Salamone v. Upstream Investment Partners, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Sherry Salamone, )

Plaintiff, ) Case No: 16 C 9489

)

v. )

) Judge Ronald A. Guzmán

Upstream Investment Partners, LLC, )

Defendant. )

MEMORANDUM OPINION AND ORDER

For the reasons set forth below, Defendant’s motion for summary judgment [37] is

denied.

STATEMENT

Background

Defendant is a full-service financial consulting firm. (Pl.’s Resp. Def.’s Stmt. Facts, Dkt.

# 42, ¶ 8.) Plaintiff began work with Defendant as an office coordinator on January 7, 2011, and

her employment was terminated on April 22, 2016. (Id. ¶¶ 6, 8.) Plaintiff alleges overtime

violations pursuant to the Fair Labor Standards Act (“FLSA”), the Illinois Minimum Wage Law

(“IMWL”), and the Illinois Wage Payment Collection Act (“IWPCA”). Defendant moves for

summary judgment as to the FLSA claim.

Standard

Summary judgment is proper when the “‘materials in the record, including depositions,

documents, electronically stored information, affidavits or declarations, stipulations (including

those made for purposes of the motion only), admissions, interrogatory answers, or other

materials’ 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.” Baines v. Walgreen Co., 863 F.3d 656, 661 (7th Cir.

2017) (quoting Fed. R. Civ. P. 56(a)). The party opposing summary judgment “cannot merely

rest on its pleadings; it must affirmatively demonstrate, by producing evidence that is more than

‘merely colorable’ that there is a genuine issue for trial.” Omnicare, Inc. v. UnitedHealth Grp.,

Inc., 629 F.3d 697, 705 (7th Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

249 (1986)). A genuine issue of material fact exists when “the evidence is such that a reasonable

jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.

Analysis

While the FLSA requires employers to pay its employees overtime premiums for hours

worked in excess of forty hours, certain classes of workers are exempt from the FLSA’s

coverage. 29 U.S.C. §§ 207, 213. Under section 213(a)(1), “any employee employed in a bona

fide executive, administrative, or professional capacity” is exempt from the FLSA’s overtime

requirements. 29 U.S.C. § 213(a)(1). Defendant contends that Plaintiff was exempt from the

FLSA as an administrative employee.

Pursuant to regulations promulgated by the Department of Labor (“DOL”), an “employee

employed in a bona fide administrative capacity” shall mean any employee: “(1) Compensated on

a salary or fee basis at a rate of not less than $455 per week . . . , exclusive of board, lodging or

other facilities;1 (2) Whose primary duty is the performance of office or non-manual work

directly related to the management or general business operations of the employer or the

employer's customers; and (3) Whose primary duty includes the exercise of discretion and

independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200(a)(1)-(3).

Plaintiff does not dispute that she received a salary in excess of $455.00 per week or that her

primary duties consisted of office work and did not include manual labor. Plaintiff contends,

however, that her job did not relate to the “management or general business operations” of

Defendant under the second prong and she did not “exercise discretion or independent judgment

with respect to matters of significance” under the third.

With respect to whether her job related to the management or general business operations

of Defendant, Plaintiff asserts that the work she performed must directly relate to the business

operations of the employee’s customers. (Pl.’s Resp., Dkt. # 43, at 6.) This assertion is

unsupported by any citation to authority, and contradicts the express language of the regulation,

so the Court will not consider it. The undisputed record establishes that Plaintiff’s work “directly

related to the management and general business operations of” Defendant or its customers, and

therefore, the second prong is satisfied.

The exercise of discretion prong, as used in this regulation, means that an employee

engages in “the comparison and evaluation of possible courses of conduct, and acting or making

a decision after the various possibilities have been considered.” 29 C.F.R. § 541.202(a). The

DOL has provided a non-exclusive list of relevant factors to assist in determining whether an

employee exercises discretion and independent judgment, including:

1 According to the DOL website, it “is undertaking rulemaking to revise the regulations

located at 29 C.F.R. part 541, which govern the exemption of executive, administrative, and

professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay

requirements. Until the Department issues its final rule, it will enforce the part 541 regulations in

effect on November 30, 2016, including the $455 per week standard salary level.” See

https://www.dol.gov/whd/overtime/fs17g_salary.pdf (last visited Jan. 10, 2018).

2

[W]hether the employee has authority to formulate, affect, interpret, or implement

management policies or operating practices; whether the employee carries out

major assignments in conducting the operations of the business; whether the

employee performs work that affects business operations to a substantial degree,

even if the employee's assignments are related to operation of a particular segment

of the business; whether the employee has authority to commit the employer in

matters that have significant financial impact; whether the employee has authority

to waive or deviate from established policies and procedures without prior

approval; whether the employee has authority to negotiate and bind the company

on significant matters; whether the employee provides consultation or expert

advice to management; whether the employee is involved in planning long- or

short-term business objectives; whether the employee investigates and resolves

matters of significance on behalf of management; and whether the employee

represents the company in handling complaints, arbitrating disputes or resolving

grievances.

Td. at § 541.202(b).

The exercise of discretion “must be more than the use of skill in applying

well-established techniques, procedures or specific standards” and “does not include .. .

recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine

work.” Jd, at § 541.202(e). The employer has the burden of demonstrating that an employee is

exempt. Schaefer—LaRose v. Eli Lilly & Co., 679 F.3d 560, 571 (7th Cir. 2012).

In support of its contention that Plaintiff was an exempt administrative employee,

Defendant points to the following:

° Plaintiff assisted in the duties of “on-boarding”’ new financial advisers

pursuant to regulations set forth by the Financial Industry Regulatory

Authority (“FINRA”) (PIL.’s Resp. Def.’s Stmt. Facts, Dkt. # 42, J 13.)

° Plaintiff represented on her resume that she was “responsible for the daily

business operations of an independent financial services office that

consists of 8 financial advisers.” (/d. J 15.)

° Plaintiff further represented on her resume that Defendant’s business

“included a tax practice since 2014, and I have been the primary person

responsible for organizing and running the tax practice. I have also been

responsible for assisting in organizing marketing events for the advisors in

our office; as well as all aspects of client service, including gathering and

processing account paperwork, on-boarding new advisors, assistance in

> According to Defendant, “on-boarding” refers to the process of transferring a financial

adviser’s license from a prior investment firm in compliance with rules set forth by FINRA and

the Securities and Exchange Commission.” (PI.’s Resp. Def.’s Stmt. Facts, Dkt. # 42, 7 12.)

organizing and running educational workshops for clients and prospects,

and placing trades for clients/advisors.” (/d.)

° In order to run Defendant’s tax practice, Plaintiff received training from

two different tax offices after which Defendant was modeling its tax

practice. Ud. 417.) Plaintiff had a role in training the financial advisors,

accountants, and part-time staff working with Defendant regarding the

processing of client income tax returns. (/d.)

° Plaintiff was responsible for making sure that all of Defendant’s policies

and procedures were “in place” prior to the tax season each year. (/d.)

° Plaintiff tracked the receipt and status of clients’ tax returns on a

spreadsheet to make certain that none “fell through the cracks.” (/d.)

° Plaintiff also ensured that Defendant’s clients’ income tax returns were

completed by the accountants on a timely basis and, if they were not,

Plaintiff communicated with the clients, financial advisors, and

accountants to determine the reason for the delay. (/d.)

° In conjunction with the Defendant’s branch manager, Plaintiff created the

“branch-support/cut-in” program for the Lisle, Illinois office where she

worked, “which was a multi-tiered program that allowed Plaintiff to

increase her compensation by performing duties for the financial advisors

at the Lisle branch that went beyond her normal duties.” (/d. J 18.)

Plaintiff worked with the Branch Manager to create and author the

documents defining the cost and level of ascending support for each

branch-support/cut-in level. (/d.)

Other than reciting Plaintiff's tasks and setting forth the relevant federal regulations,

Defendant provides no actual analysis of Plaintiffs duties as they relate to the administrative

exemption. Nor does Defendant cite to any cases. For example, it simply states without any

record support that:

In a financial services firm, where revenue is generated as [a] result of the fees

and commissions from each financial advisor’s book of business, transferring

these revenue sources to Defendant’s gross economic production is an important

matter to Defendant’s business operations. Being the primary person coordinating

the financial advisors’ continued licensure through FINRA is also critical to the

business operations of the firm because if FINRA does not authorize the transfer,

the firm loses a financial advisors’ economic production. Revenue is the life

blood of the business.

(Def.’s Reply, Dkt. # 44, at 9.) While this may be true, Defendant points to no evidence in

support of these assertions. Defendant goes on to argue that the fact that Plaintiff made sure all

of the policies and procedures were “in place” prior to the tax season removes Plaintiff “by

definition .. . from being one who is subject to undeviating compliance to office procedure, to

one who has been delegated the responsibility to put office procedure and policy into effect, at

least for Defendant’s clients’ income tax practice.” (Id.) Without more, the Court fails to see the

logical jump Defendant makes. Ensuring that procedures are “in place” could include numerous

responsibilities from ministerial tasks to high-level policymaking. It is simply not clear from the

record where on the spectrum Plaintiff’s responsibilities fell.

Moreover, Plaintiff asserts that she did not serve in an advisory capacity, nor did she

collect and analyze information regarding customers’ income, assets, investments or debts,

determine what financial products meet customers’ needs and financial circumstances or advise

customers regarding the advantages and disadvantages of different financial products. (Pl.’s

Resp., Dkt. # 43, at 7.) Plaintiff further points out that her supervisor, Nick Reiland, testified that

Plaintiff’s tasks included a number of “mundane” tasks, such as preparing documents and

confirming appointments, making coffee, reordering supplies, cleaning conference rooms, and

filling out paperwork for the financial advisors. (Def.’s Resp. Pl.’s Stmt. Facts, Dkt. # 45, ¶ 1.)

With respect to the on-boarding of new financial advisors, Plaintiff characterizes her duties as

setting up the telephone and computer and filling out paperwork to execute the transfer. It is

disputed whether on-boarding required advanced knowledge acquired by a prolonged course of

specialized knowledge, whether Plaintiff had supervisory authority over anyone or had the power

to hire or fire anyone. (Id. ¶¶ 3, 5.)

The Court finds based on the above that a genuine dispute of material fact exists as to

whether Plaintiff was employed in an administrative capacity such that she was exempt from the

FLSA, and therefore denies Defendant’s motion for summary judgment on that issue.

Defendant next asserts that portions of Plaintiff’s FLSA claim are time-barred. Pursuant

to 29 U.S.C. § 255(a), any cause of action brought under the FLSA must be commenced within

two years after the cause of action accrued. 29 U.S.C. § 255(a). The statute of limitations is

extended to three years if the cause of action arises out of a willful violation. Id. “The burden of

proof to establish a willful violation lies with the FLSA [p]laintiff[].” Cottle v. Falcon Holdings

Mgmt., LLC, 892 F. Supp. 2d 1053, 1074 (N.D. Ind. 2012). According to Defendant, because

Plaintiff’s complaint was filed on October 4, 2016, the two-year statute of limitations restricts

any overtime recovery to the time period between October 4, 2014 and October 4, 2016, which

would total $7,797.11.

The Court, however, concludes that it “is premature to consider the issue of willfulness

where, despite the Court’s denial of [Defendant’s] summary judgment motion, ‘there has been no

finding that defendants violated the FLSA.’” Tamas v. Family Video Movie Club, Inc., No. 11 C

1024, 2013 WL 1286693, at *9 (N.D. Ill. Mar. 28, 2013) (citing Allen v. Bd. of Pub. Educ. for

Bibb Cnty., 495 F.3d 1306, 1323–24 (11th Cir. 2007) (ruling reserved until FLSA violation

established); Espenscheid v. DirectSat USA, LLC, No. 09–cv–625, 2011 WL 10069108, at *30

(W.D. Wis. Apr. 11, 2011); Carlson v. C.H. Robinson Worldwide, Inc., Nos. 02–3780, 02–4261,

2005 WL 758601, at *15 (D. Minn. Mar. 30, 2005) (“under the FLSA, liability is a predicate to a

willfulness analysis and to a finding of liquidated damages”); Cooke v. Gen. Dynamics Corp.,

993 F. Supp. 56, 65-66 (D. Conn. Jun. 16, 1997) (determination of whether employer willfully

5

violated FLSA premature where material issues of fact precluded summary determination of

underlying issue of whether employees were covered by FLSA)).

Conclusion

For the reasons stated above, Defendant’s motion for summary judgment is denied. As a

final observation, the Court notes that it allowed Defendant to file a late summary judgment

motion in the interests of efficiency. Had the Court known that the parties were going to elect to

proceed without a jury, it would have denied leave to file the summary judgment motion and

simply moved ahead with the bench trial. Thus, contrary to conserving the parties’ and the

Court’s time and resources, the manner in which the parties have proceeded has essentially

doubled the work involved for the Court and significantly increased the attorneys’ fees expended

on this relatively low-damages case.

HO rtd Loyuaic

Date: January 16, 2018 aC

Ronald A. Guzman

United States District Judge