Bland v. Edward D. Jones & Co., L.P.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

WAYNE BLAND, DANUTA )

DURKIEWICZ, DAVID BOWLES and )

ADAM REYES, individually and on ) Case No. 18-cv-1832

behalf of all others similarly situated, )

) Judge Robert M. Dow, Jr.

Plaintiffs, )

)

v. )

)

EDWARD D. JONES & CO., L.P. and )

THE JONES FINANCIAL )

COMPANIES, L.L.L.P., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiffs Wayne Bland, Danuta Durkiewicz, David Bowles and Adam Reyes (“Plaintiffs”)

filed this putative collective and class action on behalf of themselves and all those similarly

situated against Defendants Edward D. Jones & Co., L.P. and The Jones Financial Companies,

L.L.L.P.; alleging violations of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (Count I)

and several Illinois and Missouri statutes. Currently before the Court is Defendants’ motion to

dismiss [38] Plaintiffs’ Amended Class and Collective Action Complaint [35]. For the reasons

stated below, Defendants’ motion to dismiss [38] is granted. Plaintiff Bowles’s claims in Count I

are dismissed with prejudice, except as to any claims that relate to the TCR Provision, which are

dismissed without prejudice. Plaintiffs’ recordkeeping claim in Count I is also dismissed with

prejudice. The rest of Count I and Counts II–VI are dismissed without prejudice. Plaintiffs are

given until April 15, 2019 to file an amended complaint consistent with this opinion. The case is

set for further status on April 23, 2019 at 9:00 a.m. Finally, Defendants’ request for oral argument

[63] is denied as moot.

I. Background1

Plaintiffs are all former Financial Advisors who worked for Defendants and participated in

Defendants’ Financial Advisor training program.2 [35, ¶¶ 9–13.] Plaintiffs assert that the terms

of the training program, the wages they received during the training program, and the wages they

subsequently received as financial advisors violate the Fair Labor Standards Act (“FLSA”), 29

U.S.C. § 201 et seq., and a host of state laws. See generally [35]. Many of their claims concern

one of the terms contained within the “Financial Advisor Employment Agreement” that Plaintiffs

and the class they wish to represent were required to execute before beginning their training.3 [Id.

¶ 15.]

The contract provision in question, which the Court will refer to as the “training cost

reimbursement provision” (“the TCR Provision”), states:

Upon execution of this Agreement and receipt of your can sell date from Edward

Jones, you will be a financial advisor of Edward Jones. If, within three (3) years

after receipt of your can sell date, your employment with Edward Jones is

terminated by you or by Edward Jones, you maintain registration of your license

with FINRA and accept employment with any entity as either an employee or

1 For purposes of the motion to dismiss, the Court accepts as true all of Plaintiffs’ well-pleaded factual allegations

and draws all reasonable inferences in Plaintiffs’ favor. Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614, 618

(7th Cir. 2007).

2 While Plaintiffs refer to all those who have had “can sell” status for less than three years as “FA Trainees,” [35, at

2 n.1], the Court will refer to those individuals who have achieved “can sell” status, such as Plaintiffs, as financial

advisors and will only use “trainees” to refer to individuals who have not yet achieved “can sell” status.

3 Plaintiffs do not challenge Defendants’ inclusion of a copy of the Financial Advisor Employment Agreement [39-

2] and the related compensation agreement [39-3] that each of the Plaintiffs’ agreed to with their motion to dismiss.

Even if they had, as the Seventh Circuit explained in 188 LLC v. Trinity Indus., Inc.:

It is also well-settled in this circuit that “documents attached to a motion to dismiss are considered

part of the pleadings if they are referred to in the plaintiff's complaint and are central to his claim.

Such documents may be considered by a district court in ruling on the motion to dismiss.” Wright

v. Assoc. Ins. Cos. Inc., 29 F.3d 1244, 1248 (7th Cir.1994).) * * * While narrow, this exception is

“aimed at cases interpreting, for example, a contract.” [Levenstein v. Salafsky, 164 F.3d 345, 347

(7th Cir.1998).]

300 F.3d 730, 735 (7th Cir. 2002). Here, Plaintiff specifically referenced the documents in question. See [35, ¶ 15;

¶20 (“Edward Jones FA Trainees are paid on a bi-weekly basis pursuant to compensation plan, and each employee

receives a schedule of expected compensation shortly after their hire”)]. The Court will therefore consider both

documents in ruling on the instant motion.

independent contractor engaged in the sale of securities and/or insurance business,

you agree to reimburse Edward Jones the reasonable cost of the training Edward

Jones has provided you including, but not limited to, the cost of the selection and

hiring. * * * You agree that the reimbursable amount bears a reasonable relationship

to the computed damages Edward Jones would suffer from a breach by you and that

Edward Jones will suffer demonstrable loss as a result of your breach. The amount

you agree to reimburse Edward Jones is $75,000.00. There shall be no reduction

in the amount of training costs owed by you in the event your employment is

terminated during the first year of service as a financial advisor of Edward Jones.

This obligation shall be reduced by $9,375.00 for each full quarter year of service

beginning the thirteenth month of your employment as a financial advisor of

Edward Jones. You must be employed by Edward Jones for each full quarter year

in order to have your training cost obligation reduced according to the provisions

of this paragraph.

[39-2, ¶ 21.] Each of the Plaintiffs also received a “Compensation Agreement,” [35, ¶ 20], that

provides a schedule of compensation for both their time as trainees and then as “New Financial

Advisors”, [39-3].

The training program comprises a 17-week “Study Calendar” period divided into two

stages. [Id. ¶¶ 17–18.] During the first or “self-study” stage, trainees study for industry licensing

exams using written online materials on computers loaned to them by Defendants.” [Id. ¶ 18.] At

the end of that stage, trainees take and must pass the FINRA Series 7 and 66 licensing exams.4

“Series 7 and 66 licenses are essential to the successful completion of the training program, and

FA Trainees must pass the exams on their first try or be fired.” [Id.]

The second or “door knock” stage, begins with one week of on-site training in either

St. Louis, Missouri or Tempe, Arizona, followed by seven weeks of knocking on doors in a

designated neighborhood to obtain individuals’ contact information. [Id. ¶ 19.] This stage ends

4 While Plaintiffs allege that “Series 4 and 66 licenses are essential to the successful completion of the program, [35,

¶ 18], they fastidiously avoid alleging if or when Plaintiffs took them or when they passed. Despite that oversite, the

Court infers that Plaintiffs must have taken them during the self-study period and passed given the TRC Provision of

which they complain only applies if an individual leaves Defendants’ employment, maintains their license, and takes

a job that involves selling financial products within three years of receipt of their “can-sell” status. [39-2, ¶ 21.]

with another on-site week, designated as “Evaluation/Graduation,” where Defendants determine

whether trainees “can sell” to prospective clients. [Id.]

During this Study Calendar period, trainees are paid on a bi-weekly basis. [Id. ¶ 20.] The

trainees also qualify as overtime eligible. [Id.] Although Defendants expect trainees to work 45

hours during the first stage and 60 hours during the second stage, the projected bi-weekly pay does

not vary between the two periods. [39-3, at 2.] Rather, Defendants adjust the hourly rate between

the two periods such that individuals like Plaintiffs are paid an almost identical amount in both

periods.5 [Id.] This “projected gross pay” includes the overtime trainees are expected to work.

[Id.] However, Plaintiffs allege that Defendants neither track nor compensate trainees for the hours

that they actually work. [35, ¶ 20.] Plaintiffs further allege that Defendants’ policy and practice

“knowingly discourages * * * [trainees] from accurately reporting all of the hours they work and

fails to pay * * * [trainees] wages and overtime for the work they perform.” [Id. ¶ 22.]

Upon achieving “can sell” status, trainees become “new financial advisors” and Defendants

classify them as overtime “exempt.” [35, ¶ 23; 39-3, at 2.] Financial Advisors are salaried, though

the salary begins to fluctuate based on performance after four months. [39-3, at 2–3.] However,

a financial advisor’s salary includes a “minimum guaranteed salary” (“MGS”) that does not

fluctuate and is paid regardless of performance. [Id.] What amount of a financial advisor’s salary

is composed of MGS “is determined by the applicable federal and state guidelines where [the

advisor’s] branch is located.” [Id. at 3.]

As new financial advisors, individuals such as Plaintiffs solicit “door knock” contacts to

become clients. [35, ¶ 23.] They receive little training during this period, which primarily

constitutes “access to a Regional Trainer and wholesaler presentations by ‘preferred partner’ firms

5 This “manipulation” involves lowering the “hourly rate” from $14.17 in the first stage, to $9.62 in the second stage.

[39-3, at 2.]

whose products the Firm pushes [new financial advisors] to sell to clients.” [Id.] However, their

primary duty is to sell financial products. [Id.] In fact, Plaintiffs allege that Defendants instructed

them to “sell these financial products without regard to the clients’ individual needs, financial

circumstances, or investment objectives.” [Id. ¶ 85.] Nor were Plaintiffs placed in job positions

“whose primary duty was to perform work directly related to the management or general business

operations of Edward Jones or clients * * *.” [Id. ¶ 86.]

Plaintiffs worked for Defendants at various offices around the country and at various

periods between January 2014 and June 2016. [Id. ¶¶ 10–13.] They each signed the Financial

Advisor Employment Agreement containing the TCR Provision.6 [Id. ¶¶ 35, 43, 52, 61.] Each

worked well over 40 hours per week, studying for the industry licensing exams, completing the

training program requirements, travelling to St. Louis or Tempe for training, completing whatever

tasks were assigned to them in the office, working to develop a network of potential clients, and

selling financial products to clients, among other things. [Id. ¶¶ 37, 45, 54, 63.] Specifically, each

alleges that he or she worked (1) more than 45 hours during the “self-study” stage, (2) more than

60 hours during the “door knock” stage, and (3) more than 40 hours a week after achieving “can

sell” status. [Id. ¶¶ 38, 46, 55, 64.] Plaintiffs allege that they were never compensated for all the

hours that they worked and did not receive the meaningful training and/or “lucrative career” that

they were promised. [Id. ¶¶ 39–40, 47–48, 56–57, 65–66.] Instead, Plaintiffs allege that they were

each constructively discharged or otherwise forced to leave, and that Defendants later demanded

that they pay either all or some portion of the $75,000 required under the TCR Provision that

6 Plaintiff Bowles claims to have worked for Defendants from January 2014 until June 2014. As explained below,

this places him outside the statute of limitations for FLSA claims.

exceeds the amount they were paid during their entire employment with Defendants. [Id. ¶¶ 40–

41, 49–50, 58–58, 67–68.]7

In response to this conduct, Plaintiffs filed this purported collective and class action suit

alleging multiple violations of the FLSA and various Illinois and Missouri statutes on March 13,

2018. See generally [1]. On June 12, 2018, Plaintiffs filed an amended complaint further detailing

those claims. See generally [35]. On July 10, 2018, Defendants filed the instant motion to dismiss.

[38.] The court now resolves the motion.

II. Standard

To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief

can be granted, the complaint first must comply with Rule 8(a) by providing “a short and plain

statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), such

that the defendant is given “fair notice of what the * * * claim is and the grounds upon which it

rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.

41, 47 (1957)) (alteration in original). Second, the factual allegations in the complaint must be

sufficient to raise the possibility of relief above the “speculative level.” E.E.O.C. v. Concentra

Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “A

pleading that offers ‘labels and conclusions’ or a ‘formulaic recitation of the elements of a cause

of action will not do.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S.

at 555). Dismissal for failure to state a claim under Rule 12(b)(6) is proper “when the allegations

in a complaint, however true, could not raise a claim of entitlement to relief.” Twombly, 550 U.S.

at 558. In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts as true all

of Plaintiffs’ well-pleaded factual allegations and draws all reasonable inferences in Plaintiffs’

7 Additional facts are discussed below where relevant to the parties’ arguments.

favor. Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007). Evaluating

whether a “claim is sufficiently plausible to survive a motion to dismiss is ‘a context-specific task

that requires the reviewing court to draw on its judicial experience and common sense.’” Id.

(quoting McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011)).

III. Analysis

Plaintiffs allege five separate violations of the FLSA (Count I), a violation of the Illinois

Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (Count II), a violation of the Illinois

Minimum Wage Law, 820 ILCS 105/1 et seq. (Count III), and a violation of the Missouri

Minimum Wage Law, V.A.M.S. 290.500 et seq. (Count VI). In addition, Plaintiffs seek the

rescission of the TCR Provision (Count IV) and the disgorgement of funds under a theory of unjust

enrichment (Count V).

A. FLSA Claims

Plaintiffs allege five violations of the FLSA: (1) that the TCR Provision violated the

FLSA’s requirement to pay wages “free and clear;” (2) that enforcement of the TCR Provision

would result in Plaintiffs’ compensation falling below the minimum wage; (3) that Defendants

failed to adequately pay the minimum wage or overtime while they were in non-exempt positions;8

(4) that Defendants misclassified Plaintiffs once they achieved can sell status and therefore failed

to pay them overtime; and (5) Defendants failed to keep accurate records. Defendants assert that

Plaintiffs have not presented a plausible claim under any of the five theories.

8 Plaintiffs response [59-1, at 20–22 (Section II(A) “Plaintiffs’ Overtime Claims are Sufficiently Pled”)], only

addresses whether Plaintiffs’ have adequately alleged that they were entitled to overtime. It does not address whether

Plaintiffs also stated a claim for a minimum wage violation. Consequently, the Court understands Plaintiffs as alleging

only a failure to pay overtime during the non-exempt period, and not that plaintiffs also failed to receive the minimum

wage. In any event, as explained below, Plaintiffs have not sufficiently alleged a minimum wage violation.

1. The TCR Provision

The FLSA requires a subject employer to pay its employees a minimum hourly wage, and

to compensate its employees at one and one-half time the regular rate for a workweek longer than

forty hours. See 29 U.S.C. §§ 206, 207. Pursuant to the FLSA, the Department of Labor has

issued regulations requiring that minimum wages be paid “free and clear,” i.e.:

Whether in cash or in facilities, “wages” cannot be considered to have been paid by

the employer and received by the employee unless they are paid finally and

unconditionally or “free and clear.” The wage requirements of the [FLSA] will not

be met where the employee “kicks-back” directly or indirectly to the employer or

another person for the employer’s benefit the whole or part of the wage delivered

to the employee.

29 C.F.R. § 531.35. Claims under § 531.35 are only cognizable if the effect of the condition

complained of would reduce the employee’s wages below the statutory minimum. See, e.g.,

Franks v. MKM Oil, Inc., 2010 WL 3613983, at *4 (N.D. Ill. Sept. 8, 2010) (concluding plaintiff

failed to state a claim because she had not pled any facts that the condition she complained of

resulted in her earning less than the minimum wage); see also Brown v. Lululemon Athletica, Inc.,

2011 WL 741254, at *4 (N.D. Ill. Feb. 24, 2011) (collecting cases holding plaintiffs must allege

that their pay fell below minimum wage). Given these rulings, the Court addresses Plaintiffs

claims that the TCR Provision places an illegal condition on their pay, [35, ¶¶ 77–78], and that

enforcement of the provision would reduce their earnings to below the minimum wage, [id. ¶¶ 77–

78, 81], together. Defendants move to dismiss both claims on the grounds that Plaintiffs do not

have standing to challenge the TCR Provision because they were paid the minimum wage during

the entirety of their employment and have not paid any amount since their termination, and that in

any event the TCR Provision does not violate the FLSA because it amounts to a loan to cover the

training that they received.

a. Plaintiffs lack standing to assert claims under the TCR Provision,

and in any event, fail to state a claim

Because it is a threshold issue, the Court must address Defendants’ standing argument

first.9 Article III of the Constitution confines federal courts to adjudicating actual cases or

controversies. U.S. Const. art. III, § 2. Under Article III, a plaintiff must allege: (1) an injury in-

fact; (2) fairly traceable to the defendant’s action; that is (3) capable of being redressed by a

favorable decision from the court. Parvati Corp. v. City of Oak Forest, Ill., 630 F.3d 512, 514 (7th

Cir. 2010) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)). The asserted

injury must be both (a) concrete and particularized and (b) actual or imminent, not conjectural or

hypothetical. Lujan, 504 U.S. at 560. Moreover, a plaintiff must demonstrate standing separately

for each form of relief sought. Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528

U.S. 167, 185 (2000).

At first glance, Plaintiffs’ standing appears tenuous. In all but one of the cases cited by the

parties in which a court has reviewed a contract provision similar to the TCR Provision at issue

here, the plaintiff had actually been deprived of a concrete dollar amount by the defendant. See

Gordon v. City of Oakland, 627 F.3d 1092, 1094 (9th Cir. 2010) (“Gordon paid the City the

$5,268.03 it claimed was due” for “‘training reimbursement’ and ‘collection costs.’”); Heder v.

City of Two Rivers, Wisconsin, 295 F.3d 777, 778 (7th Cir. 2002) (“Two Rivers withheld all of

Heder’s pay from his last two pay periods.”); City of Oakland v. Hassey, 78 Cal. Rptr. 3d 621, 629

(Cal. Ct. App. 2008), as modified on denial of reh’g (July 15, 2008), as modified (July 17, 2008)

(noting the city withheld a plaintiff’s final paycheck and a check to cash out his retirement balance

9 While Defendants do not describe it as such, the Court construes Defendants’ standing arguments as a motion to

dismiss the relevant claims under Rule 12(b)(1) and thus reviews those arguments under the Rule 12(b)(1) standard.

In this case, Defendants have made a facial attack on standing because they assert Plaintiffs allegations are insufficient

to establish injury-in-fact. See Murphy v. FT Travel Mgmt., LLC, 2014 WL 1924045, at *1 (N.D. Ill. May 14, 2014).

Consequently, the Court need only look to the complaint and “see if the plaintiff has sufficiently alleged a basis of

subject matter jurisdiction.” Id. (citations and quotation marks omitted).

to cover money owed under a repayment agreement); Park v. FDM Grp. (Holdings) PLC, 2017

WL 946298, at *2 (S.D.N.Y. Mar. 9, 2017) (“Plaintiff resigned from her FDM Consultant position

* * * and paid a Termination Fee of $20,000 * * *.”). Only one case cited by either party or located

by the Court involved a plaintiff without a concrete deprivation. See Ketner v. Branch Banking

and Trust Company, 143 F.Supp.3d 370 (M.D.N.C. 2015).

In Ketner, the named plaintiffs alleged that a provision of their employment contracts

nearly identical to the TCR Provision violated the FLSA’s minimum wage requirement and sought

a declaratory judgment invalidating it. 143 F.Supp.3d at 375–76; see also Ketner v. Branch

Banking and Trust Company, No. 14-cv-967, Docket Entry 1, ¶¶ 69–72 (M.D.N.C. Nov. 19, 2014).

In response, the defendant argued that at least one of the plaintiffs lacked standing because he had

not paid any portion of his “loan obligation.” Id. at 382. The court rejected that argument, noting

that (1) the plaintiff disputed the validity of the contract, (2) the defendant’s law firm had sent

plaintiff letters demanding payment and threatening legal action if payment was not forthcoming,

and (3) the defendant had previously enforced the provision in question and actually recovered

money. Id. at 383. The court concluded that these facts undermined any concerns that the

plaintiff’s injury was speculative or hypothetical and that based on the facts alleged, the plaintiff

had “‘an objective and reasonable apprehension of future litigation’ regarding his alleged payment

obligations under the [Agreement].” Id. at 383 (citation omitted). The plaintiff therefore had

standing.

Whether a plaintiff has “an objective and reasonable apprehension of future litigation” is

one of the standards used by the Fourth Circuit to determine if a plaintiff has standing under the

Declaratory Judgment Act (“DJA), 28 U.S.C. § 2201. See Energy Recovery, Inc. v. Hauge, 133

F. Supp. 2d 814, 817 (E.D. Va. 2000). Thus, it appears that North Carolina district court relied on

the Fourth Circuit’s jurisprudence regarding declaratory judgments to determine whether the

Ketner plaintiffs had standing. Given that the Supreme Court has held that “the ‘actual

controversy’ requirement of the Declaratory Judgment Act is coextensive with the ‘case or

controversy’ standard for determining whether the Court has jurisdiction under Article III,” see

Deutsche Leasing USA, Inc. v. Hamps Enterprises, LLC, 2015 WL 536010, at *3 (N.D. Ill. Feb.

6, 2015) (citing MedImmune, 549 U.S. at 126–27), the Court elects to do the same, especially in

view of Plaintiffs’ request for a declaration that “Defendants’ conduct, policies, and practices are

unlawful and constitute willful violations of the [FLSA] * * *.” [35, at 27 ¶ d.] The question

therefore is whether the allegations demonstrate that there is “‘a substantial controversy, between

parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance

of a declaratory judgment.’” Bell v. Taylor, 827 F.3d 699, 711 (7th Cir. 2016) (quoting

MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)).

Here, Plaintiffs have alleged that Defendants sent some form of communication stating that

they owe or demanding that they pay $75,000 as provided for by the TCR Provision, [35, ¶¶ 41,

50, 59], the validity of which Plaintiffs clearly dispute. However, unlike in Ketner, Plaintiffs have

not alleged any facts suggesting that Defendants have (1) taken any steps to bring litigation against

them, (2) ever actually collected money from individuals pursuant to the TCR Provision, or (3)

even expressly threatened to file suit.10 The absence of any such allegations places this case

precariously close to the limits of this Court’s jurisdiction. See Hyatt Int’l Corp. v. Coco, 302 F.3d

707, 712 (7th Cir. 2002) (“[A] declaratory judgment plaintiff must be able to show that the feared

lawsuit from the other party is immediate and real, rather than merely speculative.”). As the

10 Although Plaintiffs allege “Edward Jones’s harassing conduct compels FA Trainees either to hire counsel or pay

extortionate sums or both,” [35, ¶ 30], there is not one allegation that any individual has actually paid $75,000 or any

amount close to that or engaged an attorney (outside of this lawsuit). The absence of any specific instances in which

any Plaintiff has retained counsel undermines the force of the general allegation set out in paragraph 30.

Seventh Circuit has explained, “the threat of suit, however immediate, is not by itself sufficient for

the invocation of the federal power to issue a declaratory judgment.” Id. Because Plaintiffs’

allegations amount to little more than an avowal of their fear of litigation, the Court cannot

conclude that they have alleged enough to invoke the Court’s jurisdiction. There is—at least

presently—no concrete harm, and the threat of that harm is too speculative on the facts as Plaintiffs

have alleged. In fact, Defendants may never file suit against Plaintiffs for fear that the TCR

Provision could be struck down under state law as unconscionable or on other grounds.

Plaintiffs invocation of the Supreme Court’s decision in Medimmune, Inc. v. Genetech, Inc.

549 U.S. 118, 127–28, 137 (2007), does not alter the Court’s conclusion. In Medimmune, the

Court considered whether a licensee could sue for a declaratory judgment challenging the validity

of the patent underlying its contract with the licensor, when the licensee continued to perform and

benefit from that contract. 549 U.S. at 127–37. That case is readily distinguishable from this case.

If Plaintiffs were still employed by Defendants and wished to leave, but did not do so on account

of the TCR Provision, then Medimmune would support a lawsuit for a declaratory judgment.11

Here, Plaintiffs have already left Defendants’ employ and now challenge the validity of the TCR

Provision, purportedly in fear of imminent litigation against them to enforce the provision. Based

on the facts currently before it, this suit appears to be “a tactical device whereby a party who would

be a defendant in a coercive action may choose to a be plaintiff by winning the proverbial race to

the courthouse.” Hyatt, 302 F.3d at 712.

11 However, Plaintiffs’ assertion that they have alleged an injury because Defendants used the threat of the TCR

Provision to force them to work long hours, [35, ¶ 3], does not give them standing to challenge the TCR Provision. If

Plaintiff’s worked overtime hours for which they did not receive compensation, then they have a claim for insufficient

wages which the Court examines in Sections III(A)(2–3), not a suit to invalidate a provision that no longer applies to

them given that they are no longer in Defendants’ employ.

Turning to the substance of Plaintiffs’ claims, Defendants maintain that Heder and Gordon

should control the outcome in this case and require concluding in their favor. [62, at 2–6.]

Plaintiffs argue that Heder actually supports their position, and that in any event this Court should

follow the analysis laid out in Ketner, which questioned the applicability of Heder and viability of

Gordon.

In Heder, the Eastern District of Wisconsin and then the Seventh Circuit evaluated the

validity of an agreement between the City of Two Rivers and the city’s firefighters under

Wisconsin law. Heder v. City of Two Rivers, 149 F. Supp. 2d 677 (E.D. Wis. 2001); Heder, 295

F.3d at 778, 780–83. As part of the agreement in Heder, Two Rivers agreed to pay for the city’s

firefighters’ paramedic training but required any individual who left the department before three

years of service to repay the city for (1) the training, (2) any overtime wages received due to that

training, and (3) any premium wages the firefighter earned as a result of that training. 149 F. Supp.

2d at 688. The district court, describing the contract term as a “liquidated damages” provision,

held that the provision was unenforceable as to the wage repayment because it violated the FLSA,

but noted that the portion “‘equal to the cost of tuition, books, and other training costs for the

paramedic training’ [was] not problematic * * *.” Id. at 693–94. Nonetheless, the district court

invalidated the entire provision under Wisconsin law because the agreement did not reduce the

amount due over time. Id. at 693.

At the Seventh Circuit, the city conceded that Heder was entitled to keep “any

compensation that the FLSA specified as a statutory floor below which no contract may go.”

Heder, 295 F.3d at 779. Thus, he was entitled to “at least the statutory minimum wage for his final

two pay periods,” the paychecks for which the city had previously withheld as payment for the

training costs, and other liquidated damages. Id. at 778–79. However, the court also noted that

the City was entitled to collect any residual amount as an ordinary creditor, i.e. the City could

collect from any difference between the statutory minimum and the total of the paychecks. Id.

After addressing the proper way to determine the amount to which the plaintiff was entitled, the

court of appeals turned to the district court’s conclusion regarding the viability of the training costs

provision under Wisconsin law. The Seventh Circuit reversed the district court’s conclusion that

the training cost reimbursement provision amounted to a non-compete agreement, reasoning that

the “cost of training equates to the loan, repayment of which is forgiven after three years.” Id. at

782. The court therefore concluded that Heder could be required to pay for the “full costs of his

books and tuition” under state law. Id. However, the court reiterated that to the extent to which

the collection of those training costs reduced plaintiff’s overtime pay in his final two paychecks to

less than time and a half for all his overtime hours, the collection was invalid. Id.

Relying on Heder, the Ninth Circuit in Gordon concluded that the money that a police

officer paid to the defendant city pursuant to a training reimbursement agreement did not constitute

an illegal kickback under the FLSA. 627 F.3d at 1093, 1095–96. The court focused on Heder’s

comment that “[a]s long as the city paid departing firefighters at least the minimum wage, it could

collect the training costs as an ordinary creditor.” Id. at 1096 (citing 295 F.3d at 779). The Ninth

Circuit relied on this principle to conclude that because the City of Oakland had paid Gordon at

least the minimum wage for her final week of work, it was free to seek repayment of her “training

debt” as an ordinary creditor. Id.

The few district courts that have examined both Heder and Gordon have split in regard to

whether a tuition reimbursement provision such as the one at issue here is actionable as a matter

of law. In Ketner, the court concluded that Heder was inapposite as it had not actually held such

an agreement was acceptable under the FLSA and that Gordon’s reliance on Heder was therefore

misplaced. 143 F. Supp. 3d at 383. It further distinguished the two cases noting that the training

at issue in Ketner was employer specific, while Heder and Gordon both involved training that

provided portable skills. Id. at 383–84. The court also noted that the damage amount at issue

(~$36,000) was significantly more than that at issue in Gordon ($8,000) and Heder ($1,500) before

denying the defendant’s motion to dismiss. Id. The court noted that “factual development” would

“determine whether the costs of training for the LDP is a bona fide loan as asserted by [Defendant]

or a kick-back of salary.” Id. at 384.

By contrast, Park v. FDM Grp. (Holdings) PLC held that a “termination fee” which

required a payment if an individual left within a certain amount of time after the completion of her

training did not violate the FLSA. 2017 WL 946298, at *4 (S.D.N.Y. Mar. 9, 2017). Like the TCR

Provision at issue here, the contract in Park characterized the termination fee as liquidated

damages approximating the damages the defendant would suffer if the employee breached the

agreement prior to the end of the contracted period. Id. Additionally, the maximum fee of $30,000

corresponded to the maximum value of the training provided and the agreement included the

plaintiff’s specific “acknowledgement that the Company incurred significant costs in training the

employees and that the two-year term was contracted in consideration of such costs.” Id. Nor was

the fee “a deduction for tools used or costs incurred in the course of [p]lainitff’s performance of

her job as a consultant.” Id. Finally, the court noted that “[s]uch liquidated damages provisions

in employment agreements are not unusual, and even those that are explicitly tied to repayment of

the costs of a training program have been upheld as akin to loan repayment provisions.” Id. (citing

Gordon, 627 F.3d at 1096, Heder, 295 F.3d at 783). Thus, the court dismissed plaintiff’s claim.

Id. On Plaintiff’s motion for reconsideration, the Park court specifically rejected Plaintiff’s

arguments that the court should view Ketner as more persuasive than Gordon and denied her

request for leave to file an amended complaint. Park v. FDM Grp., Inc., 2018 WL 4100524, at *4

(S.D.N.Y. Aug. 28, 2018).

This Court elects to follow Park, Gordon, and especially Heder, which constitutes

controlling authority in this Circuit. As in Park, Plaintiffs explicitly agreed that the reimbursable

amount “bears a reasonable relationship to the computed damages Edward Jones would suffer

from a breach by you and that Edward Jones will suffer demonstrable loss as result of your breach.”

[39-2, ¶ 21.] Although the Court is somewhat skeptical that the actual costs of training totaled

$75,000—especially considering that the contract explicitly notes that the $75,000 includes “the

cost of selection and hiring”—the Court cannot infer from the contract that Defendants seek

reimbursement for the tools of the trade or costs incurred in the performance of Plaintiffs’ jobs.

[Id.] Nor is this case like Heder, in which the city withheld paychecks from the plaintiff and where

the liquidated damages provision expressly attempted to claw back the compensation paid to the

plaintiff.

Rather, like the tuition reimbursement provision of Heder, instead of requiring employees

to pay for all the necessary training out of their own pocket, Defendants made an investment in

their employees, but required the employees to repay at least part of that investment if they left

before the company felt it had recouped fair value for its investment—which the company

determined to take place over time at the rate of a 1/8 reduction in Plaintiffs’ obligation every

quarter they remained employed after the first year. [39-2, ¶ 21.] Moreover, unlike the purported

training in Ketner, the training here did result in Plaintiffs’ receiving portable credentials—namely,

Series 7 and 66 licenses. [35, ¶¶ 18, 38, 46, 55.]

At bottom, the contract and the parties’ performance pursuant to it resulted in Plaintiffs’

accrual of a debt that Defendants are entitled to collect. See Heder, 295 F.3d at 782. Plaintiffs

have not cited, nor has this Court located, any case that suggests employers may not act to collect

a debt incurred for an employee’s benefit at the termination of their employment on the basis that

such a collection is a kickback that would reduce Plaintiffs’ wages below the statutory minimum.

In fact, courts have held just to the contrary. See, e.g., Vazquez v. Tri-State Mgmt. Co., 2002 WL

58718, at *5 (N.D. Ill. Jan. 14, 2002) (counterclaim against employee to recover on loan used to

purchase a vehicle for the employee’s use, at the employee’s request, was not an impermissible

set-off under § 531.35). Moreover, Defendants never reduced Plaintiffs wages below the

minimum wage while they were employed, so all the case law stating an employer may not do so

is inapposite. See, e.g., Calderon v. Witvoet, 999 F.2d 1101, 1107 (7th Cir. 1993) (noting

employers “may not reduce the wage below the statutory minimum to collect a debt to the

employer”).

All the arguments that Plaintiffs raise against the TCR Provision—that $75,000 does not

bear a rational resemblance to the costs Defendants actually incurred in their training, that

Defendants used the threat of the TCR Provision to force Plaintiffs to work extra allegedly

uncompensated time, etc., see, e.g. [35, ¶¶ 24, 26]—are either potential defenses to the

enforcement of the contract that Plaintiffs could raise if and when Defendants attempt to enforce

the provision or possible reasons to invalidate the contract as a matter of state law. They are not

reasons to find that the TRC Provision violates the FLSA. The TCR Provision does not violate

the FLSA because it is not a kickback, but rather constitutes to a loan that Plaintiffs’ accrued when

they achieved “can sell” status. Consequently, any payment under the TCR Provision is not a

kickback that would reduce the Plaintiffs’ wages to below the statutory minimum wage.

Because Plaintiffs do not have standing to challenge the TCR Provision, and in any event

fail to state a claim, the Court grants Defendants’ motion as to Plaintiffs’ claims in Count I

regarding the TCR Provision. However, because the Court concludes that Plaintiffs lack standing

based on the complaint as pled, the dismissal is without prejudice and with leave to replead.

2. Failure to Pay Minimum Wage & Overtime Prior to Achieving “Can sell”

status

Plaintiffs also assert that they and all those similarly situated worked well in excess of 45–

60 hours per week in the non-exempt positions and were not paid the minimum wage or overtime

for those hours.12 [35, ¶¶ 79–80.] Defendants respond that Plaintiffs allegations are too

impermissibly vague and conclusory to state a claim.

a. Plaintiffs fail to state a minimum wage claim

“Courts generally construe FLSA * * * wage claims to apply to the work-week unit.”

Hughes v. Scarlett’s G.P., Inc., 2016 WL 4179153, at *2 (N.D. Ill. Aug. 8, 2016). Therefore, to

determine whether an employer has violated the minimum wage provision of the FLSA:

[C]ourts uniformly calculate the hourly wage over the course of a workweek—i.e.,

dividing the total compensation an employee received in a workweek by the

compensable hours worked. Although the Seventh Circuit has not expressly

addressed this issue, every circuit court that has considered the issue has utilized

the workweek averaging approach to determine whether a FLSA violation

occurred.

Hirst v. Skywest, Inc., 2016 WL 2986978, at *5 (N.D. Ill. May 24, 2016) (collecting cases and

regulations). “To state a FLSA claim under the workweek averaging approach, then, the plaintiffs

must plausibly allege at least one workweek for which the compensation they received, divided by

their total compensable time, failed to meet the FLSA minimum [hourly] wage.” Hughes, 2016

WL 4179153, at *2 (quoting Hirst, 2016 WL 2986978 at *6). In both Hirst and Hughes, the

plaintiffs failed to meet this standard because they did not include in their complaint any

12 In view of Plaintiffs’ allegations that they worked more than the amount of hours set out by the training schedule

set by Defendants and thus were not paid sufficient wages or overtime [see, e.g., 35, ¶¶ 22], the Court infers that

Plaintiffs contend that the number of hours they worked, divided by their wages for that week, resulted in a per-hour

pay of less than the minimum wage. Consequently, the Court has evaluated Plaintiffs’ claim under the “workweek

averaging approach.”

allegations concerning their “hourly wages or any examples of the total compensation they

received for any workweek” or concerning “the number of hours worked in any given week.”

Hughes, 2016 WL 4179153, at *2–3 (citing Hirst, 2016 WL 2986978, at *6).

As in Hirst and Hughes, Plaintiffs have not provided a single allegation regarding what the

Plaintiffs’ effective hourly wages were during the relevant period, nor have they introduced any

examples of the total compensation they received during any given workweek. Instead, they

simply allege that they worked more than the hours that the training schedule called for, and that

Defendants failed “to pay non-exempt FA Trainees wages and overtime for work they

perforem[ed].” [35, ¶ 22.] The mere allegation that an individual did not receive compensation

for all the hours that they worked is insufficient to state a FLSA violation. See Hirst, 2016

WL2986978 at *6. If Plaintiffs truly contend that Defendants failed to pay them the minimum

wage, they need to allege facts to support a plausible claim that their effective hourly wages fell

below the statutory minimum wage for at least one period. See, e.g., Labriola v. Clinton Entm’t

Mgmt., LLC, 2016 WL 1106862, at *4 (N.D. Ill. Mar. 22, 2016) (“The complaint must allege, at a

minimum, the hours worked for which plaintiff seeks unpaid minimum wages, and what wages, if

any, were paid. The complaint passes this threshold for both Plaintiffs by including specific factual

details, such as the approximate dates Plaintiffs worked at Pink Monkey and the number of hours

they worked each week for which they received no wages.”).

b. Plaintiffs fail to state an overtime claim

Similarly, to state a claim under the FLSA for failure to pay overtime, courts in this district

generally require a plaintiff to plead some details beyond a bare allegation that he or she worked

more than 40 hours without premium pay. See Trujillo v. Mediterranean Kitchens, Inc., 2017 WL

2958240, at *1 (N.D. Ill. July 11, 2017); Hughes, 2016 WL 4179153, at *2 (collecting cases). The

question is just how many more details are needed to make a claim plausible. While a plaintiff

need not “plead infinitesimal details to render [FLSA] claims plausible or provide defendants fair

notice of the claims against them,” Brown v. Club Assist Rd. Serv. U.S., Inc., 2013 WL 5304100,

at *6 (N.D. Ill. Sept. 19, 2013), he or she must still “provid[e] some specific facts to ground those

legal claims.” Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009).

Thus, this Court, other courts in this district, and several courts of appeals have instructed

that to state a claim for failure to pay overtime, “‘a plaintiff must sufficiently allege forty hours of

work in a given workweek as well as some uncompensated time in excess of forty hours.’” Parks

v. Speedy Title & Appraisal Review Servs., 318 F. Supp. 3d 1053, 1069 (N.D. Ill. 2018) (quoting

Silver v. Townstone Fin., Inc., 2015 WL 1259507, at *2 (N.D. Ill. Mar. 17, 2015); see also Trujillo,

2017 WL 2958240, at *1; Hughes, 2016 WL 4179153, at *3; DeJesus v. HF Management Services,

726 F.3d 85, 89 (2d Cir. 2013) (allegations that plaintiff worked over forty hours in “some or all

weeks” insufficient because at least one given week must be alleged); Pruell v. Caritas Christi, 678

F.3d 10, 12 (1st Cir. 2012) (allegation that plaintiffs “regularly worked” more than 40 hours a

week insufficient).

Plaintiffs allegations do put Defendants on notice of the time periods during which

Defendants failed to properly compensate them. Although Plaintiffs do not state the exact time

periods at issue, it would be easy to determine the exact eight weeks that each of the Plaintiffs

spent in the “study stage” and the nine weeks each participated in the “door-knocking” stage of

their training with Defendants. However, Plaintiffs specifically allege that “Edward Jones neither

tracks nor compensates FA Trainees13 for the hours they actually work.” [35, ¶ 20.] Rather,

13 As mentioned earlier, see supra n.2, it is difficult to know who exactly Plaintiffs are referring to in this allegation,

given they define FA Trainee as anyone within three years of their “can sell” date to whom the TCR Provision applies,

including those who have achieved “can sell” status and are therefore classified as exempt.

Defendants apparently provide a study schedule which assumes that trainees will work 45 hours a

week during the “self-study period” and 60 hours a week during the “door knock” stage. [35, ¶

21.] Defendants then allegedly “manipulate[ ] the ‘hourly rate’ for each stage [—by substantially

reducing the hourly rate from one stage to the next—] so the FA Trainee’s gross pay does not vary

from one stage of the Study Calendar to the next, despite the assumed increase in overtime during

the “door knock” stage.” [Id. ¶ 21.] Notably, Plaintiffs do not explain or assert why this

“manipulation” violates the FLSA. Instead, they allege that “[under] its policy and practice,

Edward Jones knowingly discourages non-exempt FA Trainees from accurately reporting all of

the hours they work and fails to pay non-exempt FA Trainees wages and overtime for the work

they perform.” [Id. ¶ 22.] They further allege that “FA trainees often put in long days of study,

including weekends, that easily exceed 45 hours per week.” [Id. ¶ 18.] Plaintiffs thus allege that

they worked more than the 45 and 60 hours, respectively, that the study schedule called for and as

a result were not adequately compensated. See [id. ¶¶ 38, 46, 55, 64].

While this approaches the detail required to place Defendants on notice of a plausible

claim, it is not quite sufficient to state a claim. Compare Brown, 2013 WL 5304100, at *6

(plaintiffs adequately pled an overtime claim where they asserted that “since July 2009, they have

worked an average of 85 hours per week but have not been properly compensated for that time.”),

and Hancox v. Ulta Salon, Cosmetics & Fragrance, Inc., 2018 WL 3496086, at *3 (N.D. Ill. July

20, 2018) (finding that plaintiff adequately stated a claim for overtime pay where she alleged that

for a two-year period “she worked more than 40 hours in a workweek during 30 to 35 pay periods”

and “was never paid proper overtime wages”), with Parks, 318 F.Supp.3d 1053, at 1069 (“Here,

Plaintiff generally alleges that she worked overtime without sufficient pay. * * * She also states

her dates of employment and her approximate salary during that timeframe. * * * However,

Plaintiff does not allege how many hours she worked in a week (and whether or not this was over

forty hours) or how many overtime hours she worked without being paid the proper salary.

Without such allegations, Defendants are not on notice of the factual basis for her FLSA claim.”)

(internal citations omitted), and Hughes, 2016 WL 454348, at *5 (holding insufficient plaintiffs’

claim that “‘[a]t such times as Plaintiffs worked more than forty hours in a week, they were not

paid time and a half.’”), and Pruell, 678 F.3d at 13 (allegation that “[t]hroughout their employment

with defendants, Plaintiffs regularly worked hours over 40 in a week and were not compensated

for such time, including the applicable premium pay” was insufficient to state a claim), and

Dejesus, 726 F.3d at 89 (allegation that “in ‘some or all weeks’ [plaintiff] worked more than “forty

hours” a week without being paid ‘1.5’ times her rate of compensation” insufficient to state a

claim). Plaintiffs allegations are hard to distinguish from those dismissed in Parks, Hughes,

Pruell, or Dejesus.

Brown or Hancox do not support a different conclusion. In Brown, the contracts at issue

called for individuals to be on call for “17.5 hour shifts, seven days a week,” and each of the

individuals asserted that they “typically work or worked at least 85 hours a week” and that they

were never paid any overtime. 2013 WL 5304100, at 3. Likewise, in Hancox, Judge Tharp noted

that the plaintiff’s allegations were nearly insufficient given her generalized allegations. 2018 WL

3496086, at *3. To support her claim plaintiff had just alleged that “she worked more than 40

hours in a workweek during 30 to 35 pay periods;” nonetheless, her claim survived because she

also alleged: (1) she was paid time and half her minimum guaranteed rate, rather than time and a

half her regular rate as required by the FLSA; (2) the defendant withheld her commission wages

when she worked more that 40 hours; and (3) she alleged the specific practices that caused her to

work during unpaid meal breaks. Id.

By contrast, Plaintiffs simply allege that “[u]nder its policy and practice, Edward Jones

knowingly discourages non-exempt FA Trainees from accurately reporting all of the hours they

work” [35, ¶ 22], and that Plaintiffs accordingly did so [id. ¶¶ 38, 46, 55, 64]. However, Plaintiffs

do not allege any facts detailing what, if any, specific pressure or policies led Plaintiffs to

underreport their time,14 nor do they provide even one example of a week in which they worked

more than 45 hours and/or were not paid sufficient overtime. Defendants’ compensation scheme

may be condemnable, or manipulative, but based on the facts before it, the Court cannot conclude

that Plaintiffs have plausibly alleged a violation of the FLSA’s overtime requirements. Plaintiffs

need to provide more details about what they were or were not paid, and at least one example of a

pay period in which their pay was insufficient given the number of hours they worked.

3. Misclassification of “Can sell” Status

Plaintiffs also allege that they are entitled to overtime after they achieved “can sell” status

and began working as financial advisors because Defendants’ misclassified them as non-exempt.

Defendants argue that Plaintiffs were not misclassified, and that in any event, Plaintiffs have not

adequately alleged that they worked overtime during the relevant period.

As explained above, the FLSA generally requires employers to pay employees overtime

for any hours worked over forty hours in a given week. 29 U.S.C. § 207(a). That requirement

does not apply, however to employees working in “a bona fide executive, administrative, or

professional capacity.” 29 U.S.C. § 213(a)(1). Here, the parties dispute whether Plaintiffs and

those similarly situated qualify for the “administrative exemption.” The administrative exemption

exempts employees

14 The generalized allegation that Plaintiffs worked excessive hours out of fear that they would be fired and therefore

subject to the TCR Provision, can only support Plaintiff’s claims after they achieved “can sell” status and therefore

exempt from overtime requirements, given the requirements of the TCR Provision do not attach until one achieves

“can sell” status.

(1) [who are] [c]ompensated on a salary or fee basis at a rate not less than $455 per

week * * * exclusive of board, lodging or other facilities;

(2) [w]hose 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) [w]hose 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). Plaintiffs allege that Defendants misclassified them as exempt

because the position they received once they achieved “can sell” status failed to meet either the

“salary basis test” or “the job duties test” and that they are therefore owed overtime wages.

Generally, affirmative defenses—such as an employee’s classification as exempt in the

FLSA context—do not justify dismissal under Rule 12(b)(b). See Doe v. GTE Corp., 347 F.3d

655, 657 (7th Cir. 2003). However, this rule does not apply when a party has included in its

complaint “facts that establish an impenetrable defense to its claims.” Tamayo v. Blagojevich, 526

F.3d 1074, 1086 (7th Cir. 2008). “If the plaintiff voluntarily provides unnecessary facts in her

complaint, the defendant may use those facts to demonstrate that she is not entitled to relief.” Id.;

see also Hecker v. Deere & Co., 556 F.3d 575, 588 (7th Cir. 2009) (affirming dismissal of claims

because complaint “so thoroughly anticipated” an affirmative defense that dismissal was

appropriate). In this case, Plaintiffs have put Defendants’ exemption defense “in play” by

necessity. Hecker, 556 F.3d at 588. In addition to their claims for overtime during their non-

exempt employment addressed above, Plaintiffs assert Defendants should have continued to pay

them overtime once they achieved “can sell” status because they were misclassified as “exempt”

under both the “salary basis” and “job duties” tests.

a. Plaintiffs’ fail to allege that they worked overtime

Before examining either of those claims, however, the Court must determine whether

Plaintiffs’ have adequately alleged that they worked overtime once they were classified as exempt

given that for the affirmative defense to apply there must have been an underlying offense. See,

e.g., Ottaviano v. Home Depot, Inc., USA, 701 F.Supp.2d 1005, 1007–08 (N.D. Ill. 2010)

(proceeding to determine whether the plaintiffs were properly classified as exempt after noting the

plaintiffs’ allegation that defendant “terminates ASMs who regularly work less than the fifty-five

hours for which they are scheduled”).

Under the standard elaborated above in Section III(A)(2), Plaintiffs have not alleged an

overtime claim for the time that they worked after attaining “can sell” status. Plaintiffs simply

allege (1) that they “routinely worked in excess of 40 hours per week after their ‘can-sell’ date,

without receiving proper overtime pay” and (2) that each Plaintiff “[a]fter achieving ‘can-sell’

status, * * * continued to work long hours, well in excess of 40 hours per week * * *.” [35, ¶¶ 24,

38, 46, 55, 64.] As the Court previously explained, without more, such formulaic and conclusory

allegations are simply not enough to state a claim for overtime. Moreover, even if Plaintiffs had

properly alleged an overtime violation after Plaintiffs achieved “can sell” status, they have not yet

alleged facts to show that they were misclassified as exempt.

b. Plaintiffs’ allegations do not show they fail the salary basis test

Plaintiffs allege that they were not paid a guaranteed, predetermined salary within the

meaning of the regulations above because (1) Defendants “paid Plaintiffs and those similarly

situated wages on the condition that Plaintiffs and those similarly situated pay ‘training costs’ up

to $75,000 under certain circumstances” and (2) Plaintiffs’ “wages were subject to reduction

because of alleged variations in the quality or quantity of work performed.” [35, ¶¶ 84–85.]

First, as explained above, the TCR Provision has no effect vis-à-vis the FLSA’s wage and

hours requirements. It is not a kickback of Plaintiffs’ salaries, but a contractual debt owed by

Plaintiffs. Thus, Plaintiffs cannot show that they fail the salary basis test by claiming their

employment was subject to the TCR Provision.

Plaintiffs’ citation to Ketner and the Department of Labor Opinion Letters that it addressed

are unavailing. First, the Court has already explained why it disagrees with Ketner’s conclusion

that the TCR Provision constitutes a kickback with implications under the FLSA. See Section

III(A)(1) supra. Additionally, the Department of Labor Opinion Letters on which Ketner relied

and that the additional letters cited by Plaintiffs also are unpersuasive. Each of the letters involved

either a purposed deduction from an employee’s paycheck to recover a previous payment that the

DOL concluded did not constitute a loan or other inapposite situation. See U.S. Dep’t of Labor,

Wage & Hour Div., Opinion Letter (Nov. 27, 2006), 2006 WL 3832994, at *7 n.5 (“What matters

is that the employee receives no less than the weekly-required amount as a guaranteed salary

constituting all or part of total compensation, which amount is not subject to reduction due to the

quality or quantity of the work performed, and that the employee is never required to repay any

portion of that salary even if the employee fails to earn sufficient commissions or fees”); U.S.

Dep’t of Labor, Wage & Hour Div., Opinion Letter (Mar. 10, 2006), 2006 WL 940663, at *1–2

(“deductions from the salaries of otherwise exempt employees for the loss, damage, or destruction

of the employer’s funds or property due to the employees’ failure to properly carry out their

managerial duties * * * would defeat the exemption * * *”); U.S. Dep’t of Labor, Wage & Hour

Div., Opinion Letter (Feb. 20, 2001), 2001 WL 1558760, at *1–2 (concluding that the two

programs at issue were both incentive programs, and not bona fide loans or cash advances, which

precluded the company from deducting amounts related to those programs from the pharmacists’

last paychecks).

As explained above, nothing in Ketner or the DOL letters examined above convinces the

Court that it should treat the TCR Provision as a kickback of the Plaintiffs’ salaries designed to

punish them if they failed to perform to a certain level. Rather, it is an education loan which only

requires repayment if an individual attempts to use that education for the benefit of a competitor.

As explained above, an employer may enforce such a provision without falling afoul of the FLSA.

Plaintiffs therefore cannot ground their salary basis challenge on the TCR Provision.

Plaintiffs’ second allegation likewise fails to plausibly allege that their compensation did

not meet the salary basis test. While Plaintiffs reference a compensation plan in their complaint

and allege that their compensation was contingent on performance and decreased within a few

months of achieving “can sell” status during the transition to commission pay [35, ¶¶ 20, 23], that

compensation plan—which Defendants attached to their motion—provides that Plaintiffs’

compensation shall never fall below $455 a week. [39-3, at 3 (explaining that Plaintiffs are

guaranteed at least $23,660 annually, or $455 a week).] The Court may properly consider such an

exhibit attached to a motion to dismiss, Adams v. City of Indianapolis, 742 F.3d 720, 729 (7th Cir.

2014), and where those exhibits contradict the complaint allegations, “the exhibits trump the

allegations.” Abcarian v. McDonald, 617 F.3d 931, 933 (7th Cir. 2010). Consequently, the Court

cannot conclude that the compensation plan set in place for Plaintiffs failed to meet the salary basis

test.15

c. Plaintiffs’ allegations do not show they fail the job duties test

Plaintiffs allege that they do not meet the job duties test because their primary duties “did

not include the exercise of discretion and independent judgment with respect to matters of

15 In fact, the DOL held an almost identical compensation system for similarly situated individuals valid under the

FLSA in one of the DOL opinion letters cited by Plaintiff. See U.S. Dep’t of Labor, Wage & Hour Div., Opinion

Letter (Nov. 27, 2006), 2006 WL 940663.

significance.” [35, ¶ 85.] Rather, they were encouraged “to sell [ ] financial products without

regard to the clients’ individual needs, financial circumstances, or investment objectives.” [Id.]

Specifically, they were instructed to sell financial products, mostly Defendants’ proprietary

products and those pre-picked and designated as “preferred product partners,” which generated

additional fees for Defendants. See [id. ¶¶ 2–3]. Nor did Defendants place “Plaintiffs * * * in job

positions whose primary duty was to perform work directly related to the management or general

business operations of Edward Jones or its clients * * *.” [Id. ¶ 86.] Plaintiffs assert that these

allegations are enough to show that they did not perform such duties that would qualify them to be

classified as exempt.

First, as the cases cited by Defendants show, determining whether an individual’s actual

job duties meet the requirements of the administrative exemption is a factually intense process.

See, e.g., In re Morgan Stanley Smith Barney LLC Wage & Hour Litig., 2017 WL 772904, at *7–

8 (D.N.J. Feb. 28, 2017) (examining the exact details of the plaintiffs’ responsibilities on a motion

for summary judgment); Tsyn v. Wells Fargo Advisors, LLC, 2016 WL 612926, at *4–17 (N.D.

Cal. Feb. 16, 2016) (same); Hein v. PNC Fin. Services. Grp., Inc., 511 F. Supp. 2d 563, 566, 570–

75 (E.D. Pa. 2007) (same). Likewise, the exemption status of an employee is an affirmative

defense that employers bear the burden of proving. A.H. Phillips, Inc. v. Walling, 324 U.S. 490,

493 (1945); Jackson v. Go-Tane Servs., Inc., 56 F. App'x 267, 270 (7th Cir. 2003). However, as

explained above, Plaintiffs themselves have placed their classification at issue and alleged facts to

support their claim that they were misclassified.

Both cases cited by Plaintiffs for the proposition that their allegations are sufficient to

plausibly state a misclassification claim contained more factual allegations than are present here.

In Lloyd v. J.P. Morgan Chase, the plaintiffs put forward a declaration that detailed their typical

day to day duties. 2013 WL 4828588, at *1–2. The Lloyd plaintiffs even included allegations

about the physical spaces in which worked, i.e. the defendant bank’s physical branches. Id. at *1.

Likewise, in Blum, the plaintiffs alleged that they were engaged primarily in “lead generation

activities: identifying protentional clients, calling protentional clients, and conducting

appointments with potential clients to encourage them to do business * * *.” Blum v. Merrill Lynch

& Co., No. 15-cv-1636, ECF. No. 1, ¶ 67 (S.D.N.Y. March 5, 2015). They also alleged that they

“regularly” attended “client prospecting functions” and “client prospecting events.” Id. at ¶¶ 26,

29, 39, 75. Although the Court did not provide a written disposition of the motion to dismiss, at

oral argument the Court explained that “the allegations that [Plaintiffs] * * * make are sufficient

allegations to, at most, [sic] for the defense to raise a factual dispute that cannot be resolved on the

motion” and denied the motion in a separate order. See Blum, ECF No. 86, 85:19–23; Blum, ECF

No. 84.

Here, Plaintiffs have not provided details about the type of environment in which they

worked, what they did on a day to day basis, or any other details that would allow the Court to

plausibly infer that they were not exempt. To the extent that Plaintiffs argue that their allegations

explaining that their role was simply to sell financial products, the Court finds persuasive both the

DOL opinion letters and opinions holding sales activities by licensed financial advisors are exempt

because such sales inherently involve their professional judgment given FINRA’s requirements.

See, e.g., Hein, 511 F. Supp. 2d at 570 (noting the DOL “has sought to exempt from the FLSA

investment advisors in the financial services industry—including those engaged in ‘sales’—

provided their sales activities are a function of their professional judgment respecting their clients’

best interests”). Plaintiffs’ allegations that they sold “financial products without regard to the

clients’ individual needs, financial circumstances, or investment objectives” do not change the

Court’s conclusion. The Court cannot infer that Plaintiffs are not exempt because they allegedly

regularly violated their professional duties under FINRA,16 without Plaintiffs’ explicit allegation

acknowledging that selling products in the manner that they allegedly did, or were required to,17

violated FINRA regulations. Plaintiffs need to provide additional information to show that that

they did not or could not exercise independent judgment or that their work was not directly related

to the general business operations of the employer. But see, Hein, 511 F. Supp. 2d at 571 (“The

[DOL] explicitly lists finance as an example of work directly related to management or general

business operations”).

Because the Court concludes Plaintiffs have not adequately pled that they worked overtime

once being deemed “exempt” or enough facts to plausibly establish that they were exempt, the

Court grants Defendants motion as to Plaintiffs’ misclassification claim in Count I, again without

prejudice.

4. Recordkeeping

Finally, although Plaintiffs appear to concede in their briefing that there is no private right

of action under the FLSA for violations of the that statute’s recordkeeping requirements [59-1, at

27], it is well established that Plaintiffs cannot maintain a suit for recordkeeping violations under

the FLSA. See Farmer v. DirectSat USA, LLC, 2010 WL 3927640, at *12 (N.D. Ill. Oct. 4, 2010)

16 See, e.g., FINRA Rule 2111(a) (requiring members or associated persons to “have a reasonable basis to believe

that a recommended transaction or investment strategy involving a security or securities is suitable for the customer,

based on the information obtained through the reasonable diligence of the member or associated person to ascertain

the customer's investment profile.”).

17 And if Defendants truly did require Plaintiffs to sell products in such a manner, the Court hopes that Plaintiffs

would report such blatant violations of FINRA’s regulations to FINRA.

(collecting cases). The Court therefore grants Defendants’ motion as to the recordkeeping claims

within Count I with prejudice.18

5. Plaintiff Bowles

While the Court will allow Plaintiffs to file an amended complaint, it must dismiss Plaintiff

Bowles with prejudice as to his overtime and misclassification claims in Count I. While the Court

generally refrains from dismissing claims on the basis of an affirmative defense, such as the statute

of limitations, Doe, 347 F.3d at 657, the allegations laid out above establish that Bowles

employment terminated more than three years before the Plaintiffs filed their complaint in this

case. See McLaughlin v. Richland Shoe Co., 486 U.S. 128, 135, (1988) (explaining that the

absolute maximum for the statute of limitations for willful violations of the FLSA is three years).

Bowles’s argument that he did not know of his harm until he received the notice seeking payment

under the TRC Provision, and that the statute of limitations should therefore be tolled is inapposite

given that argument only applies to Plaintiffs’ claims under the TCR Provision. Thus, the Court

grants Defendants’ motion to dismiss Bowles from Count I with prejudice as to any claims that do

not pertain to the TCR Provision.

B. The State Claims – Counts II–VI

Having granted Defendants’ motion to dismiss the one federal claim over which it has

original jurisdiction, the Court addresses whether to retain jurisdiction over the remaining state

law claims, Counts II–VI. 28 U.S.C. § 1367(c)(3). The Seventh Circuit has consistently stated

that “it is the well-established law of this circuit that the usual practice is to dismiss without

prejudice state supplemental claims whenever all federal claims have been dismissed prior to trial.”

Groce v. Eli Lilly & Co., 193 F.3d 496, 501 (7th Cir. 1999); Alonzi v. Budget Constr. Co., 55 F.3d

18 To the extent that the factual allegations undergirding the recordkeeping claim is relevant to other claims, the Court

considered them in the resolution of the motion.

331, 334 (7th Cir. 1995); Brazinski vy. Amoco Petroleum Additives Co., 6 F.3d 1176, 1182 (7th Cir.

1993). Finding no justification for departing from that “usual practice”!? in this case, Plaintiff's

state law claims are dismissed without prejudice. See /n re Repository Techs., Inc., 601 F.3d 710,

724-25 (7th Cir. 2010); Leister v. Dovetail, Inc., 546 F.3d 875, 882 (7th Cir. 2008) (“When the

federal claim in a case drops out before trial, the presumption is that the district judge will

relinquish jurisdiction over any supplemental claim to the state courts.”).’° However, Plaintiffs

may continue to include their state law claims in any amended complaint that they may file.

IV. Conclusion

For the reasons explained above, the Court grants Defendants’ motion to dismiss [38].

Plaintiff Bowles’s claims in Count I are dismissed with prejudice, except as to any claims that

relate to the TCR Provision, which are dismissed without prejudice. Plaintiffs’ recordkeeping

claim in Count I is also dismissed with prejudice. The remainder of Count I and Counts II-VI are

dismissed without prejudice. Plaintiffs are given until April 15, 2019 to file an amended complaint

consistent with this opinion. The case is set for further status on April 23, 2019, at 9:00 a.m.

Dated: March 19, 2019 ; 7

Robert M. Dow, Jr.

United States District Judge

9 Tn Wright v. Associated Ins. Cos., 29 F.3d 1244, 1251-53 (7th Cir. 1994), the Seventh Circuit noted that occasionally

there are “unusual cases in which the balance of factors to be considered under the pendent jurisdiction doctrine—

judicial economy, convenience, fairness, and comity—will point to a federal decision of the state-law claims on the

merits.” The first example that the Court discussed occurs “when the statute of limitations has run on the pendent

claim, precluding the filing of a separate suit in state court.” Jd. at 1251. Because the Court is granting Plaintiffs

leave to file an amended complaint, the Court defers any decision to exercise its pendent jurisdiction until the risk of

foreclosing an action due to an elapsed statute of limitations has manifested.

20 Notwithstanding the dismissal without prejudice, Plaintiffs should seriously consider the possible effects of this

Court’s decision in Section III(A)(1) regarding the TCR Provision on certain of their state claims.

32