plaintiffs sought certification, differs greatly from California Code of Civil Procedure section 382, which applies in state court. Slip op. at 11. In addition, although the Supreme Court in Dukes disapproved of a “trial by formula” of Wal-Mart’s statutory affirmative defenses to liability, trial by formula is permitted in state court to determine damages, and damage calculations have “little, if any, relevance at the certification stage....” Slip op. at 11-12. 

Here, the question is whether Allstate had a practice of not paying adjusters for off-the-clock time. The answer to that question will apply to the entire class of adjusters. If the answer to that question is “yes” – which is the answer the trial court initially assumed when it first certified the Off-the-Clock class, and is the answer we must presume in reviewing decertification – then, in Dukes’ phrase, that answer is the “glue” that binds all the class members. If some adjusters had more uncompensated time off the clock than other adjusters, that difference goes to damages. But differences in the amount of individual damages do not by themselves defeat class certification. 

Slip op. at 12-13 (internal citations omitted).  

Next, the Court held that Dukes’ discussion of commonality did not support decertification because the alleged commonality was the practice of adjusters working off-the-clock, and the allegation of that practice was sufficient on certification. Slip op. at 17. Allstate disputed that such a practice existed, but the Court declined to engage in an improper examination of the merits. Slip op. at 18. 

Finally, the Court reiterated that the need to prove individual damages could not defeat certification: 

It may be true that some adjusters never worked off the clock, and such adjusters were thus not injured by Allstate’s practice of adjusters working off the clock. But the existence of individuality as to damages does not defeat class certification.

Slip op. at 19. 

The opinion is available here. 

Jones v. Farmers Insurance Exchange: Court of Appeal Reverses Denial of Class Certification in Off-the-Clock Class Action

In Jones v. Farmers Insurance Exchange (10/28/13, mod. and pub. 11/26/13) 221 Cal.App.4th 986, the plaintiff worked as an adjuster for Farmers. He sued, alleging that Farmers should have paid him for "computer sync time" work performed before beginning his scheduled shifts.  

The plaintiff filed for class certification, and Farmers opposed, arguing that it had no uniform policy requiring unpaid pre-shift work and that individual issues thus predominated. The trial court denied certification, and the Court of Appeal reversed, finding as follows: 

Under Brinker and Sav-On the question on commonality is "whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment," and the fact that individual class members will have to prove their damages does not defeat certification. Slip op. at 9-11. 

Although the trial court is "afforded great discretion in ruling on class certification" (slip op. at 11-12), the trial court here abused its discretion "by focusing on individual issues concerning the right to recover damages rather than evaluating whether the theory of recovery is amenable to class treatment." 

Slip op. at 14. Further, "the trial court erred to the extent that its ruling was based on its evaluation of the merits of Plaintiffs’ claim as to the existence of such a uniform policy." Slip op. at 15. 

Plaintiffs’ theory of recovery is that Farmers applied a uniform policy to all putative class members denying them compensation for “computer sync time” work performed at home before the beginning of their scheduled shifts. The existence of such a policy is a factual question that is common to all class members and is amenable to class treatment.

Whether such a policy, if it exists, deprives employees of compensation for work for which they are entitled to compensation is a legal question that is common to all class members and is amenable to class treatment.  Slip op. at 12-13. Farmers disputed that it had such a policy, but this argument raised a "common question amenable to class treatment." Slip op. at 13. Farmers' other evidence went to damages, which did not defeat certification. Slip op. at 13-14. “Farmers’s liability depends on the existence of such a uniform policy and its overall impact on its APD claims representatives, rather than individual damages determinations.” Slip op. at 15. 

Because of the predominance of common issues, class certification would "provide substantial benefits to the litigants and the courts," and a class action would be a superior method of resolving the dispute. Slip op. at 15. 

Substantial evidence supported the trial court's finding that Mr. Jones was not an adequate class representative because he did not file a declaration stating that he understood his fiduciary obligation to the class. Slip op. at 17. However, rather than deny certification on this basis, the trial court should have allowed plaintiffs to amend their complaint to name a suitable class representative. Slip op. at 17-18. 

Martinez v. Joe's Crab Shack: Court Reverses Certification Denial in Misclassification Class Action

In Martinez v. Joe's Crab Shack (11/12/13, pub. 12/4/13) 221 Cal.App.4th 1148, the plaintiffs alleged that the defendants misclassified them and other salaried management employees as exempt from California’s overtime requirements. The trial court denied certification, and the Court of Appeal reversed, holding as follows: 

The plaintiffs adequately represented the class because any antagonism to the case voiced by putative class members did not go “to the very subject matter of the litigation” and could be managed by creating subclasses. Slip op. at 10-12. 

The plaintiffs’ claims were typical, even though different managers may have spent more or less than 50% of their time engaged in exempt administrative tasks. The trial court erred in focusing too greatly on this potential difference among putative class members and in attempting to resolve factual conflicts in the evidence. Slip op. at 11-12. 

Common questions of law and fact predominated, and the trial court erred in failing to find ways to prove the plaintiffs’ claims through the resolution of those common questions. Slip op. at 13-19. 

“Rather than engage in a post hoc calculation for each employee of hours worked in excess of the mandated 40-hour work week,” the fact finder should determine common issues, such as whether the employer properly classified the class members as exempt, by examining the employer’s “realistic expectations and classification of tasks.”

Slip op. at 14-15. 

Finally, the Court remanded to the trial court to reconsider whether class treatment was a superior method of resolving the plaintiffs’ claims: 

[W]e understand from Brinker, supra, 53 Cal.4th 1004, a renewed direction that class-wide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof.

 Slip op. at 19. 

The opinion is available here. 

Duran v. US Bank: Cal. Supreme Court Schedules Oral Argument

In Duran v. U.S. Bank N.A., the Court of Appeal reversed a trial court judgment in favor of a class of allegedly misclassified bank officers and ordered the class decertified. Our blog post on the Court of Appeal's decision is here.

The California Supreme Court granted review and yesterday announced that oral argument will be held on Tuesday, March 4, 2014, at 9:00 a.m., in San Francisco.

The Court's web page (here) states the issues as follows:

This case presents issues concerning the certification of class actions in wage and hour misclassification litigation and the use of representative testimony and statistical evidence at trial of such a class action. 

The Court's decision should be published within 90 days of oral argument, which would be June 2, 2014. 

Farmers Insurance Exchange v. Superior Court: Where Trial Court Relied on Just One Case in Granting Class Certification, Subsequent Depublication of That Case Required Court to Reconsider Certification Order

In Farmers Insurance Exchange v. Superior Court (Wilson) (7/23/13) --- Cal.App.4th ---, the Court of Appeal held that when a trial court relies on just one case in making an order granting class certification, the California Supreme Court's subsequent depublication of that case constitutes a change of law, and the trial court must review its earlier order on a motion for reconsideration. 

The plaintiffs filed a putative wage and hour class action on behalf of individuals employed by the defendant as claims adjusters. While the plaintiffs' motion for class certification was pending, the Court of Appeal issued its decision in Harris v. Superior Court (July 23, 2012) (discussed here), holding that a trial court should have denied a defendant's motion to decertify a class of claims adjusters and should have granted the plaintiffs' motion for summary judgment on the defendant's administrative exemption defense. 

Relying entirely on Harris and stating that it had no choice but to do so, the trial court granted the plaintiffs' motion for class certification. Less than a month later, the California Supreme Court depublished Harris (discussed here). The trial court denied the defendant's motion for reconsideration, and the defendant appealed. 

First, the Court held that the trial court's decision was subject to review on a petition for writ of mandate. Slip op. at 17-18.

Second, the Court held that depublication may constitute a change of law sufficient to warrant reconsideration under Code of Civil Procedure section 1008. Slip op. at 18-21.

Finally, the Court held that under the circumstances of this case, the trial court abused its discretion by denying the defendant's motion for reconsideration. Slip op. at 21-23.

The Court remanded to the trial court to reconsider its order granting class certification.

The opinion is available here.

Heyen v. Safeway: Court Affirms Judgment for Employee In Individual Wage and Hour Action

Heyen v. Safeway Inc. (5/23/13) --- Cal.App.4th ---, began as a putative class action and -- eleven years later -- has ended as an individual case.

Linda Heyen worked for Safeway as an assistant store manager. In 2006, she was added as a named plaintiff in an existing putative class action as against Safeway. The plaintiffs alleged that Safeway should have treated them and other assistant store managers as nonexempt employees. The trial court denied their motion for class certification in 2008, and Heyen's individual action went to trial in 2009. An advisory jury and the trial court found that Safeway improperly classified her, and the court entered judgment in her favor. The Court of Appeal affirmed, holding:

The trial court did not apply an incorrect legal standard to determine that Heyen was a nonexempt employee. Slip op. at 24-37. It properly found that time during which Heyen was performing both exempt and nonexempt tasks -- for example, when she was both running a cash register and simultaneously managing the front end of the store, including instructing and coaching other employees -- should count as nonexempt time for purposes of determining whether she was “primarily engaged in duties which meet the test of the exemption.” The Court drew four general principles from the Wage Order and the federal regulations incorporated therein: 

First, work of the same kind performed by a supervisor's nonexempt employees generally is “nonexempt,” even when that work is performed by the supervisor. If such work takes up a large part of a supervisor's time, the supervisor likely is a “nonexempt” employee. (§§ 541.108(g), 541.111(b), 541.115(b).)  

Second, the regulations do not recognize “hybrid” activities—i.e., activities that have both “exempt” and “nonexempt” aspects. Rather, the regulations require that each discrete task be separately classified as either “exempt” or “nonexempt.” (§§ 541.102(a), 541.108(a)-(g).)  

Third, identical tasks may be “exempt” or “nonexempt” based on the purpose they serve within the organization or department. Understanding the manager's purpose in engaging in such tasks, or a task's role in the work of the organization, is critical to the task's proper categorization. A task performed because it is “helpful in supervising the employees or contribute[s] to the smooth functioning of the department” is exempt, even though the identical task performed for a different, nonmanagerial reason would be nonexempt. (§ 541.108(a).)   

Finally, in a large retail establishment where the replenishing of stocks of merchandise on the sales floor “is customarily assigned to a nonexempt employee, the performance of such work by the manager or buyer of the department is nonexempt.” (§ 541.108(c).) Similarly, in such a large retail establishment, a manager's participation in making sales to customers is nonexempt, unless the sales are made for “supervisory training or demonstration purposes.” (§ 541.108(e).) 

Slip op. at 31. Based on these principles, the Court concluded that the following jury instruction was not erroneous: 

If a party claims that an employee is engaged in concurrent performance of an exempt and non-exempt work, you must consider that time to be either an exempt or a non-exempt activity depending on the primary purpose for which the employee undertook the activity at that time. The nature of the activity can change from time to time. 

Slip op. at 35. The trier of fact must determine the "objective purpose" of the employee's actions. "If such actions were taken to 'supervis[e] the employees or contribute to the smooth functioning of the department,' they were 'exempt work'; if they were taken for some other reason, they were 'nonexempt work.'" Slip op. at 37.  

Next, the Court held that the trial court did not fail to address the rule that the trier of fact must take into account the “employer's realistic expectations and the realistic requirements of the job.” Slip op. at 38-39. Substantial evidence supported the jury's finding that that "Heyen's practice of doing significant amounts of nonexempt work did not 'diverge[] from [Safeway's] realistic expectations.'" Slip op. at 39.  

The opinion is available here.  

Dailey v. Sears, Roebuck: Court Affirms Order Denying Certification of Manager / Assistant Manager Misclassification Action

In Dailey v. Sears, Roebuck and Co. (3/27/13) --- Cal.App.4th ---, the Court of Appeal affirmed a trial court order denying certification of a putative class action alleging that the employer, Sears, violated California wage and hour laws by classifying its auto center managers and assistant managers as exempt employees.  The Court held that the record contained "substantial evidence that Dailey's theory of liability — i.e., that Sears acted in a uniform manner toward the proposed class members, resulting in their widespread

misclassification as exempt employees — is not amenable to proof on a classwide basis" and that the trial court did not abuse its discretion in denying certification.  Slip op. at 3.

Specifically, the Court held: 

The trial court did not fail to explain sufficiently its reasons for denying class certification. The law does not demand great detail from the trial court, and while the order was "succinct," and a more detailed order may have been "desirable," the lack of detail did not preclude "meaningful review" by the Court of Appeal.  Slip op. at 14-17. 

The trial court did not abuse its discretion in denying class certification. The parties presented conflicting evidence of Sears's policies and practices and the effect of those policies and practices on the putative class members. The trial court did not improperly evaluate the merits of the case in evaluating the evidence presented by both sides and crediting the evidence presented by Sears, which indicated "that highly individualized inquiries would dominate resolution of the key issues in this case."  Slip op. at 17-25. 

Substantial evidence supported the trial court's finding that common questions did not predominate. For example, Sears presented evidence that there was no shortage of hourly labor, and the putative class members were not required to fulfill the roles of their nonexempt employees.  Given this and other evidence, "showing a wide variation in proposed class members' job duties," the trial court did not abuse its discretion in finding that plaintiff's theory of liability was not susceptible of common proof at trial.  Slip op. at 25-33. 

Dailey's proposal to use random sampling as a means of managing any individual questions did not "cure the deficiencies of his evidentiary showing." The sampling proposal was "not tied specifically to the facts of this case, or tailored to the evidence presented by the parties," and the trial court did not err in rejecting it.  Slip op. at 34-38.  

Dailey failed to present substantial evidence that "Sears employed any policy or routine practice to deprive proposed class members of 'off duty' meal and rest breaks and, accordingly, Dailey failed to show that this allegation could be proved on a classwide basis." Evidence that Sears had no formal written policy regarding meals and rest periods for the putative class members, provided "no evidence of a policy or widespread practice of Sears  to deprive nonexempt employees of uninterrupted meal periods and rest breaks." Indeed, such evidence was consistent with Sears's treatment of them as exempt employees.  Slip op. at 38-42. 

The trial court did not err in ruling on Sears's motion to preclude certification, even though it was addressed to a broader, statewide class that Dailey subsequently narrowed, in the second amended complaint, to a San Diego district class.  Evidence presented by Sears was relevant to the more narrow class defined by Dailey, and the trial court's order was not "so broad as to preclude any class beyond the San Diego district class."  Slip op. at 42-44. 

The opinion is available here.  

Dailey filed his petition for review in the California Supreme Court on April 30, 2013.  My gut reaction is this: after Brinker and all of its progeny, I would be surprised if the Court were to grant review, but I would not be surprised if it were to grant a petition for depublication.  

Wang v. Chinese Daily News: On Remand From SCOTUS After Wal-Mart, Ninth Circuit Reverses In Part Judgment for Class of Employees and Remands

In Wang v. Chinese Daily News, 623 F.3d 743 (9th Cir. 2010) (discussed here), the Ninth Circuit affirmed judgment after trial in favor of a class of newspaper employees. In 2011, the United States Supreme Court vacated that decision and ordered the Ninth Circuit to reconsider it in light of Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011) (discussed here). In its re-vamped opinion, Wang v. Chinese Daily News, ___ F.3d ___ (9th Cir. 3/4/13), the Ninth Circuit reversed the judgment for the class members, holding: 

Defendant Chinese Daily News (CDN) could challenge the district court's finding that the commonality requirement of Federal Rule 23(a)(2) was satisfied, even though it originally did not brief the issue.  "We conclude that the Court’s decision in Wal-Mart presents a sufficiently significant legal development to excuse any failure of CDN to discuss the commonality requirement of Rule 23(a)(2) in its opening brief."  Slip op. at 7-8. 

Although Wal-Mart differed substantially from Wang, the district court should reconsider its commonality finding in light of Wal-Mart: 

On remand, the district court must determine whether the claims of the proposed class “depend upon a common contention . . . of such a nature that it is capable of classwide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Plaintiffs must show “significant proof that [CDN] operated under a general policy of [violating California labor laws].” However, plaintiffs need not show that every question in the case, or even a preponderance of questions, is capable of classwide resolution. So long as there is “even a single common question,” a would-be class can satisfy the commonality requirement of Rule 23(a)(2). 

Slip op. at 10 (citations omitted). 

In light of Wal-Mart, the district court erred in certifying a class seeking monetary relief under Rule 23(b)(2). Further, "none of the named plaintiffs had standing to pursue injunctive relief on behalf of the class, as none of them is a current CDN employee."  Slip op. at 11. 

The district court should reconsider class certification under Rule 23(b)(3) because: (1) the Ninth Circuit recently has held that an employer's uniform policy of classifying all reporters and account executives as exempt employees is not sufficient to support Rule 23(b)(3) certification in and of itself; and (2) the California Supreme Court recently clarified meal period requirements in Brinker v. Superior Court.  Slip op. at 11-14.  

Finally, the Court held: "If the district court again certifies a class under Rule 23(b)(3), it should calculate damages in light of the Supreme Court’s admonitions in Wal-Mart."  Slip op. at 15.  

Wang v. Chinese Daily News is available here. 

Guerrero v. Superior Court: Court of Appeal Reverses Order Sustaining Demurrer on Joint Employment Issues

In Guerrero v. Superior Court (Weber) (2/11/13) --- Cal.App.4th ---, the plaintiff, Guerrero, was employed to provide in-home support services (IHSS) to eligible recipients in Sonoma County (County) under the In-Home Support Services Act. Cal. Welf. & Inst. Code § 12300 et seq. She sued the County and its In-Home Support Services Public Authority (the Authority) for violation of federal and state wage law, alleging that they jointly employed her along with the individual to whom she rendered services.

The trial court sustained without leave to amend the demurrer of the County and the Authority. The Court of Appeal reversed, holding:

Although providing IHSS-funded care does not constitute employment for all purposes, the County and the Authority were Guerrero's joint employers for FLSA purposes because: (1) "their power over the employment relationship by virtue of their control over the purse strings was substantial"; (2) her wages were determined and paid by the state and its agents, the County and the Authority; (3) the County and the Authority maintained employment records on Guerrero; and (4) the County had an inherent role in in supervising the provision of services by IHSS providers such as Guerrero. Slip op. at 12-30. The Court relied heavily on Bonnette v. California Health and Welfare Agency (9th Cir. 1983) 704 F.2d 1465 (state and counties were employers under California's IHSS program) and distinguished Moreau v. Air France (9th Cir. 2003) 356 F.3d 942 (airline was not joint employer of service workers hired by outside entities for purposes of FMLA and CFRA).

Because Guerrero alleged that she "performed general household work exceeding twenty percent of her total weekly hours worked," the trial court erred in sustaining the demurrer on grounds that her job was exempt from FLSA minimum wage and overtime protections pursuant to the domestic service companionship exception. 29 U.S.C. section 213. "Determining whether or not all of the elements of the exemption have been established is a fact-intensive inquiry. The appropriateness of any employee's classification as exempt must be based on a review of the actual job duties performed by that employee." Slip op. at 30-34.

The Court rejected the concern that allowing such wage claims on a joint employment basis make the County and the Authority "liable for wages that they have no power to control."  

The IHSS program pays for specified services delivered to qualified recipients up to a maximum number of hours. Where a qualified provider delivers services other than those authorized and covered by the program or for a greater number of hours than authorized and real parties have no knowledge that such is occurring and are realistically unable to inform themselves of such, we agree it would be inappropriate to impute the recipient's knowledge to real parties so as to require real parties to pay for such services. 

However, this was a factual issue not ripe for adjudication on demurrer.  Slip op. at 34-36.

The County and the Authority were Guerrero's employers for purposes of California wage law because: (1) California's protections cannot be any less protective of employees than federal law; (2) while they did not directly hire, fire or supervise providers, through their "power of the purse" and quality control authority, the County and the Authority had "the ability to prevent recipients and providers from abusing IHSS authorizations both as to the type of services performed and the hours worked." The trial court thus erred in finding that they did not suffer or permit Guerrero to work and were not her employers.  Slip op. at 36-45. 

Public agencies are not exempt from the provisions of Wage Order No. 15-2001.  Slip op. at 45-50. 

The trial court erred in holding that the personal attendant exemption barred Guerrero's claims because whether she rendered services as a personal attendant was a question of fact. Guerrero's allegation that she spent more than 20 percent of her time performing "general household work" raised an issue of fact as to her personal attendant status under the wage order.  Slip op. at 50-52.  

The opinion is available here.  

The County and the Authority just last week filed their petition for review in the California Supreme Court. The Court last year granted review in Patterson v. Domino's Pizza (discussed here), in which the Court of Appeal held that a franshisor may be liable for a franchisee's alleged violations of the Fair Employment and Housing Act, but denied review in Aleksick v. 7-Eleven (2012) 205 Cal.App.4th 1176, in which the Court of Appeal held that 7-Eleven is not liable for allegedly failing to pay its franchisees' employees their earned wages. If I had to wager, I would say that the Court will deny review, particularly because Guerrero arises on the defendants' demurrer.  

Muldrow v. Surrex: On Remand Following Brinker, Court of Appeal Again Affirms Judgment for Employer, and Supreme Court Denies Depublication Request

The California Supreme Court meets each week to act on cases and publishes its actions on its web site (here) on Thursday mornings. This week, the Court denied a request for depublication in Muldrow v. Surrex Corporation (8/29/12) 208 Cal. App. 4th 1381. I did not catch the Court of Appeal decision when it came down, so here it is:  

In Muldrow v. Surrex Solutions Corporation (1/24/12) 202 Cal.App.4th 1232 (discussed here), a recruiter sued his employer for failure to pay overtime and meal period compensation. The trial court certified the class and, after a bench trial, found: (1) the class members were subject to the commissioned employees exemption from the overtime requirements; (2) the employer provided meal periods to them, and (3) it was not obligated to ensure that they took their meal periods. The Court of Appeal affirmed, and the Supreme Court issued a grant-and-hold order pending Brinker.  On remand after Brinker, the Court of Appeal once again affirmed the judgment, holding: 

1. Brinker had no impact on the Court's analysis of the overtime exemption for commissioned employees, and the trial court correctly held that the employees were subject to the exemption. 
2. The trial court did not err “in ruling that [the employer] was not obligated to ensure that meal period[s] were taken." Citing Brinker, 53 Cal.4th at p. 1040. 

The opinion is available here. 

As I mentioned above, the California Supreme Court on January 3 denied a request for depublication filed by the Brinker plaintiffs. The Muldrow plaintiffs apparently did not file a petition for review. 

Harris v. Superior Court (Liberty Mutual): California Supreme Court Denies Review of Administrative Exemption Decision, Grants Depublication

In Harris v. Superior Court (Liberty Mutual Ins. Co.) (2011) 53 Cal.4th 170 (discussed here), a unanimous California Supreme Court held that that the “administrative/production worker dichotomy” is not dispositive of the administrative exemption defense.

On remand (discussed here), the Court of Appeal held once again that the trial court erred in granting the defendants' motion to decertify the class and in denying the plaintiffs' motion for summary judgment on the administrative exemption defense.

Thank you to Kim Kralowec for pointing out on her blog that on Wednesday, the California Supreme Court denied the employer's petition for review of the most recent decision, but granted a depublication request filed by the California Employment Law Council.  

Muldrow v. Surrex: On Remand After Brinker, Court of Appeal Affirms Holding that Class Members Were Commissioned Sales Exempt and Employer Provided Meal Periods

In Muldrow v. Surrex Solutions Corporation (1/24/12) 202 Cal.App.4th 1232 (blogged here), a recruiter sued his employer for failure to pay overtime and meal period compensation. The trial court (San Diego Superior, Judge Nugent) certified the class, and the parties tried the case to the court. The trial court found that the class members were subject to the commissioned sales exemption from the overtime requirements, that the employer provided meal periods to them, and that it was not obligated to ensure that they took their meal periods. The Court of Appeal affirmed, but the California Supreme Court granted review pending its decision in Brinker v. Superior Court (4/12/12) 53 Cal.4th 1004.  

On remand, the Court of Appeal affirmed its prior decision -- not impacted by Brinker -- that the recruiters were subject to the commissioned sales exemption because: 

1. The class members were engaged principally in selling services (slip op. at 12-15); 
2. The class members' commissions were sufficiently related to the price of those services (slip op. at 16-22); and 
3. The employer's payment of draws against commissions constituted a bona fide commission system (slip op. at 22-24). 

The Court also affirmed its prior decision that the employer had provided the required meal periods to the class members and was under no obligation to ensure that they took their meal periods.  Slip op. at 24-25.  

The opinion is available here. 

Harris v. Superior Court (Liberty Mutual): On Remand, Court of Appeal Again Reverses Orders Decertifying Class and Denying Plaintiffs' Motion for Summary Judgment of Exemption Defense

In Harris v. Superior Court (Liberty Mutual Ins. Co.) (2011) 53 Cal.4th 170 (discussed here), a unanimous California Supreme Court held that that the “administrative/production worker dichotomy” is not dispositive of the administrative exemption defense. 

On remand, the Court of Appeal has held once again that the trial court (Los Angeles Superior, Judge Carolyn B. Kuhl) erred in granting the defendants' motion to decertify the class and in denying the plaintiffs' motion for summary judgment on the administrative exemption defense.  

Here's the Court's summary, which describes the ruling pretty clearly: 

Employers claim that the administrative exemption to the overtime compensation requirements applies to claims adjusters.  Adjusters claim that the exemption does not apply.  In addition, Adjusters contend that the issue of whether their work duties are of the kind required for application of the administrative exemption is a predominant issue common to the claims of all putative class members, warranting class certification.  The trial court initially agreed and certified Adjusters' proposed class.  Later, however, the court revisited the issue and decertified the class for all claims arising after October 1, 2000, on the ground that under Wage Order 4-2001, but not under Wage Order 4-1998, the work duties issue is neither dispositive nor a predominant issue that would justify class treatment of Adjusters' claims.  

Both sides petitioned for writ review.  Employers seek decertification of the portion of the class that remains certified.  Adjusters seek recertification of the decertified portion of the class and also challenge the trial courts denial of their motion for summary adjudication of Employers' affirmative defense based on the administrative exemption.  We grant Adjusters' petition and deny Employers' petition because Adjusters' primary work duties are the day-to-day tasks of adjusting individual claims not directly relating to management policies or general business operations. 

Slip op. at 3.  Here's my more detailed review: 

Overview of California and Federal Regulations.  

The 2001 series of Wage Orders incorporates the Federal regulations -- as they existed as of January 1, 2001 -- into the definition of what work meets the test of the exemption.  "So, just as the statute is understood in light of the wage order, the wage order is construed in light of the incorporated federal regulations."  Slip op. at 8. 

Parsing the language of the regulation reveals that work qualifies as "administrative" when it is "directly related" to management policies or general business operations.  Work qualifies as "directly related" if it satisfies two components.  First, it must be qualitatively administrative.  Second, quantitatively, it must be of substantial importance to the management or operations of the business.  Both components must be satisfied before work can be considered "directly related" to management policies or general business operations in order to meet the test of the exemption.  (Fed. Regs. § 541.205(a) (2000).) 

Slip op. at 9-10.  At issue in Harris is whether the adjusters' work satisfies the "qualitatively administrative" requirement of the "directly related" test.  Ibid.  

Wage Order 4-1998 and the Federal Regulations.  

Next, the Court explained that the Federal regulations -- which are not incorporated into the 1998 wage orders -- none-the-less guide the Court's interpretation of the 1998 wage orders.  

Accordingly, because we conclude that the same federal regulations that are incorporated into Wage Order 4-2001 must be used as a guide to interpreting Wage Order 4-1998, we agree with the parties that the analysis of the administrative exemption should be the same under both wage orders.

Slip op. at 11.  

The Qualitative Component of the “Directly Related” Requirement

Under the federal regulations ... an employee's work duties meet the test of the exemption only if they "relat[e] to the administrative operations of a business as distinguished from "production" or, in a retail or service establishment, 'sales' work" (Fed. Regs. § 541.205(a) (2000)), but the import of that statement is not perfectly clear.  We take it to mean that only duties performed at the level of policy or general operations can satisfy the qualitative component of the "directly related" requirement.  In contrast, work duties that merely carry out the particular, day-to-day operations of the business are production, not administrative, work.

Slip op. at 11-12 (emphasis added).  An employee who is primarily engaged in work that is not "directly related to the administrative operations of a business" cannot fall under the administrative exemption.  Ibid.  

Application of the Qualitative Component of the “Directly Related” Requirement

The undisputed evidence showed that the adjusters are not exempt employees because they are "primarily engaged in work that fails to satisfy the qualitative component of the 'directly related' requirement because their primary duties are the day-to-day tasks involved in adjusting individual claims."  Slip op. at 13.  This non-exempt work includes investigating and estimating claims, making coverage determinations, setting reserves, negotiating settlements, making settlement recommendations for claims beyond their settlement authority, and identifying potential fraud.  

This work is not carried on at the level of management policy or general operations.  Administratively exempt work would include, for example, serving on committees to develop company policies and practices.  Defendants' summary judgment fails because defendants did not show that any class members spent more than 50% of their time engaged in such work.  Slip op. at 14.  

The undisputed facts show that Adjusters are primarily engaged in work that fails to satisfy the qualitative component of the "directly related" requirement. Adjusters therefore are not primarily engaged in work that is "directly related to management policies or general business operations." Accordingly, Adjusters cannot be exempt administrative employees under either Wage Order 4-1998 or Wage Order 4-2001.

Slip op. at 15.  

Application of Federal Regulations Former Part 541.205(b) (2000)

Federal Regulations former part 541.205(b) (2000) provided: 

The administrative operations of the business include the work performed by so-called white-collar employees engaged in "servicing" a business as, for[] example, advising the management, planning, negotiating, representing the company, purchasing, promoting sales, and business research and control.

Defendants argued that the Adjusters are exempt because they are engaged in this type of work.  The Court rejected this argument, holding that "not all activities that involve advising management, planning, negotiating, and representing the company satisfy the qualitative component of the 'directly related' requirement."  Slip op. at 16.  The Court then held: "Because Employers make no attempt to specify where the line should be drawn, let alone to show that Adjusters' work falls on the proper side, their argument fails."  Slip op. at 17.  

This holding would appear to have fairly broad application to other professions, and the Court used the example of legal secretaries to illustrate the point.  Legal secretaries perform many of the types of work described in the regulation, but "it is difficult to see how any of that secretarial work could constitute work that is 'directly related to management policies or general business operations.'"  Slip op. at 18.  

The Court then emphasized an important point that it undoubtedly hopes will help insulate its ruling from further review before the California Supreme Court: 

The Supreme Court observed that "the one element of the administrative exemption" that is at issue in these proceedings concerns "the character of [Adjusters'] duties," and the court pointed out that the analysis in the Bell cases was based on the plaintiffs' role in their employer's business and consequently did not address the character of those plaintiffs' duties. Nowhere in this opinion do we in any way rely upon the Bell cases, and our discussion of Employers' argument concerning Federal Regulations former part 541.205(b) (2000) concerns only Adjusters' duties and is entirely independent of Adjusters' role in Employers' business. 

Slip op. at 19 (internal citations omitted).  

Producing the Employer’s Product

"Employers argue that Adjusters do not produce Employers' product because Employers' product is the transference of risk, not claims adjusting."  Slip op. at 19. The Court rejected this argument for two reasons: first, because adjusting claims is "an important and essential part of transferring risk;" and second, because "workers who do not produce their employer's product can still do work that fails to satisfy the qualitative component of the 'directly related' requirement."  Slip op. at 20.  

The Court here demonstrates the Supreme Court's point that the production worker / administrative dichotomy does not always work.  The Court again uses the example of the legal secretary.  He or she does not produce the law firm's product -- legal advice -- but he or she also does not perform work that is directly related to the firm's management policies or general business operations.  Slip op. at 21.  

Effect of Federal Regulations Former Part 541.205(c)(5) (2000)

Federal Regulations former part 541.205(c) (2000) provided: 

The test of "directly related to management policies or general business operations" is also met by many persons employed as advisory specialists and consultants of various kinds, credit managers, safety directors, claim agents and adjusters, . . . and many others.  

Defendants again argued that the Adjusters are exempt because they are engaged in this type of work.  The Court rejected the argument, holding that this regulation is related to the quantitative element of the "directly related" requirement, and the Supreme Court has already held that only the qualitative element is at issue.  Slip op. at 22.  

Agency Opinion Letters and Federal Case Law

The Court declined to follow opinion letters from the DOL or the DLSE.  It also declined to follow district court cases.  Slip op. at 22-24.  

The Alleged Heterogeneity of the Class

Finally, the Court addressed the Defendants' argument that "the qualitative component of the "directly related" requirement cannot be dispositive, and class treatment cannot be appropriate because the certified class is so heterogeneous." Slip op. at 24.  The Court dismissed this argument, again relying on its conclusion that "no evidence shows that any class members primarily engage in work at the level of management policy or general business operations."  Slip op. at 24.  In other words, absent evidence that any class members are subject to the administrative exemption, the Defendants' exemption defense fails.  And that is a predominant issue common to the class members.  Slip op. at 25.  

Conclusion

The parties do not disagree as to Adjusters' work duties. Indeed, the evidence is essentially undisputed as to what those duties are. We hold that, with the few exceptions we have noted, Adjusters' work duties do not satisfy the qualitative component of the "directly related" requirement because they are not carried on at the level of policy or general business operations. Adjusters therefore are not primarily engaged in work that is "directly related to management policies or general business operations." (Fed. Regs. § 541.205(a) (2000).) It follows that Adjusters are not exempt administrative employees under either Wage Order 4-1998 or Wage Order 4-2001. Accordingly, Adjusters' motion for summary adjudication should have been granted, and, because the qualitative component of the "directly related" requirement is a predominant common issue under both wage orders, Employers' motion for class decertification should have been denied in its entirety.

Slip op. at 25-26. Defendants undoubtedly will petition the California Supreme Court for review, and it will be very interesting to see how the Supreme Court responds.  

As I said regarding the Supreme Court's decisions in Harris and Brinker, this court seems to be looking for its identity, at least in employment law cases.  Perhaps by the time Harris goes back up -- if it does go back up -- this Court will have a better sense of how it is going to approach and resolve employment cases and it will give us a more definitive decision than it did the first time around.  On the other hand, perhaps the Court of Appeal has done enough to satisfy the concerns raised by the Supreme Court the first time around, and the Supreme Court will deny review.  

The opinion is available here.  

Christopher v. Smithkline Beecham: SCOTUS Holds that Pharma Reps Are Exempt Salespeople Under FLSA

The Supreme Court of the United States has issued its decision in Christopher et al. v. Smithkline Beecham Corp., --- U.S. --- (6/18/12). In a five-to-four vote along well-established lines, the Court held that pharmaceutical sales representatives are exempt from the Fair Labor Standards Act (FLSA) overtime requirements as "outside salesmen." 

In short (very short) the Court held that the DOL's interpretation of the exemption -- that pharma reps are not exempt because they are not primarily engaged in sales -- (a) is entitled to no deference and (b) has no persuasive value.  Examining the exemption itself, the Court found that (c) pharma reps are outside sales exempt because they are primarily engaged in sales, which includes “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.”  

As it frequently does, the Court has made my job easy (a little too easy, perhaps?) by issuing a detailed syllabus, which reads as follows:

The Fair Labor Standards Act (FLSA) requires employers to pay employees overtime wages, see 29 U. S. C. §207(a), but this requirement does not apply with respect to workers employed “in the capacity of outside salesman,” §213(a)(1). Congress did not elaborate on the meaning of “outside salesman,” but it delegated authority to the Department of Labor (DOL) to issue regulations to define the term. Three of the DOL’s regulations are relevant to this case. First, 29 CFR §541.500 defines “outside salesman” to mean “any employee . . . [w]hose primary duty is . . . making sales within the meaning of [29 U. S. C. §203(k)].” §§541.500(a)(1)?(2). Section 203(k), in turn, states that “ ‘[s]ale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” Second, §541.501 clarifies that “[s]ales within the meaning of [§203(k)] include the transfer of title to tangible property.” §541.501(b). Third, §541.503 provides that promotion work that is “performed incidental to and in conjunction with an employee’s own outside sales or solicitations is exempt work,” whereas promotion work that is “incidental to sales made, or to be made, by someone else is not.” §541.503(a). The DOL provided additional guidance in connection with its promulgation of these regulations, stressing that an employee is an “outside salesman” when the employee “in some sense, has made sales.” 69 Fed. Reg. 22162.

The prescription drug industry is subject to extensive federal regulation, including the requirement that prescription drugs be dispensed only upon a physician’s prescription. In light of this requirement, pharmaceutical companies have long focused their direct marketing efforts on physicians. Pharmaceutical companies promote their products to physicians through a process called “detailing,” whereby employees known as “detailers” or “pharmaceutical sales representatives” try to persuade physicians to write prescriptions for the products in appropriate cases. 

Petitioners were employed by respondent as pharmaceutical sales representatives for roughly four years, and during that time their primary objective was to obtain a nonbinding commitment from physicians to prescribe respondent’s products in appropriate cases. Each week, petitioners spent about 40 hours in the field calling on physicians during normal business hours and an additional 10 to 20 hours attending events and performing other miscellaneous tasks. Petitioners were not required to punch a clock or report their hours, and they were subject to only minimal supervision. Petitioners were well compensated for their efforts, and their gross pay included both a base salary and incentive pay. The amount of incentive pay was determined based on the performance of petitioners’ assigned portfolio of drugs in their assigned sales territories. It is undisputed that petitioners were not paid time-and-a-half wages when they worked more than 40 hours per week. 

Petitioners filed suit, alleging that respondent violated the FLSA by failing to compensate them for overtime. Respondent moved for summary judgment, arguing that petitioners were “employed in the capacity of outside salesman,” §213(a)(1), and therefore were exempt from the FLSA’s overtime compensation requirement. The District Court agreed and granted summary judgment to respondent. Petitioners filed a motion to alter or amend the judgment, contending that the District Court had erred in failing to accord controlling deference to the DOL’s interpretation of the pertinent regulations, which the DOL had announced in an amicus brief filed in a similar action. The District Court rejected this argument and denied the motion. The Ninth Circuit, agreeing that the DOL’s interpretation was not entitled to controlling deference, affirmed.

Held: Petitioners qualify as outside salesmen under the most reasonable interpretation of the DOL’s regulations. Pp. 8–25.

(a) The DOL filed amicus briefs in the Second Circuit and the Ninth Circuit in which it took the view that “a ‘sale’ for the purposes of the outside sales exemption requires a consummated transaction directly involving the employee for whom the exemption is sought.” Brief for Secretary of Labor as Amicus Curiae in In re Novartis Wage and Hour Litigation, No. 09–0437 (CA2), p. 11. The DOL changed course after the Court granted certiorari in this case, however, and now maintains that “[a]n employee does not make a ‘sale’ . . . unless he actually transfers title to the property at issue.” Brief for United States as Amicus Curiae 12-13. The DOL’s current interpretation of its regulations is not entitled to deference under Auer v. Robbins, 519 U. S. 452. Although Auer ordinarily calls for deference to an agency's interpretation of its own ambiguous regulation, even when that interpretation is advanced in a legal brief, see, id., at 461-462, this general rule does not apply in all cases. Deference is inappropriate, for example, when the agency’s interpretation is “‘plainly erroneous or inconsistent with the regulation,’ ” id., at 461, or when there is reason to suspect that the interpretation “does not reflect the agency’s fair and considered judgment on the matter,” id., at 462. There are strong reasons for withholding Auer deference in this case. Petitioners invoke the DOL’s interpretation to impose potentially massive liability on respondent for conduct that occurred well before the interpretation was announced. To defer to the DOL’s interpretation would result in precisely the kind of “unfair surprise” against which this Court has long warned. See, e.g., Long Island Care at Home, Ltd. v. Coke, 551 U. S. 158, 170-171. Until 2009, the pharmaceutical industry had little reason to suspect that its longstanding practice of treating detailers as exempt outside salesmen transgressed the FLSA. The statute and regulations do not provide clear notice. Even more important, despite the industry’s decades-long practice, the DOL never initiated any enforcement actions with respect to detailers or otherwise suggested that it thought the industry was acting unlawfully. The only plausible explanation for the DOL’s inaction is acquiescence. Whatever the general merits of Auer deference, it is unwarranted here. The DOL’s interpretation should instead be given a measure of deference proportional to its power to persuade. See United States v. Mead Corp., 533 U. S. 218, 228. Pp. 8–14. 

(b) The DOL’s current interpretation—that a sale demands a transfer of title—is quite unpersuasive. It plainly lacks the hallmarks of thorough consideration. Because the DOL first announced its view that pharmaceutical sales representatives are not outside salesmen in a series of amicus briefs, there was no opportunity for public comment, and the interpretation that initially emerged from the DOL’s internal decisionmaking process proved to be untenable. The interpretation is also flatly inconsistent with the FLSA. The statute defines “sale” to mean, inter alia, a “consignment for sale,” and a “consignment for sale” does not involve the transfer of title. The DOL relies heavily on 29 CFR §541.501, which provides that “[s]ales . . . include the transfer of title to tangible property,” §541.501(b), but it is apparent that this regulation does not mean that a sale must include a transfer of title, only that transactions involving a transfer of title are included within the term “sale.” The DOL’s “explanation that obtaining a non-binding commitment to prescribe a drug constitutes promotion, and not sales,” Reply Brief for Petitioners 17, is also unconvincing. Since promotion work that is performed incidental to an employee’s own sales is exempt, the DOL’s conclusion that detailers perform only nonexempt promotion work is only as strong as the reasoning underlying its conclusion that those employees do not make sales. Pp. 14–16. 

(c) Because the DOL’s interpretation is neither entitled to Auer deference nor persuasive in its own right, traditional tools of interpretation must be employed to determine whether petitioners are exempt outside salesmen. Pp. 16–24.

(1) The FLSA does not furnish a clear answer to this question, but it provides at least one interpretive clue by exempting anyone “employed . . . in the capacity of [an] outside salesman.” 29 U. S. C. §213(a)(1). The statute’s emphasis on “capacity” counsels in favor of a functional, rather than a formal, inquiry, one that views an employee’s responsibilities in the context of the particular industry in which the employee works. The DOL’s regulations provide additional guidance. Section 541.500 defines an outside salesman as an employee whose primary duty is “making sales” and adopts the statutory definition of “sale.” This statutory definition contains at least three important textual clues. First, the definition is introduced with the verb “includes,” which indicates that the examples enumerated in the text are illustrative, not exhaustive. See Burgess v. United States, 553 U. S. 124, 131, n. 3. Second, the list of transactions included in the statutory definition is modified by “any,” which, in the context of §203(k), is best read to mean “ ‘one or some indiscriminately of whatever kind,’ ” United States v. Gonzales, 520 U. S. 1, 5. Third, the definition includes the broad catchall phrase “other disposition.” Under the rule of ejusdem generis, the catchall phrase is most reasonably interpreted as including those arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a commodity. Nothing in the remaining regulations requires a narrower construction. Pp. 16–20.

(2) Given this interpretation of “other disposition,” it follows that petitioners made sales under the FLSA and thus are exempt outside salesmen within the meaning of the DOL’s regulations. Petitioners obtain nonbinding commitments from physicians to prescribe respondent’s drugs. This kind of arrangement, in the unique regulatory environment within which pharmaceutical companies operate, comfortably falls within the catchall category of “other disposition.” That petitioners bear all of the external indicia of salesmen provides further support for this conclusion. And this holding also comports with the apparent purpose of the FLSA’s exemption. The exemption is premised on the belief that exempt employees normally earn salaries well above the minimum wage and perform a kind of work that is difficult to standardize to a particular time frame and that cannot easily be spread to other workers. Petitioners—each of whom earned an average of more than $70,000 per year and spent 10 to 20 hours outside normal business hours each week performing work related to his assigned portfolio of drugs in his assigned sales territory—are hardly the kind of employees that the FLSA was intended to protect. Pp. 20–22.

(3) Petitioners’ remaining arguments are also unavailing. Pp. 22–24.

Justice Alito wrote the opinion, joined by Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas. Justice Breyer write a dissent, joined by Justices Ginsburg, Sotomayor, and Kagan. The opinion is available here.