                                                                            F I L E D
                                                                      United States Court of Appeals
                                                                              Tenth Circuit
                                       PUBLISH
                                                                             JUN 10 1999
                     UNITED STATES COURT OF APPEALS
                                  TENTH CIRCUIT
                                                                        PATRICK FISHER
                                                                                  Clerk


 RICHARD ACKERMAN, TIMOTHY
 BOOKER, ERICH BUTLER, MICHAEL
 DICKSON, EDWARD DONAHOE,
 MICHAEL FABIAN, STEVEN JONES,
 MARK MARES, ROBERT MOON,
 JAMES MUELLER, DANA ROE, KIM
 SMITH, PAUL SPIELMAN, ALAN
 TAMONDONG, AND BRAD
 VELLIQUETTE,
                                                           Nos. 97-1079,
       Plaintiffs - Appellees/Cross-
                                                                97-1102
       Appellants,

 v.

 COCA-COLA ENTERPRISES, INC., a
 Delaware Corporation in good standing
 and licensed to do business in Colorado,

       Defendant-Appellant/Cross-
       Appellee.


                    Appeal from the United States District Court
                            for the District of Colorado
                            (D.C. No. 93-OK-1633-TL)


Walter V. Siebert, of Sherman and Howard, Denver, Colorado (Ronald G. Ingham and
Kelly L. Weston, of Miller and Martin, Chattanooga, Tennessee, with him on the briefs),
for the Defendant-Appellant/Cross-Appellee.

Daniel P. Powell, Alamosa, Colorado (Gary McPherson and Brandon P. Hull, Aurora,
Colorado, with him on the briefs), for the Plaintiffs-Appellees/Cross-Appellants.
Before ANDERSON, EBEL, and HENRY, Circuit Judges.


HENRY, Circuit Judge.


       Coca-Cola Enterprises (Coca-Cola) appeals the district court’s decision that

advanced sales representatives and account managers employed by the company are

entitled to overtime compensation under the Fair Labor Standards Act (FLSA), 29 U.S.C.

§§ 201-219.1 We conclude that these employees are exempt from the overtime

compensation requirements of the FLSA because they are “outside salesmen,” as that

term is defined by Department of Labor regulations. We therefore reverse the decision of

the district court and remand for further proceedings consistent with this opinion.



                                    I. BACKGROUND

       From 1991 to 1993, the plaintiffs were employed by Coca-Cola as advance sales

representatives and account managers. Their primary responsibility was to sell Coca-Cola

products to grocery stores, convenience stores, and mass merchandisers. During the

period from 1991 to 1993, Coca-Cola also employed individuals known as

“merchandisers.” Although merchandisers did not sell Coca-Cola products, they


       1
               The Coca-Cola advance sales representatives and account managers have
filed a cross-appeal in which they challenge several other rulings by the district court. In
light of our conclusion regarding the outside salesman exemption, we address neither the
issues raised in the cross-appeal nor the other issues raised in Coca-Cola’s appeal.

                                              2
performed a wide variety of tasks associated with the distribution and promotion of the

company’s products, including: restocking shelves, replacing damaged products, filling

coolers, filling vending machines, delivering products and equipment, adjusting and

cleaning display shelves, setting up displays, rotating products, hanging signs, cleaning

the warehouse, cleaning coolers and shelves, restocking pallets, and transferring products

from one store to another.

       During the period at issue in this case, Coca-Cola employed two different methods

of distribution. Prior to April 1, 1992, Coca-Cola used a hybrid system. For customers

whose accounts exceeded four million dollars, the company employed advance sales

representatives (including the plaintiffs) to sell the products before delivery. Following

the sale, delivery drivers transported Coca-Cola products to the appropriate store. Coca-

Cola’s merchandisers then stocked the shelves and performed other merchandising tasks.

For smaller accounts, Coca-Cola distributed its products through route sales drivers.

These drivers visited stores, sold the product, stocked the shelves, displayed

advertisements, and performed all the other required merchandising.

       In April 1992, Coca-Cola changed its distribution system such that individuals

known as account managers (including the plaintiffs) sold products for both large and

small accounts prior to delivery. Under this “presale” system, the account managers

visited large grocery stores, convenience stores, and mass merchandisers, sold Coca-Cola

products, and performed various merchandising tasks. For the larger grocery store and


                                             3
mass merchandiser accounts, Coca-Cola assigned merchandisers to perform various

merchandising tasks. Coca-Cola did not assign merchandisers to the smaller accounts,

and, at these locations, the account managers performed the necessary merchandising

tasks themselves. The account managers frequently performed these tasks at the larger

accounts as well.

       In their work as advance sales representatives and account managers, the plaintiffs

typically arrived at Coca Cola’s offices at about 5:00 a.m. After attending a sales

meeting, they gathered advertising materials from a storeroom and loaded them into

station wagons supplied by the company. They then visited ten to fifteen grocery stores,

fifteen to twenty convenience stores, and a few mass merchandisers. At the grocery

stores and mass merchandisers, they inspected product displays and advertising and then

determined the amount of available inventory. At certain stores, the plaintiffs also set up

advertising materials. After performing these tasks, they spoke to store managers about

subsequent deliveries, obtaining approval for Coca-Cola to ship additional products.

Delivery drivers then transported the Coca-Cola products to stores, and the merchandisers

performed various tasks associated with displaying and promoting the products.

       From 1991 until 1993, the plaintiffs regularly worked more than forty hours a

week as advance sales representatives and account managers. Their hours ranged from an

average low of fifty-five hours per week to an average high of seventy-two hours per

week. Coca-Cola paid them a salary, bonuses, and commissions. Because Coca-Cola


                                             4
considered them to be exempt from the requirements of the FLSA, the plaintiffs did not

receive overtime compensation. In contrast, Coca-Cola viewed delivery drivers and

merchandisers as subject to the FLSA and paid them overtime.

        The plaintiffs filed this action in July 1993, alleging that Coca-Cola had violated

the FLSA by failing to pay them overtime compensation. Coca-Cola responded that the

FLSA’s overtime compensation requirements were not applicable to the plaintiffs because

of the statutory exemptions governing outside salesmen and motor carriers and because of

the exemption governing positions consisting of a combination of two or more exempt

jobs.

        After a bench trial, the district court issued a memorandum opinion rejecting Coca-

Cola’s arguments under each of the claimed exemptions and concluding that the plaintiffs

were entitled to overtime compensation under the FLSA. The court also rejected Coca-

Cola’s argument that the plaintiffs’ damages should be calculated on the basis of the

“fluctuating work week method,” under which a successful plaintiff receives overtime

compensation at only half his or her regular rate (instead of the usual one-and-a-half times

his or her regular rate). See 29 C.F.R. § 778.114 (discussing the fluctuating work week

method). Finally, the court rejected the plaintiffs’ argument that they were entitled to

liquidated damages, reasoning that Coca-Cola had demonstrated that it acted in good faith

and had reasonable grounds for believing that its actions did not violate the FLSA.




                                              5
                                     II. DISCUSSION

       Congress enacted the FLSA, 29 U.S.C. § 201-219, in order to improve “labor

conditions detrimental to the maintenance of the minimum standard of living necessary

for the health, efficiency, and general well-being of workers.” 29 U.S.C. § 202(a). In

furtherance of this aim, the FLSA established a minimum wage, required overtime pay in

certain instances, and prohibited child labor. See 29 U.S.C. §§ 206, 207, 212.

       In spite of these broad remedial aims, Congress concluded that not all workers

required the same kind of protection. It exempted from the FLSA’s requirements “any

employee employed in a bonafide executive, administrative, or professional capacity . . . ,

or in the capacity of outside salesman (as such terms are defined and delimited from time

to time by regulations of the Secretary [of Labor]. . . .)” 29 U.S.C. § 213(a)(1).

       Exercising that delegated authority, the Secretary has promulgated a series of

regulations that define these exemptions. 29 C.F.R. § 541.500 defines the term “outside

salesman” as:

                any employee:

                (a) who is employed for the purpose of and who is
                customarily and regularly engaged away from his employer’s
                place or places of business in:
                       (1) making sales within the meaning of section
                       3(k) of the Act; or
                       (2) Obtaining orders or contracts for services or
                       for the use of facilities for which a
                       consideration will be paid by the client or
                       customer; and
                (b) Whose hours of work of a nature other than that described

                                              6
              in paragraph (a)(1) or (2) of this section do not exceed 20
              percent of the hours worked in the workweek by nonexempt
              employees of the employer: Provided, That work performed
              incidental to and in conjunction with the employee’s own
              outside sales or solicitations, including incidental deliveries
              and collections, shall not be regarded as nonexempt work.


(emphasis added).

       In the district court proceedings, Coca-Cola contended that the plaintiffs were

“outside salesmen” under the definition set forth in § 541.500. The company focused on

the proviso of subsection (b), arguing that although the plaintiffs performed some

merchandising tasks, those tasks were “incidental to and in conjunction with” their sales

of Coca-Cola products. Significantly, in the district court proceedings, there was no

dispute as to either subsection (a) of § 541.500 or the first part of subsection (b). The

parties agreed that the plaintiffs were employed for the purpose of selling Coca-Cola’s

products and that they were regularly and customarily engaged in that activity away from

Coca-Cola’s offices. See 29 C.F.R. § 541.500. They also agreed that the time that the

plaintiffs spent performing work of a nonexempt nature (i.e. merchandising) exceeded

twenty percent of the hours worked by nonexempt workers (i.e. merchandisers). Thus,

the district court’s determination of whether the plaintiffs were outside salesmen

depended entirely upon the question raised by § 541.500(b)’s proviso–whether the

plaintiffs’ merchandising tasks were “incidental to and in conjunction with” their sales of

Coca-Cola products.


                                              7
       In its memorandum opinion, the district court concluded that Coca-Cola had failed

to establish that the plaintiffs’ merchandising activities were “incidental to and in

conjunction with” their own sales. The court cited testimony “that merchandising was

primarily done because customers expected it to be done and that merchandising

increased the sale of Coca-Cola products in general.” Aplt’s App. at 16-17. Additionally,

the court noted that merchandising activities occupied anywhere from twelve to forty-one

hours of the plaintiffs’ time each week. Id. at 17 n.5. Noting that “incidental” means

“occurring or apt to occur as an unpredictable or minor concomitant” or “of a minor,

casual, or subordinate nature,” see id. (quoting Webster’s II New Riverside University

Dictionary 618 (1984)), the court said that “[a]n activity that consumes anywhere from 20

to 65 percent of an employee’s workday cannot be said to be a minor occurrence.” Id. It

therefore concluded that the plaintiffs were not outside salesmen under the FLSA.

       On appeal, Coca-Cola argues that the district court erred in applying the phrase

“incidental to and in conjunction with” in the proviso of 29 C.F.R. § 541.500(b). Under

the Department of Labor’s regulations, Coca-Cola maintains, the merchandising work

performed by the plaintiffs, though often time-consuming, was still incidental to and in

conjunction with their own sales of Coca-Cola products; as a result, the plaintiffs’

merchandising responsibilities do not defeat the outside salesman exemption.

       In response, the plaintiffs maintain that Coca-Cola’s reading of the outside

salesman exemption conflicts with the policies underlying the FLSA. The plaintiffs


                                              8
observe that, under Coca-Cola’s reading of the applicable regulations, merchandising

work could be exempt from the FLSA when performed by outside salesmen but governed

by the FLSA when performed by merchandisers. Such an interpretation, the plaintiffs

contend, allows Coca-Cola to avoid the overtime compensation requirements of the FLSA

entirely by exploiting the distinction between merchandisers and account managers. They

observe that under Coca-Cola’s reading of the regulations, the company would be

permitted to employ non-exempt merchandisers for only forty hours a week while

requiring account managers (who are exempt as outside salesmen under Coca-Cola’s

interpretation of the FLSA) to work more than forty hours a week in order to complete the

merchandising work left undone by the merchandisers.

       In light of the parties’ arguments, the question before us is the same one presented

to the district court: whether the plaintiffs’ merchandising activities were “incidental to

and in conjunction with” their sales of Coca-Cola products such that the plaintiffs were

covered by the FLSA exemption for outside salesmen. We review the district court’s

resolution of this legal question de novo, see Sanders v. Elephant Butte Irrigation District,

112 F.3d 468, 470 (10th Cir. 1997), but we examine the underlying factual determinations

for clear error. Id. Additionally, in light of the FLSA’s broad remedial aims, exemptions

must be narrowly construed. Carpenter v. City & County of Denver, Colo., 82 F.3d 353,

355 (10th Cir. 1996) (citing Mitchell v. Lublin, McGaughy, & Assocs., 358 U.S. 207, 211

(1959)). As the employer, Coca-Cola bears the burden of proving that particular


                                              9
employees fit “‘plainly and unmistakenly within [the exemption’s] terms.’” Reich v.

Wyoming, 993 F.2d 739, 741 (10th Cir. 1993) (quoting Arnold v. Ben Kanowsky, Inc.,

361 U.S. 388, 392 (1960)). However, “the [Department of Labor] regulations are entitled

to judicial deference and are the primary source of guidance for determining the scope of

exemptions to the FLSA.” Spradling v. City of Tulsa, 95 F.3d 1492, 1495 (10th Cir.

1996) (citation omitted).



           A. Department of Labor Regulations Regarding Outside Salesmen

       As Coca-Cola suggests, the Department of Labor’s regulations provide guidance in

determining what tasks may be considered “incidental to and in conjunction with” the

plaintiffs’ sales of Coca-Cola products. Section 541.503 uses that phrase in the following

manner:

              Work performed “incidental to and in conjunction with the
              employee’s own outside sales or solicitation” includes not
              only incidental deliveries and collections . . . , but also any
              other work performed by the employee in furthering his own
              sales efforts. Work performed incidental to and in
              conjunction with the employee’s own outside sales or
              solicitations would include, among other things, the writing of
              his sales reports, the revision of his own catalog, the planning
              of his itinerary and attendance at sales conferences.

29 C.F.R. § 541.503 (emphasis added).

       The subsequent regulations describe in more detail the kinds of activities that are

viewed as “in conjunction with and incidental to” outside sales. See 29 C.F.R. §§


                                            10
541.504–541.505. These regulations address promotional work and the work of “driver

salesmen,” who deliver products and make sales. In both instances, a key inquiry is

whether the employee in question actually consummates the sale of his or her employer’s

products at a particular location. If that employee consummates the sale but also

performs a variety of other tasks intended to promote the company’s products but not

directly involving sales, those tasks may still be considered “incidental to and in

conjunction with” those sales. On the other hand, if the employee in question does not

actually consummate the sale at the location in question, then his other activities, even if

closely related to sales, are not “incidental to and in conjunction with” those sales under

the regulations.

       For example, the Department of Labor’s regulation regarding promotional work

gives the illustration of a manufacturer’s representative who visits retailers accompanied

by a salesman for a distributor (or “jobber”). If the manufacturer’s representative does

preliminary work (“which may include arranging the stock, putting up a display or poster,

and talking to the retailer for the purpose of getting him to place the order for the

product”), but the distributor’s salesman actually takes the order after the preliminary

work is done, then such work is not incidental to sales made by the manufacturer’s

representative and is not exempt. See 29 C.F.R. § 541.505(c)(2). The same regulation

gives an example of a nonexempt company representative who visits stores in order to

perform promotional work but does not complete the sale of his company’s products:


                                              11
              [A]nother type of situation involves the company
              representative who visits chainstores, arranges the
              merchandise on shelves, replenishes stock by replacing old
              with new merchandise, consults with the manager as to the
              requirements of the store, fills out a requisition for the
              quantity wanted and leaves it with the store manager to be
              transmitted to the central warehouse of the chainstore
              company which later ships the quantity requested. The
              arrangement of merchandise on the shelves or the
              replenishing of stock is not exempt work unless it is incidental
              to and in conjunction with the employee’s own outside sales.
              Since the manufacturer’s representative in this instance does
              not consummate the sale nor direct his efforts toward the
              consummation of a sale (the store manager often has no
              authority to buy) this work must be counted as non-exempt.

29 C.F.R. § 541.504 (c)(4) (emphasis added).

       The regulation regarding driver salesmen, 29 C.F.R. § 541.505, adopts a similar

approach. It contrasts a route driver who does not make sales at the locations he visits

(and is therefore not covered by the exemption for outside salesmen) with a route driver

who takes orders or obtains commitments for the products he delivers (and is therefore

covered by the exemption):

              [A] route driver primarily engaged in making deliveries to his
              employer’s customers and performing activities intended to
              promote sales by customers, including placing point-of-sale
              and other advertising materials, price stamping commodities,
              arranging merchandise on shelves or in coolers or cabinets,
              rotating stock according to date, and cleaning and otherwise
              servicing display cases is not employed in the capacity of
              outside salesman by reason of such work. Such work is
              nonexempt work for purposes of this part unless it is
              performed as an incident to or in conjunction with sales
              actually made by the driver to such customers. If the driver
              who performs such functions actually takes orders or obtains

                                            12
              commitments from such customers for the products he
              delivers, and the performance of the promotion work is in
              furtherance of his own sales efforts, his activities for that
              purpose in the customer’s establishment would be exempt
              work.

29 C.F.R. § 541.505(d) (emphasis added).

       Courts considering the outside salesman exemption have applied this distinction

between employees who consummate sales at out-of-the-office locations and those

employees who do not consummate sales there. For example, in Skipper v. Superior

Dairies, Inc., 512 F.2d 409, 416 (5th Cir. 1975), the Fifth Circuit reversed a district

court’s ruling that a dairy product distributor’s routeman was covered by the outside

salesman exemption, reasoning that the routeman’s responsibility was to deliver products

in prearranged amounts. The court cited testimony from the district court proceedings

indicating that the sale of the dairy products was made not by the routeman but by other

individuals in the company. See id. at 414-415. In an earlier case, the Sixth Circuit

reached a similar conclusion, holding that a soft drink bottler’s routeman was not covered

by the outside salesman exemption because the routeman did not solicit orders and

because the managers of the stores that he visited lacked the authority to enter into

binding sales agreements with the routeman. See Hodgson v. Klages Coal & Ice Co., 435

F.2d 377, 383 (6th Cir. 1970). In contrast, other courts have concluded that driver-

salesmen who make sales of their employers’ products at the locations they visit are

covered by the outside salesman exemption. See, e.g., Hodgson v. Krispy Kreme


                                              13
Doughnut Co., 346 F. Supp. 1102, 1107 (M.D.N.C. 1972).



                     B. The Outside Salesman Exemption in this Case

       In the case before us, the record indicates that, as advance sales representatives and

account managers, the plaintiffs consummated the sales of Coca-Cola products at the

stores that they visited. In this regard, we note that the parties have not challenged the

district court’s conclusion that the plaintiffs were employed for the purpose of selling

Coca-Cola products and were regularly engaged in that activity. The parties also have not

challenged the district court’s description of Coca-Cola’s distribution systems and of the

plaintiffs’ sales responsibilities under those systems. Moreover, in testimony at trial,

several of the plaintiffs described their taking of orders for company products from store

managers. See Aplt’s App. at 85, 152. There is no evidence in the record that sales of

Coca-Cola products at stores visited by the plaintiffs were made by any other Coca-Cola

employees, and neither in the district court proceedings nor in this appeal have the

plaintiffs disputed the proposition that it was through their own transactions with

personnel from stores carrying Coca-Cola products that sales were accomplished. The

plaintiffs thus resemble the exempt “driver salesman” identified in 29 C.F.R. §

541.505(d), an employee who “actually takes orders or obtains commitments from . . .

customers.” In light of their authority to effect sales at the stores they visited, plaintiffs

may be contrasted with the nonexempt manufacturer’s representative discussed in 29


                                              -14-
C.F.R. § 541.504 (c)(4)–the one who “does not consummate the sale nor direct his efforts

toward the consummation of a sale.”

       Because the plaintiffs consummated sales of Coca-Cola products at the stores they

visited, the work that they performed in promoting those sales is “incidental to and in

conjunction with” those sales under the Department of Labor’s regulations. See 29

C.F.R. § 541.504 (a) (stating that “any promotional work which is actually performed

incidental to and in conjunction with an employee’s own outside sales or solicitations is

clearly exempt work. On the other hand, promotional work which is incidental to sales

made, or to be made, by someone else cannot be considered as exempt work.”); 29 C.F.R.

§ 541.505(d) (stating that promotion work and delivery work are exempt if incidental to

and in conjunction with the employee’s own sales or efforts to sell). Here, the plaintiffs

have not disputed Coca-Cola’s contention that their various merchandising tasks

promoted sales of Coca-Cola products at the stores they visited. Instead, they argue only

that because merchandising work is considered non-exempt if performed by

merchandisers, it should also be considered non-exempt when performed by outside

salesmen. See Aplee’s Br. at 14-17. This argument misconstrues the Department of

Labor regulations, which provide that promotional work performed by employees who

consummate sales may be covered by the outside salesman exemption even if the same

work would not be exempt if performed by other employees. See, e.g., 29 C.F.R §

541.504(b)(2) (noting that “[i]ncidental promotional activities may be tested by whether


                                            -15-
they are ‘performed incidental to an in conjunction with the employee’s own outside sales

or solicitations’ or whether they are incidental to sales which will be made by someone

else.”). Therefore, we conclude that the plaintiffs’ merchandising work was “incidental

to and in conjunction with” their outside sales of Coca-Cola products under the proviso of

§ 541.500(b). As a result, in spite of their merchandising work, the plaintiffs are covered

by the outside salesman exemption.

       In reaching the contrary conclusion, the district court relied on testimony that

“merchandising was primarily done because the customers expected it to be done and that

merchandising increased the sales of Coca-Cola products in general.” Aplt’s App. at 16-

17. Although we do not dispute the district court’s characterization of this testimony, we

note that neither the fact that the plaintiffs were motivated by a desire to please customers

nor the fact that merchandising increased sales of products at other locations is

determinative of what activities are “incidental to and in conjunction with” outside sales

under the Department of Labor regulations. Instead, what matters is whether the

plaintiffs--or someone else--sold Coca-Cola products at the locations where the plaintiffs

performed merchandising activities and whether, if the plaintiffs sold Coca-Cola products

at those locations, their merchandising work promoted those sales.

       The district court also relied on the quantity of merchandising work performed by

the plaintiffs in certain weeks, reasoning that an activity that consumes anywhere from

twenty to sixty-five percent of an employee’s work week cannot be characterized as


                                            -16-
incidental. Id. at 17. Although the district court’s reasoning is persuasive under the

dictionary definition of “incidental” on which it relied, that dictionary definition is not

applicable here. Instead, we must apply the phrase as used in the applicable regulations,

which use the phrase “incidental to and in conjunction with” in a manner not directly

correlated to the amount of time expended. See 29 C.F.R. § 541.505 (a) (stating that “[a]

determination of an employee’s chief duty or primary function must be made in terms of

the basic character of the job as a whole” and that “the time devoted to the various duties

is an important, but not necessarily controlling, element”).

       We agree with the plaintiffs that, as the Department of Labor regulations are

written and as Coca-Cola has interpreted them, the company may be allowed to avoid

paying overtime in certain instances by assigning merchandising tasks to account

managers rather than to merchandisers. Although such an assignment may be inequitable

and subject to challenge on other grounds, the evidence in this case does not establish a

violation of the FLSA under the current Department of Labor regulations. Because

Congress has delegated the authority to define the FLSA exemptions to the Department of

Labor, and because the plaintiffs have not here challenged those regulations as arbitrary,

capricious, or manifestly contrary to the statute, see Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 844 (1984), our task here is to apply the

exemptions as defined in the regulations.




                                             -17-
                                    III. CONCLUSION

       We therefore conclude that the plaintiffs are exempt from the FLSA as outside

salesmen. The district court’s decision is reversed, and the case is remanded to the

district court for further proceedings consistent with this opinion.




                                             -18-
