sdny.jpgAuthored by Robert Whitman

A New York federal judge has ruled that an insurance agent meets the criteria for the “outside sales” exemption, but ruled that factual disputes about the timing of the agent’s commission earnings preclude summary judgment on his claim for unlawful deductions under state law.

In Gold v. New York Life Ins. Co., Judge William Pauley granted NY Life’s motion for summary judgment on the issue of exempt status, holding that plaintiff Avram Gold easily satisfied the criteria for the exemption – specifically, that his primary duty was “making sales . . . or obtaining orders” and that he “is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.”

Gold, who held various securities licenses that enabled him to sell products such as mutual funds in addition to life insurance, contended that his primary duty was not sales but providing financial advice.  Pointing to the regulatory requirements applicable to registered representatives, such as the “Know Your Client” and “Suitability” rules, Gold argued (with the assistance of expert testimony) that he was primarily responsible for providing investment guidance, not selling.

The court rejected that contention.  It stated that those rules “simply place restrictions on how Gold executes his employment duties; they do not convert a sales position into an advisory one.”  As for the expert’s report, the court said it was “of little relevance” because it concerned “the duties of generic registered representatives” rather than Gold specifically.

Of particular note, the court declined to rely on two Department of Labor opinion letters that Gold had cited:  one (FLSA 2006-43), involving registered representatives, because it addressed the administrative exemption, not outside sales; and the other (FLSA 2009-28), involving insurance agents, because it acknowledged that such agents may, depending on their duties, qualify for the outside sales or administrative exemptions.

In less welcome news for New York Life, the court denied summary judgment on the issue of whether deductions from Gold’s compensation were permissible under § 193 of the New York Labor Law, which bars “any deduction from the wages of an employee” except under limited circumstances.

Gold was paid through a “ledger-based” system, under which he received “credits” based on his earned commissions and incurred “debits” for expenses such as telephone service, computer support, liability insurance, and office space.  He did not receive commissions until the customer paid the first month’s premium, at which time the company advanced him the first year’s worth, subject to later reversal if the customer cancelled.

The court found the applicable documents and course of dealings between Gold and the company to be ambiguous as to the precise point in time when Gold’s commissions were actually “earned” and therefore deemed “wages” under the Labor Law.  If, the court said, any deductions were made after the commissions were earned, then they were unlawful under § 193.  But to the extent the parties agreed that the commissions were earned only when the customers’ premiums became “non-reversible,” then any deductions before then would be permissible.