California Court Grants Summary Judgment Against Hershey’s in Overtime Lawsuit

On February 23, 2011, the Northern District of California granted a partial summary judgment motion against Hershey Company by Retail Sales Representative (RSR). Campanelli v. Hershey Co., 2011 U.S. Dist. LEXIS 17483 (N.D. Cal. Feb. 23, 2011). The RSRs sought to have the court find that the outside sales and administrative exemptions to the federal Fair Labor Standards Act (“FLSA”) do not apply to their job duties. According to the Court, “RSRs are part of teams that help [Hershey] sell its products directly to retail outlets of various sizes, ranging from Walmarts to grocery chains to mom-and-pop stores. Each RSR services retail outlets in a designated sales territory.” Id. at *3. RSRs did not receive commissions, but had annual salaries between $40,000 and $50,000. Id. This case concerned slightly over 100 RSRs.

The Campanelli court first examined the outside sales exemption to the overtime laws which requires a position to have the primary duty of making sales. Id. at *12. The court rejected the use of this exemption, stating that:

“Here, defendant has not produced evidence that plaintiffs’ primary duties are “making sales” as contemplated by the regulations. Defendant concedes that its upper-level salespeople, such as CSEs, negotiate sale agreements — without any involvement from the RSRs — for the company’s products with customers’ corporate offices (i.e., Walmart, Safeway, Albertson’s, etc.). That is when the sale is recorded, and Hershey products are later shipped to the retailers. It is undisputed that plaintiffs then help stimulate sales by encouraging retailers to replenish their supply and ensuring that sold products are properly marketed at the retail stores. While this facilitates the movement of Hershey products from warehouses and stockrooms to the shelves of retail stores and into the hands of consumers, this does not constitute an additional ‘sale.’ The work done by plaintiffs may increase defendant’s sales, but it does not affect the plaintiffs’ own sales. Since plaintiffs are not the individuals making the actual sale as the exemption requires, this type of ‘incremental selling’ and ‘sell through,’ even if they were the plaintiffs’ primary duties, does not amount to exempt work.” Id. at *17-18.

The Campanelli court similarly rejected the administrative exemption, primarily relying on Hershey’s failure to proffer evidence that the RSRs’ job duties were related to matters of significance. Id. at *32. The court further rejected the company’s contention that RSRs fell within the “combination” exemption which “allows employees to be classified as exempt if they perform a combination of outside sales and administrative duties, but their primary duty does not fit neatly into either exemption.” Id. at *34 (citing 29 C.F.R. § 541.708).

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