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Beauford v. ActionLink, LLC

United States Court of Appeals, Eighth Circuit

March 20, 2015

Jennifer Beauford, Individually and on behalf of others similarly situated; Steve Cox, Individually and on behalf of others similarly situated; Elaina Grauer, Individually and on behalf of others similarly situated; Richard S. Levis, Individually and on behalf of others similarly situated; Richard Neidert, Individually and on behalf of others similarly situated; Jill Pate, Individually and on behalf of others similarly situated; Cheryl Songster, Individually and on behalf of others similarly situated, Plaintiffs
v.
ActionLink, LLC, Defendant - Appellee, Karl Adams, III; Donny Banerjee; Michael Breeding; David Caffey; Stephanie Davis; Samvel Davtyam; John Demian; Jason Dorazio; Coley Faulk; Michael Fayfer; Frances Francisco; Kasey Gray; John Karalis; Jason Kelly; John McLouglin, Jr.; Greg Morrison; Terrance Nowak; Ryan Okimoto; Janette Reynolds; Ricardo Rubalcava; Carolee Sabala; Rene Sandoval, Jr.; Jeff Saylors; Gregory Sutton; William Wagoner, Claimants - Appellants; Jennifer Beauford, Individually and on behalf of others similarly situated; Steve Cox, Individually and on behalf of others similarly situated; Elaina Grauer, Individually and on behalf of others similarly situated; Richard S. Levis, Individually and on behalf of others similarly situated; Richard Neidert, Individually and on behalf of others similarly situated; Jill Pate, Individually and on behalf of others similarly situated; Cheryl Songster, Individually and on behalf of others similarly situated, Plaintiffs - Appellees
v.
ActionLink, LLC, Defendant - Appellant

Submitted: September 10, 2014.

Page 397

Appeal from United States District Court for the Eastern District of Arkansas - Little Rock.

For ActionLink, LLC, Defendant - Appellee (13-3265): Corena Gamble Larimer, Tucker & Ellis, San Francisco, CA.

For Karl Adams, III, Donny Banerjee, Michael Breeding, David Caffey, Stephanie Davis, Samvel Davtyam, John Demian, Jason Dorazio, Coley Faulk, Michael Fayfer, Frances Francisco, Kasey Gray, John Karalis, Jason Kelly, John McLouglin, Jr., Greg Morrison, Terrance Nowak, Ryan Okimoto, Janette Reynolds, Ricardo Rubalcava, Carolee Sabala, Rene Sandoval, Jr., Jeff Saylors, Gregory Sutton, William Wagoner, Claimants - Appellants (13-3265): John T. Holleman, Maryna O. Jackson, Timothy A. Steadman, Holleman & Associates, P.A., Little Rock, AR.

For Jennifer Beauford, Individually and on behalf of others similarly situated, Steve Cox, Individually and on behalf of others similarly situated, Elaina Grauer, Individually and on behalf of others similarly situated, Richard S. Levis, Individually and on behalf of others similarly situated, Richard Neidert, Individually and on behalf of others similarly situated, Jill Pate, Individually and on behalf of others similarly situated, Cheryl Songster, Individually and on behalf of others similarly situated, Plaintiffs - Appellees (13-3380): John T. Holleman, Maryna O. Jackson, Timothy A. Steadman, Holleman & Associates, P.A., Little Rock, AR.

For ActionLink, LLC, Defendant - Appellant (13-3380): Corena Gamble Larimer, Tucker & Ellis, San Francisco, CA.

Before MELLOY, BENTON, and SHEPHERD, Circuit Judges.

OPINION

Page 398

MELLOY, Circuit Judge.

In September 2011, the Department of Labor (DOL) began investigating a complaint that ActionLink, LLC, a marketing company, had misclassified some of its employees

Page 399

as exempt under the Fair Labor Standards Act (FLSA) and failed to pay overtime compensation. During the subsequent DOL investigation, ActionLink agreed to reclassify the employees as non-exempt and to pay them their missing back wages. It sent the employees checks with a disclaimer stating that the checks represented " full payment from Actinlink [sic] or [sic] wages earned, including minimum wage and overtime, up to the date of the check." A number of employees cashed the checks; others did not.

Some of the employees then sued ActionLink, claiming that they were entitled to additional pay under the FLSA. The employees moved for partial summary judgment, asking the court to confirm their non-exempt status. ActionLink also moved for summary judgment, denying that it had misclassified the employees and requesting that the district court declare the employees exempt. The district court granted the employees' motion and declared them non-exempt. ActionLink then moved for summary judgment against all of the employee--plaintiffs who had cashed the back-wages checks. It asserted that these plaintiffs had waived their rights for additional remuneration under 29 United States Code section 216(b). The district court granted ActionLink's motion and dismissed the cases.

The employees appeal, claiming they are not barred from pursuing additional claims against ActionLink because ActionLink did not notify them of the consequences of cashing the settlement checks and because the DOL did not supervise the purported settlement. ActionLink cross-appeals. It contends that the district court erred by declaring the employees non-exempt. We agree with the district court that the employees are non-exempt under the FLSA, so we affirm in part. But we reverse in part and remand because we conclude the release language on the checks was insufficient to notify employees of the consequences of cashing the checks. The employees therefore did not waive their FLSA claims by cashing the checks.

I.

ActionLink provides marketing services for electronics and appliance manufacturers. LG Electronics, LLC, contracted with ActionLink in late 2010 to embark on a marketing campaign promoting LG products. ActionLink hired " brand advocates" to visit retail stores, to train the retail stores' employees on how LG electronics worked, and to convince those employees to recommend LG products to customers. ActionLink preferred to hire brand advocates with prior sales and marketing experience, but it did not require this prior experience. Brand advocates occupied the bottom of ActionLink's organizational chart.

ActionLink typically trained brand advocates for five days. It assigned every brand advocate approximately twenty stores to cover each week. ActionLink provided brand advocates with scripts, PowerPoint presentations, and other promotional materials to use when they visited stores. In addition to teaching store employees about LG products, the brand advocates maintained in-store LG displays, cleaned and repaired LG products, and spoke with customers who had questions about the products. The brand advocates' goal was to boost sales of LG products. ActionLink provided each brand advocate a small monthly budget to use for promotional activities. Despite their other tasks, brand advocates did not sell directly to customers or to retail stores. ActionLink prohibited brand advocates from negotiating prices, making marketing decisions, and deciding what inventory should be ordered. Brand advocates maintained

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a close relationship with their supervisors. They frequently spoke with supervisors during conference calls and through emails. And at the end of each store visit, ActionLink required brand advocates to complete a six-page call report informing ActionLink exactly what the brand advocates did during their visits.

ActionLink initially classified these employees as " outside salesmen," exempting them from the FLSA's overtime requirements. ActionLink paid them roughly $42,000 per year and did not offer them incentive-based pay. It refused to pay them overtime despite many brand advocates working 50 to 75 hours per week. ActionLink maintained this payment schedule between February 2011 and November 2011.

In September 2011, however, the DOL received a complaint that ActionLink may have been misclassifying brand advocates as exempt. An investigator from the DOL's Wage and Hour Division determined that ActionLink had unintentionally misclassified the brand advocates. The investigator met with ActionLink a number of times in late 2011 to discuss the misclassification and plan how to remedy the violation.

ActionLink reclassified the employees as non-exempt in December. It informed employees in a letter that it had reclassified them.[1] ActionLink calculated the back overtime pay each brand advocate was due and, on December 30, 2011, sent settlement checks to all of the brand advocates it believed deserved additional wages. The check stub, on the same page as the check but beneath a perforation, contained the following fine-print language: " By cashing this check, the employee to whom [sic] is made is agreeing that he or she has received full payment from Actinlink [sic] or [sic] wages earned, including minimum wage and overtime, up to the date of the check." [2]

The DOL investigator was out of the office when these checks were sent, so he did not approve the payments or view the language located on the check stubs until he returned in late January 2012. When he returned, he provided ActionLink a WH-56 form describing the amounts that should have been paid. ActionLink's payroll manager signed the form and sent copies of the previously distributed checks to the DOL investigator.

A number of brand advocates sued in March 2012, claiming that they did not receive payments to which they were entitled under the FLSA. The plaintiffs were separated into two categories--those who cashed checks from ActionLink, the " Adams plaintiffs," and those who did not, the " Beauford plaintiffs." Both categories moved for partial summary judgment, asking the district court to declare that they were non-exempt under the FLSA. ActionLink also moved for ...


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