Weninger v. Gen. Mills Operations LLC

344 F.Supp.3d 1005

John WENINGER, Plaintiff,

v.GENERAL MILLS OPERATIONS LLC, Defendant.

Case No. 18-CV-321-JPS

United States District Court, E.D. Wisconsin.

Signed September 25, 2018

David M. Potteiger, James A. Walcheske, Matthew J. Tobin, Scott S. Luzi, Walcheske & Luzi LLC, Brookfield, WI, for Plaintiff.

Casey M. Kaiser, Sofija Anderson, Littler Mendelson PC, Milwaukee, WI, Shanthi V. Gaur, Littler Mendelson PC, Chicago, IL, for Defendant.

ORDER

J.P. Stadtmueller, U.S. District Judge

Plaintiff John Weninger ("Weninger") filed this action on March 2, 2018, alleging violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. , and the Family Medical Leave Act ("FMLA"), 29 U.S.C. § 2601 et seq. , against his former employer, Defendant General Mills Operations LLC ("General Mills"). (Docket # 1). Weninger seeks to bring his FLSA claim on a class basis, which in the parlance of the FLSA is called a collective action. See 29 U.S.C. § 216(b). On June 22, 2018, he filed a motion for conditional certification of his FLSA claim as a collective action. (Docket # 16). General Mills opposes the motion and filed its own motion for summary judgment as to the FLSA claim. (Docket # 21). Both motions are fully briefed and, for the reasons stated below, General Mills' motion will be denied without prejudice and the proposed collective action will be conditionally certified.

1. BACKGROUND

The basic facts are undisputed. General Mills manufactures consumer food products. It operates nearly thirty production facilities across the country, including one in Milwaukee, Wisconsin, where Weninger worked. He was employed as a Training Coordinator, which is a non-exempt, hourly position for FLSA purposes.

In addition to their regular, hourly rates of pay, General Mills employees like Weninger received lump sum payments referred to as "Wage Incentive Bonuses." The bonus was determined annually and paid out in two separate payments, one in December and one in July. The Wage Incentive Bonus is calculated according to a formula established by General Mills and known to its non-exempt employees, including Weninger, in order to encourage or reward their rapid, safe, consistent, and efficient work performance. If a General Mills employee is an active, full-time employee at the time the Wage Incentive Bonus is made, he or she is entitled to receive it. The formula takes into account the employee's work performance, the production facility's performance, the safety and reliability of the facility, and other performance metrics.

The result of the Wage Incentive Bonus formula is a percentage. That percentage is multiplied by the employee's "eligible earnings" (a term used by General Mills, not the FLSA), including regular (or "straight") pay, overtime pay, and holiday pay combined. The product of that calculation is the total Wage Incentive Bonus for the year, which, as noted above, is paid in two installments. The Wage Incentive Bonus was not included in Weninger's or other employees' regular rates of pay when determining overtime compensation, for reasons that will be explored below.

Many General Mills employees enjoy another bonus, called the "Lump Sum Merit Bonus." According to General Mills, the bonus has no relation to employee productivity and is only used to adjust employee compensation based on prevailing market rates for similar work. (Docket # 32 at 8). Like the Wage Incentive Bonus, the Lump Sum Merit Bonus is calculated by applying a fixed percentage to the employee's eligible earnings—his straight time, overtime, and holiday pay combined. For instance, in 2016 eligible employees received a Lump Sum Merit Bonus of 1% of their eligible earnings. (Docket # 24 ¶¶ 3–4).

2. ANALYSIS

2.1 General Mills' Compensation Structure

Conditional certification of a collective action is distinct from the procedure normally applied to class litigation under Federal Rule of Civil Procedure 23. Woods v. N.Y. Life Ins. Co. , 686 F.2d 578, 579–80 (7th Cir. 1982). It allows a court to conditionally certify a collective action under the FLSA so that notification to putative class members may be made, those putative class members may affirmatively opt in to the collective action, and class discovery may be taken. 29 U.S.C. § 216(b) ; Woods , 686 F.2d at 579–80. Once this is done, the plaintiff can move for final, full certification of the collective action. Jirak v. Abbott Labs., Inc. , 566 F.Supp.2d 845, 848 (N.D. Ill. 2008). For the initial step of conditional certification, the plaintiff must only make "a minimal showing that others in the potential class are similarly situated," Mielke v. Laidlaw Transit, Inc. , 313 F.Supp.2d 759, 762 (N.D. Ill. 2004), which requires no more than "substantial allegations that the putative class members were together the victims of a single decision, policy, or plan," Thiessen v. Gen. Elec. Capital Corp. , 267 F.3d 1095, 1102 (10th Cir. 2001).

On the face of the complaint, Weninger appears to satisfy this lenient standard. He alleges that he and other hourly, non-exempt employees at General Mills' production facilities were subject to its unlawful practice of failing to include the Wage Incentive Bonus, a non-discretionary form of remuneration, in their regular rates of pay for purposes of determining overtime compensation. See (Docket # 1 ¶ 46).¹ General Mills essentially concedes that the Wage Incentive Bonus should be considered part of its employees' regular rate. (Docket # 22 at 8–11). But it nevertheless asserts that it should be granted summary judgment on the FLSA claim because its Wage Incentive Bonus is a permissible percentage bonus. Id.

Non-discretionary bonuses must normally be recomputed into an employee's regular rate before calculating his overtime compensation. 29 U.S.C. § 207(e)(3)(a) ; 29 C.F.R. § 778.211(c) ; Gilbertson v. City of Sheboygan , 165 F.Supp.3d 742, 749–50 (E.D. Wis. 2016). Otherwise, an unscrupulous employer could take a portion of an employee's ordinary compensation, call it a "bonus," exclude it from the employee's regular rate, and thereby artificially deflate the employee's overtime rate of pay. In an interpretive regulation, the Department of Labor ("DOL") opines that an employer can avoid this recomputation exercise by paying a percentage bonus based on the employee's "total earnings," including all straight time, overtime, and other remuneration combined. 29 C.F.R. § 778.210.² From a mathematical perspective, a percentage bonus under Section 778.210 achieves the same result as recomputation. Thus, percentage bonuses are permissible not because they have some independent legal justification, but because they achieve the same ultimate result for the employee.

General Mills says this is how its Wage Incentive Bonus works. (Docket # 22 at 11). Weninger disagrees, arguing that the Wage Incentive Bonus is calculated based on what General Mills calls "eligible earnings," a sum that includes pay for straight time, overtime, and holidays, but excludes other portions of an employee's "total earnings," such as the Lump Sum Merit Bonus, in contravention of Section 778.210. (Docket # 29 at 7–8).

The FLSA requires that an employee be compensated with overtime pay "at a rate not less than one and one-half times" the employee's regular rate for hours worked in excess of forty in a week. 29 U.S.C. § 207(a). An employee's "regular rate" includes "all remuneration for employment paid to...the employee," id. § 207(e), subject to eight statutory exemptions. Cleveland v. City of Los Angeles , 420 F.3d 981, 988 (9th Cir. 2005) (citing Arnold v. Ben Kanowsky, Inc. , 361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960) ). Payments that do not fall within an exemption "must be totaled in addition to the regular earnings of an employee" before a regular hourly rate of pay can be determined. 29 C.F.R. § 778.208. The employer bears the burden of establishing that a payment is exempt from the regular rate. Idaho Sheet Metal Works, Inc. v. Wirtz , 383 U.S. 190, 209, 86 S.Ct. 737, 15 L.Ed.2d 694 (1966). "FLSA exemptions are to be narrowly construed against...employers and are to be withheld except as to persons plainly and unmistakably within their terms and spirit." Klem v. Cty. of Santa Clara, Cal. , 208 F.3d 1085, 1089 (9th Cir. 2000).

Weninger's argument relies on the premise that the phrase "total earnings" in Section 778.210 is equivalent to the phrase "regular rate" used in Section 207. Some courts have found that "total earnings" encompasses merely straight time and overtime, while others hold that the phrase includes all remuneration for employment, including non-discretionary bonuses, just like an employee's regular rate. Compare White v. Publix Super Markets, Inc. , No. 3:14-cv-1189, 2015 WL 4949837, at *18 (M.D. Tenn. Aug. 19, 2015), with Harris v. Best Buy Stores, L.P. , Case No. 15-cv-00657-HSG, 2016 WL 4073327, at *4–5 (N.D. Cal. Aug. 1, 2016). General Mills does not urge the Court to take a side in this dispute. It defends the Lump Sum Merit Bonus as a percentage bonus, as will be explained below. Thus, for present purposes the Court assumes that the Lump Sum Merit Bonus falls within the "total earnings" of the employee under Section 778.210.

The parties dispute how the Lump Sum Merit Bonus should be categorized and how it was treated by General Mills.³ Like his argument about the Wage Incentive Bonus, here Weninger says that the Lump Sum Merit Bonus should be included in the regular rate because it is nondiscretionary and intended to foster worker retention, 29 C.F.R. § 778.211(c), while General Mills responds that the Lump Sum Merit Bonus is calculated as a percentage bonus in exactly the same way as the Wage Incentive Bonus—that is, a fixed percentage applied to the sum of the employee's straight time, overtime, and holiday pay, (Docket # 32 at 7). Thus, in General Mills' view, the Lump Sum Merit Bonus does not need to be recomputed into the employee's wage before calculating overtime, per ...