Stickles v. Atria Senior Living, Inc.

Background

George Stickles and Michele Rhodes worked as community sales directors (CSDs) for Atria Senior Living, Inc., and Atria Management Company, LLC. The defendants operate 46 senior-living communities in California and lease living spaces to senior citizens. CSDs worked from offices at their communities, reported to executive directors, and recorded daily activities in a customer-relationship-management database. The database tracked activities but not hours. Defendants paid CSDs flat salaries and commissions based on the total revenue of their respective communities. They did not pay overtime or provide meal and rest breaks because they classified CSDs as exempt outside salespersons.

A prior order certified a class of CSDs who had not signed arbitration agreements and whom defendants classified as exempt outside salespersons during the specified class period. Certification covered only whether defendants properly used the outside-salesperson exemption; certification of the underlying wage-and-hour claims was held in abeyance. Both sides moved for summary judgment on defendants’ ninth affirmative defense, which asserted that the CSDs were properly classified as exempt outside salespersons.

Legal standard

Summary judgment is proper when the record shows no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. Under California law, an outside salesperson is an employee who customarily and regularly works more than half of the working time away from the employer’s place of business selling items or obtaining orders or contracts for products, services, or use of facilities. California exemptions from mandatory overtime protections are narrowly construed. The employer bears the burden of proving the exemption.

Under the California Supreme Court’s decision in Ramirez v. Yosemite Water Co., the court examined the realistic requirements of the job, including how employees actually spend their time, the employer’s realistic expectations, and the job’s overall requirements. The court first identified which activities counted as sales and then considered whether CSDs spent more than half their time on qualifying outside-sales work.

Activities that did not qualify as outside sales

The court held that responding to phone calls, emails, or texts from potential residents; initiating such communications; and assisting walk-in visitors were “inquiries,” not sales. Those activities were directed toward scheduling tours, learning about potential residents, and building rapport, rather than persuading a particular customer to purchase a product at that time. The court treated this work as directed toward stimulating sales generally rather than completing specific sales.

Tours of the communities also did not qualify as outside sales because they occurred inside the employer’s places of business. Competitive updates—researching local competitors and reporting the findings to management—did not involve attempting to lease living spaces. Professional sales calls likewise did not qualify. During those calls, CSDs met with professionals such as doctors, real estate agents, attorneys, and hospital or rehabilitation-center employees to develop referral relationships. The professionals were not prospective residents, did not purchase goods or services from the defendants, and did not enter referral agreements with them. The court concluded that the professionals were referral sources, not customers whom CSDs were trying to persuade to purchase specific apartments.

The court rejected defendants’ comparisons to pharmaceutical and medical-device sales. In those industries, doctors or hospitals control which products patients receive or purchase. The court found that professional referral sources here did not control the market for leasing apartments to seniors; CSDs could sell directly to the seniors.

Activity that qualified as outside sales

The court held that “secondary closes” qualified as outside sales. These were visits with potential residents at homes, hospitals, and rehabilitation centers after the residents had not signed a lease following a community tour. The purpose was to persuade the potential resident to schedule a lease signing. Because these visits involved attempting to persuade potential customers to purchase apartments and occurred away from the employer’s workplace, they were directly related to sales and were exempt work.

Application to the class

Only secondary closes qualified as outside sales. Defendants therefore had to show that CSDs were realistically required to spend more than 50 percent of their working time on secondary closes. The court found that defendants’ own expectations did not support that conclusion: defendants expected CSDs’ interactions with seniors generally to occur inside the communities and expected most outside-community work to consist of professional sales calls.

The activity data supported the same conclusion. More than 90 percent of CSD workweeks during the class period had no entry for a home visit or hospital/rehabilitation visit. By contrast, 87 percent had at least one tour entry, and 50 percent had at least three tour entries. Fifty-five percent had at least one professional-sales-call entry. Although the data did not show the hours spent on secondary closes, the court found that the greater weight of the evidence showed CSDs spent less than a majority of their time on them. Defendants did not raise a genuine dispute about the frequency of secondary closes.

The court also rejected defendants’ arguments based on the position’s sales designation, sales training, commissions, solicitation of new business, and supervision. It found those factors less important than the nature and amount of each activity under California’s quantitative test. The court further concluded that the CSDs’ efforts to develop referral relationships stimulated the defendants’ sales generally rather than consummating the CSDs’ own specific sales.

The order addressed only the outside-salesperson exemption for purposes of class-wide summary judgment. Defendants’ brief reference to an administrative exemption did not provide sufficient evidence, and the court did not consider other possible exemptions for class-wide summary judgment.

Disposition

Except as to Felicia Horkins, Jennifer Hall, and Angelina Nunez, the court granted plaintiffs’ motion for summary judgment. It denied defendants’ motion. The court ordered separate trials on the misclassification issue for those three class members. It also denied plaintiffs’ evidentiary objections as moot. The order did not resolve the underlying wage-and-hour claims or consider other exemptions for class-wide summary judgment.