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Carol Gorey, On Behalf of Herself v. Manheim Services Corporation

May 13, 2011


The opinion of the court was delivered by: James S. Gwin, United States District Judge:

OPINION & ORDER [Resolving Doc. Nos. 131; 134]

In this conditionally certified Fair Labor Standards Act ("FLSA") collective action, both sides move for summary judgment. Plaintiff Carol Gorey moves on behalf of herself and fifty-five opt-in Plaintiffs (collectively the "Plaintiffs").*fn1 [Doc. 138.] The Defendants, who through various legal entities operate a nationwide network of Manheim auto auctions, (collectively "Manheim"), cross move for summary judgment. [Doc 145.]

For the reasons stated below, the Court GRANTS IN PART and DENIES IN PART the Plaintiffs' motion for summary judgment, and GRANTS IN PART and DENIES IN PART the Defendants' motion for summary judgment.

I. Background

Plaintiff Carol Gorey filed this collective action complaining that Manheim improperly classified her and the opt-in Plaintiffs as overtime exempt under the FLSA. Plaintiff Gorey makes a similar claim under New York state law. [Doc. 42.] Responding, Manheim says the Plaintiffs are properly classified as exempt from federal and state overtime and wage laws because their primary job duties involve outside sales, administrative tasks, or a combination of the two. [Doc. 145 at 2.]

Manheim operates more than seventy automobile auctions across the country and around the world. Manheim's customers are dealers, banks, fleet companies, and manufacturers who come to bid on cars to replenish their inventory or to sell excess stock. Manheim makes money on both ends, receiving a fee when its customers buy or when its customers sell cars. When cars are sold at the auction, the buyer, the seller, and Manheim sign a three-way contract. Manheim also offers transportation, reconditioning, repair, inspection, finance, and key-replacement services. [Doc. 132 at 5-6.]

Manheim employs "inside" and "outside" sales representatives to assist with its auctions and promote its services. Inside sales representatives-who are not the subject of this lawsuit-work on the lot administering auctions, helping customers, and soliciting business for the auction over the phone. When inside sale representatives work more than forty hours a week, Manheim pays them overtime as "non-exempt" employees under the FLSA. [Doc. 132 at 12.]

On the other hand, outside sales representatives (who are sometimes generically called dealer sales representatives) leave the auction lot and travel to dealer locations to "bring[] new business" to their respective Manheim location. [Doc. 132 at 12.] Although each outside sales representative describes the purpose of these trips somewhat differently, they seek to get dealers to the auction lot to buy and sell vehicles, which in turn drives up the representatives' commissions. See e.g.,[Doc. 132 at 19-21 ("As an [outside sales representative] my main duty has been to travel around and visit motor vehicle dealers at their place of business and to sell the services of Manheim . . . and the use of its facilities."].

Unlike inside sales representatives, Manheim classifies its outside sales representatives as "exempt" and does not pay them extra for overtime. [Doc. 132 at 13.] Instead, it pays these employees a fixed salary with the opportunity to earn extra commissions. For instance, in 2008 Plaintiff Gorey's base salary was $57,000; her total commissions were $20,000. [Doc. 149-38.] Gorey and the other outside sales representatives earn commissions when a dealer they cover sells a vehicle at the auction, and earn more money the quicker the vehicle sells. In 2009, for example, Manheim paid these commissions:

(1) Each car sold day 1 to day 30..................................................................$10

(2) Each car sold day 31 to day 60................................................................$9

(3) Each car sold day 61 and up....................................................................$3

[Doc. 149-37] Although the commission structure varies by year and location-Gorey earned up to $20 a car in 2008-the outside sales representatives describe their cumulative commissions as "substantial," and at least one representative earned more in commission than he did in base salary. [Doc. 132 at 16; Doc. 149-35.]

Manheim auctions typically charge dealers $200 if their vehicle sells above $2500,$75 if it sells below that mark, and nothing if the bidding does not reach the reserve price. [Doc. 149-11; Doc. 149-12.] Depending on the dealer, the outside sales representatives have some ability to negotiate a different fee schedule or to include some ancillary services at no charge. For example, Plaintiff Gorey offered one dealer free pick-up service for the vehicles the dealer sent to auction (while charging a different dealer $20 for pick up from that same city), and also offered a dealer a $20 rebate on each vehicle if it sold more than fifty at the auction. [Doc. 149-10.]

Manheim's outside sales representatives work off the lot visiting new and existing dealers four days a week or "80%" of the time. [Doc. 132 at 22.] Given the amount the outside sales representatives travel, Manheim does not actively monitor their hours or day-to-day schedule. See e.g., [Doc. 132 at 22 ("Given that I am usually away from [the auction] traveling to customers, alone in most cases, I have no direct supervision by . . . management on most days."] Nonetheless, the outside sales representatives all agree that they work more than forty hours a week, on average. [Doc. 132 at 22, 23.] Gorey, for example, says she routinely put in eighty-hour work weeks.

Each Manheim auction holds a weekly sale day. On this day the outside sales representatives are back on the lot "assisting dealers in getting cars set up for auction." [Doc. 132 at 26.] Outside sales representatives, for example, advocate on behalf of their respective dealers to the auctioneers to get their dealers earlier "lane position." Earlier lane position is important to dealers because it gives them a better opportunity to sell, as more people bid at the beginning of the auction than at the end. [Doc. 132 at 27.] Lane position is important to the outside sales representatives, as well, because their commissions are contingent upon their dealers' vehicles actually selling at the auction. [Doc. 132 at 28.]

Against this backdrop, the Plaintiffs move for summary judgment on their claim that the Defendants withheld overtime pay in violation of the FLSA, 29 U.S.C. ยง 201 et seq., which states that "no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation . . . at a rate not less than one and one-half times the regular rate." [Doc. 42 at 14.] Plaintiff Gorey also moves for summary judgment on behalf of a putative class of Manheim's New York employees alleging a violation of the equivalent New York state law, and a violation of New York's "spread of hours" regulation, which requires an employer to pay an employee a premium equal to one hour's pay ...

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