Wyndham Resorts willfully violated the FLSA by prohibiting commissioned sales representatives from accurately recording their work time, instructing managers to alter their timecards to ensure they did not reflect any overtime, and failing to pay the reps for their off-the-clock work, a federal judge in Tennessee found. Ruling in the sales reps’ favor after a bench trial in this long-running collective action, the trial court further found that liquidated damages and a three-year limitations period were proper and that a random sampling of sales reps fairly represented class members who did not testify. Relying on the credited representative testimony, and “mindful that the time records are essentially of no use due to their falsity and inaccuracy,” the court concluded the reps worked an average of 52 hours a week as a matter of reasonable inference (not quite the 64 hours estimated by the reps) and therefore, they were entitled to 12 hours of overtime pay per week for the recovery period. The parties had told the court they could readily calculate and agree on an appropriate dollar amount in the event damages were awarded, so the court held off on entering a monetary judgment until the parties do that math (Pierce v. Wyndham Vacation Resorts, Inc., January 29, 2018, Shirley, C.).
Nonexempt, and non-recorded. The sales representatives sold Wyndham Resort ownership interests or trial packages to current and prospective owners. They were paid on commissions, with a minimum wage advance that would be recouped from their commissions when they made a sale. In 2009, Wyndham reclassified its sales reps from exempt to nonexempt and began using timeclocks to record their time. Upper management feared that paying the reps for overtime would impact the bottom line, which in turn would cut into upper management’s own pay, since management’s compensation structure included a bonus based on net operating income. Consequently, Wyndham began to violate its own written policies on recording work hours and paying overtime. According to the court, “the overwhelming evidence establishes a consistent practice of prohibiting Sales Representatives from recording overtime and managers doctoring timecards to prevent overtime compensation.”
The sales reps didn’t fare too poorly themselves. Indeed, the three highest-earning reps made, on average, more than $450,000, $500,000, and $700,000 a year during the recovery period. (The court had previously held the FLSA’s “highly compensated employee” exemption from overtime did not apply, however.) Yet a sampling of time records indicated these reps worked 17 hours, 12.75 hours, and 18.5 hours during the most productive sales months. “It is hard to imagine that these hard-working, high earners worked these few hours in the most productive month, yet earned the six-figure incomes they did,” the court wrote.
Pay records questioned. But this questionable pay practice was “turned on its head in 2013,” the court explained, after the sales reps found out that one of their own was deemed ineligible for medical benefits because his time cards did not reflect enough hours worked to qualify. That led the reps to question the accuracy of their own time records. Also around this time, two employees complained about working while not clocked in, and a sample audit showed that sales representatives were indeed working while not clocked in. (Several managers and a regional HR official were terminated following the audit.).
Collective action. Contending that they worked off the clock and were not paid overtime, a group of sales reps filed suit, and the court conditionally certified a collective action comprised of three categories of current and former nonexempt, commissioned sales reps. Wyndham moved to decertify the class contending, among other arguments, that the representative proof in this case was inadequate under Tyson Foods, Inc. v. Bouaphakeo. But the court denied the motion in an October 2017 ruling, concluding the reps met their burden to proceed as a collective action. Whether they actually presented representative testimony of liability and damages was reserved for trial, however.
At trial, the plaintiffs presented live testimony of 26 witnesses and deposition testimony of five plaintiffs and four defense witnesses. Wyndham presented live testimony of nine witnesses and designated 32 depositions. (The court outlined the witness testimony in detail in its opinion.) The court found Wyndham violated the FLSA and that the violations were willful, carried out at the urging of upper management in order to increase their own bonuses.
Plaintiffs’ witnesses credible. The court found the witnesses for the plaintiffs “highly credible,” especially in light of the documentary evidence and managers’ own admission that they did in fact doctor timecards. Sales reps testified that managers edited their time cards and that they had to sign inaccurate or even blank “punch forms” after managers did so, or risk being placed on “overage,” a form of discipline. Often, managers simply forged the punch forms themselves. Reps were required to clock out when not giving a tour but still working, to clock out for lunch even when they did not take a lunch break, to work from home without pay with management’s knowledge, clock out when working evenings if they began to approach overtime, and to not record time spent working at dinner parties or weekend sales events. The reps “were lulled into believing that underreporting actual hours did not mean anything financially because the hours would only be credited as hours at minimum wage, and therefore, recouped from their commissions,” the court found. “They were never told that they were entitled to overtime based on their commission amounts.”
Doctored timecards. Several Wyndham managers testified that they doctored the reps’ timecards. One manager said she was directed to do so by the site vice president and sales directors, and explained how she made illegitimate edits to the reps’ time records on the company’s “WynTime” system, and stating that 90 percent of the edits she made were not legitimate and were done to keep the reps’ reported hours under 40. The how-to’s of altering time records were even discussed at management meetings, she asserted. Notably, Wyndham did not cross-examine this witness, or “call as witnesses those against whom she made such damning claims.” Also, her testimony was consistent with how the sales reps described their timecard edits.
Managers concede breaches. Another manager testified that he logged on every Thursday to adjust the sales reps’ time records before timecards were turned in on Friday mornings and that he knew the reps were working overtime, but he was instructed by management to adjust the timecards. Another manager said he instructed reps to clock out and continue working. When asked why, he stated that the reps “had to pay the money back and that overtime affected the net operating income.” One sales manager, fearful for her job, even sent an email to her personal account from her work email documenting the practice and stating that “I had always been told that they had to pay back the money anyways,” that she repeatedly asked her own manager if she should let reps continuing working even though they were going into overtime and was repeatedly told “yes,” and that two of her team members were transferred out from under her, in retaliation for her having “gone to HR over WynTime.”
Defense witness credibility. In contrast, the court found deficiencies in the testimony of Wyndham’s witnesses. One sales rep described herself as a “workhorse” yet her time records recorded an average 4.4 hours per day during October, Wyndham’s busiest sales month. This seemed unfeasible to the court, which also observed that this rep had missed a “punch” almost every day for six months, had 1,109 missed punches, and testified “that everyone was on vacation in January and February, which is obviously not credible.” Moreover, the reps who testified on Wyndham’s behalf were still employed by the company. All Wyndham offered in the way of testimony were “current employees who testified they did not do such things, but those supervisors accused of such did not testify as noted herein.”
Emails and other evidence. As for documentary evidence, Wyndham’s time records were “grossly inaccurate,” which supported the plaintiffs’ off-the-clock claims. There were “voluminous” records of forged punch forms and unsigned timecards. The “missed punch” report for one busy September was 501 pages, according to the results of one audit. There were numerous emails, sent weekly before the pay period closed, instructing sales managers to edit time records. In an email referencing one of her reps, a senior manager wrote, “How Craig wrote deals this week but according to the clock wasn’t here will be a mystery to the auditors!” One former sales rep testified that his manager began clocking him in and out, a contention that was supported by the fact that “someone continued to fictitiously clock him in and out when he was not even working at Wyndham.”
Representative testimony. Wyndham again urged that representative testimony should not be permitted, but the court had limited discovery to a representative sampling, deeming it “fair and proportional to the needs to the case.” Scolding the defendants here, the court noted that Wyndham “can hardly complain about Plaintiffs’ amount of proof, given that they have objected at every request to try this case fairly and efficiently.” Wyndham balked at even proposing a representative sample configuration and continued to insist that no representative proof would be sufficiently reliable. Wyndham initially agreed to limit the number of depositions, then later insisted that it should be allowed to take each and every plaintiff’s deposition.
Again, Wyndham turned to Tyson Foods, Inc. v. Bouaphakeo, but the court had already distinguished that 2016 Supreme Court decision from the litigation at hand. The defendant also relied on Espenscheid v. DirectSat USA, LLC, in which the Seventh Circuit rejected representative testimony to prove FLSA violations absent expert statistical analysis. However, “the Sixth Circuit has expressly stated that Espenscheid is at odds with Sixth Circuit precedent,” the court noted, pointing to the controlling appeals court’s post-Tyson decision in Monroe v. FTS USA, LLC, which allowed representative statistical evidence in an FLSA collective action. The court also rejected Wyndham’s due process arguments, finding the defendant was free to challenge the testimony of each witness through cross-examination, was allowed to call any of its own witnesses it desired, and offered no explanation of the defenses it was unable to explore on account of the case being litigated as a collective action.
Averaging damages. The sales reps’ purported averages of overtime hours worked varied, and if taken as true, some reps will be overpaid and some will be underpaid, Wyndham argued further. However, the court saw little cause for concern. “Damages in collective actions are not exact, nor could they be given that Defendants did not keep accurate time records. Here, Plaintiffs have specifically requested an average for all Plaintiffs, and taking an average naturally means that some Plaintiffs may be overpaid and some may be underpaid,” the court explained. “Regardless, this does not affect Defendants as the amount of overtime remains the same.”
Representative, but repetitive. In the end, after hearing the evidence, the court was satisfied that the representative testimony, gleaned from random sampling and representing 25 and 50 percent, respectively, of each of the three categories of sales reps, was sufficiently representative of the non-testifying class members to establish liability and damages on a representative basis. The overall testimony of the class witnesses “was so repetitive and consistent on the key issues” that to have heard more witnesses would only have lengthened the three-week trial. “Further,” the court added,” if there were other witnesses who would have testified contrary to these Plaintiffs called, the Defendants were free to call them as witnesses. Their failure to call more witnesses than they did is telling.”
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