Utz Quality Foods has agreed to resolve a massive overtime class action, negotiating a $2.5 million settlement to compensate nearly two thousand delivery route drivers. In their lawsuit, the drivers accused Utz of illegally classifying them as exempt from overtime pay. Around 1,800 current and former drivers will be eligible to secure payouts in the settlement. Roughly a third of these potential class members work or worked in Pennsylvania.
Utz Drivers Challenge Company Pay Practices
The class action, filed in September of 2015, challenged the snack food giant’s entire compensation scheme, according to the York Daily Record. Utz classifies its route sales professionals as “outside salespersons,” a class of workers generally considered exempt from the Fair Labor Standards Act. The drivers, however, think this federal classification is all wrong.
The Fair Labor Standards Act is a federal law that guarantees most American workers the right to overtime pay. Overtime wages should kick in after 40 hours in one workweek. The law says that any hours over 40 must be paid at one-and-a-half times a worker’s regular rate. Outside salespeople, however, are exempt from the law’s provisions – not entitled to overtime wages.
The Outside Salesperson Exemption
What does an outside salesperson look like? Door-to-door salespeople are a perfect example – fulfilling the two requirements recognized in federal law:
- the employee’s primary duty is making sales, or obtaining orders or contracts for services
- the employee is customarily and regularly engaged away from the employer’s place or places of business
Door-to-door salespeople are still out there. In fact, the Bureau of Labor Statistics said in 2010 that door-to-door sales created around $22.8 billion in revenue that year. There’s little in common, however, between door-to-door salespeople and Utz delivery drivers, according to the newly-settled class action. Route sales representatives are tasked with delivering products along defined routes. Employers say the drivers also “encourage” retailers to carry more products.
Dated Model Isn’t Aligned With Reality, Lawyer Says
Plaintiffs’ attorney Hans Nilges, however, suggests that actual sales have taken a backseat to delivery in recent decades. “I think historically route drivers [were] more classic door-to-door salesmen,” Nilges told reporters. The business, though, has “changed over the years,” according to Nilges, “but the industry did not respond appropriately to re-classify their employees.”
Utz isn’t buying the historical account outlined by Nilges and his clients. The company maintains that its pay practices are “fair and legal,” according to PennLive. Settling the lawsuit, in the words of Utz representatives, was a business decision, not an admission of wrongdoing:
“We were fully prepared to try this case with a jury in Harrisburg, and we fully expected to have been vindicated,” Dylan Lissette, the CEO of Utz, announced in a press release. “However, when we budgeted how much it would cost us to take the case to trial, we realized that it would have cost us considerably more in legal fees than the amount we would settle the case for even though we fully believed we would prevail.”
The settlement agreement, reached with the help of a mediator, does not require Utz to alter its overtime policy. Route drivers will continue to be classified as overtime-exempt, relying instead on commissions for extra pay.
Snack Companies Under Fire In Overtime Claims
Based in Hanover, Pennsylvania, Utz is the largest privately-held snack company in the United States. Most popular chip companies were bought up by large corporate conglomerates decades ago. Lay’s and Frito’s, for example, were both purchased by PepsiCo in the 50s and 60s. Utz Quality Foods, on the other hand, has remained a family-owned company since its founding, in 1921. Utz products are distributed up and down the East Coast, reaching from the uppermost tip of Maine to northern Florida. The company’s western sweep extends to Louisiana. The class action was initially filed by a delivery driver working in Ohio.
Last year, another Pennsylvania-based potato chip company, Herr Foods Inc., settled a similar class action, Law360 reports. In their own lawsuit, originally filed in 2013, former employees said Herr’s had paid its route drivers a salary, along with commission, but failed to pay overtime wages.