Peter RAMIREZ, Plaintiff and Appellant, v. YOSEMITE WATER COMPANY, INC., Defendant and Respondent.
In this case we are called on to resolve whether a bottled water delivery driver was entitled to overtime pay or whether he was an “outside salesperson” and thus exempt from the Industrial Welfare Commission Wage Orders. Plaintiff, Peter Ramirez, was employed in this capacity by defendant, Yosemite Water Company, Inc. After he left the company, Ramirez brought an action against Yosemite to recover unpaid overtime wages. Yosemite relied on the defense that Ramirez was an “outside salesperson,” and thus exempt from the wage and overtime laws. The trial court entered judgment in favor of Yosemite and Ramirez appealed. We construe the meaning of “outside salesperson,” as that term is defined in the orders to mean an employee who spends more than 50 percent of the day away from the employer's premises selling. Substantial evidence supports the trial court's conclusion Ramirez was an outside salesperson with the result he was exempt from the overtime laws. Accordingly, the judgment is affirmed.
FACTUAL AND PROCEDURAL BACKGROUND
Yosemite is in the business of selling bottled water, cups, coffee, other ingredients and renting water coolers. By 1995, the company had grown from 70 to 150 routes. A route is a defined territory over which a “route sales representative” is responsible for all delivery and sales activity.
Between April 1989 and November 1992, Ramirez was employed by Yosemite as a route sales representative. From November 1992 to March 3, 1993, when he left the company, Ramirez served as a relief route sales representative for Yosemite.
A. The route sales representative.
Maya Soderstrom, President of Yosemite, testified the Yosemite route sales representatives sell products and service. The products Yosemite sells are bottled water, coffee, tea, water coolers, and various service plans. The service the route sales representative sells is reliably delivering bottles on the scheduled dates to customers according to their needs, bending, stooping, lifting and rotating bottles for the customers, and cleaning the water cooler. Also included in service, in Soderstrom's mind, is reconciling the books, sending out late-payment notices, preparing the bills, replacing supplies, gassing up and washing the truck, and otherwise completing the job according to the company's “guidelines.” Soderstrom explained, “[w]hen they [the route sales representatives] are out at the customer, they are [also] constantly trying to upgrade sales to the customer, whether it's upgrading a cooler, ․ seeing if they need additional ․ products, ․ making sure the cooler itself looks clean․” For all of this, route sales representatives are paid a percentage based on the number of bottles and other items sold.
When a salesperson makes a delivery, Soderstrom expects him to “engage in selling activity.” As Soderstrom explained, selling “is the main job of our route salespeople,” who are in the field selling “constantly.” (Italics added.) The company's expectation is that the salesmen are selling “90 percent or more ․ of their workday.” “They try to get existing customers to renew ․ they try to upgrade what they sell to their customers, try to sell the variety of products that we carry ․ ” The route sales representative is expected to spend 80 percent of his time in the field away from the company's premises.
The company also has full-time solicitors whose job it is to seek new customers. The solicitors are paid a base salary and so much per new customer or “news.” Soderstrom testified these solicitors spend “a hundred percent” of their time selling. “Well over 90. Sometimes they would deliver a product.” The route sales representatives' commission is based on the number of bottles sold, whereas the solicitors' commission is based on the number of new customers acquired.
Soderstrom then explained she is “not in the field. We have really little contact with the customer, unless the customer calls in to the company when they have a problem. They [route sales representatives] are constantly trying to build a rapport with that customer. Our business is built on service to the customer and the loyalty to that customer. It's a price sensitive industry, but you build and retain your customers by building a personal loyalty with the customer.” Thus, the company expects the route sales representative to solicit constantly when he is on his route because it is the way for the company to grow.
Ramirez testified when he was hired, he was assigned to route 15 to replace Dan Ledbetter who was promoted to route supervisor and who trained Ramirez. On route 15, which covered the Glendale-Burbank area, Ramirez had 10 delivery days which he repeated two times a month, so that he delivered water to a particular customer approximately once every two weeks.
C. In the field.
Each five gallon bottle of water Ramirez delivered weighed 40 pounds. On an average business stop, Ramirez would deliver six to seven bottles; an average residential customer purchased one to two bottles.
For established customers, Ramirez would exchange full for empty bottles and refill and replace other stock and supplies. He would also rotate bottles on his truck, check the bottles for leaks and foreign objects inside, carry the bottles to the customer's house. For some customers, Ramirez would also rotate the spare water bottles, wipe off the tops and place the bottles in the coolers. Ramirez was responsible for examining the coolers for leaks, cleaning them and ensuring the hot and cold water functioned correctly. Ramirez would do minor service on the coolers but broken coolers would have to be replaced.
When he was a route sales representative, Ramirez was paid a minimum of $1,400 per month which Yosemite considered a “guaranteed draw against commissions.” Ramirez would also receive an additional 22 percent per bottle and 10 percent for cups, tea, coffee and cooler rentals he delivered. Ramirez received additional money for each new customer he signed up.
D. Typical day.
Early in the morning, Ramirez reported at the Yosemite plant in Los Angeles. In the office, Ramirez would follow up with customers by telephone and do bookkeeping. Ramirez's route supervisor would also flag particular customers who needed special attention. Before going out on his route, Ramirez would wash his truck, check the oil, water and fill the gas tank, as instructed by the company. A loader from the warehouse would count the bottles, equipment, cups and ingredients on the truck to verify the number and keep a tally. Ramirez would leave for his route between 7:30 and 8:30 depending on whether he had extra paperwork or calls, or whether he had a particularly long drive that day.
When he arrived at a customer's address, Ramirez would look up the patron's history, and deliver the required number of bottles. Afterwards, Ramirez would write down in his log the amount of bottles and other products he delivered, the number of empties he retrieved, and payments received, and then adjust the balance owed. Ramirez averaged six stops an hour. Upon returning to the plant in the evening, Ramirez would wait for the night loader to count the inventory. Ramirez would sign the inventory sheet and go to the office and return telephone calls, prepare bills for the next day, and tally up the cash received and inventory delivered because he could not go home at the end of a day until his accounts were balanced. This last work at the plant would usually take Ramirez two hours.
Sometimes, Ramirez testified, his average day lasted 11 hours and sometimes he worked longer, such as when he had difficulty balancing his accounts. Ramirez testified he worked Monday through Friday, more than 40 hours in a week. Ramirez worked on the average of one Saturday a month or every two months for about six hours. Some Saturdays Ramirez would do paperwork, accounting and bookkeeping. Other Saturdays he would go out and solicit new customers. Ramirez was not paid for any overtime hours worked.
At least 60 percent of Ramirez's working hours were spent off the company's premises. From the time he left the plant around 8 a.m., until he returned in the evening, Ramirez testified he worked anywhere from seven to nine hours not counting the time he solicited new customers or ate meals.
Ramirez saw a customer only about five to seven percent of the time, usually at the customer's request. Ramirez did not engage in selling to customers he did not see. Customers would communicate by leaving notes or calling and Ramirez would leave bills and gentle reminders of overdue payments under the bottles.
Daniel Ledbetter testified over 80 percent of Ramirez's time at work was spent away from the Yosemite plant and over 90 percent of his working day was spent in selling activities.
E. New customers.
When he began on route 15, it was an 800-bottle route serving about 500 customers. When he left the company, route 15 was a 1,900-bottle route, serving approximately 500 to 550 customers.
Ramirez was expected to obtain the equivalent of one new customer per day worked. To do that, Ledbetter told Ramirez he would have to speak to 10 people a day. It would take Ramirez about 30 minutes to make those 10 contacts. In a five-day work week, Ramirez would spend about 3 to 3 1/2 hours trying to sell his service to potential new customers. The three hours would include set up and telephone calls. Occasionally, Ramirez would pass out to old and new customers a list of Yosemite's products.
If a potential customer called the company to initiate service, Ramirez would receive a note to call that person back and set up a time to begin service. At the time he set up a new customer, if he met the customer face-to-face, he would explain the service rules and minimum purchases, and describe the additional products Yosemite had to offer. If Ramirez solicited the new business, but a serviceman delivered an extra bottle, Ramirez would not get paid for the extra bottle delivered. However, Ramirez explained, he would not try to sell more goods every time he delivered to that same customer because it was bad for customer relations and he wanted his patrons to feel comfortable asking Ramirez for something.
If a company solicitor sold water to a new resident located in route 15, Ramirez would deliver the water and get the credit for that “new” even though he did not do the soliciting.
F. Other testimony.
Claude I. Niesen, Special Projects Manager and a sales training manager at Yosemite opined that Ramirez's primary function at the company was as a retail sales representative and over 80 percent of his workweek was spent away from the company's premises. Niesen also opined that for 850 minutes a week. Ramirez also spent an hour a day at breakfast, lunch and break. Ramirez was engaged in activities that were not customer-solicitation related. Niesen considered non-customer solicitation work a sales function. Also considered as sales functions, are delivery of promotional materials, sales training, setting up new orders, promotion of equipment upgrades and additional ingredients, pump sales and placing equipment and ingredients on the truck.
G. The lawsuit.
After he left the company, Ramirez filed his complaint for unpaid overtime wages, unlawful wage deductions and employee charges and unpaid wages. Yosemite cross-complained against Ramirez for damages for interference with contractual relations and with prospective economic advantage as the result of Ramirez's alleged attempt to solicit Yosemite's customers when Ramirez left the company.
After trial, the court found in favor of Yosemite. Based on the facts, the trial court was of the opinion during the period Ramirez was employed as a “ ‘route sales representative,’ ” he was an “outside salesperson” as that term is defined by the California Industrial Wage Commission. This conclusion was based on the finding, in particular, “[w]hile Plaintiff was away from [his] employer's premises he engaged in both sales activities, delivery activities and dual sales and delivery activities. Although some functions are more easily designated as solely a ‘sales' function versus ‘service’ functions (e.g. make the sales pitch or writing a sales order), other functions are so integrated with the main objective of making and keeping the sales commissions that it is difficult to designate these functions as one or the other.” Thus, “During the time that Plaintiff was employed as a Route Sales Representative he spent at least fifty percent of the time he was away from Defendant's premises engaged in sales activities such as solicitation of and distribution of sales literature to customers and potential customers.” After judgment was entered, Ramirez filed his timely appeal.
Ramirez contends (1) the trial court incorrectly construed Industrial Welfare Commission Wage Order No. 7-80 (Cal.Code Regs., tit. 8, § 11070); (2) there is no evidence to support the court's finding Ramirez was an outside salesperson and so he (a) should have been paid overtime, and (b) was not a commissioned employee. [[/]]**
l. The meaning of “outside salesperson” in Wage Order No. 7-80.
The California Industrial Welfare Commission (IWC) was established to “promulgate orders regulating wages, hours, and conditions of employment for employees throughout the state.” (Nordquist v. McGraw-Hill Broadcasting Co. (1995) 32 Cal.App.4th 555, 561, 38 Cal.Rptr.2d 221, citation omitted.) IWC Wage Order No. 7-80 (Order No. 7-80) governs employees in the mercantile industry. However, this order, which establishes minimum wages and overtime pay, excludes from its ambit, “outside salespersons.” (Grubb & Ellis Co. v. Spengler (1983) 143 Cal.App.3d 890, 897, 192 Cal.Rptr. 637, Order No. 7-80, subd. 1.(B).) The reason for this exclusion “ ‘․ is that such employees normally control their own hours and are paid on a commission basis.’ [Citation.]” (Grubb & Ellis Co., supra.)
“Outside Salesperson” is defined in Order No. 7-80 as “any person ․ who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.” 1 (Order No. 7-80, subd. 2.(I), italics added.)
In resolving the question whether Ramirez was an “outside salespersons” and thus exempt from the overtime-pay requirements of Order No. 7-80, we are guided by certain rules pertaining to employment. (1) The employer carries the burden of proving the employee is exempt; (2) exemptions are construed narrowly and against the employer, and (3) their application is limited to those employees who fall plainly and unmistakably within their terms. (Nordquist v. McGraw-Hill Broadcasting Co., supra, 32 Cal.App.4th at p. 562, 38 Cal.Rptr.2d 221, citing Corning Glass Works v. Brennan (1974) 417 U.S. 188, 196-197, 94 S.Ct. 2223, 2229, 41 L.Ed.2d 1, and Dalheim v. KDFW-TV (5th Cir.1990) 918 F.2d 1220, 1224.)
Focusing on the Order's definition of “outside salesperson” as one who spends “more than half the working time ․ selling ․ items or obtaining orders ” Ramirez argues selling does not include scheduled delivery of water and the functions associated therewith. In Ramirez's view, most of his time was spent in “ ‘rendering a service, not selling it.’ ”
Research has revealed no cases which sets out the factors for analyzing whether a bottled-water deliveryman who engages in sales, is an outside salesperson. However, the California overtime laws and the wage orders are modeled to some degree on the federal Fair Labor Standards Act (FLSA). (29 U.S.C. § 213.) The federal regulations at 29 C.F.R. § 541.500 et seq. define the “outside salesperson” as any employee “(a) Who is employed for the purpose of and who is customarily and regularly engaged away from his employer's place or places of business in: [¶] (1) Making sales ․ or [¶] (2) Obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer ․ ” 2 (Italics added.) Because of the similarity in the definitions, we may look to the federal regulations for guidance. (Nordquist v. McGraw-Hill Broadcasting Co., supra, 32 Cal.App.4th at p. 562, 38 Cal.Rptr.2d 221; Monzon v. Schaefer Ambulance Service, Inc. (1990) 224 Cal.App.3d 16, 39, 273 Cal.Rptr. 615.)
Section 541.505(a) of 29 C.F.R. provides federal courts some direction in resolving the question of whether a “driver [salesperson]” who delivers the employer's products to the employer's customers but also engages in selling such products, is an “outside salesperson.” The regulations specifically address “the bottled[-]water distribution industry, where employees' occupations combine selling or sales promotion activities with product delivery.” (29 C.F.R. § 541.505, subd. (b).) Whether such an employee qualifies as an outside salesperson under the federal regulations depends on “the content of the job as a whole and not on its title or designation or the kind of business in which the employer is engaged.” (Ibid.) Hence, resolution of the issue is fact-driven where the court must decide whether “the employee is really employed for the purpose of making sales rather than for the service and delivery which he performs.” (29 C.F.R. § 541.505, subd. (a), italics added.) If so, “all work that he performs which is actually incidental to and in conjunction with his own sales effort is exempt work.” (Ibid.)
The employee qualifies as an “outside salesperson” under the regulations, “if and only if the facts clearly indicate” he or she is “employed for the purpose of making sales ” and he is “customarily and regularly engaged in such activity.” That is, the employee's “chief duty or primary function” is the making of sales or taking of orders and the employee must be a salesperson by occupation. (29 C.F.R. § 541.505, subd. (a), italics added.)
An “outside salesperson” is characterized in the Federal Regulations as “a routeman who provides the only sales contact between the employer and the customers, who calls on customers and takes orders for products which he delivers from stock in his vehicle ․ and who receives compensation commensurate with the volume of products sold․” (29 C.F.R. § 541.505, subd. (a), (b).) Thus, a driver makes sales when he is soliciting at the stops on his routes, sales or orders for his employer's products. Also, the driver who calls on established customers on his route, carrying an assortment of articles which his employer sells, to persuade them to purchase additional products or increased amounts of goods, is selling. The driver who “calls on new prospects for customers along his route and attempts to convince them of the desirability of accepting regular delivery of goods is likewise engaged in sales activity․” (Id., at subd. (c).) “[P]rovided such solicitation of the customer is frequent and regular” (ibid.), work incidental thereto and in conjunction with such sales, such as loading, driving the truck, delivering the products, removing empty containers for return to the employer and collecting payment is also considered by the federal government to be exempt work. (29 C.F.R. § 541.505, subd. (c).)
One is not an “outside salesperson” if he is a driver who calls on established customers “day after day or week after week, delivering a quantity of his employer's products at each call.” (Subd. (c).) In the words of the regulations, such an employee “[p]lainly ․ is not making sales when he delivers orders to [ (1) ]customers to whom he did not make the initial sale [ (2) ] in amounts which are exactly or approximately prearranged by the customer or contractual arrangement or [ (3) ] in amounts specified by the customer and not significantly affected by solicitations of the customer by the delivering driver.” (Subd. (c).) Making deliveries where the amounts are recurring and determined by the customer's demand, rather than the driver's sales effort, do not qualify the driver under the Federal Regulations as an “outside salesperson” nor is the work incident thereto considered exempt work. (29 C.F.R. § 541.505(c).)
2. Ramirez was an “outside salesperson” and thus exempt from overtime pay requirements.
Synthesizing the guidelines in federal regulations together with Order # 7-80, and the results to the facts of this case, we conclude, as a route sales representative, Ramirez was an “outside salesperson” and exempt from the overtime requirements. The testimony is clear that Ramirez was employed for the purpose of making sales of products and of Yosemite's service. His prime function was selling bottles of water and additional products Yosemite had to offer, as well as selling the service of maintaining the products and customers. For all of this, Ramirez was compensated on a commission basis keyed to the numbers of bottles or ingredients sold and the increases in the number of customers. (29 C.F.R. § 541.505, subd. (a).) The job of the route sales representative, who, the parties stipulated was the primary contact the company had with the customer (see 29 C.F.R. § 541.505, subd. (a)), is to call on customers to whom he delivered bottles, make sure the products are in good working order and the customers' water needs are looked after. Not only is the route sales representative delivering bottles, but he is expected to solicit and leave promotional literature at stops, call on new prospective customers and persuade current customers to increase their orders. Additionally, the parties stipulated while Ramirez was engaged in work off the premises, he worked alone “over ninety percent of the time.” All of these characteristics are typical of the job the federal regulations regard as outside salesperson under 29 C.F.R. § 541.505, subdivisions (a) and (b).
Ramirez himself testified he tried to sell extra merchandise to existing customers, left notes with customers to encourage them to increase water purchases; maintained a route book describing the activity and needs of each customer; prepared bills for customers; tallied cash received from sales, encouraged customers to refer their friends and neighbors; solicited at least 10 prospective new customers a day, on Saturdays and door-to-door during the week, and he even lowered prices if necessary to secure sales or save accounts.
Ramirez next argues we cannot include in the calculation of sales-related functions all of the incidental activities because they involve lifting, cleaning, bending, stooping, carrying, bottle-rotating and cooler replacement, but not selling. Based on the Federal Regulations which provide persuasive guidance, we must first consider whether the route sales representative was hired for the purpose of making sales, whether his chief duty is sales and whether he is away from his employer's premises and customarily and regularly engaged in selling. (29 C.F.R. § 541.505, subd. (a).) We concluded, supra, that Ramirez was hired for such purposes. If so, then under the federal guidelines, all of the activities incidental thereto, including loading, driving, delivering products, removing empty bottles and collecting payment, also constitute selling-related activities and can be included in the Wage Orders “more than fifty percent” calculation stated in Order # 7-80. (29 C.F.R. § 541.505, subd. (c).)
The evidence amply supports the trial court's conclusion here that Ramirez's actual solicitation and door-to-door selling, together with the incidental activities, take up more than 50 percent of the time Ramirez was away from the Yosemite premises. Hence, Ramirez was an “outside salesperson” as that term is defined under the Order # 7-80 and was exempt from the overtime laws. Ramirez himself testified he spent approximately 60 percent of an 11 hour workday or six and a half hours away from Yosemite's premises performing sales activities, or work which was incidental thereto. Niesen reviewed all the sales records, consulted with Yosemite employees and concluded as a route sales representative Ramirez spent over 90 percent of his time engaged in selling activities. In short, sufficient evidence supports the court's conclusion Ramirez customarily and regularly worked more than half the working time away from the Yosemite's place of business selling or obtaining orders. (Order # 7-80, § 2.(I).)
Ramirez's testimony he only spent three hours per week soliciting new business, and a minuscule amount of time each year trying to sell new products to existing customers is based on his understanding of what selling entails and was contradicted by others who defined his job description and selling differently. To the degree that a resolution was to be made of conflicting testimony, that is a task for the trial court. Otherwise, the facts that Ramirez did not try to persuade current customers to increase their orders, did not read the training manuals, and did the minimum necessary to solicit, do not make him less of an outside salesperson; it just means he did not do his job as optimally as the company expected. Indeed, he admitted he was not a great salesperson. The evidence supports the court's conclusion, the company expected, and the route sales representatives were encouraged by their commissions to influence the amounts of bottles and other products that a customer would purchase.
Ramirez relies extensively on Keyes Motors, Inc. v. Division of Labor Standards Enforcement (1987) 197 Cal.App.3d 557, 563, 242 Cal.Rptr. 873, where the court of appeal stated the automobile mechanics employed by Keyes Motors, which sells and services automobiles, “are engaged in rendering a service, not selling it ” and are not exempt from the overtime provisions of Order # 7-80. (Id., at p. 563, 242 Cal.Rptr. 873, italics added.) The Keyes court explained, “a mechanic performs labor, not sales.” (Id., at p. 564, 242 Cal.Rptr. 873.) Keyes is of little use for our purposes because, not only does it involve a different section of the Order, but it involves analysis of the activities of a distinctly different category of job, namely mechanics.
Next, Ramirez argues the trial court erred in its calculating the “more than fifty percent” equation in Order # 7-80. The trial court here found “[d]uring the time that [Ramirez] was employed as a Route Sales Representative he spent at least fifty percent of the time he was away from [Yosemite's] premises engaged in sales activities such as solicitation of and distribution of sales literature to customers and potential customers.”
Finally, Ramirez argues the trial court's focus “ ․ is on 50% of the time away from the employer's place of business, not the exemption requirement that 50% of all work time must be [spent in] selling functions away from the place of business.” (Original italics.) Stated otherwise, the court found Ramirez was selling during more than half of the time that he was away from Yosemite's premises, whereas to be exempt, the employee must be away and selling half of the time he is working. In mathematical terms, the court found Ramirez spent up to 20 percent of his workday at Yosemite's workplace, leaving 80 percent of his time in the field. If Ramirez were engaged in sales at least 50 percent of that 80 percent, he argues, he was selling only 40 percent of his worktime, which is not enough to place him within the exemption. We conclude the evidence shows Ramirez fits the definition of “outside salesperson,” i.e., more than 50 percent of his time is spent away and selling. The activities involved direct sales, i.e., soliciting new customers and selling additional products to existing customers or his activities were so integrated with the main objective of making and keeping the sales commissions that the trial court was correct. Thus, Ramirez was exempt from the overtime provisions of Order # 7-80.
The judgment is affirmed.
FOOTNOTE. See footnote *, ante.
1. To avoid application of the Order's definition of “outside salesperson,” Yosemite argues Labor Code section 1171 specifically excludes “outside salesmen” from the Industrial Welfare Commission's jurisdiction with the result the IWC exceeded its jurisdiction in defining “outside salesmen.” The argument is utterly specious.Labor Code section 1171 defines scope of the chapter on wages, hours and working conditions by excluding outside salesmen. Necessarily, the IWC must establish what it means by outside salesmen so that it can ascertain whether an employee falls within its jurisdiction. It is an essential part of the IWC's job to set the perimeters of the chapter's scope so that it can perform its statutory function and oversee uniform application. (Marshall v. McMahon (1993) 17 Cal.App.4th 1841, 1848, 22 Cal.Rptr.2d 220.) A manifest purpose behind Order # 7-80, which, pursuant to section 1185 of the Labor Code is “valid and operative,” is to establish the parameters of Labor Code section 1171.
2. While we agree with Yosemite that the federal regulations are helpful, we note their definition of “outside salesperson,” although close to the definition contained in Order No. 7-80, does not include the specific requirement that the salesman be selling for “more than half the working time away” from the employer's premise. (Order No. 7-80, § 2. (I), italics added.)
FOOTNOTE. See footnote *, ante.
ALDRICH, Associate Justice.
CROSKEY, Acting P.J., and KITCHING, J., concur.