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Karl v. Zimmer Biomet Holdings, Inc.

United States District Court, N.D. California

October 25, 2019

JAMES KARL, individually and on behalf of all others similarly situated, Plaintiff,
v.
ZIMMER BIOMET HOLDINGS, INC., a Delaware corporation; ZIMMER US, INC., a Delaware corporation; BIOMET U.S. RECONSTRUCTION, LLC, an Indiana limited liability company; BIOMET BIOLOGICS, LLC, an Indiana limited liability company; and BIOMET, INC., an Indiana corporation, Defendants.

          ORDER ON MOTION FOR SUMMARY JUDGMENT, MOTION TO FILE UNDER SEAL, AND REQUEST FOR CONTINUANCE UNDER RULE 56(d)

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE.

         INTRODUCTION

         In this putative employment class action, defendants move for summary judgment and to file under seal. Plaintiff requests a denial or continuance of summary judgment under Rule 56(d). For the reasons stated below, defendants' motion for summary judgment is Granted in part and Denied in part. Defendants' motion to file under seal is Granted. Plaintiff's Rule 56(d) motion is Denied.

         STATEMENT

         A prior order has set forth the detailed background of this case (Dkt. No. 70). In brief, defendant (and parent corporation) Zimmer Biomet Holdings, Inc. (“Zimmer Biomet Holdings”) and its subsidiaries - including defendants Zimmer US, Inc. (“Zimmer US”); Biomet U.S. Reconstruction, LLC (“Biomet Reconstruction”); Biomet Biologics, LLC (“Biomet Biologics”); and Biomet, Inc. (“Biomet”) - engaged in designing, manufacturing, and marketing biopharmaceutical and medical device products. Relevant here, Zimmer U.S. engaged with Biomet Reconstruction and Biomet Biologics in selling products focused on knees, hips, sports medicine, foot and ankle, extremities, and trauma. They primarily sold these products to physicians and hospitals (Dkt. Nos. 86, Exh. 1 at 82:24-83:2; 89 ¶ 4).

         In August 2015, plaintiff James Karl signed a sales associate agreement with Zimmer US, Biomet Reconstruction, and Biomet Biologics and thereafter began working for those three entities as a sales representative selling orthopedic devices in California. That sales associate agreement classified Karl as an “independent contractor.” He was paid through Edge Medical, LLC, which he established for tax purposes (Dkt. Nos. 14-2 ¶ 1; 86, Exh. 1 at 243:17-22, 250:9-12).

         Karl was a member of “Team Golden Gate, ” led by Territory General Manager Don Quigley (an employee who managed defendants' operations in a given territory), which covered sales in the San Francisco Bay Area region. Members of Team Golden Gate were paid on a commission-only basis under a “pooled” arrangement. That is, defendants (1) set a “base rate” commission percentage for each product type sold, (2) pooled each team member's base rate commissions, and (3) paid each member a predetermined percentage of the pooled commissions, regardless of the amount of commissions that member personally generated (Dkt. Nos. 97-1, Exh. A at 117:6-119:22; 97-2 ¶¶ 5-6).

         As part of his job duties, Karl spent on average between 60 and 70 percent of his time on “case coverage.” This involved assisting surgeons in the operating room - including setting up defendants' products, informing a surgeon of the product's safety and effectiveness, and fielding a surgeon's questions - and planning for procedures, such as designing modifications for implants. Karl's workday averaged between ten to twelve hours (Dkt. Nos. 86, Exh. 1 at 223:16-22; 97-1, Exh. A at 68:17-69:7, Exh. B at 222:18-20; 97-2 ¶ 12).

         In July 2018, Karl filed the instant putative class action and now seeks eight claims for relief: (1) violation of the FLSA; (2) failure to pay overtime wages under California law; (3) failure to provide meal periods under California law; (4) failure to provide rest periods under California law; (5) failure to provide itemized wage statements; (6) failure to reimburse business expenses; (7) unfair business practices; and (8) PAGA claim (Dkt. No. 41 ¶¶ 51-106). The gravamen of these claims stems from the allegation that defendants misclassified their sales representatives as independent contractors rather than employees and thus denied them various benefits under federal and California wage-and-hour laws.

         All defendants now move for summary judgment against Karl (individually) on his (1) FLSA claim (Claim 1), arguing that he cannot prove that he was an “employee” and that even if he were an employee, he qualified as an exempt “outside salesperson” under the FLSA; and (2) various state law claims (Claims 2-4, 6-7), arguing that Karl cannot prove he was an “employee” under California law, was an exempt “outside salesperson” under California law regardless, and had the opportunity to take meal and rest periods. Zimmer Biomet Holdings and Biomet separately further move for summary judgment on all claims on the independent ground that they neither defendant employed Karl or contracted with him (Dkt. No. 85 at 1).

         Karl opposes (Dkt. No. 97) and concurrently moves under Rule 56(d) for a denial or continuance of summary judgment (Dkt. No. 98). This order follows full briefing and oral argument.

         ANALYSIS

         Summary judgment is appropriate if there is no genuine dispute as to any material fact. FRCP 56(a). A genuine dispute of material fact is one that “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). “In judging evidence at the summary judgment stage, the court does not make credibility determinations or weigh conflicting evidence.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). “Rather, it draws all inferences in the light most favorable to the nonmoving party.” Ibid.

         1. Overtime Wages under the FLSA and California Labor Code (Claims 1-2).

         Defendants argue that Karl cannot prove he was an “employee” under the FLSA or California law such that he was entitled to overtime wages. They further contend that even assuming he was misclassified as an independent contractor, Karl qualified as an exempt outside salesperson for the purposes of his overtime claims. This order agrees and holds that, even if Karl was an employee, he qualified as an exempt “outside salesperson” under both federal and state law.[1]

         A. Exemption Under the FLSA.

         Under the FLSA, an employee is entitled to overtime wages unless the employer shows that the employee worked “in the capacity of outside salesman.” 29 U.S.C. § 213(a)(1). The outside salesperson exemption applies to any employee (1) whose “primary duty” is (as relevant here) “making sales, ” and (2) who “is customarily and regularly engaged away from the employer's place or places of business in performing such primary duty.” 29 C.F.R. § 541.500(a). An employee's “primary duty” means “the principal, main, major or most important duty that the employee performs.” Id. § 541.700(a). This analysis must be guided by the totality of the circumstances, “with the major emphasis on the character of the employee's job as a whole.” Ibid.

         Exempt sales activities include “work performed incidental to and in conjunction with the employee's own outside sales or solicitations, including incidental deliveries and collections” and “[o]ther work that furthers the employee's sales efforts . . . including, for example, writing sales reports, updating or revising the employee's sales or display catalogue, planning itineraries and attending sales conferences.” Id. § 541.500(b). Promotional work is “one type of activity often performed by persons who make sales, which may or may not be exempt outside sales work, depending upon the circumstances under which it is performed.” Id. § 541.503(a). Promotional work “performed incidental to and in conjunction with an employee's own outside sales or solicitations is exempt work”; promotional work “incidental to sales made, or to be made, by someone else is not exempt outside sales work.” Ibid.

         “Whether an activity is excluded from hours worked under the FLSA . . . is a mixed question of law and fact. The nature of the employees' duties is a question of fact, and the application of the FLSA to those duties is a question of law.” Ballaris v. Wacker Siltronic Corp., 370 F.3d 901, 910 (9th Cir. 2004). “An employer who claims an exemption from the FLSA bears the burden of demonstrating that the exemption applies.” Klem v. Cty. of Santa Clara, California, 208 F.3d 1085, 1089 (9th Cir. 2000).

         Here, both sides agree that Karl spent the majority of his time attending surgeries and assisting physicians with the implantation of defendants' medical devices. The parties, however, sharply dispute whether case coverage constituted sales-related activity. Defendants, of course, argue that the primary reason Karl assisted surgeons was to sell their products (Dkt. No. 85 at 16). Karl, on the other hand, describes his role as “a product and procedure expert” who advised surgeons on implant procedures (Dkt. No. 97 at 9). This order finds that, in light of the totality of the circumstances and the purpose of the FLSA exemption, Karl's primary duty was to make sales and case coverage constituted sales-related activity.

         First, defendants hired Karl as a sales representative whose job was “to exercise best efforts to aggressively market and sell the Products in the Territory” (Dkt. No. 14-2 ¶ 6(a)). During his deposition, Karl described himself and his team members as “salespeople” who were “driven by sales” (Dkt. 86, Exh. 1. at 101:19-23). He agreed that his “most important goal ...


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