Karl v. Zimmer Biomet Holdings, Inc.

Background

James Karl brought a putative employment class action against Zimmer Biomet Holdings, Inc., Zimmer US, Inc., Biomet U.S. Reconstruction, LLC, Biomet Biologics, LLC, and Biomet, Inc. Karl signed a sales associate agreement with Zimmer US, Biomet Reconstruction, and Biomet Biologics in 2015. The agreement classified him as an independent contractor. He worked as a sales representative selling orthopedic devices in California, was paid through Edge Medical, LLC, and received commissions through a pooled team arrangement.

Karl spent approximately 60 to 70 percent of his time on “case coverage,” assisting surgeons in operating rooms, setting up products, answering questions about product safety and effectiveness, and planning procedures. He worked an average of 10 to 12 hours per day. His complaint asserted eight claims: federal overtime violations; California overtime, meal-period, and rest-period violations; failure to provide itemized wage statements; failure to reimburse business expenses; unfair business practices; and a claim under the Private Attorneys General Act.

Summary-judgment standards and overtime claims

The defendants moved for summary judgment against Karl individually. Summary judgment is proper when there is no genuine dispute about a fact that could affect the result under the governing law. The court must view the evidence and reasonable inferences in favor of the nonmoving party and may not decide witness credibility or weigh conflicting evidence.

For the federal overtime claim, the defendants argued that Karl could not prove he was an employee and, alternatively, that he was exempt from overtime as an outside salesperson. The court resolved the claim under the exemption and expressly stated that it did not need to decide whether Karl was misclassified as an independent contractor. Under the Fair Labor Standards Act, the outside-salesperson exemption applies when an employee’s primary duty is making sales and the employee regularly performs that duty away from the employer’s place of business.

The court found that Karl’s primary duty was making sales and that his case coverage was sales-related. It relied on his hiring as a sales representative, his testimony that he and his team were salespeople, his description of sales as his most important goal, and his testimony that his “solution-selling” method involved helping surgeons in ways that increased sales, developed customer relationships, and protected business from competitors. The court also relied on his commission-based compensation, autonomy, work away from the defendants’ business locations, and regular annual earnings of more than $130,000. It held that Karl had not raised a triable issue of fact and granted summary judgment on Claim 1.

The court applied a similar outside-salesperson exemption under California law, which considers whether more than half of the employee’s actual work involved sales-related activity. It found that Karl qualified under that standard as well and granted summary judgment on Claim 2. Because the applicable California wage order did not apply its meal- and rest-period requirements to outside salespersons, the court also granted summary judgment on Claims 3 and 4.

Expense reimbursement and unfair-business-practices claims

For Karl’s California expense-reimbursement claim, the court applied the multifactor test from S.G. Borello & Sons v. Department of Industrial Relations. That test considers the hirer’s right to control the manner and means of the work, along with other factors bearing on whether the worker is an employee or an independent contractor.

The court held that a reasonable jury could reach different conclusions about Karl’s status. The evidence included contract provisions allowing the defendants to terminate the relationship on 10 days’ notice, requiring Karl to transfer business information and customer accounts when the relationship ended, and evidence that the defendants required him to enter scheduling information into administrative systems, obtain approval for advertising, and refrain from promoting products on social media. The court therefore denied summary judgment on Claim 6.

Because Claim 6 remained viable, the court held that Karl’s California unfair-business-practices claim remained viable at least to that extent. It therefore denied summary judgment on Claim 7.

Claims against Zimmer Biomet Holdings and Biomet

Zimmer Biomet Holdings and Biomet separately sought summary judgment on all claims, arguing that neither entity employed Karl or contracted with him. The court agreed. Karl contracted with Zimmer US, Biomet Reconstruction, and Biomet Biologics. The court found no evidence that Zimmer Biomet Holdings participated in Karl’s day-to-day sales operations, hired independent-contractor sales representatives, controlled their pay, or kept employment records. It also found no evidence that Biomet controlled the contracting entities or was involved in Karl’s work.

The court rejected Karl’s argument that references to affiliates in the sales associate agreement made Zimmer Biomet Holdings and Biomet parties to the contract. The agreement identified only Karl, Zimmer US, Biomet Reconstruction, and Biomet Biologics as the contracting parties, and the affiliate references did not make the other entities signatories. The court also concluded that Karl had not raised a fact issue under either the federal or California joint-employer standards. It granted summary judgment on all claims in favor of Zimmer Biomet Holdings and Biomet.

Sealing request and Rule 56(d) request

The defendants sought to seal an exhibit containing information about Karl’s compensation, including gross sales, net sales, and commission percentages. Because the court did not rely on that information and the public could understand the dispute without it, the court found compelling reasons to seal the material and granted the motion to file under seal.

Karl sought to delay or deny summary judgment under Federal Rule of Civil Procedure 56(d), arguing that discovery was incomplete. The court denied that motion. It found that Karl had not shown that the additional discovery he sought would provide meaningful information, had been aware of the joint-employer issue for months, and had not adequately explained how the requested records would affect the exemption analysis. The court also noted that his request for discovery about control over his work was moot because summary judgment had already been denied on the expense-reimbursement issue.

Disposition

The defendants’ motion for summary judgment was granted in part and denied in part as described above. The defendants’ motion to file under seal was granted, and Karl’s Rule 56(d) motion was denied.