Marshall v. Sam Dell’s Dodge Corp.

Ray Marshall (plaintiff), United States secretary of labor, brought an action under the Fair Labor Standards Act (FLSA) against Sam Dell’s Dodge Corporation (Dell) (defendant), an automobile dealership, alleging that Dell violated the overtime requirements of the FLSA with respect to 117 salespeople. During the time relevant to the litigation, the minimum wage ranged from $1.60 to $2.65 per hour. Dell paid its sales staff under an evolving set of plans. Generally, however, each salesperson received base pay of $56 per week plus various commissions and bonuses. Dell also furnished many of the salespeople with demonstrator vehicles, or demos. The salespeople were permitted to drive the demos for personal use; however, Dell told them that the demos were not for their families, and the employees primarily used the cars in connection with their job duties. Although one of the changes to Dell’s compensation plans indicated that the value of the use of the demo vehicles would be reported to the Internal Revenue Service on a Form 1099, it did not appear that Dell ever did so, and Dell’s payroll records did not account for the demos. Dell’s timekeeping records grossly understated the number of hours the sales staff worked. The salespeople actually worked an average of at least 55 hours per week, but Dell required them to sign time slips purporting to show that they were working 36 hours per week. All the salespeople had weeks in which they received only the $56 weekly base pay and no commissions or bonuses. During those weeks, the salespeople were paid less than the minimum wage.