Call Center Employees Who Received Commissions Not Based Upon Percentage of Sales Price Still Exempt from Overtime Pay

Parker v. NutriSystem, Inc., 2010 WL 3465054 (3d Cir., September 7, 2010) – The Third Circuit Court of Appeals has determined that call center sales employees who received a flat rate per sale that is not strictly based upon the cost of the product to the customer still were paid on the basis of “commissions” and thus not eligible for overtime under the Fair Labor Standards Act. Under NutriSystem’s compensation scheme, most call center sales associates do not receive an hourly rate or overtime, but instead receive flat-rate payments of $18, $25 or $40, depending on the time of day of the sale and whether the sale came from an inbound or outbound call. Relying on several Department of Labor (DOL) opinion letters, the plaintiff argued that the payments were not “commissions,” because they were not strictly based on a percentage of the cost of the product sold to the customer. The Court of Appeals disagreed, holding that payments need not be based strictly on a percentage of the end cost to the consumer to qualify as commissions. It held that the payments at issue were “commissions” because, among other reasons, they were sufficiently proportional to the cost of the products sold to the consumers (most of the meal plans cost roughly the same amount), and they were based on the value NutriSystem was receiving from the sales associates’ work, which was unrelated to the employees’ actual time worked.