United States Court of Appeals For the First Circuit

No. 23–1793

JULIE A. SU, Acting Secretary of Labor, United States Department of Labor,

Plaintiff, Appellee,

v.

F.W. WEBB COMPANY,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Angel Kelley, U.S. District Judge]

Before

Barron, Chief Judge, Selya and Kayatta, Circuit Judges.

Rachel Cowen, with whom James M. Nicholas, Henry Leaman, and McDermott Will & Emery LLP were on brief, for appellant.

Joseph E. Abboud, Attorney, U.S. Department of Labor, Office of the Solicitor, with whom Seema Nanda, Solicitor of Labor, Jennifer S. Brand, Associate Solicitor, and Rachel Goldberg, Counsel for Appellate Litigation, were on brief, for appellee.

August 1, 2024 KAYATTA, Circuit Judge. The Acting Secretary of Labor

brought this action against F.W. Webb Company ("Webb"), an

industrial product wholesaler, alleging that Webb misclassified

its Inside Sales Representatives ("ISRs") as exempt administrative

employees in violation of the Fair Labor Standards Act's overtime

and recordkeeping requirements. The district court granted

judgment to the Secretary on both claims, finding that the ISRs

did not qualify for the exemption because their "primary duty" is

not "directly related to the management or general business

operations" of Webb or its customers. See

(a)(2). For the following reasons, we are unpersuaded by

Webb's appeal from that judgment.

I.

A.

Webb is a wholesale distributor of engineering and

construction products including plumbing, heating, cooling, and

PVF (pipes, valves, and fittings) equipment and fixtures. Webb's

principal business is to make "wholesale sales of those products

to contractors in various industries, government organizations,

institutions such as universities and hospitals, industrial

buyers, and other customers who work in construction, building

maintenance, and infrastructure." Su v. F.W. Webb Co.,

, 11–12 (D. Mass. 2023). Webb generates its revenue

from three categories of employees "who directly sell the products

- 2 - to customers": ISRs, outside salespersons, and counter

salespersons.

.

Webb's principal office is in Bedford, Massachusetts,

but it also operates more than a hundred storefront locations

across nine states in New England and the mid-Atlantic.

During the relevant period of the Secretary's investigation, Webb

employed over 600 ISRs across those nine states.

Webb employs

far more ISRs than it does outside or counter salespersons, which

number around 300–350 and 100 respectively. During the period in

question, Webb classified all of its ISRs as administrative

employees exempt from the Fair Labor Standards Act's ("FLSA")

overtime requirements, and at least some ISRs worked over forty

hours during some workweeks without receiving FLSA overtime

premiums.

It is uncontested that Webb generates revenue from its

ISRs though the sales transactions they complete with customers.

It is also uncontested that the ISRs directly interact with

customers throughout the sales process, from a customer's initial

contact to the delivery of purchased products.

In the

interim, ISRs work with the customer to "figure out what the right

product or products [are]." ISRs specialize in various product

areas, but Webb considers all its ISRs to have the same position

and basic duties.

ISRs report to the general manager

supervising the store at which they work, but at some stores they

- 3 - may also report to an "inside sales manager."

ISRs themselves

do not have management duties over other employees.

A representative March 2019 job description posted by

Webb stated that ISRs "will work cooperatively with . . . other

members of the sales team to grow existing customers, to create

new customers and meet or exceed monthly sales quotas at the

appropriate gross margin while increasing customer satisfaction."

Specific job responsibilities are listed as follows: processes

and maintains customers' orders; creates transfers between various

Webb locations to fulfill customer orders; attains specialty

material through the use of purchase orders; recommends, sources,

and prices bids for customers; makes pricing decisions on

orders/bids to maintain competitiveness in the marketplace;

follows up on long lead time purchase orders, keeping customers

informed of any changes; effectively handles customer-service

issues; schedules and manages customer deliveries; produces bids

for customer approval; manages credits to Webb standards; and

additional duties as assigned.

Unlike Webb's counter salespersons, who primarily

provide quotes and conduct simple over-the-counter sales

transactions in stores, ISRs spend only a minority of their time

providing readymade quotes to customers from a specified parts

list.

at 12–13. Counter salespersons primarily service

customers who physically visit a Webb storefront location to

- 4 - purchase a specified product, such as "small equipment pieces,

fittings, [and] valves." By contrast, while ISRs also complete

similar kinds of transactions to those performed by counter

salespersons, they principally interact with customers over phone

and email -- and often on more significant projects. Also unlike

counter salespersons, ISRs have discretion and authority to

deviate from Webb's pricing matrix when dealing with customers.

.

Webb expects its ISRs to "possess the knowledge and

expertise in their respective [product] areas in order to advise

their customers on the best solutions for their needs."

Principally, this involves working with the customer, who might

not know which specific part or item they require, to identify the

specific item that best meets their goals.

Often a customer

will provide an ISR with specifications for a project -- such as

in connection with the customer's preparation of a bid in response

to a request for proposal -- and ask the ISR to provide quotes for

all the products needed to meet those specifications, based on

Webb's inventory and items the ISR can source.

Accordingly,

several ISRs aver that they spend a majority of their time

"advising" or "consulting" customers on the best solutions for

their projects, a process which often culminates in the customer

making one or more purchases. As Webb's COO acknowledges, "[t]he

end game is completing the sale[.]" Webb does not charge customers

- 5 - consulting fees for ISRs' time spent guiding them toward specific

products for their project or bid.

Webb admits that it hopes its ISRs' interactions with

customers lead to a sale. But regardless of the outcome, Webb

views ISRs' services as "important to maintaining the pipeline of

transactions in the future" by promoting customer relationships.

As Webb explains, "[e]nsuring that the customers are satisfied and

will return to Webb for their [respective] needs is an integral

part of [an ISR's] duties." To that end, ISRs act as "Webb's eyes

and ears on the marketplace," providing general managers with

information about competitors for Webb's development of marketing

and pricing strategies.

ISRs' additional duties include providing technical

support to outside salespersons -- who are not as "technically

savvy" as ISRs -- such as information on the selection and

sufficiency of particular products. ISRs also perform various

duties after a particular sale is made, including tracking Webb

inventory once a customer makes an order, following up on an

order's shipping status, interacting with third-party

manufacturers if necessary, and addressing customer complaints.

ISRs are compensated in accordance with grade levels as

determined by seniority and experience, as well as pay tiers within

those grade levels, which are determined by an ISR's annual

- 6 - performance appraisal.

at 13–14. To document ISRs'

performance appraisals, Webb uses a standard form completed by

each ISR's general manager. The form is divided into two sections:

section A, which looks at "key responsibilities," and section B,

which measures "behavioral responsibilities." The manager

completing the form assigns ratings for a set of criteria within

each of these sections based on software metrics that Webb uses to

track ISRs' activities during the work day.

.

Section A measures "key responsibilities" by assessing

ratings for an ISR across four categories. The first, "sales and

GP budget," asks if the employee met sales and profit targets for

the year. See

The second, "bid and bid follow-up," is based

on the number of bids written, win rate, and follow up rate.

Third, "open orders" measures the number of open order sales past

due, open orders past due, and open orders with follow up required.

Fourth and finally, "communication" is measured by the number of

phone calls answered, not answered, as well as the number of an

ISR's calendar entries.

As for Section B, the "behavioral responsibilities"

component measures "customer focus"; "drive for results";

"integrity, interpersonal savvy, and organizational agility";

"listening and negotiating"; "functional/technical skills";

"technical learning"; and "problem solving." For example, the

"customer focus" rating is based on whether the ISR, among other

- 7 - things, "[i]s dedicated to meeting the expectations and

requirements of internal and external customers," and "[a]cts with

customers in mind." Similarly, "drive for results" measures if an

ISR is "consistently one of the top performers" and is "[v]ery

bottom-line oriented."

B.

After completing an investigation, the Secretary filed

suit against Webb in July 2020. In addition to asserting an FLSA

retaliation claim not relevant here, the Secretary alleged that

Webb misclassified its ISRs as administrative employees exempt

from the FLSA's overtime and recordkeeping requirements, failed to

pay ISRs the requisite overtime premium under the FLSA for certain

weeks, and failed to maintain records of hours worked for

non-exempt employees. After discovery, the district court granted

the Secretary's motion for partial summary judgment on both its

overtime and recordkeeping claims. F.W. Webb Co., 677 F. Supp. 3d

at 28–29.

The district court found that Webb's core business

purpose was to sell its products, and that the ISRs' primary duty

was to make sales by servicing Webb's customers.

.

Accordingly, since the ISRs effectively "produce the product or

provide the service that the company is in business to provide,"

at 19 (quoting Walsh v. Unitil Serv. Corp.,

(1st

Cir. 2023)), the district court concluded that the ISRs' primary

- 8 - duty was not "directly related to the management or general

business operations of the employer" as required to qualify for

the administrative employee exemption,

(a)(2).

The court found that the FLSA's overtime and recordkeeping

requirements applied to ISRs, and that Webb violated both

requirements by failing to pay ISRs overtime or keep proper

records. F.W. Webb Co., 677 F. Supp. 3d at 28–29. After all

remaining claims and defenses were resolved by agreement and final

judgment was entered in the Secretary's favor, Webb's timely appeal

followed.

II.

We review a district court's entry of summary judgment

de novo, viewing the record in the light most favorable to the

nonmovant -- here, Webb -- and drawing all reasonable inferences

in its favor. Martínez v. Novo Nordisk Inc.,

(1st

Cir. 2021). Summary judgment is appropriate where "there is no

genuine dispute as to any material fact and the movant is entitled

to judgment as a matter of law." Fed. R. Civ. P. 56(a).

A.

The FLSA requires that covered employers pay certain

employees an overtime premium "at a rate not less than one and

one-half times the regular rate at which [they are] employed."

(a)(1). Employers must also keep records tracking

covered employees' work hours.

§ 211(c);

(a).

- 9 - The FLSA exempts from these provisions "any employee

employed in a bona fide executive, administrative, or professional

capacity . . . as such terms are defined and delimited from time

to time by regulations of the Secretary."

(a)(1).

The Secretary's regulations define those working in an

"administrative" capacity as those employees: (1) who are

compensated on a salary or fee basis pursuant to

at a rate of not less than $844 per week (subject to

certain exceptions); (2) whose primary duty is the performance of

office or non-manual work directly related to the management or

general business operations of the employer or the employer's

customers; and (3) whose primary duty includes the exercise of

discretion and independent judgment with respect to matters of

significance.

(a). To fall under the

exemption, "each of the three prongs must be satisfied and the

employer bears the burden of establishing each prong." Unitil

Serv. Corp.,

(citing Reich v. John Alden Life Ins.

Co.,

, 7–8 (1st Cir. 1997)).

The parties do not dispute that Webb's ISRs meet the

applicable salary basis test (prong one) and the independent

judgment and discretion test (prong three) to qualify for the

administrative employee exemption. This appeal therefore turns on

the exemption's second prong, i.e., whether their "primary duty is

the performance of office or non-manual work directly related to

- 10 - the management or general business operations of the employer or

the employer's customers."1

(a)(2).

The Secretary's regulations expand on the meaning and

scope of the exemption's "primary duty" requirement. First,

"primary duty" is defined as "the principal, main, major or most

important duty that the employee performs," which "must be based

on all the facts in a particular case, with the major emphasis on

the character of the employee's job as a whole."

§ 541.700(a).

The regulations note that "[t]he amount of time spent performing

exempt work can be a useful guide" to the analysis, and thus

"employees who spend more than 50 percent of their time performing

exempt work will generally satisfy the primary duty requirement."

Id. § 541.700(b). "Time alone, however, is not the sole test,"

1 The Secretary's regulations also provide that: An employee may qualify for the administrative exemption if the employee's primary duty is the performance of work directly related to the management or general business operations of the employer's customers. Thus, for example, employees acting as advisers or consultants to their employer's clients or customers (as tax experts or financial consultants, for example) may be exempt.

(c). Here, Webb has never argued that the ISRs' primary duty directly relates to the management or general business operations of Webb's customers as opposed to Webb itself. We therefore find any such argument waived. See United States v. Zannino,

, 9 n.7, 17 (1st Cir. 1990) (noting that arguments not raised below are deemed waived on appeal, as are issues only "adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation").

- 11 - and "[e]mployees who do not spend more than 50 percent of their

time performing exempt duties may nonetheless meet the . . .

requirement if the other factors support such a conclusion."

Those factors include, inter alia, "the relative importance of the

exempt duties as compared with other types of duties" and "the

employee's relative freedom from direct supervision."

§ 541.700(a).

Additionally, the regulations make clear that employees

will meet the primary duty requirement only if they "perform work

directly related to assisting with the running or servicing of the

business, as distinguished, for example, from working on a

manufacturing production line or selling a product in a retail or

service establishment." Id. § 541.201(a). To that end, the

regulations also provide that:

Work directly related to management or general business operations [can] includ[e], but is not limited to, work in functional areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations[;] government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities.

Id. § 541.201(b).

- 12 - B.

We now consider whether the ISRs' "primary duty" is

"directly related to the management or general business

operations" of Webb under the FLSA's administrative employee

exemption.2

(a)(2). This court recently

clarified that, in conducting this analysis, "it is often useful

to identify and articulate the business purpose of the employer,"

meaning "the production or provision of 'the very product or

service that the' employer . . . 'offers to the public.'" Unitil

Serv. Corp.,

(quoting John Alden Life Ins. Co.,

). Here, the district court identified Webb's business

purpose as "produc[ing] wholesale sales of its products to its

customers." F.W. Webb Co., 677 F. Supp. 3d at 20. Webb did not

dispute this characterization of its business purpose below and

does not challenge it on appeal. We thus accept it as an undisputed

fact for purposes of our analysis.

Having identified Webb's business purpose, we next

conduct a "relational" analysis, "compar[ing] the employee's

primary duty to the business purpose of the employer" to determine

whether that duty "directly relates to the business purpose of the

employer or, conversely, is directly related to the 'running or

servicing of the business.'" Unitil Serv. Corp., 64 F.4th at 6–7

2 Webb does not claim that ISRs' primary duty relates to the management or general business operations of Webb's customers.

- 13 - (quoting

(a)). Put another way, we consider

"whether an employee's primary duties are 'ancillary' to the

business's 'principal production activity' or 'principal

function.'"

at 7 (quoting John Alden Life Ins. Co.,

).3

We agree with the district court that the undisputed

facts show that the ISRs' primary duty is "to help sell Webb's

products" by delivering discrete customer sales, and that this

duty is "'directly related' to Webb's business purpose of making

wholesale sales of its products." F.W. Webb Co., 677 F. Supp. 3d

at 20, 22. The ISRs are therefore ineligible for the exemption.

Id. at 20.

3 Unitil Service Corporation noted that its analytical framework "has its roots in what has sometimes been referred to as the 'administrative-production dichotomy,'" which, while not dispositive, "can be useful in assessing whether the [primary duty requirement] has been satisfied."

. We find that for a wholesaler like Webb, Unitil Service Corporation's analysis is instructive. We therefore reject Webb's assertion that the district court's implicit reliance on the administrative-production dichotomy was error. Nor do we read the district court opinion as having treated this dichotomy as dispositive. Additionally, because the district court's use of the administrative-production dichotomy was proper, we reject Webb's argument that the district court's reliance on Martin v. Cooper Electric Supply Co.,

(3d Cir. 1991) somehow requires reversal. Even assuming, arguendo, that Martin is not as persuasive as the district court found, the district court never considered itself bound by Martin. So, Webb's quibbles with some stale aspects of Martin's reasoning -- such as its narrow construction of FLSA exemptions -- miss the mark.

- 14 - Indeed, there is simply no support for the claim that

ISRs primarily function to "promote sales generally" or to provide

some amorphous advisory or technical support role as opposed to

delivering individual sales of Webb products themselves. Webb

admits that ISRs do not work in "marketing," that they directly

interact with customers throughout the sales process, and that

they generate revenue for Webb in the form of sales that they make.

The record does not show that ISRs have any policymaking authority

within Webb apart from providing information to those formulating

policy, or that they have managerial duties over other employees.

Even if ISRs sometimes provide technical support to outside

salespersons, there is no claim of that being their primary duty.

In sum, ISRs do not "perform work directly related to assisting

with the running or servicing" of Webb, as distinguished, for

example, "from working on a manufacturing production line or

selling a product in a retail or service establishment."

(a). Webb is a wholesaler, and ISRs make those

wholesales. Their primary duties are not "administrative" in any

sense of the word.

In an attempt to ward off this conclusion, Webb argues

that the ISRs' primary duty involves exemption-qualifying

"high-level customer service" and that the district court

committed several errors in finding otherwise. In particular,

Webb argues that the district court improperly discounted evidence

- 15 - of ISRs' work as "advisors, consultants, and concierges" to deliver

"solutions" and ensure customer satisfaction, and that "these

customer service duties constitute the bulk of ISRs' work time."

To that end, Webb points to several affidavits from individual

ISRs stating that they spend a majority of their time providing

such "advisory" duties while only a small percentage of their time

"quoting specific parts."4

Much the same could be said of the many salespersons in

many industries who advise customers in selecting a product with

the aim of at some point making a sale. Consider salespersons in

a clothing store. They can be said to provide high-level customer

service advising clients on size and style choices to ensure

customer satisfaction by providing clothing solutions. Yet these

individuals are clearly not exempt under the FLSA. Reiseck v.

Universal Commc'ns of Miami, Inc.,

(2d Cir.

2010), abrogated in part by Encino Motorcars, LLC v. Navarro,

(2018).

We also reject Webb's passing argument -- made during

oral argument but nowhere in its briefs -- that our decision in

4 On this point, Webb fails to specify what if any portion of the ISRs' work time is spent performing post-sale concierge work "beyond any actual sale." We thus analyze ISRs' purported "high-level customer service responsibilities" in the aggregate. And in any event, Webb elsewhere concedes that the ISRs perform no customer-service duties "outside the context of making sales or sales that ha[ve] been made."

- 16 - Cash v. Cycle Craft Co.,

(1st Cir. 2007), coupled

with the Secretary's examples of exempt administrative employees

at

, counsels otherwise. For one, as the

district court found, Cash is distinguishable because the exempt

Harley-Davidson employee in question was responsible for improving

customer satisfaction generally and was not involved in individual

sales. F.W. Webb Co., 677 F. Supp. 3d at 22 (discussing Cash, 508

F.3d at 681–82, 686); cf. John Alden Life Ins. Co.,

(noting the distinction between "promoting sales" generally and

sales efforts "focused simply on particular sales transactions").

Additionally, the thrust of this well-worn distinction between

particular sales and general sales promotion points to the

conclusion that ISRs are more akin to non-exempt employees whose

primary duty is "selling financial products" as opposed to those

whose primary duties involve "advising the customer regarding the

advantages and disadvantages of different financial products" and

"marketing, servicing or promoting the employer's financial

products."

(b). At bottom, customer advice

rendered in the context of making a particular sale is simply not

"directly related to the management or general business

operations" of an employer whose core business purpose is making

sales.

§ 541.200(a)(2).

Webb also analogizes the ISRs to a class of employees

this court found exempt in another case: Marcus v. American

- 17 - Contract Bridge League,

(1st Cir. 2023). Following

its penchant for avoiding a "relational" analysis comparing the

ISRs' primary duty to Webb's business purpose under the rubric of

Unitil Service Corporation, see

, Webb instead trains

its analysis on comparing the ISRs' duties to those of "field

supervisors and area managers" working for the bridge tournament

operator in Marcus. 80 F.4th at 48–49. Webb argues that because

the exempt field supervisors and area managers in Marcus spent

25 percent of their time performing "high-level customer

service-oriented responsibilities" that directly related to the

running of the bridge organization's business,

, the

ISRs -- whom Webb says spend 50–95 percent of their time performing

similar work -- are exempt a fortiori. But this argument

misconstrues what Marcus actually held.

In Marcus, the employees in question were expected

(1) to "develop, implement, and manage strategic and long-term

processes and programs, including tournament planning/review";

(2) to be the "[f]irst point of contact for issues related to

tournament operations and staff"; (3) to "[e]stablish and maintain

effective relationships with tournament sponsors"; and (4) to

exercise "significant supervisory authority over other employees."

at 48–49. Therefore, the court found that the field

supervisors and area managers' primary duty was directly related

to the running and management of the bridge tournament operator.

- 18 - See

. Marcus never made any categorical finding that the

25 percent of the employees' time spent performing

customer-service work was sufficient to satisfy the exemption's

primary duty requirement. Rather, it properly reached its

conclusion "based on all the facts in [that] particular case, with

a major emphasis on the character of the employee[s'] job as a

whole."

(a).

Moreover, Webb admits that -- unlike the employees in

Marcus who were charged with developing "long-term processes and

programs,"

-- the ISRs do not perform any

customer-service duties "outside the context of making sales or

sales that had been made." And also unlike those employees, ISRs

do not exercise any significant supervisory authority over other

employees. Thus, even taking Webb's argument on its face, Marcus

does not move the needle toward finding the ISRs exempt.

Nor is there much to support the notion that ISRs are

merely internal technical support specialists in contrast to

Webb's customer-facing outside and counter salespersons. There is

no dispute that ISRs themselves generate revenue for Webb in the

form of producing particular sales, or that ISRs liaise with

customers directly, from the initial communication to after an

order is made. While sometimes an ISR may be "latched onto" an

outside salesperson to provide technical support for a customer,

the record admits to no general structure whereby the outside

- 19 - salespersons deal with customers while ISRs provide merely

internal support to the outside salespersons. Rather, Webb itself

asserts that ISRs are charged with dealing with Webb's more

important customers themselves. This conclusion also finds

further support in how Webb measures ISR performance for purposes

of compensation, which considers each ISR's sales and profits, the

number of bids written that lead to completed sales, the number of

phone calls made, and even how "bottom-line oriented" each ISR

proves to be.

All in all, it strains credulity to read the ISRs'

amorphous customer-service duties as anything but central to

Webb's business purpose of producing wholesale sales of its

products. If we accepted that ensuring "customer satisfaction"

and the "long-term integrity of the business" through making

individual sales was sufficiently ancillary to Webb's business

purpose to render ISRs exempt, then few salespersons would ever

receive FLSA overtime protection.

III.

For the foregoing reasons, the judgment of the district

court is affirmed.

- 20 -