Employment Class Action Blog

Employment Class Action Blog

Information and Commentary on Class Action Cases Affecting Employers

Seventh Circuit Clarifies Rules for Compensating Tipped Employees Performing Non-tipped Work

Posted in FLSA

The Fair Labor Standards Act (FLSA) and most states permit restaurants to pay tipped employees a tip-credit rate, an amount less than the minimum wage with the expectation that tips will make up the difference. It goes without saying, however, that the system raises questions, such as how to pay a tipped employee when he or she performs non-tipped functions at work. Earlier this month, the United States Court of Appeals for the Seventh Circuit provided some clarity.

The case, Schaefer v. Walker Bros. Enterprises, — F.3d —, 2016 WL 3874171 (7th Cir. July 15, 2016), was brought by two classes of Original Pancake House servers. The first class claimed that the restaurants were required to pay them the minimum wage rate for the time they spent performing non-tipped duties. The second class argued that the disclosures provided by the restaurants regarding compensation of tipped employees failed to meet federal requirements.

In addition to performing normal server tasks like taking orders and delivering food, the servers in this case were also obligated to spend about 10 to 45 minutes each shift performing tasks they argued were completely unrelated to traditional server functions. For example, they were required to wash and cut fruits and vegetables; prepare applesauce, jellies and salsas; restock bread bins and replenish condiment dispensers; fill ice buckets; brew hot drinks; clean toasters, burners and woodwork; and dust picture frames. The servers argued that the restaurants should not be allowed to use the tip-credit rate for the time they spent performing these functions because they are unrelated to tipped tasks. The Seventh Circuit disagreed. Continue Reading

Here’s a Tip for You, Jack – Fifth Circuit Upholds Ruling on Restaurant Credit Card Offset

Posted in Wage and Hour

Life is filled with risky decisions. Should you take that new job? Should you put in an offer on that house that is just out of your price range? Should you really eat that last piece of cake when you’ve already had two? Companies make big gambles, too. For example, should Lionsgate really invest millions in a sequel to Now You See Me when nary a soul is clamoring for one?

In the wage and hour world, there are few risks more hazardous than the tip credit system. For the unfamiliar, the basic rule is that tips belong to employees, not the employer. Under the Fair Labor Standards Act (“FLSA”), employers may pay tipped employees less than the minimum wage, as long as the employees receive enough in tips to make up the difference. Easy, right? As the saying goes when cooking pasta: Step 1 – Measure the amount of pasta you need; Step 2 – Wrong.

The tip credit system is fraught with potential problems for employers. For example, if an employee does not receive sufficient tips to make up the difference between his direct wage and minimum wage, the employer must make up the difference. Or, when a tipped employee is required to contribute her tips to a tip pool that includes individuals who do not customarily receive tips, the employee is owed all the tips she submitted to the pool and the full minimum wage. Continue Reading

Court Grants Summary Judgment for Employer in California Class Action Vacation Pay Case

Posted in Wage and Hour

Underlying claim premised on PowerPoint slide invalid

Most California employers know that California treats vacation pay largely as a vested benefit that cannot ordinarily be “forfeited.” In common parlance, the state prohibits “use it or lose it” policies. To prevent employees from accruing, or claiming to have accrued, large amounts of vacation time, most California employers have a policy that states that employees cease to accrue time once they have hit a set maximum. This neatly avoids the “forfeiture” problem because the employees simply stop accruing time and forfeit nothing.

Like many national employers, IBM had such a policy that was specifically directed to California and was different from the policy that applied in other states. Despite having such a policy, the company found itself a defendant in the Northern District of California in a class action contending that it, in fact, was applying a “use it or lose it” policy in that state. Reznik v. International Business Machines, Inc., Case No. 15-cv-02419-YGR (June 7, 2016). Continue Reading

Sixth Circuit Rejects Class Action Settlement With Key Documents Under Seal

Posted in Collective Action

All’s not fair in secretive class-action settlements.

If class actions are the exception (see Wal-Mart Stores, Inc. v. Dukes), then class-action settlements are a reflection of that exception. Specifically, the secrecy that might otherwise accompany dispute resolution is usually not permitted in class-action settlement, whether pursuant to Rule 23 or under the Fair Labor Standards Act (FLSA).

With that policy in mind, the Sixth Circuit sent back for a do-over a $30 million class-action settlement on Tuesday, June 7, 2016, chastising the district court for allowing several key documents to be filed under seal, unavailable for class members to review. Those sealed documents in Shane Group, Inc., et al. v. Blue Cross Blue Shield of Michigan, Nos. 15-1544/1551/1552, included class certification briefing and the named plaintiffs’ expert report that purported to detail the scope of antitrust damage suffered by three million to seven million putative class members. The price-fixing case alleged that private individuals and corporations were damaged by a rate-setting scheme orchestrated by Blue Cross’ efforts to expand its footprint in Michigan’s health-insurance market. After the complaint alleged some $13.7 billion in damages, and the expert report determined approximately $118 million in damages, the parties reached a class-wide settlement of $30 million. But because the unnamed class members couldn’t review any of the most relevant documents, the unanimous panel vacated the order approving the settlement and remanded it “for an open and vigorous examination of the settlement’s fairness to the class.” Continue Reading

Eighth Circuit Stays the Course in the Cellular Sales of Missouri Opinion, Rejecting the NLRB’s Arguments Against Class Waivers

Posted in Class Certification, Collective Action, National Labor Relations Act

Following in the wake of an earlier opinion, the Eighth Circuit rebutted the National Labor Relations Board’s (“Board”) arguments that by requiring employees to enter into arbitration agreements with a class and collective action waiver, it violated the National Labor Relations Act (“NLRA”). This comes only a week after the Seventh Circuit ruled in favor of the Board’s position on essentially the same issue. See Lewis v. Epic Systems Corp., which we recently discussed here.

In Cellular Sales of Missouri, LLC v. National Labor Relations Board, No. 15-1620 (June 2, 2016), the Eighth Circuit drew upon Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013), to reject a Board decision premised on the conclusion that the company violated Section 8(a)(1) of the NLRA by requiring its employees to enter into an arbitration agreement that waived class or collective actions arising from employment disputes. Continue Reading

District Court Denies Conditional Certification of Off-the-Clock Case Despite Bad Emails

Posted in Conditional Certification, Wage and Hour

“As far as overtime, you (like I) can only bill a 40hr work week even though we put in like 60hrs at times.”

This isn’t exactly the email you want to see if you are defending an off-the-clock wage and hour claim, but it was one of several addressed this week by the District of New Jersey in a case in which the court looked past the local bad facts to find that the plaintiffs had failed to establish a common claim affecting all class members nationwide.

In Federman v. Bank of America, Civil Action No. 14-441 (MAS) (TJB) (May 31, 2016), the two plaintiffs were employed by two different contractors providing IT services to the same financial institution. They brought suit against their employers, the bank and various recruiters, claiming that they and others nationwide were being forced to work off the clock. In support of their motion for conditional certification of FLSA claims on behalf of all contract workers nationwide, they relied on the email cited above as well as other local emails reflecting that hours in excess of 40 could not be billed and “[u]nfortunately, that’s how management is . . . .” Continue Reading

Lewis v. Epic Systems Opinion – Seventh Circuit Swimming Against the Tide on Mandatory Individual Arbitration

Posted in Arbitration

In a sweeping May 26 opinion, the U.S. Court of Appeals for the Seventh Circuit shook up the arbitral landscape and created a remarkable circuit split regarding the enforceability of arbitration agreements with class action waivers in the employment sector.

In Lewis v. Epic Systems Corp., No. 15-2997, the Seventh Circuit held that an arbitration agreement precluding collective arbitration or collective action violates Section 7 of the National Labor Relations Act, 29 U.S.C. § 157 (NLRA), and is unenforceable under the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq (FAA). The decision put the Seventh Circuit decidedly at odds with the Fifth, Second, Eighth, Ninth and Eleventh Circuits on this crucial issue that ultimately influences the extent to which employers can rely on class action waivers in arbitration agreements to limit class liability. Since 2011, when the U.S. Supreme Court permitted such waivers in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), employers have relied upon them to require that disputes be resolved through individual arbitration. Those waivers precluded employees from pursuing collective action relief for Fair Labor Standards Act (FLSA) claims.

Concepcion, however, arose in the consumer class action context, and involved the precise question of whether a state contract law proscribing individual arbitration had to yield to the FAA’s pro-arbitration command. 563 U.S. at 340. Apparently realizing that Concepcion’s fit with Section 7 of the NLRA was not necessarily airtight, the National Labor Relations Board (NLRB) pushed back, and continued to bring enforcement actions for labor violations, arguing that while the FAA may trump contrary state law, it does not displace employees’ rights to engage in concerted activities under Section 7. See e.g., D.R. Horton, 357 N.L.R.B. No. 184 (2012); Murphy Oil USA, Inc., 361 N.L.R.B. No. 72 (2014). And as we have discussed in detail here before, every circuit court to analyze the NLRB’s argument has rejected it by holding that the FAA’s policy of favoring arbitration overrides any concerted activity rights employees have to class or collective remedies. See D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013); Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326, 1336 (11th Cir. 2014); Richards v. Ernst & Young, LLP, 744 F.3d 1072, 1075 n. 3 (9th Cir. 2013); Owen v. Bristol Care, Inc., 702 F.3d 1050, 1053–55 (8th Cir. 2013); Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297 n. 8 (2d Cir. 2013). That is, until last Thursday. Continue Reading

Supreme Court Continues Sanctions Litigation Against the EEOC

Posted in EEOC

A slap in the face, maybe, after 11 years

Back in 2005, a prospective driver for a trucking company filed a charge with the EEOC contending that two trainers sexually harassed her during an over-the-road trip. That charge triggered a lawsuit in which the EEOC went on to claim that over 250 other women had been harassed, and that the company had a “pattern and practice” of such harassment. Serious allegations but, it turns out, ones that for the most part lacked evidence. Further much of the case was dismissed either because of the Commission’s own conduct in discharging its obligation to conciliate or occurrences such as the refusal of at least 100 of the alleged victims to appear for depositions. These matters resulted in the dismissal of virtually all of the claims and sanctions against the Commission of over $4 million. We’ve blogged aspects of this case at least three times (3/21/2012, 4/20/2011, and 10/7/2013). The Eighth Circuit ultimately reversed those sanctions because many of the claims were dismissed on procedural grounds rather than specifically on the merits. This created a conflict among the circuits and the Supreme Court accepted certiorari last year. Continue Reading

Standing Together to a Point: Spokeo Holding Reflects Broad Supreme Court Agreement on Standing Rules in Actions Raising Statutory Violations

Posted in FCRA

Amid the meteoric rise of statutory damage class action filings, the Supreme Court laid out ground rules on Monday for when a case meets both components of the injury-in-fact requirements of Article III.

In a 6-2 opinion in Spokeo, Inc. v. Robins, No. 13-1339, written by Justice Samuel Alito, the Court held that a named plaintiff in a federal class action complaint cannot establish Article III standing solely by alleging a statutory violation that carries with it a statutory damage provision. None of the justices, including the two dissenters, disagreed with that. Those types of allegations have become commonplace recently in federal courts by way of Telephone Consumer Protection Act (“TCPA”) and Fair Credit Reporting Act (“FCRA”) class actions. Both statutes carry statutory damage provisions without requiring proof of actual damages. After the Ninth Circuit held that standing was properly established based on an alleged FCRA violation, the Spokeo certiorari petition was essentially a challenge to such a class action procedure. Although the Supreme Court clearly delineated the standing requirements for statutory damage plaintiffs, the effect of its holding is unlikely to drastically curtail the statutory damage class action trend.

In remanding Spokeo to the Ninth Circuit, the Court held that the appellate court correctly determined that the Spokeo plaintiff, Thomas Robins, alleged a particularized injury to satisfy the injury component of Article III standing. But the Court held a particularized injury alone is not sufficient. Importantly, the Court noted in a footnote that a class action “adds nothing to the question of standing, for even named plaintiffs who represent a class ‘must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong.’” Op. at 6-7, n. 6 citing Simon v. Eastern Ky. Welfare Rights Organization, 426 U.S. 26, 40 n. 20 (1976). Rather, the injury must be concrete and particularized. And it noted that a concrete injury can include intangible harm that did not exist prior to its Congressional creation by way of a statute such as the FCRA or TCPA. Because the Ninth Circuit did not address whether Robins’ injury was sufficiently concrete, that is, “‘real’ and not ‘abstract,’” remand was necessary to consider “both aspects of the injury-in-fact requirement.” Continue Reading

Balancing Transparency and Secrecy in Class Action Settlements

Posted in Class Action Fairness Act

Companies have the right to protect their trade secrets against public disclosure, while class action members (and the judges who must determine the fairness and adequacy of proposed class action settlements) have the right to know the potential value of their claims. At times, as seems to be the case with respect to the proposed $100 million class action settlement between Uber Technologies, Inc. and its drivers in California and Massachusetts in O’Connor v. Uber Technologies, Inc., 13 CV-03826 (N.D. Cal.), these respective rights can clash.

On the one hand, before he approves the proposed class action settlement, the United States District Court Judge in the O’Connor case is required by Rule 23(e) of the Federal Rules of Civil Procedure to determine whether the settlement is fair and adequate; information that appears to be relevant to this determination in the O’Connor case are such things as the most recent valuation of Uber as a company, as well as data on the number of miles logged by drivers, gross fares, and service fees on fares. Not surprisingly, on the other hand, and although Uber is keen to see the proposed class action settlement approved, Uber contends that all of this is trade secret information/data and should be shielded from public disclosure by means of sealed court records.

Interestingly, class counsel for the plaintiffs in the O’Connor case took no position on whether what Uber contends is trade secret information should be sealed. The District Court Judge, though, is not yet convinced of the propriety of sealing records containing such information and has ordered the parties’ counsel to “explain why the potential value of the claims should not be publicly disclosed given the importance of this information in the court’s determination of the fairness and adequacy of a proposed class action settlement.” Continue Reading