Larry Darveau v. Detecon, Inc.

After Detecon, Inc., a small wireless telecommunications consulting
company, discharged one of its officers, Larry Darveau, he
brought this action, alleging that Detecon had not paid him overtime
in violation of the Fair Labor Standards Act of 1938 ("FLSA" or the
"Act"), 29 U.S.C. § 207 (2000). Fifteen days later, Detecon filed a
fraud suit in state court against Darveau. Darveau then amended his
complaint in this case to allege that Detecon's lawsuit constituted an
illegal retaliatory action under 29 U.S.C. § 215(a)(3) (2000) of the
FLSA. The district court dismissed Darveau's retaliation claim for
failure to state a cause of action, and the court granted summary judgment
to Detecon on Darveau's remaining claims. We affirm in part
and reverse and remand in part.

I.

Larry Darveau initially worked as an independent contractor for
Detecon. On April 1, 2003, Detecon hired Darveau as Director of
Sales, North America, with an annual salary of $150,000, a commission
on all revenue Darveau generated, and a bonus for meeting specified
sales goals. Eight months later, Detecon promoted Darveau to -
or, more accurately, "retitled" him as - Vice President of Sales,
North America, a position in which he earned essentially the same
pay. Throughout this period, Darveau's employment duties appear to
have changed little from his work as an independent contractor,
except that, when made Vice President of Sales, Darveau became a
member of Detecon's Executive Team.

On December 27, 2004, Detecon notified Darveau that it was eliminating
his position and terminating his employment agreement effective
January 31, 2005. A month later, Detecon and Darveau entered
into a "Commission Settlement and Release Agreement," which provided
that Detecon would pay Darveau $50,000 in return for Darveau's
agreement not to sue Detecon regarding "commission claims."
The agreement did not, however, specify any release from possible
claims under the FLSA, and no party contends on appeal that the
agreement bars any of the claims at issue in this case.

On August 1, 2005, Darveau filed a complaint against Detecon in
federal district court, seeking, inter alia, compensation for unpaid
overtime under the FLSA. Two weeks later, Detecon filed an action
in the Circuit Court of Fairfax County, Virginia, against Darveau,
alleging fraud and fraudulent concealment arising out of a sales contract
whose termination Darveau assertedly hid in order to meet his
annual bonus of $50,000. Detecon later amended its complaint in state
court to substitute claims for breach of contract and constructive fraud
related to these same incidents. In response, Darveau amended his
own federal complaint to include both a breach of contract and retaliation
claim, contending that Detecon's action constituted retaliation
under the FLSA in violation of 29 U.S.C. § 215(a)(3). Darveau then
removed Detecon's state court action to federal court; that action was
consolidated with Darveau's suit and treated as a counterclaim.

The district court granted Detecon's motion to dismiss Darveau's
retaliation claim under Rule 12(b)(6). The court granted summary
judgment to Detecon on the overtime compensation and breach of
contract claims, and to Darveau on Detecon's counterclaims for constructive
fraud and breach of contract claims. Only Darveau appeals.

II.

Darveau initially argues that the district court erred in granting
summary judgment to Detecon on his FLSA overtime compensation
claim. We disagree.

The FLSA establishes the general rule that employers must compensate
each employee "at a rate not less than one and one-half times
the regular rate" for all overtime hours that an employee works. 29
U.S.C. § 207(a)(1). The Act defines overtime as employment in
excess of forty hours in a single workweek, id., but exempts from the
general rule "any employee employed in a bona fide executive,
administrative, or professional capacity," id. § 213(a)(1) (2000). An
employer bears the burden of proving that a particular employee's job
falls within such an exemption. Reich v. John Alden Life Ins. Co., 126
F.3d 1, 7 (1st Cir. 1997). Additionally, "the remedial nature of the
statute requires that FLSA exemptions be ‘narrowly construed against
the employers seeking to assert them and their application limited to
those establishments plainly and unmistakably within [the exemptions']
terms and spirit.'" Id. (quoting Arnold v. Ben Kanowsky, Inc.,
361 U.S. 388, 392 (1960)). We review de novo the district court's
grant of summary judgment in favor of Detecon, applying the same
standard as did the district court and construing the facts in the light
most favorable to Darveau, the non-moving party. See Holland v.
Washington Homes, Inc., 487 F.3d 208, 213 (2007).

The Secretary of Labor, as directed by statute, has adopted regulations
defining a bona fide administrative employee, as that term is
used in 29 U.S.C. § 213(a)(1). 29 C.F.R. § 541.200 (2006). Although
the Secretary amended these regulations effective August 23, 2004 -
in the middle of Darveau's tenure at Detecon - the amendments do
not significantly change the criteria for the administrative exemption
in Darveau's case. Compare 29 C.F.R. §§ 541.2, 541.214(a) (2003)
with 29 C.F.R. § 200(a) (2006); see also Dep't of Labor, Op. Ltr.,
FLSA2006-11 at 3 (Sept. 8, 2006), available at http://www.dol.gov/
esa/whd/opinion/FLSA/2007/2007_02_08_06_FLSA.pdf. An employee
qualifies for the administrative exemption under both sets of
regulations if (1) the employee is compensated on a salary or fee basis
(as defined in the regulations) at a rate not less than $250 per week
under the former regulations and not less than $455 per week under
the revised regulations; (2) the employee's 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) the employee's "primary duty
includes the exercise of discretion and independent judgment with
respect to matters of significance." 29 C.F.R. § 541.200 (2006); 29
C.F.R. § 541.214 (2003). (Emphasis added by MoreLaw)
Indisputably, Darveau's annual compensation of $150,000 satisfies
the salary requirement. Although salary alone is not dispositive under
the FLSA, we note that the "FLSA was meant to protect low paid
rank and file employees" and that "[h]igher earning employees . . . are
more likely to be bona fide managerial employees." Counts v. S.C.
Elec. & Gas Co., 317 F.3d 453, 456 (4th Cir. 2003). Notwithstanding
this annual salary, Darveau argues that Detecon has not demonstrated
that he meets either of the other two requirements.

First, relying on Martin v. Cooper Elec. Supply Co., 940 F.2d 896
(3d Cir. 1991), and certain Department of Labor Opinion Letters,
Darveau contends that he did not perform work "directly related to the
management or general business operations of the employer." See 29
C.F.R. § 541.200 (2006). Darveau insists that, as an inside salesman
whose primary duty was to sell Detecon's consulting services to current
and prospective clients, he did not participate in the general management
of the company. Second, Darveau maintains that his duties
did not include "the exercise of discretion and independent judgment
with respect to matters of significance," see id., because he assertedly
lacked the authority to make independent decisions free from supervision
and never acted in a leadership or supervisory role.

In fact, a review of the evidence unquestionably reveals that Darveau
does fall within the administrative exemption. Unlike the wholesale
salespersons in Martin, 940 F.2d at 902-07, who simply sold
from their offices the employer's inventory of electronic goods to
industrial buyers and government organizations, Darveau played a
significant role in projecting Detecon's "public face" and carrying its
services to the telecommunications industry. In this capacity, Detecon
gave Darveau wide latitude to use his "lengthy industry experience
and contacts." The company empowered him to approach current and
potential clients, discern the possible range of their wireless telecommunications
needs, and then relay this information to the technical
staff at Detecon's main office. The technical staff would craft an individually
tailored package of consulting services playing to Detecon's
strengths. Darveau would then integrate this technical information
with a pricing structure he was provided and construct a formal proposal
that he would polish and present to the potential client. If the
client expressed interest, Darveau would work with other members of
Detecon's management team to negotiate some of the terms of the
contract and conclude the sale.

Numerous other undisputed facts demonstrate that Darveau's
duties involved the performance of "office . . . work directly related
to the . . . general business operations of the employer or the employer's
customers," which required the "exercise of discretion and independent
judgment with respect to matters of significance." See 29
C.F.R. § 541.200 (2006); 29 C.F.R. § 541.214 (2003). As a member
of Detecon's Executive Team, Darveau helped to shape Detecon's
general business policies, for instance, by proposing revisions to
Detecon's travel and expense policy. He worked closely with CEO
Eckart Pech in hiring two additional directors of sales. In the company's
unsuccessful bid to assist T-Mobile in its assumption of the
Cingular GSM Network in California, Darveau's own emails describe
his role as the "overall project manager" for the proposal, acting, in
his words, as the "gate keeper" who "coordinate[d] . . . that effort to
make sure it got done." Finally, in June of 2007 and 2008, Darveau
presented sales status reports that recommended strategies to develop
additional business in the telecommunications market, identifying
major accounts and proposing specific steps for advancing Detecon's
share in those industry segments.

Darveau's significant role in conducting both specific sales and
shaping Detecon's more general market strategy, as well his participation
in the company's overall management and hiring policy, was thus
wholly unlike the "routine selling efforts focused simply on particular
sales transactions" at issue in Martin. 940 F.2d at 905. Rather, Darveau's
duties more nearly approximate the exempt duties described in
Martin involving "marketing activity aimed at promoting (i.e.,
increasing, developing, facilitating and/or maintaining) customer sales
generally." Id. (emphasis in original). Indeed, Darveau's duties are
akin to the activities of the insurance marketing representatives found
to be within the administrative exemption in Reich, 126 F.3d at 3-4,
10. The Reich representatives, like Darveau, did more than sell a predetermined
product; they had to cultivate business relationships and
keep agents apprised of how different products might satisfy the particular
needs of prospective end clients, while exercising a significant
degree of autonomy regarding client contact. Id. at 3-4; see also Cash
v. Cycle Craft Co., No. 07-1768, 2007 WL 4111921, at *2-6 (1st Cir.
Nov. 20, 2007); Schwind v. EW & Assocs., 357 F. Supp. 2d 691, 704-
06 (S.D.N.Y. 2005); Wilshin v. Allstate Ins. Co., 212 F. Supp. 2d
1360, 1375-79 (M.D. Ga. 2002).

Given the full range of Darveau's employment duties, Darveau
falls within the requisites of the administrative exemption. The district
court properly granted summary judgment to Detecon on Darveau's
FLSA overtime compensation claim.

III.

Having rejected Darveau's FLSA overtime compensation claim,
we now consider his retaliation claim, which the district court dismissed
pursuant to Federal Rule of Civil Procedure 12(b)(6). Darveau
maintains that by filing a fraud suit against him, which he alleges is
without basis in fact or law, a mere fifteen days after he filed his
action for FLSA overtime compensation, Detecon unlawfully retaliated
against him in violation of the FLSA.

The retaliation provision of the FLSA is a central component of the
Act's complaint-based enforcement mechanism. "To secure
[employer] compliance with the substantive provisions of the FLSA,
Congress ‘chose to rely on information and complaints received from
employees seeking to vindicate rights claimed to have been denied.'"
Ball v. Memphis Bar-B-Q Co., 228 F.3d 360, 363 (4th Cir. 2000)
(quoting Mitchell v. Robert De Mario Jewelry, Inc., 361 U.S. 288,
292 (1960)).

The retaliation provision renders it unlawful "to discharge or in any
other manner discriminate against any employee because such
employee has filed any complaint or instituted or caused to be instituted
any proceeding under or related to this chapter." 29 U.S.C.
§ 215(a)(3). The provision therefore effectuates enforcement of the
Act's substantive provisions by removing "fear of economic retaliation"
so that employees need not "quietly . . . accept substandard conditions."
Mitchell, 361 U.S. at 292. As we recognized in Ball, we
must interpret the retaliation provision "bearing in mind the Supreme
Court's admonition that the FLSA ‘must not be interpreted or applied
in a narrow, grudging manner.'" Ball, 228 F.3d at 364 (quoting Tenn.
Coal, Iron & R.R. v. Muscoda Local No. 123, 321 U.S. 590, 597
(1944)).

A plaintiff asserting a prima facie claim of retaliation under the
FLSA must show that (1) he engaged in an activity protected by the
FLSA; (2) he suffered adverse action by the employer subsequent to
or contemporaneous with such protected activity; and (3) a causal
connection exists between the employee's activity and the employer's
adverse action. Wolf v. Coca-Cola Co., 200 F.3d 1337, 1342-43 (11th
Cir. 2000); Conner v. Schnuck Mkts., Inc., 121 F.3d 1390, 1394 (10th
Cir. 1997). Detecon does not contend, and the district court did not
hold, that Darveau's complaint fails to allege facts establishing the
third prong, a causal connection between Darveau's FLSA overtime
claims and Detecon's claims against him for fraud. Detecon argues
that Darveau's complaint fails to establish the first two prongs.

A.

As to the first prong, Detecon conceded before the district court
that Darveau not only alleged but actually engaged in protected activity
in filing his complaint for overtime pay under the FLSA.1 On
appeal, however, Detecon argues to the contrary. In the interest of
judicial economy, we address the contention, even though not raised
below.

Relying on Burnette v. Northside Hosp., Detecon maintains that
Darveau must not only show that "he subjectively (that is, in good
faith) believed that his employer was engaged in unlawful employment
practices, but also that his belief was objectively reasonable in
light of the facts and record presented." 342 F. Supp. 2d 1128, 1134
(N.D. Ga. 2004) (quoting Little v. United Techs., Carrier Transicold
Div., 103 F.3d 956, 960 (11th Cir. 1997)). Detecon argues Darveau
had no such objectively reasonable belief because Department of
Labor regulations explicitly offer as examples of exempt administrative
duties Darveau's own primary employment duties. See 29 C.F.R.
§ 541.201(b) (2006).

Assuming, without deciding, that a FLSA retaliation plaintiff must
allege facts demonstrating that he had an objectively reasonable belief
that his employer violated the FLSA, we believe that Darveau met
1In its Motion to Dismiss before the district court, Detecon stated:
"While Detecon does not dispute that Darveau engaged in a statutorily
protected activity when he filed the present action against Detecon, Detecon
asserts that its state law action against Detecon [sic] does not constitute
an ‘adverse action by the employer' as that prong has been
interpreted by the courts." R. on Appeal, Doc. No. 36, at 4.
this burden. Although we have rejected his overtime claim, it was an
"objectively reasonable" claim when considered "in light of the facts
and record presented." Several features of Detecon - its extremely
small size, its project-driven management structure, and its focus on
on-site consulting - complicate the application of the key terms of
the FLSA's wage and hours exemptions to Darveau. Although Darveau's
overtime compensation claim ultimately fails, Darveau did not
allege an objectively unreasonable claim in light of these facts.

B.

Detecon's principal argument, and the basis for the district court's
dismissal of Darveau's retaliation claim, rests on the second prong of
the prima facie case - the employee must have suffered an adverse
action by the employer subsequent to or contemporaneous with the
protected activity. Wolf, 200 F.3d at 1342-43; Conner, 121 F.3d at
1394.

Darveau notes that the Supreme Court has expressly held that a
lawsuit filed by an employer against an employee can constitute an
act of unlawful retaliation under another federal statute governing
employment rights when the lawsuit is filed with a retaliatory motive
and lacking a reasonable basis in fact or law. See Bill Johnson's Rests.
v. NLRB, 461 U.S. 731, 744 (1983); see also BE & K Constr. Co. v.
NLRB, 536 U.S. 516, 528-37 (2002) (affirming Bill Johnson's holding,
stressing that only those lawsuits that are retaliatory in intent and
baseless in fact or law do not implicate First Amendment and federalism
concerns). Darveau's complaint alleges Detecon filed its lawsuit
with retaliatory motive and without any reasonable basis in fact or
law.

Nevertheless, the district court held, relying on older Title VII
cases (which Detecon had cited to the court), that in order to establish
an FLSA retaliation claim, Darveau had to demonstrate that he suffered
a materially adverse employment action involving an ultimate
employment decision related to hiring, leave, discharge, promotion, or
compensation. The court reasoned that because Darveau had left
Detecon's employment six months prior to filing his FLSA suit, he
could not possibly have suffered any employment action, adverse or
otherwise, from Detecon. Requiring a FLSA retaliation plaintiff to
allege and prove a materially adverse employment action would of
course have the practical effect of declaring that the FLSA's prohibition
applies to retaliation exclusively against current, and not former,
employees.

This rationale rests on outdated Title VII precedent. The Supreme
Court has now clearly rejected this view. In Robinson v. Shell Oil Co.,
519 U.S. 337, 345-46 (1997), the Court explicitly held that for purposes
of Title VII's retaliation provision, "employee" encompasses
former, as well as current, employees. Even more recently, in Burlington
N. & Santa Fe Ry. Co. v. White, 126 S. Ct. 2405, 2414 (2006),
the Court held that a Title VII retaliation plaintiff need not allege or
prove an ultimate adverse employment action, because "[t]he scope
of the anti-retaliation provision extends beyond workplace-related or
employment-related retaliatory acts and harm." The Court ruled that
Title VII's retaliation provision requires a plaintiff simply to allege
and prove "that a reasonable employee would have found the challenged
action materially adverse, which in this context means it well
might have dissuaded a reasonable worker from making or supporting
a charge of discrimination." Id. at 2415 (citations and internal quotation
marks omitted).

Although throughout this litigation Detecon has relied on Title VII
cases, it now insists that we should not give weight to Robinson and
Burlington Northern in construing the FLSA. In so arguing, Detecon
not only ignores its own reliance on Title VII cases, but also the
almost uniform practice of courts in considering the authoritative
body of Title VII case law when interpreting the comparable provisions
of other federal statutes. See, e.g., McKennon v. Nashville Banner
Publ'g. Co., 513 U.S. 352, 357-61 (1995) (interpreting the Age
Discrimination in Employment Act ("ADEA")); Garcia v. Johanns,
444 F.3d 625, 631-33 & n.7 (D.C. Cir. 2006) (interpreting the Equal
Credit Opportunity Act); Davidson v. Midelfort Clinic, Ltd., 133 F.3d
499, 511 (7th Cir. 1998) (interpreting the retaliation provision of the
Americans with Disabilities Act). Of particular note here, we and
other courts have looked to Title VII cases in interpreting the FLSA.
See Shaliehsabou v. Hebrew Home of Greater Wash., Inc., 363 F.3d
299, 305-07 (4th Cir. 2004); Nichols v. Hurley, 921 F.2d 1101, 1103-
10 (10th Cir. 1990); Brewster v. Barnes, 788 F.2d 985, 990 & n.7 (4th
Cir. 1986). Of course, we must take care to respect any differences
in language and purpose between Title VII and the FLSA. See Ball,
228 F.3d at 363-65 (noting differences in the protected activities enumerated
in the FLSA's retaliation provisions and those specified in
Title VII).

But we find no significant differences in either the language or
intent of the two statutes regarding the type of adverse action their
retaliation provisions prohibit. The FLSA and Title VII contain identical
general definitions of "employee." Compare 29 U.S.C. § 203(e)(1)
(2000) (FLSA) with 42 U.S.C. § 2000e(f) (2000) (Title VII); see also
United States v. Rosenwasser, 323 U.S. 360, 362 (1945) (declaring
with regard to the FLSA that "[a] broader or more comprehensive
coverage of employees within the stated categories would be difficult
to frame."). Moreover, both statutes provide the same broad definition
of a prohibited retaliatory act; each statute renders it unlawful to "discriminate
against" any employee who has engaged in the described
protected activities. Compare 29 U.S.C. § 215(a)(3) (FLSA) with 42
U.S.C. § 2000e-3(a) (2000) (Title VII). The similar statutory language
suggests that the Supreme Court's interpretation of "employee" in
Robinson - to include former as well as current employees - and
definition of retaliatory acts in Burlington Northern similarly apply in
the FLSA context.

Although the two statutes seek to combat separate workplace problems,
the purpose of their retaliation provisions is one and the same
- namely, to secure their substantive protections "by preventing an
employer from interfering (through retaliation) with an employee's
efforts to secure or advance enforcement of the Act's basic guarantees."
Burlington Northern, 126 S. Ct. at 2412. Indeed, in Robinson,
the Court relied on a FLSA case to support its conclusion that the
"primary purpose" of Title VII's anti-retaliation provision was to
"[m]aintain[ ] unfettered access to statutory remedial mechanisms."
519 U.S. at 346 (citing Mitchell, 361 U.S. at 292-93). Furthermore,
the underlying legislative purpose of the FLSA, although different, is
just as expansive and important as that of Title VII. See 29 U.S.C.
§ 202(a) (2000) (explaining the purpose of the FLSA as the elimination
of "labor conditions detrimental to the maintenance of the minimum
standard of living necessary for health, efficiency, and general
well-being of workers").

Somewhat surprisingly, Detecon contends that looking to the
Supreme Court's Title VII jurisprudence in this FLSA case will generate
the "anomalous result" of extending protection from retaliation
to former employees who no longer enjoy the substantive protections
of the FLSA. Br. of Appellee at 50. Yet in Burlington Northern, the
Court rejected this very argument in the Title VII context, observing
that Title VII's anti-retaliation provision serves a different purpose
than its substantive provisions and that such "differences in . . . purpose
. . . remove any perceived ‘anomaly.'" 126 S. Ct. at 2414. The
more unfortunate anomaly would be if an employee's underlying
FLSA claim could be brought after he quit, but the employee's protection
from retaliation ended when the employee stepped beyond the
employer's doorstep.

Our conclusion accords with that reached by our sister circuits. The
Tenth Circuit has held that an employer's third-party complaint for
indemnity against four former employers could, as a matter of law,
qualify as unlawful retaliation under the FLSA. Martin v. Gingerbread
House, Inc., 977 F.2d 1405, 1406-08 (10th Cir. 1992). Similarly,
the Sixth Circuit has concluded that the FLSA retaliation
provision should extend to former employees: "There is nothing in the
language or history of [the FLSA] to indicate that Congress intended
to penalize dissatisfied employees who voluntarily leave an employer
by thereafter denying them the protections of [the Act]. There is every
reason to conclude precisely the contrary." Dunlop v. Carriage Carpet
Co., 548 F.2d 139, 147 (6th Cir. 1977). The Fifth Circuit has likewise
recognized that the FLSA protects former employees from
retaliation, and not merely current ones. Hodgson v. Charles Martin
Inspectors of Petroleum, Inc., 459 F.2d 303, 306 (5th Cir. 1972). Former
employees require such protection because they often need references
from past employers, they may face retaliation from new
employers who learn they have challenged the labor practices of previous
employers, and they sometimes must return to past employers
for a variety of reasons, putting them once more at risk of retaliation.
Id.

For all these reasons, we hold that the district court clearly erred
in requiring Darveau to allege that his employer retaliated against him
with a "materially adverse employment action." Rather, a plaintiff
asserting a retaliation claim under the FLSA need only allege that his
employer retaliated against him by engaging in an action "that would
have been materially adverse to a reasonable employee" because the
"employer's actions . . . could well dissuade a reasonable worker from
making or supporting a charge of discrimination." Burlington Northern,
126 S. Ct. at 2409. Darveau has alleged such an action here, i.e.,
that his employer filed a lawsuit against him alleging fraud with a
retaliatory motive and without a reasonable basis in fact or law. We
therefore must reverse the judgment of the district court dismissing
Darveau's retaliation claim and remand for further proceedings consistent
with this opinion.2

* * *

http://pacer.ca4.uscourts.gov/opinion.pdf/062092.P.pdf

For the foregoing reasons, the judgment of the district court is
AFFIRMED IN PART AND
REVERSED AND REMANDED IN PART.

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