Karl v. Zimmer Biomet Holdings, Inc.

Background

James Karl worked as a California sales representative for Zimmer US, Inc., Biomet U.S. Reconstruction, LLC, and Biomet Biologics, LLC. His agreement called him an independent contractor, and he was paid through his own limited liability company. He sold orthopedic medical devices and spent about 60% to 70% of his time assisting surgeons during operations, including preparing products, answering questions, and helping plan procedures. His pay came only from commissions under a pooled arrangement involving other members of his sales team.

Karl asserted eight claims: overtime under the Fair Labor Standards Act, California overtime, California meal-period and rest-period violations, inadequate wage statements, unreimbursed business expenses, unfair business practices, and a claim under California’s Private Attorneys General Act. The defendants sought summary judgment on several claims and argued that Zimmer Biomet Holdings, Inc. and Biomet, Inc. were not Karl’s employers or joint employers. Karl sought additional discovery under Federal Rule of Civil Procedure 56(d), which allows a court to delay a summary-judgment decision when a party shows that necessary facts cannot yet be presented.

Outside-sales exemption

The court granted summary judgment on Karl’s federal overtime claim and California overtime claim. Under the federal law, an outside salesperson is exempt from overtime when the person’s main duty is making sales and the person regularly performs that duty away from the employer’s business. California law similarly exempts a person who works more than half the time away from the employer’s business selling products or obtaining orders.

The court concluded that Karl’s primary duty was making sales under federal law and that more than half of his work was sales-related under California law. It treated his “case coverage”—assisting surgeons during procedures—as part of his sales method because Karl’s own testimony showed that the work helped him develop relationships with physicians, promote products, obtain orders, and prevent competitors from taking business. The court also relied on his sales compensation, autonomy, work away from the companies’ offices, and experience in the medical-device industry.

The court did not decide whether Karl was misclassified as an independent contractor for purposes of the overtime claims because the outside-sales exemption resolved those claims. It granted summary judgment on Claim 1, the Fair Labor Standards Act overtime claim, and Claim 2, the California overtime claim.

Meal and rest periods

Because California’s applicable wage order does not apply its meal- and rest-period requirements to outside salespersons, the court granted summary judgment on Claims 3 and 4.

Expense reimbursement and unfair-business-practices claim

The court denied summary judgment on Claim 6, Karl’s California expense-reimbursement claim. Applying California’s multifactor employment test, the court found that a reasonable jury could reach different conclusions about whether Karl was an employee or an independent contractor. The court noted evidence concerning the companies’ termination rights, Karl’s required transfer of business information and customer materials after termination, required scheduling entries, and limits on his advertising and social-media activity.

The court also denied summary judgment on Claim 7, Karl’s unfair-business-practices claim, because that claim remained viable at least to the extent it was based on the expense-reimbursement claim that remained pending.

Zimmer Biomet Holdings and Biomet

The court granted Zimmer Biomet Holdings, Inc. and Biomet, Inc. summary judgment on all claims. Karl contracted with Zimmer US, Biomet Reconstruction, and Biomet Biologics, and the court found no evidence that Zimmer Biomet Holdings or Biomet controlled Karl’s work, handled his pay, hired sales representatives, or maintained employment records concerning him. The court also rejected Karl’s argument that references to corporate affiliates in his agreement made those two entities contract parties.

Other rulings

The court granted the defendants’ motion to file under seal information about Karl’s commission compensation, including gross sales, net sales, and commission percentages, because the information was not needed for the public to understand the ruling and the defendants showed compelling reasons for sealing it.

The court denied Karl’s Rule 56(d) request for additional discovery. It found that he had had substantial time to pursue discovery, had not adequately shown that the requested information would affect the joint-employer analysis, and had not explained how the requested purchase-order and administrative-tool information would change the outside-salesperson analysis. The court certified the outside-salesperson issues for possible interlocutory appeal under 28 U.S.C. § 1292(b). Judge Alsup’s final disposition was that the defendants’ summary-judgment motion was granted in part and denied in part, the sealing motion was granted, and Karl’s Rule 56(d) motion was denied.