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Parker v. NutriSystem

July 30, 2009

ADRIAN E. PARKER
v.
NUTRISYSTEM, INC.



The opinion of the court was delivered by: Bartle, C.J.

MEMORANDUM

In this collective action the named plaintiff Adrian E. Parker has sued his former employer, NutriSystem, Inc. ("NutriSystem") for violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201, et seq., and the Pennsylvania Minium Wage Act, 43 Pa. Cons. Stat. §§ 333.101 et seq., on behalf of himself and others similarly situated. To bring a collective action under the FLSA, the named plaintiff must establish that the members of proposed class are all similarly situated and each member must consent in writing to participate in the lawsuit. 29 U.S.C. § 216(b). The court conditionally granted Parker's motion to proceed as a collective action on September 26, 2008, and seventy-eight plaintiffs have opted in. Plaintiffs, who were all employed by NutriSystem since May 28, 2005 as sales associates, seek to recover unpaid time and a half compensation for the hours they worked in excess of forty hours per week.

Before the court are cross motions for summary judgment. NutriSystem has moved for summary judgment against Parker and the first four opt-in plaintiffs, Donald J. Wilson, Frank L. Stephens, IV, Monica Thompson, and Senya Saunders. It has informed the court that it intends to move for summary judgment against the other plaintiffs if the court resolves the pending motion in its favor. The plaintiffs have also moved for summary judgment against NutriSystem.

I.

The following facts are undisputed. NutriSystem is a provider of a weight loss and weight management program based on prepared prepackaged meals. It markets and sells its products directly to individual customers for their personal use. NutriSystem's core product is a 28-day meal program. Several varieties of the meal plan are available depending on customers' needs. For instance in 2008 NutriSystem offered: a women's regular 28-day meal plan for $342.36, or $293.72 under the "auto-ship" method; a men's regular 28-day plan for $371.50, or $319.95 under the auto-ship method; a women's or men's silver 28-day plan (for older customers) for $342.36, or $293.72 under the auto-ship method; a women's or men's diabetic-friendly 28-day plan for $342.36, or $293.72 under the auto-ship method; and a women's or men's vegetarian 28-day plan for $342.36, or $293.72 under the auto-ship method. Under the "auto-ship" method of shipment a customer signs up to receive automatic monthly shipments of food and is charged by NutriSystem on a monthly basis. Customers are permitted to cancel the auto-ship plan after the first month. Under the regular plans, the customer receives only a 28-day shipment and then must affirmatively request additional shipments before they are sent. The prices change based on market conditions. NutriSystem also offers periodic discounts and promotions to target certain customers.

Customers typically place their orders with NutriSystem via the internet or telephone. QVC, the home shopping television network, also sells NutriSystem products direct to customers, but those sales accounted for no more than 5% of NutriSystem's annual revenue during the time period relevant to this collective action.

NutriSystem operates a call center in Horsham, Pennsylvania, where some 230 sales associates make telephone calls to and receive telephone calls from potential customers twenty-four hours a day. A company policy prohibits sales associates from remaining idle for more than five minutes while awaiting an inbound call. Before the five minute mark is reached, associates must initiate an outbound sales call, for example to people who filled out profiles on the company website but failed to place an order or to customers who previously placed orders but their credit cards were declined. Generally, NutriSystem experiences its highest volume of orders in the first quarter of the year after the holiday season when consumers experience "holiday remorse" and are most likely to initiate diets.

NutriSystem sales associates are assigned to six different work shifts: 7:00 a.m. to 3:30 p.m., 9:00 a.m. to 5:30 p.m., 11:00 a.m. to 7:30 p.m., 1:30 p.m. to 10:00 p.m., 3:30 p.m. to 11:00 p.m., and 11:00 p.m. to 7:30 a.m. (the "overnight shift"). Before 2007, sales associates could request permission to work additional hours beyond their scheduled shifts. Since January, 2007, sales associates, except those working the overnight shift, can work extra hours in a given week only if in the preceding week they exceeded the average "sales dollars per call," a figure the company calculates based on the revenue the sales associates generate and the calls they make each week. This ensures that only the best sales associates are permitted to work extra hours.

In March, 2005 NutriSystem implemented its current compensation scheme for sales associates. Under the plan, each pay period they receive the larger of either their hourly pay or their flat rate payments per sale. The hourly rate is $10 per hour for the first forty hours per week, and $15 per hour for overtime. The flat rates per sale are $18 for each 28-day program sold on an incoming call during daytime hours, $25 for each 28-day program sold on an incoming call during evening or weekend hours, and $40 for each 28-day program sold on an outbound call or during the overnight shift.*fn1

The majority of the sales associates each pay period are compensated based on these flat rates, not hourly rates.

When sales associates are paid the flat rates for the sales made they do not receive any overtime compensation. That is, the flat rates do not increase when an associate works more than forty hours in one week.

Lead plaintiff Adrian Parker was a NutriSystem sales associate from November, 2005 until February, 2008 when he was terminated. Parker's compensation was always comprised of flat rate payments because his flat rate earnings always exceeded what would have been his hourly earnings. He worked 2080.25 hours in 2006 and earned $65,136, while in 2007 he worked 1913.75 hours and earned $68,381.

Donald Wilson, the first opt-in plaintiff, was employed as a sales associate for NutriSystem from December, 2005 until November, 2007 when he was terminated. Like Parker, he was always paid his flat rate earnings. In 2006 he worked 2405.5 hours and earned $80,769, and in 2007 his hours were at least 2027 hours with income of $73,824.*fn2

NutriSystem employed Frank Stephens, the second opt-in plaintiff, as a sales associate from December, 2005 until September, 2008 when he was discharged. Stephens was paid his flat rate earnings for all but three pay periods. The most he earned in one year was $84,393.50 in 2006 when he was on the job for 2196.5 hours. In fifteen of his pay periods in 2007 he worked more than 80 hours, often substantially more, and in the other eleven he worked less than 80 hours, often substantially less. In 2007 the records show 1952.75 hours and $71,235 in compensation. For the eight plus months that he spent at NutriSystem in 2008, he obtained $37,226 for his 1472 hours.

Monica Thompson, the third opt-in plaintiff worked as a NurtiSystem sales associate from November, 2005 until October, 2008 when she was terminated. She was always paid her flat rate earnings. He hours in 2006 were 1970.25 and she earned $58,998, while her hours in 2007 were 1674.25 and she earned $48,790. In 2008 the record shows 1544.25 hours in nine and half months of work and compensation of $41,939.

Finally, NutriSystem employed Senya Saunders, the fourth opt-in plaintiff, as a sales associate from December, 2005 until November, 2007 when she was terminated for job abandonment. In two biweekly pay periods she was paid the hourly wage. For all other periods she received her flat rate earnings. In 2006, she spent 1774 hours on the job and was paid $45,865,50. In 2007 her hours were 1602 during the ten and a half months she worked, and she was paid $39,952.

The plaintiffs contend that they are owed time and a half compensation for the weeks that they worked more than forty hours and were paid under the flat-rate compensation plan.*fn3

II.

Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). After reviewing the evidence, the court draws all reasonable inferences in the light most favorable to the non-moving party. In re Flat Glass Antitrust Litig., 385 F.3d 350, 357 (3d Cir. 2004). We may consider only evidence that would be admissible at trial. Fed. R. Civ. P. 56(e); Philbin v. Trans Union Corp., 101 F.3d 957, 961 n.1 (3d Cir. 1996).

III.

The FLSA requires that employers pay their employees one-and-one-half times their regular rate of pay for any hours worked in excess of forty hours per week. 29 U.S.C. ยง 207(a). Section 207(i) establishes an exception to the overtime requirements for employees working in ...


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