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Smith v. Equinox Holdings, Inc.

United States District Court, N.D. California, San Francisco Division

April 10, 2015

JOSEPH A. SMITH, Plaintiff,
EQUINOX HOLDINGS, INC., et al., Defendants.


LAUREL BEELER, Magistrate Judge.


Plaintiff Joseph Smith sued his former employer Equinox for unpaid wages under California law based on Equinox's allegedly mistaken classification of him as an exempt employee. (Compl., ECF No. 1-1.)[1] He also sued for (1) retaliatory termination, (2) defamation based on an Equinox manager's allegedly telling other employees that Equinox fired him for "integrity" reasons, and (3) breach of contract. (Id. ) Equinox counters that Smith was an exempt employee and thus is not entitled to additional wages and that it fired him for violation company policy. (Motion, ECF No. 49.) It moves for summary judgment on all claims (Id. )

Because genuine issues of material fact preclude summary judgment, the court denies Equinox's summary-judgment motion.


This case is about a retail manager who performed well for years, but who was eventually fired when his employer discovered that he had (allegedly) breached company policy in certain transactions. Many facts are undisputed. The court recounts them here from the parties' joint statement of undisputed material facts (ECF No. 49-1). The Analysis below contains a more detailed discussion of additional facts relevant to specific issues.


From 2008 to December 2013, Plaintiff Joseph A. Smith worked as a manager for several Equinox retail clothing and workout-gear shops located in Equinox Fitness facilities in California. (ECF No. 49-1, ¶ 1.) Mr. Smith started working for Equinox in the summer of 2008 as a Regional Shop Manager. (Id. ¶ 2.) His offer letter states that his employment would be at will. (Id. ¶ 3.) A year or two later, Mr. Smith's title was changed to District Shop Manager. (Id. ¶ 4.) He later became the National Shop Training Manager. (Id. ¶ 5.) During his career, Mr. Smith was responsible for three Equinox shops in California. (Id. ¶ 6.)

A. Plaintiff's Job: Duties and Characteristics

Mr. Smith was responsible for training and developing both sales associates and Managers on Duty. (Id. ¶¶ 6, 17.) His salary when he was fired was roughly $61, 000 per year. (Id. ¶ 7.) (Equinox sales associates made around $10 per hour. (Id. ¶ 8.)) He participated in the hiring of approximately 15 associates. (Id. ¶ 9.) He claims that "on a daily basis" he researched the previous day's sales to decide how to place items on the floor. (Id. ¶ 28.) He was responsible for ensuring that all three shops had systems that mirrored one another according to corporate directives. (Id. ¶ 29.) Mr. Smith could choose (and submit for upper-management approval) which stores he would visit on which days. (Id. ¶ 30.) He made hiring recommendations that were followed "more often than not" and promoted one sales associate to Manager on Duty. (Id. 30.) His 2009 performance review reflects that he oversaw "trunk shows" and special events at the shops, and was responsible for ensuring that club events were "cleanly" executed. (Id. ) It is undisputed that, as District Shop Manager, Mr. Smith engaged in and was responsible for:

• Talent management - Helping with and ensuring the proper coaching, training, and development of sales associates aid Managers on Duty; identifying "top trainers."
• Operational excellence - Understanding and upholding loss-prevention and inventory-management policy, including ensuring that the team followed the policies; ensuring that he and his team understood all communication and training materials and accurately completed assigned operational tasks; helping with scheduling and shift coverage; administering and completing "Shop Visit Audits."
• Product and presentation - Ensuring that the shop and staff reflected brand standards (proper execution of merchandising, "marketing direction, " and dress code); enforcing and maintaining organizational standards on sales floor, at "cash wraps, " and in stockrooms; ensuring that shops within his territory were visually enticing.
• Professional dimensions - Building effective relationships with employees, colleagues, supervisors, and clients; maintaining working knowledge of happenings and general standards and practices outside the shop; complying with and enforcing company policy and procedure; resolving personnel concerns fairly and in a timely manner.

(Id. ¶ 32.)

Mr. Smith was deployed to train and develop talent in the company; he focused on finding the best possible staff and on "bringing them to a level that would make his shops operate flawlessly." (Id. ¶¶ 10-16.) In his 2012 review, he highlighted the fact that he had promoted a sales associate to Manager on Duty in Palo Alto and had also cultivated new talent for a new Manager on Duty at the Pine Street store. (Id. ¶ 12.) As manager, Mr. Smith was responsible for ensuring that sales associates did their jobs and correcting them to improve performance. (Id. In ¶¶ 9-20.) He completed performance reviews for his associates. (Id. ¶ 18.)

Mr. Smith was further expected to understand, train other employees on, and enforce company policy. (Id. ¶¶ 22-23, 32.) This included the meal-break policy. (Id. ) When Mr. Smith was in the shops himself, he enforced those policies; he gave permission for breaks and reminded people to take breaks when they were due. (Id. ¶¶ 22-23.)

Mr. Smith also performed work that Equinox characterizes as being "much above the District Shop Manager title." ( See ECF No. 49 at 11.) However characterized, it is undisputed that Mr. Smith helped open new stores in Southern California, in the course of which he trained new associates and managers. (ECF No. 49-1, ¶ 24.) He trained three new district managers in 2011 and led the "LA 2 District" in Los Angeles. (Id. ¶¶ 25.) The previous year, Equinox had sent Mr. Smith to Florida to help turn around the region, which had been performing poorly, by training a new manager and identifying opportunities for that manager to produce better results for Equinox. (Id. ¶ 26.) In 2013, Equinox flew him to New York to work with the Senior Manager of Retail Operations, Becca Briggs, to revise training documents in advance of a national meeting. (Id. ¶ 33.)

Mr. Smith's employment agreement with Equinox established certain sales goals for the shops that he managed. Sometime in Spring or Summer 2013, Equinox raised those goals. (Id. ¶ 35.) Mr. Smith knows of no policy forbidding the company from raising his sales goals (Id. ¶ 36.) He does not know the criteria that Equinox uses when deciding whether to raise goals (Id. ) His regional manager, Brooke English, told him that his sales goals had been raised because he was doing "fabulous" work and the company believed that he could meet the more ambitious targets. (Id. ¶ 37.)

B. Mr. Smith Complains to Equinox

Early in 2013, Mr. Smith allegedly raised concerns to senior Equinox personnel that nonexempt shop employees were not able to take their breaks on time and that the company was not complying with its meal- and rest-break policy. (Id. ¶ 41.) Mr. Smith does not recall anyone at Equinox telling him that he should not complain about these things. (Id. In 43-44.) He further alleges that shortly before June or July 2013 he complained to several Equinox officers that he himself was misclassified as exempt. (Id. ¶ 47.) He was aware that a wage-and-hour class action had been filed against Equinox. (Id. ¶ 40; Smith Dep. - ECF No. 49-3 at 74.)

C. Underperformance, Investigation, Termination

In November 2013, Equinox noticed low profit margins in its Northern California stores. (ECF No. 49-1, ¶ 48.) The ensuing investigation revealed low margins in Mr. Smith's shops and associated these low margins with sales prices being applied after sales had ended. (Id. ¶ 49.) Equinox then started to investigate Mr. Smith. (Id. ¶ 50.) On November 7, 2013, Equinox personnel met with Mr. Smith and other shop employees. (Id. ¶ 51.) Equinox told Mr. Smith that he could prepare a written response to the issues raised at the meeting and that this "would be passed along to people who better understand shop business." (Id. ¶ 52.) Mr. Smith felt uncomfortable with this approach; he declined to submit a written response and instead asked "to speak with someone else at Equinox regarding the matter." (Id. )

Equinox concluded that Mr. Smith had rung his own sale and given himself a discount on items that should not have been discounted. (Id. ¶ 56.) It is undisputed that Equinox's loss-prevention provided that anyone found applying unauthorized discounts to transactions could be subject to discipline up to and including termination. (Id. ¶¶ 53, 55.) Mr. Smith understood this. (Id. ) His position as a regional and district manager obligated him not only to follow loss-prevention policies himself but to ensure that shop associates followed them as well. (Id. ¶ 54.) Tracey Gaven-Bridgmann, the Equinox manager who fired Mr. Smith, participated in the firing of an employee who "she believes to have been a Manager on Duty" in one of the company's New York stores "for abusing the employee discount and ringing her own sales." (Id. ¶¶ 56-57.) The New York employee was actually fired for misusing a customer's gift card. (Briggs Dep. - ECF No. 51-3 at 175.)

In December 2013, Equinox fired Mr. Smith for ringing up his own sales and giving unauthorized discounts. (Id. ¶ 56, 60, 61.) The Equinox officer who fired Mr. Smith testified that, when she made that decision, he had not given any explanation for his challenged actions. (Id. ¶ 54.) Mr. Smith has testified that two other Equinox store managers told him that "they heard he was terminated for integrity reasons.'" (Id. ¶ 64.) One of these managers also told him that she had been told this by regional manager Brooke English. (Id. ¶ 65.) Mr. Smith did not know of anything suggesting that information about his firing had been otherwise "made public." (Id. ¶ 67.)


Both parties go beyond the undisputed facts to offer additional details about the composition of Mr. Smith's work. These details will affect the pivotal question of whether Mr. Smith was "primarily engaged" in exempt managerial work. Mr. Smith argues that, whatever his managerial duties, he spent most of his time doing non-exempt work. Equinox denies this.

For its part, to the undisputed facts recounted above, Equinox adds a single item: It contends that Mr. Smith's "register history" at Equinox shows that, during his whole tenure, he rang up "approximately 3% of the sales in his shops." (ECF No. 49 at 12; Briggs Decl. - ECF No. 49-5 at 1, ¶ 2.) This proves (in Equinox's view) that Mr. Smith "rarely acted as a [non-exempt] sales associate." (ECF No. 49 at 12.) It explains: "[T]he percentage to total sales contribution of any associate working in any of Equinox' [s] shops is almost exactly the percentage of the total operating hours that they work." (Id. (citing Briggs Decl. - ECF No. 49-5 at 2, ¶ 3).) A sales associate who works 60% of the hours in a given shop will ring up 60% of sales; one who works 10% of the hours will account for that fraction of sales.

The plaintiff goes further in filling out the record. His basic assertion is that he "performed non-managerial duties for more than 50% of his work time." (ECF No. 51 at 10.) He claims that he "spent most of his work time receiving shipments, stocking shelves, folding merchandise, and selling clothing." (Id. (citing Smith Dep. - ECF No. 51-2 at 16).) "These were the same job duties performed by non-exempt Shop employees." (ECF No. 51 at 10 (citing Smith Dep. - ECF No. 51-2 at 22-23, Smith Decl. - ECF No. 51-5 at 2, ¶ 5).) "During an average work week, " Mr. Smith continues, he "spent approximately 30-40% of his work time receiving deliveries of merchandise, unpacking this merchandise, processing the merchandise in preparation for putting it on Shop shelves, logging this merchandise in the Equinox database system, tagging this merchandise, and disposing of the boxes and packing materials" in which it arrived. (ECF No. 51 at 10 (citing Smith Decl. - ECF No. 51-5 at 2, ¶ 6 and Gaven-Bridgmann Dep. - ECF No. 49-3 at 112-13).) Another "40-50% of his work time" Mr. Smith describes as occupied by "greeting customers... [, ] informing them of promotions..., organizing the... Shop floor, " folding and displaying merchandise, "creating sales tags, dressing mannequins, and cleaning the Shop floor." (ECF No. 51 at 10-11; Smith Decl. - ECF No. 51-5 at 2, ¶ 6.) He also rang up customer sales. (Id. ) Finally in this vein, Mr. Smith asserts that he spent "approximately 5-10% of his work time checking inventory in the backroom, organizing the backroom, and cleaning the backroom." (Id. )

On a related point, Mr. Smith claims that, [a]lthough he was a District Manager, " he "had minimal authority and discretion over his work because his supervisors and Equinox's corporate office had to approve most of his decisions." (ECF No. 51 at 11.) According to Mr. Smith, the corporate office instructed him on "how to manage the Shops, select merchandise, manage inventory, ensure loss prevention, and carry out company brand standards." (Id. ) "Equinox's corporate office controlled the operation of the Shops, " he continues, "including developing key business metrics, selling tactics, and how to clean and maintain the Shop." (Id. ) He "had no input into the budget" for the shops that he managed, and "did not have authority to determine the labor hours that were allocated" to his shops. (Id. )

* * *

Having set out these additional facts, this may be the best place to address the parties' crossing objections about this material. The plaintiff objects to parts of Ms. Briggs's testimony especially her assertion that Equinox "register history" for Mr. Smith shows that he accounted for roughly 3% of sales in his shops.[2]

Then there is the defendant's objection. Equinox complains that Mr. Smith's opposition invokes a "raft of facts" without having conferred with Equinox's counsel about whether any of them would have been "appropriate for a joint statement of facts." (ECF No. 52 at 6.) This "violate[s] the spirit" of the court's standing order, which contemplates that a party opposing summary judgment "may propose additional undisputed facts to the moving party... and ask for a response...." (Id. (quoting standing order)). Equinox ...

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