- May 2, 2016
- Posted by: admin
- Category: News
Recently, a federal district court in Texas has ruled that the personal trainers working at Gold’s Gym locations in Texas are not exempt employees under the Fair Labor Standards Act (FLSA) and therefore are entitled to seek overtime pay. It also clarified as to when retail employees can be deemed as working on commission for the purposes of FLSA exemption. (See Casanova v. Gold's Tex. Holdings Grp., Inc., 5:13-CV-1161-DAE, 2016 U.S. Dist. LEXIS 37932).
Currently, Gold’s Texas Holding Groups Inc. is operating in forty-one gym locations. Gold’s Gym argued the case under two heads, firstly, that a commission is paid to its trainers and secondly, that an incentive is paid based on the performance.
Gold’s Gym maintained that its trainers fell under the exemption as codified in 29 U.S.C. §207(i) and that its trainers received a percentage of the fees that was charged to the Gold Gym’s customers. This percentage varies and was based on the trainer’s certification level and type of training offered. Gold further argued that the trainers negotiated with the customers for the price per session and this enabled the trainers to receive more incentives since they could train more people at a time and charge higher rates.
The court while ruling for more than 80 current and former Gold’s trainers stated that they were denied overtime pay despite working for more than forty hours a week and the pay system was not a “bona fide commission”. Judge David A. Ezra concluded stating that this fee looked like a commission wherein the trainers could negotiate. However, the actual percentage was not paid out to them until the completion of the one-hour training sessions, and since the compensation was still dependent on the number of hours worked, it was not a commission and hence, the FLSA exemption did not apply.
As for the second argument, Gold’s argued that the compensation system at Gold’s like any other gave performance incentives. However, the court stated that Gold’s has misinterpreted the application of performance-based incentives to bonafide commissions.
The court stated that Gold’s trainers had financial incentives when they earned more certifications to increase their share of customer’s training fee; and this system was not a performance based system a qualification based system that differed from incentive structures found in genuine commission arrangements.
Ezra opined that this stream did not incentivize trainers to work faster and earn more commission-based income but the qualification-based incentives under these circumstances only allowed for earning a higher hourly rate which is not a commission.
Thus, the court ruled that Gold’s trainers only received a percentage of the fees paid by the customers which was not commission and that the FLSA exemption for retail or service establishment whose compensation was more than 50% based on commissions would also not apply. Furthermore, it was stated that the trainers’ income cannot be “decoupled’ from their actual working hours so Gold’s could not claim the exemption for commission paid employees. And that the incentive program was not performance based, rather qualification based, falling outside the ambit of commission.