Employment Class Action Blog

Employment Class Action Blog

Information and Commentary on Class Action Cases Affecting Employers

Ding-Dong, Yard-Man Is Dead! Supreme Court Decision in Tackett a Huge Win for Employers in the Retiree Healthcare Arena

Posted in Benefits

On Monday, a unanimous United States Supreme Court issued its decision in M & G Polymers USA, LLC v. Tackett, Supreme Court Case No. 13-101, vacating and remanding the Sixth Circuit’s holding that a group of retirees was entitled to lifetime healthcare benefits per the terms of various collective bargaining agreements.  In doing so, the Supreme Court rejected UAW v. Yard-Man Inc., 716 F.2d 1476 (6th Cir. 1983), and its progeny, and directed lower courts to determine whether retiree health benefits vest based on ordinary contract principles without any presumption or inference in favor of vesting.

For employers located in the 46 states outside the Sixth Circuit, it may be unclear why this case is a big deal.  For the lucky majority, a brief history lesson is in order.  Outside the Sixth Circuit, a collective bargaining agreement, and the obligations it contains, expires on its expiration date.  Thus, the parties must come to agreement as to the new terms at relatively regular intervals, taking into account market forces, changes in their relative bargaining positions, and their respective interests.   However, in 1983, the United States Court of Appeals for the Sixth Circuit rendered its decision in Yard-Man, in which it manufactured an “inference” that retiree welfare benefits, primarily paid health insurance, would “vest” and would survive the clear expiration of the agreement. Continue Reading

The Supreme Court’s denial of certiorari in Iskanian only hardens the federal-state divide over PAGA claims

Posted in Arbitration, PAGA

The divide continues between California and federal law on whether an arbitration agreement can entirely waive an employee’s ability to seek classwide or multiparty representational relief. The Supreme Court on Tuesday denied certiorari in CLS Transp. Los Angeles LLC v. Iskanian, No. 14-341, leaving in place the California Supreme Court’s June 23 ruling that representative claims under the state’s Private Attorneys General Act (PAGA) cannot be waived in an arbitration agreement.

Since Iskanian, a number of federal district courts had rejected the California Supreme Court’s reasoning, holding that the U.S. Supreme Court’s AT&T Mobility v. Concepcion decision requires enforcement of class or representative action waivers in arbitration agreements as a matter of Federal Arbitration Act preemption—even where the claims are pursued under PAGA. [Indeed, federal district courts have rejected Iskanian’s conclusions in Lucero v. Sears Holding Mgmnt. Corp., Case No. 3:14-cv-01620 (S.D. Cal. Dec. 2, 2014); Mill v. Kmart Corp., Case No. 14-cv-02749 (N.D. Cal. Nov. 26, 2014); Ortiz v. Hobby Lobby Stores, Inc., 2014 U.S. Dist. LEXIS 140552 (E.D. Cal. Oct. 1, 2014); Chico v. Hilton Worldwide, Inc., 2014 U.S. Dist. LEXIS 147752 (C.D. Cal. Oct. 7, 2014); and Langston v. 20/20,Companies, Inc., 2014 WL 5335734 (C.D. Cal. Oct. 17, 2014)].  Continue Reading

Court Approves Overtime Class Settlement After Initially Rejecting It

Posted in Meal and Rest Periods

We wrote last May about the court’s rejection of a $1.75 million settlement in Cruz v. Sky Chefs, Inc., Case No. C-12-02705 DMR (N.D. Cal. 2014) [May 27, 2014]. The court’s decision related to the settlement of run-of-the-mill California wage and hour claims purportedly brought on behalf of approximately 3,000 employees involved in the preparation of airline meals. The court rejected the settlement at that time due to, among other things, a $15,000 incentive award sought by the lead plaintiff and an attorney fee request that would have consumed 30 percent of the settlement, as well as questions as to how the settlement amount had been calculated. The court in particular was concerned that the amount of the settlement was relatively low and amounted to something less than 10 percent of the relief sought.

The court’s decision at that time was consistent with a growing trend, particularly in jurisdictions with extensive class litigation, to examine class settlements more carefully than in the past. We noted back then that the plaintiffs had committed the tactical error of simply presenting the settlement with little explanation of why its terms were reasonable and not answering specific questions about it the court had posed. Continue Reading

The Widening California Divide: The Rejection of Iskanian by Federal District Courts and Potential Resolution

Posted in PAGA

In an October 22, 2014, posting, we addressed the growing divide between California federal district courts and the California Supreme Court over whether an arbitration agreement can waive an employee’s right to pursue a representative claim under the state’s Private Attorney General Act (PAGA).  That divide has now widened as two more federal district courts have rejected the June 23, 2014, holding of Iskanian v. CLS Transp. Los Angeles, LLC, 327 P. 3d 129 (2014).  (Discussed in a June 23, 2014, posting here).  Iskanian is currently pending on certiorari before the United States Supreme Court.  (See Petition in CLS Transp., L.A. LLC v. Iskanian, No. 14-341).  The question presented: “Is an employee’s waiver in an arbitration agreement of a collective or ‘representative action’ under [PAGA] so distinguishable from a ‘class action’ waiver that it is immune from the otherwise preemptive effective of the Federal Arbitration Act . . . as held by this Court in AT&T Mobility v. Concepcion?”  [citations omitted].

Three amici briefs have weighed in on the issue, including The Pacific Legal Foundation and National Federation of Independent Business.  The Petition currently is scheduled for conference on January 9, 2015.  If granted, the Supreme Court could resolve the growing divide, because federal not state courts ultimately determine the scope of federal preemption.  See Gade v. Nat’l Solid Waste Mgmt. Ass’n., 505 U.S. 88, 98 (1992); Kilgore v. Key Bank Nat’l Ass’n, 673 F.3d 947, 960 (9th Cir. 2012).  Otherwise, the type of court deciding the waiver issue  ̶  state or federal  ̶  will be determinative rather than the constitutional authority of that court.

The two recent opinions, Lucero v. Sears Holding Mgmnt. Corp., Case No. 3:14-cv-01620 (S.D. Cal. Dec. 2, 2014), and Mill v. Kmart Corp., Case No. 14-cv-02749 (N.D. Cal. Nov. 26, 2014), now join Ortiz v. Hobby Lobby Stores, Inc., 2014 U.S. Dist. LEXIS 140552 (E.D. Cal. Oct. 1, 2014); Chico v. Hilton Worldwide, Inc., 2014 U.S. Dist. LEXIS 147752 (C.D. Cal. Oct. 7, 2014); and Langston v. 20/20,Companies, Inc., 2014 Wl 5335734 (C.D. Cal. Oct. 17, 2014) in rejecting the Iskanian holding.  The opinion, on reconsideration after Iskanian, in Fardig v. Hobby Lobby Stores, Inc., 2014 U.S. Dist. LEXIS 139359 (C.D. Cal. Aug. 11, 2014) reached a similar conclusion.

The federal courts above uniformly agreed that the essence of the Iskanian opinion regarding PAGA waivers is hostile to arbitration and contrary to the FAA.  As described in Lucero:

The Iskanian court concluded that an employee’s agreement not to bring a representative PAGA action is contrary to public policy if it takes place before a suit arises, but nevertheless explained that, after a labor dispute arises, an employee is free to choose not to bring a representative PAGA claim.

But, citing Langston, the Lucero court concluded that disfavor of pre-dispute arbitration agreements actually prompted the Iskanian decision:

“ . . . [A]lthough the [Iskanian] court asserts that the basis for holding representative PAGA claim waivers unconscionable is that an employee cannot waive a right that properly belongs to the government, the court nevertheless acknowledges that an employee may actually sometimes waive the government’s right to bring a PAGA claim. . . .  That inconsistency illuminates the fact that it is not an individual’s ability to waive the government’s right that drives the court’s rule, but rather the [Iskanian] court’s general disfavor for pre-existing agreements to arbitrate such claims individually.”

Lucero at 8, citing Langston, 2014 WL 5335734 at *7.

While there is disagreement among federal courts over the availability of individual PAGA claims, the majority of the recent decisions require that PAGA claims be brought on an individual basis.  In Ortiz, however, the court found that “PAGA actions cannot exist on an individual basis” but that “Plaintiff’s PAGA action falls within the waiver provision and Plaintiff is banned from pursuing her PAGA claim in arbitration.”  2014 U.S. Dist. LEXIS at *38-39.  Regardless, the post-Iskanian federal court decisions provide that PAGA claims cannot be maintained in court.

The present state-federal conflict encourages forum shopping in removable diversity cases and obscures the proper role of the Federal Arbitration Act.

The Bottom Line: The present split on PAGA waivers warrants U.S. Supreme Court review.  Until that occurs, the full enforcement of an employment arbitration agreement still depends on whether a state or federal court is considering it.

U.S. Supreme Court Eases CAFA Removals

Posted in Class Action Fairness Act

Congress passed the Class Action Fairness Act (CAFA) in 2005, in response to perceived (in fact real) concerns regarding potential abuses of the class action process. Among CAFA’s important provisions was the right to remove a case to federal court.

Despite the clear congressional intent, some federal courts have treated CAFA removal with hostility. The Ninth Circuit, for example, held in 2007 that a defendant seeking to remove must prove CAFA jurisdiction by a “legal certainty,” a standard that appears nowhere in the statute. Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007). Plaintiffs, too, sought to avoid CAFA removal by various pleading tricks, such as limiting the damages they sought in their complaint – at least until the time for removal passed. Continue Reading

Unanimous Supreme Court Finds Security Screening Time NOT Compensable

Posted in FLSA, Wage and Hour

Security screening has become more common over the past decade, both to promote security for some employers and to deter employee theft for others. A growing issue in wage and hour law, at least until this morning, was whether the time spent in that screening was compensable under the Fair Labor Standards Act. In Integrity Staffing Solutions, Inc. v. Busk, Case No. 13-433 (U.S. S. Ct. December 9, 2014), a unanimous United States Supreme Court held that it was not.

We’ve blogged about some of the prior litigation in this arena, including lawsuits against clothing retailer Urban Outfitters and Apple, which you can read about here. These suits were fueled, at least in part, by the Ninth Circuit’s 2013 decision in Busk v. Integrity Staffing Solutions, Inc., Case No. 11-16882 (9th Cir. 2013), in which the court addressed claims by a putative class of workers employed at a warehouse used to ship products for Amazon.com. The crux of their claim was that they had to undergo a security screening as they left work as part of an effort to prevent employee theft. According to the plaintiffs, those security screenings could take upward of 25 minutes, as employees had to wait to remove their keys, belts, and wallets and then go through metal detectors before leaving the facility. They also asserted that the employer could have reduced the time spent waiting, even to de minimus levels, by adding more screeners or staggering quitting times. Interestingly, the district court dismissed the case without discovery under Rule 12(b)(6), finding that the complaint failed to state a claim upon which relief could be granted. It also held that, in any case, the plaintiffs could not simultaneously proceed with a Rule 23 class action under Nevada law and an FLSA section 16(b) (29 U.S.C. § 216(b)) collective action.

Continue Reading

Nevada Supreme Court Finds Class of Strippers Were Employees

Posted in FLSA, Independent Contractors, Wage and Hour

Given the extensive use of euphemisms in the exotic dancing trade, we’ll apologize in advance for any unintended puns.

We’ve written on the issue of the classification of exotic dancers or strippers in the past [April 8, 2011, October 19, 2011, November 21, 2012], but the question continues to ripple through the courts.  While the industry practice has been to classify the performers as independent contractors, the trend is strongly in favor of their being treated as employees.

Most recently, in Zuri-Kinshasa v. Sapphire, Case No. 59214 (Nevada Oct. 30, 2014), the plaintiffs sought to represent a class of over 6,000 semi-nude performers working at the Sapphire Las Vegas Club claiming entitlement to the minimum wage under Nevada law.  According to the court, the performers received no wages but worked solely for tips and dancing fees paid by patrons.  They had generally flexible schedules subject to the requirement that they work at least 6 hours on any given day.  The club’s rules established minimum prices for private performances (presumably lap dances), required a certain number of stage performances, and governed a minimum heel height, and the music was selected by the club DJ.  The club charged a daily house fee to the performers under a written “entertainer” agreement. The performers largely controlled the “artistic” aspects of their performances and were free to work for other establishments.

Continue Reading

Sixth Circuit Remands Memphis Title VII Disparate Impact Case, Yet Again

Posted in Discrimination, Title VII

It’s hard not to feel sorry for the residents of Memphis, Tennessee.  Depending on which source you consult, its violent crime rate hovers between three and four times the national average, and various publications describe it as one of the top 10 most violent cities in the United States.  As we’ve commented previously, its fire department has been embroiled in Title VII litigation regarding promotion practices for over 30 years.  And now its police department, whose primary task should be reducing that crime rate, is still fighting over its promotion practices after 40 years of litigation. This dispute, if a person, would now be old enough to qualify for protection under the ADEA.

All of these cases stem from the tests and procedures used to make decisions as to promotions.

In the most recent case,  Johnson v. City of Memphis, Case Nos. 13-5452/5454 (6th Cir. Oct. 27, 2014), the city created a promotion process for police officers in 1996 that was itself in response to what was then roughly 20 years of litigation over its promotion practices.  With the assistance of an expert, it relied heavily on a video “high-fidelity” law enforcement role-play exercise (50 percent), with consideration of a written test (20 percent), performance evaluations (20 percent), and seniority (10 percent).  Continue Reading

California Appellate Court Rejects Class Action Settlement Due to Excessive Attorney Fees

Posted in Wage and Hour

Pigs get fat and hogs get slaughtered, so the saying goes. As we’ve noted before on Oct. 7, June 5, and Dec. 18, courts are starting to examine attorney fee awards in class action settlements much more closely, and the results often aren’t exactly pretty.

The most recent example is the case of Lofton v. Wells Fargo Home Mortgage, Case No. A136626 (Cal. App. Oct. 22, 2014). The Lofton case really involved two cases with a convoluted procedural history, but bear with us and we’ll try to skip any unnecessary details.

The underlying matter was a garden-variety wage and hour dispute over whether California home mortgage consultants were properly classified as exempt. The Lofton case was brought in state court in San Francisco, and purported to cover the entire state of California. A second similar action was brought in Los Angeles Superior Court by a different set of attorneys. The second case, of course, should have been consolidated with the first or stayed—a matter the court noted but for which there was no explanation. Continue Reading

California District Court Rejects Yet Another Class Settlement

Posted in Wage and Hour

“Another one bites the dust…”

In yet another decision rejecting a settlement of an employment class action, the Northern District of California refused to approve a settlement of a wage and hour suit due to numerous problems with the resolution reached between the parties. In Myles v. AlliedBarton Security Services, LLC, Case No. 12-cv-05661-JD (N.D. Cal. Nov. 12, 2014), the plaintiffs sought to represent a class of 11,500 security officers who contended that they were improperly denied accrued vacation pay under California law. Four months before trial, they settled the case for a total of $1,750,000, including an attorney fee award of 30 percent (or $525,000). We’ll discuss the rest of the terms in a minute, but even if all the money had gone to the class, the amount per class member would have been a hair over $150.

The district court refused to approve the settlement for several reasons. We’re listing these reasons below, but they all share two features: (1) the parties failed to make a record as to why they were necessary; and (2) while many might have survived individually, collectively they would have been difficult to defend absent compelling circumstances. What were the problematic terms? Continue Reading