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Herrera v. TBC Corp.

United States District Court, E.D. Virginia, Richmond Division

May 7, 2014

ANTONIO HERRERA, et al., Plaintiffs,
TBC CORPORATION, et al., Defendants

For Antonio Herrera, Ricardo Leal, Dan Mobley, Andrew Page, Plaintiffs: James Harrell Shoemaker, Jr., LEAD ATTORNEY, Jason Eric Messersmith, Scott Lee Reichle, Patten Wornom Hatten & Diamonstein LC, Newport News, VA; Giselle Brianceschi Schuetz, Max Phillip Barack, Nina Miriam Schwartz, Rebecca Houlding, PRO HAC VICE, Law Offices of Joshua Friedman PC, Mamaroneck, NY.

For TBC Corporation, TBC Retail Group, Inc., Defendants: Jimmy Frank Robinson, Jr., LEAD ATTORNEY, James Clay Rollins, Ogletree Deakins Nash Smoak & Stewart PC (Richmond), Richmond, VA.

For NTW, LLC, Defendant: Jimmy Frank Robinson, Jr., LEAD ATTORNEY, Ogletree Deakins Nash Smoak & Stewart PC (Richmond), Richmond, VA.


Page 740

Henry E. Hudson, United States District Judge.


(Defendants' Motion for Summary Judgment)

This is a putative collective action brought under the Fair Labor Standards Act (" FLSA" ), 29 U.S.C. § 201, et seq. The proposed class, which seeks overtime compensation, encompasses all mechanics employed by Defendants TBC Retail Group, Inc. and NTW, LLC d/b/a NTB who are paid on a " flat rate" basis. This case is presently before the Court on Defendants' Motion for Summary Judgment.[1] The motion turns on a narrow dispositive issue--whether the challenged method of flat rate compensation is a bona fide commission plan--and if so, whether it is exempted from overtime by 29 U.S.C. § 207(i). Both parties have filed memoranda supporting their respective positions. The Court heard oral argument on April 30, 2014.

Defendants operate retail establishments at over 800 locations nationwide. Defendants offer not only automotive repair services, but they sell a variety of parts and accessories to the general public. Plaintiffs are mechanics employed by Defendants.

According to Plaintiffs, they are compensated in one of two ways. Approximately one third participate in what they refer to as a commission program. Under this program, mechanics are compensated based on their certifications and skill sets, thereby receiving a straight percentage of the billed mechanical work that they perform. (Pls.' Mem. Opp'n Mot. Summ. J. 3, ECF No. 52.) Compensation under this straight commission program is not at issue in this case. The remaining mechanics, who compose the proposed class, are compensated under what is commonly referred to as a flat rate system. ( Id. 4.) Although the parties disagree on aspects of this compensation scheme, the basic underlying formula appears to be clear.

The compensation received by Plaintiffs is the product of two factors: " turned hours" times " flat rate." (Defs.' Mem. Support Mot. Summ. J. 5, ECF No. 48.) Both appear to be terms of art in the automotive industry. " Turned hours" represents a predetermined number of hours that a service task should theoretically require. It does not necessarily reflect the actual number of hours spent completing the requested service. ( Id. )

Each individual mechanic employed by Defendants is assigned an hourly rate, referred to in the industry as his or her " flat rate." A " flat rate" is assigned based on the mechanic's experience and certifications. ( Id. ) Defendants contend that " the labor component of customer pricing is calculated by multiplying the number of turned hours assigned to the purchased service by the 'shop rate' for the relevant location." ( Id. ) Defendants maintain that each location has a specific shop rate based on the competitive environment in that particular geographic area." ( Id. ) Plaintiffs, however, contest whether the record evidence supports the conclusion that each

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location has a specific " shop rate." [2] This discrepancy does not, however, rise to the level of a disputed material fact and was not listed as such in Plaintiffs' opposition memorandum.

Plaintiffs further rejoin that Defendants' description of the compensation scheme is distortedly simplistic. For example, " certain customers regularly pay a different hourly labor rate than other customers." (Pls.' Mem. Opp'n to Mot. Summ. J. 13.) Some preferred customers are charged a " discounted rate, yet the mechanics' pay remains the same as it [is] when the work is performed for a standard customer." ( Id. ) Other services are performed at a flat rate or at no extra charge to the customer. ( Id. at 8-9.) Plaintiffs also point out that

Defendants fail to acknowledge anywhere in their memorandum that the labor costs charged to customers vary by the difficulty of the labor . . . [undermining] Defendants' contention that mechanics receive a commission related to the cost of labor. That is because while customer labor fees may vary, the mechanic's rate remains stagnant . . . .

( Id. at 12.) Defendants also note that Plaintiffs' description of their pay scheme does not include differential pay. " Mechanics receive an additional payment when the rate of pay for hours actually worked in a pay period falls below $10.88 [one and one half times minimum wage] . . . . In other words, if the mechanic receives too few turned hours along with insufficient fixed rate compensation in a given pay period, Defendants increase their pay 'as if they had earned one and one half times the minimum wage for a forty hour work week." ( Id. at 15.)

Despite a number of arguments on the margins, Plaintiffs' core contention is that Defendants are unable to demonstrate that their method of compensating mechanics is a bona fide commission scheme. Plaintiffs argue that Defendants cannot establish the critical element of proportionality between the compensation to the employees and the amount charged to the customer to qualify as a commission-based scheme.

Defendants disagree and maintain that their payment plan is a bona fide commission scheme qualifying for exemption from overtime under 29 U.S.C. § 207(i). They further contend that their method of compensating mechanics is widely accepted in the industry and is firmly rooted in Fair Labor Standards Act (" FLSA" ) jurisprudence.

An overview of decisions by United States Courts of Appeal reveals a deep split on the issue of whether or not the compensation scheme for mechanics at issue in this case, which is common in the industry, is proportional and compliant with 29 U.S.C. § 207(i). There is also no clear consensus among federal circuits on the burden of proof when employers invoke FLSA exemptions. The Fourth Circuit appears to require clear and convincing evidence. See Desmond v. PNGI Charles Town Gaming, L.L.C., 564 F.3d 688, 691 (4th Cir. 2009) ( citing Shockley v. City of Newport News, 997 F.2d 18, 21 (4th Cir. 1993)). The standard of proof in the Fourth Circuit is premised on the well settled rule of construction of FLSA exemptions. Such exemptions are to be

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" narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within [the exemptions'] terms and spirit." Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960).

The standard of review for summary judgment motions is well settled in the Fourth Circuit. Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate " if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Fed.R.Civ.P. 56(c). The relevant inquiry in a summary judgment analysis is " whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52. In reviewing a motion for summary judgment, the court must view the facts in the light most favorable to the nonmoving party. Id. at 255.

Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). " [T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48 (emphasis in original). Indeed, summary judgment must be granted if the nonmoving party " fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To defeat an otherwise properly supported motion for summary judgment, the nonmoving party must rely on more than conclusory allegations, " mere speculation," the " building of one inference upon another," the " mere existence of a scintilla of evidence," or the appearance of " some metaphysical doubt" concerning a material fact. Lewis v. City of Va. Beach Sheriff's Office, 409 F.Supp.2d 696, 704 (E.D. Va. 2006) (citations omitted). The court cannot weigh the evidence or make credibility determinations in its summary judgment analysis. Williams v. Staples, Inc., 372 F.3d 662, 667 (4th Cir. 2004). In analyzing motions for summary judgment, it is important to keep in mind that a material fact is one that might affect the outcome of a party's case. Anderson, 477 U.S. at 248; JKC Holding Co. LLC v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). Whether a fact is considered to be " material" is determined by the substantive law, and " [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248; see also Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir. 2001). A " genuine" issue concerning a material fact only arises when the evidence, viewed in the light most favorable to the nonmoving party, is sufficient to allow a reasonable jury to return a verdict in that party's favor. Anderson, 477 U.S. at 248.

There appears to be no material facts genuinely in dispute and the parties identify none in ...

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