Employment Class Action Blog - Information and Commentary on Employment Class Action Cases Affecting Employers

It’s bad enough that a plaintiff’s attorney loses a motion to certify a class – it must be even worse when the reason the motion is denied is the attorney’s own failure to plead his case properly.  A recent California court of appeals decision affirmed the denial of a California meal and rest break class in part because it found that the plaintiffs’ attorney could not adequately represent the class.  Interestingly, the court cited errors made by the attorney during certification briefing in support of this finding. 

In Chaaban v. Wet Seal, Inc., Super Ct. No. 07CC01290 (Cal. 4^th App. Dist. April 4, 2012), the plaintiffs appealed an order denying their motion to certify a class action against their former employer, Wet Seal.  They alleged various violations of California’s Labor Code and the applicable wage order, including claims for unpaid meal and rest periods.   They filed their motion for certification in June 2010 along with 67 exhibits.  In what the court described colorfully described as “evidentiary bloodletting,” the trial court found the vast bulk of this evidence to be inadmissible.  After clearing away the “deadwood,” the trial court denied plaintiffs’ motion based on their failure to make the well-established showings of commonality and typicality, as well as its determination that the plaintiffs’ counsel could not adequately represent the proposed class.       

In affirming the trial court’s decision, the court found that the plaintiffs had not established commonality because they had failed to show how they could prove that Wet Seal had not provided meal and rest breaks to its employees on a class-wide basis.  The plaintiffs’ evidentiary failures aside, the court noted that they had failed to explain how allegations of missed meals and breaks could be determined for the class as a whole without resorting to numerous individual inquiries.  The court found the plaintiffs’ reporting time and split-shift payments to be “even more complex problems” in terms of class treatment. 

As for typicality, the court found that the potential class representatives did not establish through admissible evidence that they had claims against Wet Seal.  Rather, the plaintiffs’ declarations contained unfounded assertions such as “I was never paid an additional hour of pay for any missed rest break” without explaining what foundation they used to establish this.  Thus, because the plaintiffs had not shown they had claims against Wet Seal, they failed to demonstrate that they had claims against Wet Seal that were typical of the class they proposed to represent. 

Running the risk of piling on, the court then cited the plaintiffs’ counsel’s certification briefing missteps to support its conclusion that class counsel was unable to handle a large class action properly.  The court found that the plaintiffs’ counsel’s inability to offer admissible evidence, overruled objections to West Seal’s expert declaration, and inability to prepare an adequate reply brief did “not install confident in appellants’ counsel’s qualifications to be class counsel.”  Perhaps sensing a sinking ship, the court also noted that more experienced plaintiff class action lawyers had already dissociated themselves from the case.  The court concluded that plaintiffs’ counsel’s relative lack of experience and questionable resources to handle a case with potentially 10,000 class members provided “ample” support for the trial court’s ruling.      

The bottom line:  While this case provides some guidance for a possible inadequacy of representation argument based on poor lawyering, practically this will likely be a moot issue since errors that could give rise to such a defense are also likely to result in the plaintiffs producing a losing certification motion. 

When James Bond brandishes his Walther PPK and walks into a printing plant, you know one thing is certain - you will be "treated" to at least a half-dozen newspaper puns.  And, since this article is about a recent California case involving newspaper carriers, it will, of course, be no different.

Ever since Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), stopped the presses last summer, courts have been struggling with how to interpret the decision, and more importantly, how to define its holding with pending class actions.  The judge in Dalton v. Lee Publications, Inc., Case No. 3:08-cv-01072 (S.D. Cal. April 24, 2012), faced just such a dilemma.  The plaintiffs, employed as newspaper home delivery carriers, initially sued in 2008 on the premise that the employer, Lee, had misclassified them as independent contractors.  In July 2010, the court certified the class as Lee newspaper home delivery carriers who had signed written agreements designating them as independent contractors.

Lee was black, white, and red all over its face when it saw that a class of 800 employees had been certified, so it quickly appealed.  In November 2010, however, the Ninth Circuit denied its appeal.  Still determined that the certification was not fit to print, Lee moved for decertification following the Dukes decision in 2011.  Primarily, Lee argued that individualized issues predominated over common issues, and that the class of 800 would be unmanageable.

The court disagreed.  Using Dukes as front page, above the fold material, it wasted no time distinguishing the 1.5 million individuals involved there with the "scant" 800 employees of Lee.  Lee argued that the court could not merely look to the similar contracts signed by the plaintiff class members as a "common answer" to the question.  Plaintiffs, on the other hand, convinced the court that Lee kept "extensive records" that purportedly demonstrated mileage, hours, and other information with respect to each class member.  Any individual damages could be determined through those records, and without any kind of "representative sampling."

It wasn't all bad news for Lee, however.  Before putting the paper to bed, the court conceded that if the workers could not present such proof of individualized damages at trial, and they were forced to resort to individual testimony, Lee could renew its motion for decertification at that time.

The Bottom Line:  Even after Dukes, it is difficult to allege individualized damages for decertification purposes when the defendant keeps meticulous records from which it can easily calculate the amounts.

Following down the road paved late last year by the Ninth Circuit in Am. Trucking Ass’ns, Inc. v. City of Los Angeles, (ATA II), 660 F.3^rd 384 (2011), and the Southern District of California in Dilts v. Penske Logistics LLC  (discussed here), Judge Jacqueline Nguyen in the Central District of California has dismissed a putative class action brought by a group of route delivery drivers against Performance Food Group in Esquivel v. Vistar Corp. dba Roma Food and dba Performance Food Group.pdf, Central District of California Case No. 2:11-cv-07284-JHN-PJWx.  

The plaintiffs in Esquivel claimed that throughout their employment, the defendants scheduled their delivery routes in a way that prevented the drivers from taking duty-free meal breaks and that time pressures to make deliveries by a certain time of day also prevented them from taking breaks.  The plaintiffs further alleged that their wage statements were inaccurate because they did not include amounts allegedly due for missed meal break premiums.

Defendant Performance Food Group moved to dismiss the case on the grounds that the plaintiffs’ claims were preempted by the Federal Aviation Administration Authorization Act (“FAAAA”), 49 U.S.C. § 14501 et seq.  The Court agreed and dismissed the case, finding the reasoning in Dilts applicable and persuasive, and that, as in Dilts, “‘the length and timing of meal and rest breaks seems directly and significantly related to such things as the frequency and scheduling of transportation,’ such that requiring off-duty breaks ‘at specific times throughout the workday . . . would interfere with competitive market forces within the . . . industry.” (quoting Dilts, 2011 WL 4975520 at *9).

The plaintiffs argued that the FAAAA does not preempt California’s meal and rest break laws by citing to various state and federal cases, which the Court found were either “fundamentally distinguishable” from cases involving meal and rest break laws or unpersuasive because they predated ATA II and Dilts.  The plaintiffs further argued that Dilts was an “outlier decision” and was “wrongly decided”, but the Court disagreed, finding that Dilts applied a novel test enunciated by the Ninth Circuit in ATA II to cover a previously unanswered question regarding FAAAA preemption.

The Bottom Line:  Support is growing for motor carriers to dispose of California meal and rest break claims. 

The Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), seems to be taking hold in meal and rest period cases in California, as shown by two decisions handed down this month.

The most recent casualty of the holding in Dukes is Cortez v. Best Buy Stores, LP, Case No. CV-11-05053 SJO (FFMx) (C.D. Cal. Jan. 25, 2012). The Cortez case was a putative class action against electronics retailer Best Buy. To meet the Dukes requirement of a common policy, the plaintiffs contended that the company’s policy of not budgeting for overtime or for missed meal and rest periods at the store level resulted in employees being pressured to falsify their time records by local managers and thus not being paid properly under California law.

This is actually a pretty clever theory, but the court didn’t buy it. It noted that the company’s policy was compliance with applicable law and the company could certainly direct its managers to manage their stores in a way that did not incur unnecessary overtime or other obligations above straight time pay. It found that the plaintiffs’ claims all boiled down to reliance on one-on-one oral statements (or possibly store-wide, but no greater), that rendered a state-wide class unavailable under Dukes. Indeed, the court’s opinion casts doubt on whether a case relying on oral statements should ordinarily ever be certified.

The court similarly found that any claims that time records were falsified would have to be evaluated on a case-by-case basis as there are many legitimate reasons why time records could be changed, such as an employee forgetting to punch in or out, etc. Applying Dukes, the court denied the plaintiffs’ motion for class certification.

Earlier this month, in Hughes v. Winco Foods.pdf, Case No. ED CV11-00644 JAK (Opx), (C.D. Cal. Jan. 4, 2012), a different judge of the same court reached the same conclusion with respect to a proposed class of grocery store workers at approximately 30 stores. In Hughes, the plaintiffs brought run-of-the-mill California claims for missed meal and rest periods. They relied on electronic payroll data that showed that over one-third of the time employees did not receive their initial meal period within 5 hours as required under California law. They argued that the company policy requiring employees to obtain approval from a supervisor before taking a break resulted in employees not receiving the time to which they were entitled.

The court, relying on evidence from the employer (and a dose of common sense), found that the issue of management approval of breaks necessarily came down to the individual manager. Management differed between stores, departments, and employee functions, as well as other factors. Further, significantly in light of Dukes, the employer’s formal policies required compliance with California law. The court found that the only truly uniform policy was one of management discretion, which was, of course, the very argument rejected in Dukes. The court concluded that the plaintiffs could not meet the requirement of commonality under Rule 23(a)(2) and Dukes, and further could not demonstrate either predominance or superiority under Rule 23(b)(3). Thus, it denied certification.

The Bottom Line: California district courts are applying Dukes to bar certification of California meal and rest period claims based on conduct attributable to individual managers.

Maryland staffing corporation Aerotek Scientific, LLC (“Aerotek”), allegedly required its employees who worked at one of its call centers in California to arrive at work at least ten minutes before the beginning of their shifts to log into their computers and be at the ready to receive calls at the immediate start of their shifts. While this sounds like a sound customer service practice, Aerotek employee Tamara Pryor alleged that this and other requirements resulted in she and other class members performing pre-shift work without proper compensation.

In Pryor v. Aerotek Scientific, LLC, Case No. CV-10-06575-MMM-AJW, (C.D. Cal. Nov. 15, 2011), the plaintiff brought claims against Aerotek in the Central District of California for the typical litany of state law wage and hour claims, for failure to pay wages due for pre-shift work, failure to pay overtime, failure to provide accurate itemized wage statements, failure to pay wages upon termination, and unfair business practices in violation of California Business & Professions Code Sections 17200 et seq. She further claimed that Aerotek instructed its employees to record only the time they were logged into its telephone system as time worked, although employees also spent time logging into their computer system before they were logged into it. Pryor also claimed that Aerotek required class members to round their start and end times to the nearest 15-minute interval and precluded them from logging into the telephone system before the scheduled start of their shift, which allegedly ensured that the substantial portion of any rounding would be in Aerotek’s favor.

On November 15, 2011, the district court denied certification of the class. In keeping with the growing trend among wage and hour certification decisions, the district court cited Dukes v. Wal-Mart Stores, Inc., 131 S. Ct. 2541 (2011), but denied certification on grounds unrelated to the issues focused upon in that decision. Like its decision in Lessard v. Skywest Airlines, Inc., Case No. 2:11-cv-03769-JHN-VBK (C.D. Cal. Oct. 24, 2011), less than a month earlier, the district court denied certification on the basis that the Rule 23(b) predominance requirement had not been met. The Court concluded that Aerotek’s common time reporting policies were not enough to satisfy the predominance requirement which is “far more demanding” than Rule 23(a)’s commonality requirement. The Court observed that Aerotek’s common time reporting policies would not have had a uniform impact on employees in light of the significant discrepancies in employees’ testimony regarding how early they were told to arrive at work and how long it took them to log into the telephone system. The Court also observed that Aerotek’s rounding practices necessitated individualized inquiries because “even an employee who worked for a few minutes before recording time . . . may have been compensated for the time if the employee rounded his or her total time up at the end of the day.” Accordingly, this precluded reaching a conclusion as to whether, on a classwide basis, employees were underpaid.

The Bottom Line: The Dukes decision is taking hold, at least indirectly. Plaintiffs seeking to assert class claims need to demonstrate a common policy or issue that had a uniform impact on employees that is subject to common proof.

Authorship credit: Dawn Kennedy

An employer permits its employees to trade shifts voluntarily. A nice favor, right? Unfortunately, there are claimants ready to assert class action wage and hour claims when the employees' own decisions create potential overtime issues.

In Lessard v. Skywest Airlines, Inc., Case No. 2:11-cv-03769-JHN-VBK (C.D. Cal. Oct. 24, 2011), the plaintiffs were former ticket agents for Skywest Airlines in California. They asserted that the company permitted employees to trade shifts among themselves, but that it failed to take into account California overtime requirements when the trades resulted in them working over 40 hours per week or 8 hours per day. Part of the reason this was an issue is that section 13 of the federal Fair Labor Standards Act has an exemption for airline workers, so that the state overtime claims may be the only ones that may apply. Perhaps important to the outcome of the case, the trades were voluntary among employees, rather than shifts dictated by the employer.

The plaintiffs also contended that Skywest failed to include various performance rewards - bonuses - into the regular rate for overtime purposes. They asserted the standard array of California Labor Code violations and sought to represent two state-wide class of Skywest agents, one for the shift trade issues, and the other for alleged bonus calculation claims.

The district court denied certification of both classes. The district court cited the recent decision of Dukes v. Wal-Mart Stores, Inc.,131 S. Ct. 2541 (2011), but decided the case on issues that were not directly discussed in that case. It found that neither class met the Rule 23(b) predominance requirement. While the reasons differed slightly between the two proposed classes, the key problem with both was that while the plaintiffs alleged that a common policy existed, they never identified what that policy was and even their own submissions suggested variations in the putative class members' experience. The court also rejected plaintiffs' identification of a general issue regarding the validity of the relevant California Wage Order, finding that it was but one of many issues in the case.

The court concluded that Rule 23(b) was not satisfied, and denied class certification for both proposed classes.

The Bottom Line: Plaintiffs seeking to assert class claims need to demonstrate a common policy or issue whose resolution will determine the outcome of the case.

Court Washes Out Meal and Rest Break Claims for Class of Whirlpool Drivers and Installers

Tired of the stains those pesky meal and rest break requirements leave on your California operations? If your business is a motor carrier covered by the Federal Aviation Administration Authorization Act of 1994 (“FAAA Act”), some power to help clean up that mess just bubbled up in the Southern District of California.

In Dilts v. Penske Logistics LLC, Southern District of California Case No. 08-CV-318 JLS (BLM) (Oct. 19, 2011), after a class of hourly appliance delivery drivers and installers who were assigned to its Whirlpool account was certified, Penske Logistics LLC filed a motion for partial summary judgment in an effort to eliminate the plaintiffs' meal and rest break claims. Penske did not try to establish that it had not violated California's meal and rest break laws, but rather, it argued that the laws were preempted by the FAAA Act.

The parties did not dispute that the duties of the employees at issue included loading Whirlpool appliances from warehouses in California onto their trucks, transporting the appliances to other locations within California, and installing the appliances. However, the plaintiffs disputed that these activities fell within the scope regulated by the FAAA.

In concluding that the plaintiffs’ activities do fall within the scope regulated by the FAAA, the Court relied upon Subtitle IV of Title 49 of the United States Code which regulates interstate transportation. Specifically, the Court cited subsection (c)(1) which states:

Except as provided in paragraphs (2) and (3), a State . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . or any motor private carrier, broker, or freight forwarder with respect to the transportation of property. 49 U.S.C. § 14501(c)(1).

The Court found that intrastate activity is covered by the FAAA Act and that Penske qualifies as a “motor carrier . . . with respect to the transportation of property” in this case.

The plaintiffs argued that Penske’s purely intrastate operations in this case brought them outside of the FAAA Act’s regulatory scope. However, the Court disagreed, citing to the text of the statute and Congressional findings that “the regulation of intrastate transportation of property by the States has imposed an undue burden on interstate commerce . . . and certain aspects of the State regulatory process should be preempted.” Pub. L. No. 103-305, § 601(a), 108 Stat. 1569, 1605 (1994). The Court also found that Penske’s activities qualified as those of a “motor carrier” under the definition of the FAAA Act, which broadly defines the term as “a person providing commercial motor vehicle . . . transportation for compensation.” 49 U.S.C. § 13102(14). The Court also noted that “transportation” includes “services related to that movement.” 49 U.S.C. § 13102(23). Because plaintiffs, as Penske drivers/installers, operated commercial motor vehicles which transported property and conducted services related to that movement, the Court found their activities were regulated under the FAAA Act.

After confirming that Penske’s activities fell within the scope regulated by the FAAA Act, the Court then analyzed the issue of whether California’s meal and rest break laws fell within the “preemptive scope” of the FAAA Act. The plaintiffs argued that the FAAA Act did not preempt the meal and rest break laws because, according to the plaintiffs, they do not impose substantive standards “related to” the price, route or service of a motor carrier. The Court found, however, that the history of the FAAA Act and its preemption provision, as well as binding authority from case law led to the conclusion that California’s meal and rest break laws are preempted by the FAAA. Because the preemption language of the FAAA Act did not expressly encompass state regulation of meal and rest breaks, the Court considered the legislative history of Section 14501 and found that it reflects Congress’ “clear and manifest purpose” that the California meal and rest breaks be preempted.

To determine whether California’s meal and rest break laws were within the scope of the FAAA Act’s preemption provisions, the Court analyzed whether the laws, which do not directly target the motor carrier industry, “‘bind’ Penske’s prices, routes or services and thereby ‘interfere with competitive market forces within the industry,’” and found that they do. Penske argued, and the court agreed, that the “fairly rigid meal and break requirements impact the types and lengths of routes that are feasible” and that while “the laws do not strictly bind Penske’s drivers to one particular route, they have often the same effect by depriving them of the ability to take any route that does not offer adequate locations for stopping, or by forcing them to take shorter or fewer routes. In essence the laws bind motor carriers to a smaller set of possible routes.” Penske also asserted that the meal and rest break laws have a significant impact on Penske’s services, in that scheduling off-duty meal periods for drivers would require one or two less deliveries per day per driver, and the mandatory breaks reduce driver flexibility, interfere with customer service, and, “by virtue of simple mathematics,” reduce the amount of on-duty work time allowable to drivers and thus reduce the amount and level of service Penske can offer its customers without increasing its workforce and investment equipment. Accepting these undisputed facts as true, the Court found that the length and timing of meal and rest breaks seemed “directly and significantly related to such things as the frequency and scheduling of transportation” and that the “connection to ‘schedules, origins, and . . . destinations’ is far from tenuous.” The key issue, the Court found, is “that to allow California to insist exactly when and for how long carriers provide breaks for their employees would allow other States to do the same, and to do so differently” and (quoting the Supreme Court in Rowe v. New Hampshire, 552 U.S. 364, 373 (2008)) that “‘to interpret the federal law to permit these, and similar, state requirements could easily lead to a patchwork of state service-determining laws, rules and regulations.’’’ Ultimately, the Court found that “state regulation of details significantly impacting the routes or services of the carrier’s transportation” is “itself preempted by the FAAA Act.”

In their attempts to persuade the Court that the California meal and rest break laws were not preempted by the FAAA Act, the plaintiffs characterized the laws as “simply the requirement to pay one hour of wages” in order to analogize their case to other cases in which courts have found that wage hours are not preempted. The Court found that this was a “mischaracterization,” because the meal and rest break laws “are not simply wage laws which require employers to pay employees a certain wage and thus indirectly affect the prices of a service.” Rather, they prescribe events “that must occur over the course of the driver/installer’s day.” The Court was also not persuaded by the plaintiffs’ argument that the California meal and rest break laws come within the safety exception of the FAAA Act. While the Court acknowledged that the public health concerns addressed by the meal and rest break laws are serious, it held that they are not directly connected to motor vehicle safety and that therefore, the motor vehicle safety exception to the FAAA Act’s preemptive scope does not apply, and California’s meal and rest break laws are preempted by the FAAA Act.

The Bottom Line: If you are a transportation company and your employees’ work is regulated by the FAAA, you may have a “clean” defense to assert against claims for California meal and rest break violations.

Want to read tea leaves?  One of the questions arising immediately in the wake of the Supreme Court's decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. __, 131 S. Ct. 2541 (2011), was whether its holdings would apply to cases under the FLSA.  Defendants can point to much of the Dukes Court's language, but plaintiffs, and some courts, question whether it does apply given that Rule 23 does not govern collective litigation under section 16(b) of the FLSA.  A recent Supreme Court entry has suggested to some that the Court has applied Dukes to FLSA cases, but a more realistic reading may be less optimistic.

Many of you are already aware of the lengthy and colorful saga of the case of Wang v. Chinese Daily News, Inc., a combined FLSA and California state law case that began at roughly the same time as the original district court decision in Dukes. The plaintiffs in Wang asserted that the employer had misclassified newspaper reporters as exempt.  The district court certified a class of 187 employees in 2005 under both state and federal law.  The court was soon chagrined, however, by generally low opt-in numbers with respect to the FLSA claim and, more importantly, by the extremely high opt-out rates with respect to the state law claims.  The plaintiffs successfully claimed that the employer had sought to deter class participation by conduct such as terminating one of the representative plaintiffs on the day before her deposition and making opt-out forms on a table at work with the sign "Don't Tear the Company Apart!".   After addressing questions regarding the employer's communications with the class members, the district court turned to the merits of the plaintiffs' claims that they had been misclassified.  In a decision that was noteworthy itself, the district court granted summary judgment on the merits in the plaintiffs' favor, finding that the reporters did not perform exempt work.  In 2007, after a long trial relating to damages, a jury awarded the class $2.5 million, an amount that grew to $7.7 million after the trial court completed a bench trial regarding injunctive relief and state law issues.  The district court further directed an additional, supervised opt-in period to expand the class. The Ninth Circuit affirmed, citing what it described as the employer's coercive tactics in discouraging class participation. The defendant sought certiorari from the United States Supreme Court.

On October 3, 2011, the Supreme Court vacated and remanded the case. Its entry, in its entirety, states:

    "Petition GRANTED. Judgment VACATED and case REMANDED for further consideration in light of Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ____ (2011). Justice Breyer took no part in the consideration or decision of this petition."

A housekeeping matter:  Justice Breyer did not participate because district court Charles R. Breyer, who sat on the Ninth Circuit panel in the case by designation, is his brother.

Obviously, there is no written opinion, but the entry has raised hopes by some as an indication that the Supreme Court has explicitly held that Dukes will apply to FLSA cases.  Analytically, we believe that Dukes does apply to such claims, as the Supreme Court's commonality analysis in Dukes was identical to that used to determine whether the plaintiffs are "similarly situated" under section 16(b) of the FLSA. Still, the entry is less than clear on this point.  The Ninth Circuit in Wang relied heavily on its own en banc decision in Dukes (the opinion the Supreme Court reversed) and permitted a 23(b)(2) class to proceed using the analysis the Supreme Court expressly rejected in Dukes.    While the Wang case contained a collective action claim under the FLSA, given the Rule 23 and state law issues, it is hard to say that the Supreme Court definitively addressed the FLSA issue.

The Bottom Line:  Dukes applies to wage and hour litigation and should apply under the FLSA, but there is still an open question as to whether lower courts will follow it in FLSA cases.

Plaintiff Given a Bitter Pill to Swallow in Vitamin Shoppe

Just as Harry Potter or Transformers will rule over the summer box office, the Supreme Court’s decision in Wal-Mart v. Dukes will undoubtedly reign supreme over the employment law class and collective action discussions for the summer of 2011.  But even amidst the big-budget thrills and headlines of Lord Voldemort or Dukes, other movies and decisions of note still slip through under the radar.  Such is the case with Vasquez v. Vitamin Shoppe Industries, Inc.pdf Case No. 10 CIV 8820 (LTS) (THK), which the Southern District of New York handed down earlier this week.  

Plaintiff Vasquez moved the conditional certification of a nationwide class of Vitamin Shoppe store managers for failure to pay overtime under the FLSA.  His argument hinged on the allegation that he was misclassified as exempt, based on his contention that he spent 80 percent of his time performing non-managerial tasks.  (Incidentally, while such an allegation could be problematic for the employer under California law, it is far from fatal under federal law, which looks to the importance of duties, rather than the time spent on them to determine the primary duty).  To support his claim for conditional certification and class notice, plaintiff submitted his own personal declaration and copies of his paystubs.  Although he averred that he had “personal knowledge” of other store managers who performed the same work, he could not identify any by full name, nor offer any details regarding what duties they performed.  Only later, in his reply brief, did the plaintiff finally offer a modicum of more detail, including generalized descriptions of what non-managerial tasks the other store managers performed.

The defendant, however, decided that when it came to its opposition, “more is more.”  For every measure that plaintiff was sparse in his pleadings, Vitamin Shoppe added a voluminous record, consisting of corporate documentation confirming managerial control, declarations from multiple store managers in several states, and descriptions of the managerial tasks the store managers were required to, and did in fact, perform.

In reaching its decision, the Southern District acknowledged that plaintiff’s burden at the conditional certification stage was minimal.  Even with that low burden, however, the court emphasized that certification was “not automatic.”  The court reiterated that plaintiff must prove that he and other potential plaintiffs were subject to a common policy or plan that violated the law.  Simple, conclusory allegations were not enough.  Taking into account the plaintiff’s declaration and evidence, which relied almost entirely on his own personal experience, the court found the plaintiff fell short of meeting his burden.  The court described its reasoning in plain terms:  “The logic of Plaintiff’s argument that he is entitled to nationwide class certification appears to be the following:  he has identified a handful of SMs whose predominantly non-managerial duties belie their executive exemption.  All SMs are exempt.  Therefore, all SMs are misclassified.”  This misses the mark.  Mere classification of a group of employees as exempt under the FLSA is not enough, the court explains.

Ultimately, the plaintiff did not go home empty-handed.  While the court refused to grant a nationwide class of store managers, it did certify the managers at the seven stores that plaintiff mentioned and testified regarding in his reply brief.

The Bottom Line:  A lenient standard at the conditional certification stage does not mean conditional certification is a “guarantee.”  The plaintiff must show more than personal knowledge and a single declaration to get a nationwide class.

It has been a good few weeks for employers in the satellite dish industry.  Just last week, we wrote of the case of Espenscheid v. Directsat USA, LLC.pdf, Case No. 09-cv-625-bbc (W.D. Wis. May 23, 2011), in which the court decertified a class of satellite dish technicians only days before trial.  In that case, the court, despite repeated earlier rulings in favor of the class, concluded that the actual trial of such a case would be unwieldy.  Only a few days later, in Delano v. MasTec Inc.pdf., Case no. 10-cv-00320-JDW-MAP (M.D. Fla. June 2, 2011), a different district court denied even conditional certification of a similar class.

In Delano, the plaintiffs were former installers of satellite dishes who were paid primarily on a piece-rate basis.  They contended that the company encouraged the underreporting of hours by requiring pre-authorization of overtime (which was never granted) and withholding work assignments if it appeared that a technician was nearing 40 hours in a given work week.  These measures, of course, were lawful, but the plaintiffs contended that the company was aware that the technicians were working more hours than they were reporting.  They submitted numerous declarations to the effect that supervisors "must have been aware" that the technicians were working overtime hours due to the company's scheduling and reporting structures.  A handful of declarants asserted that mostly unspecified supervisors directed them not to report over 40 hours no matter how much they worked.  Based on this evidence, the plaintiffs moved for conditional certification and notice to the class.

The Middle District of Florida, like other courts in the Eleventh Circuit, follows the two-step procedure for certifying collective actions under the FLSA.  The court recognized that the plaintiffs' burden at the initial notice stage was light, but also that it was not “invisible.”  It further noted the requirement in that court for the plaintiffs to demonstrate that other, similarly situated employees wanted to opt in.  Ultimately, the court found that the plaintiffs failed to satisfy even the lesser burden because few technicians had expressed a desire to join the case, and many of the employees were subject to arbitration agreements that would have limited or barred their participation.  The court’s opinion also suggests fundamental problems with the plaintiffs’ case in that the company’s formal policies demanded adherence to the FLSA, while the plaintiffs’ proof of an over-arching practice consisted of anecdotal evidence from different facilities that together did not rise to the level of a state-wide employment practice.  It concluded that even conditional certification was inappropriate.

Incidentally, the court also noted during the course of its opinion - quite correctly - that the term “conditional certification” is a misnomer.  It is simply an order directing notice to the proposed class.  The "class" cannot be certified until there are opt-ins because section 16(b) of the FLSA, 29 U.S.C. section 216(b), provides that no one can be made a party without their consent.

The Bottom Line:  An overtime class should not be conditionally certified absent employees who are similarly situated, have claims they can assert, and actually want to join the litigation.

Jury trials of employment class actions are rare.  If a case is certified, oftentimes the risk of going forward is simply too great for the employer, and it settles.  Three recent cases, however, reflect that in those few class action cases that are tried, a plaintiff's verdict is far from a certainty, particularly in the wage and hour arena.

Most recently, in Johnston v. The Rawlings Co.LLC, Case No. 08-0800 (Oldham Cty., Kentucky, Circuit Court), a class of 360 medical claims examiners sought $12 million arising out of their alleged misclassification as exempt employees.  Following a 3-week trial in Kentucky state court, the jury returned a defense verdict on May 27, 2011.

One day earlier, in Lopaz v. Tyson Foods, Inc., Case No. 8:06-CV-459 (D. Neb), a class of hourly meat processing employees contended that they were not properly paid for all hours of work.  They specifically challenged a "gang time" system used by the employer that they claimed deprived them of pay for donning and doffing, sanitizing equipment, and similar duties.  On May 26, a federal jury returned a verdict in favor of the employer.  What makes this case especially interesting is that the employer had previously lost such a case in Kansas earlier in 2011 and had settled a similar case with the United States Department of Labor.  Further, the attorneys for the plaintiffs had previously recovered a $32 million verdict in a wage and hour case against Family Dollar Store.

Earlier this year, in Henry v. Quicken Loans (E.D. Mich), a group of mortgage loan officers brought suit against Quicken Loans, contending that they were misclassified as administrative exempt employees and were owed overtime.  They argued, essentially, that they were actually salespeople, and lacked any significant discretionary authority.  They also relied on a 2010 U.S. Department of Labor interpretation that stated that such employees most likely were not administratively exempt.  Following a four-week trial, the jury returned a defense verdict on March 14, 2011, and also returned jury interrogatories reflecting its finding that the employees performed duties that were administratively exempt.

The Bottom Line:  Class action trials involve very high stakes, but recent history shows that employers, as well as plaintiffs, may prevail.

A federal court in California recently held in a class action case that employers satisfy California’s split shift wage regulation if they pay their employees who work split shifts at least the minimum wage for the actual time spent working plus one additional hour at the minimum wage rate.  (Galvez v. Federal Express Inc.pdf., No. 3:07-cv-02505 (N.D. Cal. April 28, 2011)). 

The Galvez lawsuit was brought as a class action against FedEx by several subclasses of FedEx drivers and couriers.  Among their claims was that under California Industrial Wage Commission Wage Order 9, section 4(C), employees who worked split shifts were entitled to receive their regular wages for the hours they worked plus a premium of one hour’s pay at the minimum wage.  FedEx filed a motion for partial summary judgment and argued that section 4(C) does not automatically entitle California employees who work split shifts to an extra hour of pay at the minimum wage rate.  Rather, section 4(C) only requires that employees who work a split shift receive at least the minimum wage rate for the hours they worked plus an additional hour at the minimum wage rate. 

Section 4(C) provides:  “When an employee works a split shift, one (1) hour’s pay at the minimum wage shall be paid in addition to the minimum wage for that workday, except when the employee resides at the place of employment.” 

FedEx argued that under the proper reading of the Wage Order, the plaintiffs were not entitled to any additional compensation.  For example, on May 30, 2006, plaintiff Alexander Galvez worked and was paid for 9 hours and 15 minutes on a split shift.  While Galvez was not paid an additional premium for working a split shift, he was paid more than $69.19, the applicable minimum wage for 10 hours and 15 minutes of work.  Thus, FedEx claimed, Galvez and the other such plaintiffs were not entitled to any additional compensation.  In contrast, the plaintiffs argued that under the Wage Order employees who work a split shift are entitled to receive their regular wages for the hours they worked plus a premium of one hour’s pay at the minimum wage for working a split shift, regardless of the total amount of wages paid. 

The court agreed with FedEx and granted its motion for partial summary judgment.  The court found that section 4(C) is not ambiguous and that the plaintiff’s interpretation would violate principles of statutory construction by substituting “regular wage” for “minimum wage.” 

As an interesting side note, FedEx cited helpful language contained from the 1978 version of the Division of Labor Standards Enforcement manual.  While the pertinent language was removed from later versions of the manual, FedEx relied on a declaration from Gregory Rupp, former assistant chief (1995-2003) and acting deputy chief (2003-2004) at DLSE, to state that the omission from later editions “is not an indication that the DLSE discontinued this method of determining compliance with the split shift requirement . . . .”  Rupp also testified that “if an employee’s wage rate was higher than the applicable minimum wage, the amount of regular wages that exceeded minimum wage was credited toward the split shift premium.”  While the plaintiffs objected to the court’s consideration of the Rupp declaration as improper expert testimony on the interpretation of law, the court disagreed and found the declaration to be permissible evidence of how the regulation was interpreted in practice. 

The Bottom Line:  California employees who work split shifts are not automatically entitled to an extra hour’s pay at the minimum wage rate.  However, employers with California employees who work split shifts and are paid at or near the minimum wage rate should check their policy to make sure these employees are being paid in compliance with California law.  These employees must be paid at least the total of the number of hours worked in a split shift x California minimum wage rate + one additional hour at the California minimum wage rate.  

In White­head v. Va­ca­tion Char­ters, Ltd., a class ac­tion judg­ment in ex­cess of $2.2 mil­lion was en­tered against the owner/op­er­a­tor of a Poconos time­share re­sort for mis­clas­si­fy­ing sales em­ploy­ees as in­de­pen­dent con­trac­tors dur­ing a three-year pe­riod.

The Court of Com­mon Pleas of Philadel­phia County held that Va­ca­tion Char­ters and its own­ers were jointly and sev­er­ally li­able for de­priv­ing 259 class plain­tiffs of their law­ful wages and ben­e­fits un­der Penn­syl­va­nia’s Wage Pay­ment and Col­lec­tion Law.  The court found that the de­fen­dants re­quired their time­share sales­per­sons to sign non-ne­go­tiable in­de­pen­dent con­trac­tor agree­ments in mid-2005.  Ac­cord­ing to the court’s find­ings of fact and con­clu­sions of law, while the form con­tracts stated that the sales­per­sons were not “em­ploy­ees” for fed­eral, state or lo­cal state pur­poses, the de­fen­dants con­tin­ued to con­trol all as­pects of the sales staff’s work sched­ules, dress codes, mar­ket­ing pro­to­cols and day-to-day ser­vices. 

As to com­mis­sions/wages, the con­tracts al­lowed the de­fen­dants to hold back from each sales­per­son’s wages and com­mis­sions up to 10% for any sale fi­nanced on a de­ferred pay­ment ba­sis.  The hold back was "charged back when a cus­tomer de­faulted on his ac­count by hav­ing made less than four monthly pay­ments."  Op­er­a­tionally, the hold back funds were not seg­re­gated, but held, with­out in­ter­est, in a gen­eral ac­count where they could be spent on re­sort ex­penses.  In ad­di­tion, the hold back would be in­creased to 50% when the pur­chaser had a low credit score and no wages/com­mis­sions would be earned un­til the pur­chaser paid 10% of the con­tract price - poli­cies that were not dis­closed in the in­de­pen­dent con­trac­tor agree­ment. 

The class ac­tion was filed af­ter the In­ter­nal Rev­enue Ser­vice and Penn­syl­va­nia’s De­part­ment of La­bor and In­dus­try in­ves­ti­gated a for­mer sales­per­son’s claims that he had not re­ceived hold­back funds.  These agen­cies found that the sales­per­son was an em­ployee en­ti­tled to un­em­ploy­ment com­pen­sa­tion.  As the court pointed out, de­fen­dants “likely owe FICA, Medicare and FUTA to the In­ter­nal Rev­enue Ser­vice on be­half of the class mem­bers.” 

All of this means that the de­fen­dants are likely still on shift­ing ground when it comes to as­sess­ing the to­tal li­a­bil­ity it may be fac­ing.  Its case il­lus­trates that at­tempts to limit ex­penses by re-clas­si­fy­ing em­ploy­ees as in­de­pen­dent con­trac­tors can of­ten back­fire in a big way when even one for­mer em­ployee at­tempts to re­cover un­em­ploy­ment ben­e­fits.

The Bottom Line:  Misclassifying sales employees as independent contractors can put employers between a proverbial rock and a hard place.

Please see Baker Hostetler's Hospitality Lawg for a related post on the Whitehead case.

The Second Appellate District in California recently affirmed a trial court's refusal to certify a class of store managers in Mora, et al. v. Big Lots Stores, Inc.pdf., Case No. B221949 (April 18, 2011).  Whether this case should be treated as a welcome sign for employers, however, remains an enigma wrapped inside a riddle (served with a delicious side salad of suspicion topped with freshly grated paranoia).

The plaintiff store managers claimed they were owed overtime (along with the standard litany of other claims under California law) because they spent the majority of their work hours performing nonmanagerial, nonexempt work.  The plaintiffs moved for class certification, arguing that (i) they all shared the same job classification and job description, (ii) the company classified them as exempt executives based on the duties listed in the job description, and (iii) the “special sauce” of the combo meal, that their duties all varied from the job description in the same respects and to the same extent.  In support of this position, the plaintiffs submitted 44 declarations from current and former store managers that—surely by coincidence and without any prodding from counsel—just happened to describe precisely the same nonmanagerial duties (i.e., stocking shelves, moving merchandise, working a cash register).  They also relied upon testimony from a corporate representative that the company classified all store managers as exempt under the California executive exemption based upon the duties listed in the corporate job description.

In response, the company argued that the activities performed by its store managers varied based on a number of factors, and that they split their time among these various responsibilities in unique ways.  In addition to the deposition testimony of plaintiffs and company representatives, the company also introduced a report from an expert that was based on data collected through direct observation of 40 randomly selected store managers for a full workweek.  (Perhaps the next fertile ground for overtime class actions will be observers used by experts to collect evidence regarding potential overtime class members?)  Based on this data, the expert concluded that there were large differences among the store managers in the functions they performed and how they allocated their time among their responsibilities, and that approximately 2/3 of the managers spent more than 50% of their time on exempt managerial functions.  (EDITOR’S NOTE: The quantitative 50 percent threshold is unique to California state wage and hour law.)

Applying the California "well-defined community of interest" test (which essentially incorporates FRCP 23(a) and (b) concepts of typicality, adequacy and predominance), the trial court denied class certification.  The court found that the variation among the store managers in how they allocated their time among their responsibilities precluded the plaintiffs from establishing typicality and predominance.  (Interestingly, the court also found that the named plaintiffs' "checkered" work histories precluded them from serving as adequate class representatives.)

On appeal, the plaintiffs argued that the trial court's decision improperly focused on "issues of fact" that pertained to the merits of their claims.  The appellate court disagreed.  Though it acknowledged the plaintiffs’ showing that all class members were treated as exempt and that they shared the same job description regardless of store location, the court found it notable that the plaintiffs did not allege that the duties listed in the job description were nonmanagerial (and therefore nonexempt).  Rather, the court explained, the plaintiffs were attempting to obtain class certification based upon a factual showing that their actual duties varied in similar ways from the corporate job description, due to a common corporate policy and practice.  Because the trial court had conflicting evidence before it on this point, the appellate court held that it was not an abuse of discretion for the judge to credit Big Lots' position over that of the plaintiffs.

Fantastic so far, right?  Both the trial court and the appellate court are poking around beneath the warm crust of the plaintiffs’ job description, like sticking one’s finger into a pie to see what flavor it is.  In regard to this point, the expert testimony presented by the employer is of particular note in that it was based on direct observation of a significant sample.  Thus, the expert was able to base his opinion on actual, day-to-day activities rather than boring old statistics and inferences. 

Then things get weird.  The appellate court observed that it would not have been an abuse of discretion for the trial court to certify the proposed class based on the plaintiffs' evidence.  This is the same evidence that the trial court described as consisting of “identical and undetailed declarations.”  The employer, in contrast, submitted expert testimony based on direct observation of 99,000 work events spanning more than 1,700 work hours.  That’s like comparing a pastel M&M to a life-size chocolate bunny.

The Bottom Line:  In preparing job descriptions, employers should remain vigilant of the fact that such materials are frequently appropriated  (some would say "misappropriated")  by plaintiffs and their counsel, and that in the past some courts have certified classes based on such descriptions in connection with other evidence.  Where practical and accurate, the potential variations in a particular job classification should be acknowledged and at least minimally described.

If you think wage and hour class actions aren’t very sexy, you’re wrong.

A class of exotic dancers in California and other states have received preliminary court approval of a $10 million settlement of their class action suit in which they claimed that their adult nightclub employers misclassified them as independent contractors.  Trauth v. Spearmint Rhino Companies Worldwide, Inc.pdf (Case No. 5:09-cv-01316) (C.D.Cal).

The representative plaintiffs of the class of approximately 11,000 females who perform live nude and semi-nude dance entertainment alleged that their employers violated the Fair Labor Standards Act (FLSA), the California Labor Code and Unfair Competition Act and other states’ wage and hour laws when they allegedly failed to pay them minimum wage and split their tips to pay for “stage fees” and compensate other nightclub employees such as managers, doormen, and disc jockeys.

While this case may attract a peculiarly prurient interest, it ought to strip all employers of the notion that they are immune from similar suits.  Courts have been approving multimillion-dollar settlements involving employers of all stripes, including the pharmaceutical, banking, health club, energy, telecommunications, casino and health care industries.

The authors of Employment Class Action blog have written about many of these cases in the past.  Some arise when former “independent contractors” file for unemployment benefits and then argue that they are really employees.  Class actions are now also being filed when a large number of independent contractors in a particular line of work -- such as tech support or computer programmers, sales representatives, maintenance workers, nurses and construction workers -- work exclusively for one employer over a significant period of time and perform duties similar to that of workers traditionally classified as employees. 

Often, the employers getting into the most trouble are those that have laid off a large group of employees only to re-hire them as independent contractors so that they can avoid paying employment taxes, overtime wages and benefits.

The Internal Revenue Service, U.S. Department of Labor and many state labor departments also are looking to lay bare employers who they claim are misclassifying their workers.  In an effort to collect more employment tax revenue, over the next three years, the IRS plans to randomly select and audit up to 6,000 businesses that use contractors.  The DOL stated in its 2011-2016 strategic plan that it will partner with the IRS to root out employers who continue to misclassify employees as independent contractors. 

The government efforts likely will arouse the interest of workers eager to seek unpaid minimum wage and overtime pay through class action filings.

The Bottom Line:  An employer can be nakedly exposed to a wage and hour class action unless workers are properly classified.

As many of the postings in this blog reflect, there has been a veritable flood of class and collective actions asserting wage and hour violations.  But even apart from Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9^th Cir.), cert. granted, 131 S.Ct. 795 (2010), now pending before the United States Supreme Court, discrimination cases still are being brought and may, under the proper circumstances, be certified.

In Brown v. Nucor.pdf. Case No. 2:04-CV-22005-CWH (D.S.C. Feb. 17, 2011), the plaintiffs brought suit against the employer under Title VII and 42 U.S.C. Section 1981, asserting hostile environment race discrimination claims on a class-wide basis.  They supported their claims with anecdotal evidence regarding numerous racist comments and monkey noises being broadcast over the company’s radio system, as well as other discriminatory acts. They also presented statistical evidence regarding lost promotional opportunities.  Incidentally, the plaintiffs were represented by the Alabama firm of Wiggins, Childs, Quinn, and Pantazis, among others, a firm that has scored a number of notable victories in both the discrimination and wage and hour arenas.

The suit was originally filed in 2004.  In 2007, following numerous procedural turns, the district court denied class certification, but that determination was overturned by the Fourth Circuit in 2009.  See Brown v. Nucor Corp., 576 F.3d 149 (4^th Cir. 2009),  In a 2:1 opinion, that court found that the denial of certification was an abuse of discretion.  This was itself an unusual holding, but the Fourth Circuit’s decision focused entirely on Rule 23(a) did not state which of the required Rule 23(b) provisions would apply.  In fact, after the court amended its opinion, it did not even mention Rule 23(b) at all.. 

On remand, predictably, the focus of the argument was on the meaning of the Fourth Circuit’s ruling.  The plaintiffs argued that the Fourth Circuit, by omitting any Rule 23(b) discussion, essentially directed that the class be certified under Rule 23(b)(2), for equitable relief.  Plaintiffs tend to prefer Rule 23(b)(2) classes because of their relative ease of administration and the absence of any opt-out rights by class members.  The defendant argued that the court of appeals had left open the possibility of denying certification if the district court found that no provision of Rule 23(b) applied.

The district court disagreed with both parties, but still handed the plaintiffs a victory.  It found that while the Fourth Circuit had not prescribed a provision of Rule 23(b), its order was clear that some class should be certified.  It found, however, no basis to apply Rule 23(b)(2), however, because the plaintiffs’ claims for back pay and punitive damages caused monetary relief to predominate. It also refused to certify a “hybrid” 23(b)(2)/23(b)(3) class.  It noted that there was a three-way split among the circuits and that the issue was currently before the Supreme Court in Dukes.  As to the availability of a hybrid claim, it sided with the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5^th Cir. 1998), and held that none was available.  Finding that class issues predominated, it therefore certified the class under Rule 23(b)(3).

Nucor has promised another appeal.  If and when a district court ever reaches the merits, the parties will have to litigate claims that may be seven to ten years old, and will likely test the limits of the witnesses’ memories.

The Bottom Line:  Wage and hour claims may now comprise the lion’s share of class action litigation, but don’t discount the possibility of race or sex discrimination class actions, which can themselves be extremely dangerous for the employer.  Litigation of this type can and often does drag on for many years.

Many who have had the “pleasure” of traveling by plane in the past few years have no doubt been placed in a veritable Hurt Locker of bag fees and surcharges.  The Adams v. US Airways, Inc.pdf 2011 U.S. Dist. LEXIS 14660 (D. Ariz. Feb. 11, 2011), matter arose from those humble beginnings, much like Dev Patel in Slumdog Millionaire, to find itself before the District Court of Arizona.  But, unlike Josh Brolin’s character in No Country for Old Men, who found himself unexpectedly rich upon discovering a bag full of money, the plaintiff skycaps at issue in Adams were unable to convince the District Court that US Airways was being unjustly enriched at the expense of an alleged minimum wage violation under the FLSA. 

The Adams case was born when US Airways Departed from tradition and began charging a $2 per bag fee on passengers in 2005.  As a result, and not unexpectedly, passengers began to tip skycap baggage handlers less.  The skycaps felt the Crash of their paychecks plummeting, and in turn, alleged in a putative collective action that the reduced tipping dropped their wages below the required minimum wage in violation of the FLSA, and the equivalent Arizona law.  Now a far cry from being a Million Dollar Baby, the plaintiffs alleged that US Airways was being unjustly enriched by their bag fees, and filed suit.

Unlike Samwise’s journey home in Return of the King, however, the skycap’s case was not long in duration.  US Airways immediately raised the issue of whether the plaintiffs sufficiently pled that it was a joint employer.  Without being a joint employer, US Airways was not liable for any damages under the FLSA.  To determine whether or not a joint employer status existed, the court considered the “totality of the circumstances” and specifically looked at whether US Airways had: 1) the power to hire and fire the employees; 2) supervised and controlled employee work schedules and conditions of employment; 3) determined the rate and method of payment; and 4) maintained employment records.

With those factors in mind, the court dealt with the skycaps’ claims in (as Sean Connery famously described) the “Chicago way”: First, the skycap services were not essential to US Airways’ business.  Second, there was no indication that US Airways had the power to hire and fire, control schedules, payment, or anything other than the two dollars assessed as a bag fee.  So while it may have taken A Beautiful Mindto come up with the unjust enrichment theory on behalf of the skycaps, the court ultimately held that plaintiffs’ conclusory allegations “do not demonstrate the plausibility of a claim that US Airways is a joint employer.”

With that finding in hand, the court cut through the remaining claims like a Gladiator—without joint employer status under the FLSA, the relationship between US Airways and the skycaps was “too attenuated” to result in unjust enrichment for the airline.  The claim was summarily dismissed. 

The Bottom Line:  As the saying goes, there’s more than one way to skin a cat.  By proving it wasn’t a joint employer under the FLSA, US Airways sidestepped a potentially expensive (and time-consuming) collective action without having to run the usual gamut of exemptions. 

And one last note: This is actually the third case in less than a year involving skycaps.  In an earlier decision mentioned here in Adams, Thompson v. U.S. Airways, Inc., 717 F. Supp. 2d 468 (E.D. Pa. 2010), the court found that US Airways controlled decisions relating to skycap compensation or the performance of services.  No similar facts were alleged in this matter, making it, if nothing else, a nice companion piece, and proof that factual details make all the difference in the world.

 And just prior to Thompson, the skycaps in Travers v. JetBlue Airways Corp., Case No. 08-10730-GAO (D. Mass. Sept. 30, 2010), alleged a similar claim to the one in Adams when they, too, found their tips decreased following an increase in bag fees.  The court in Travers denied conditional certification (despite having denied, for the most part, the defendants’ summary judgment motions).  For a more detailed analysis of the court’s decision against certification, please see our blog entry dated October 12, 2010.

A recent case for the Western District of New York demonstrates that little is certain in class action litigation.  In Omiatek v. Big Lots, Inc.pdf., Case No. 09-CV-0352S(Sr) (W.D. N.Y. Jan. 20, 2011), the court bucked two trends and (1) denied conditional certification (2) of a proposed class that consisted of assistant managers.

A little background:  The two-step procedure now used by many courts in FLSA cases requires at least two visits to the question of certification of a proposed collective action.  First, the court determines the question of “conditional certification,” under which it requires a lesser showing of whether the proposed class members are sufficiently similarly situated to permit notice.  The term is a misnomer because the court is not “certifying” anything, but only authorizing notice to the proposed class and a period of time for proposed members to opt in.  Still, conditional certification is often granted and may give the plaintiff a false sense of success and the defendant an equally false sense that it has “lost” the case.  Both parties, however, must undergo a time-intensive and at times disruptive set of tasks related to management of the opt-in class.

Afterwards, the court engages into a much more rigorous inquiry as to whether the proposed class of opt-ins can proceed as a class.  Even if the plaintiffs pass that hurdle, however, decertification remains a very real possibility.  Recognizing this step, and citing the lower standard for conditional certification, many courts have “conditionally” certified cases that, in fact, cannot survive as fully blown collective actions.  We’ll call this trend one.

Trend two is the spate of cases over “assistant manager” positions.  In many of these cases, plaintiffs’ counsel have successfully argued that the class members for the particular employers are managers in name only and that, in fact, they have no management functions at all.  These actions have been particularly successful in California, where the issue of whether the employee’s primary duties are exempt is determined on a quantitative (do they duties take over 50% of the employee’s time) rather than qualitative basis (what’s the most important part of their job).  Much of the debate turns on whether the individuals are indeed assistant managers, or whether an inflated title has been given to an employee otherwise dedicated to nonexempt work.

Now, we turn to the Omiatek case.  In that case, the plaintiff, a former assistant manager, sought to pursue both FLSA claims and New York state wage claims against the Big Lots retail chain.  He moved for conditional certification of the FLSA claim, contending that the chain had a uniform policy of classifying assistant managers as exempt, discouraged hourly employees from working overtime so that assistant managers had to do more of their duties, and (he claimed) were micromanaged by their superiors.  So far, so good – the class consisted of assistant managers and the plaintiff was seeking conditional certification.

The magistrate judge further found that another court had considered claims against the same employer, had conditionally certified them, and even had denied decertification when sought be the employer.  Even better.

But here the case quickly fell apart.  The previous court, after seven days of trial evidence, had reconsidered its prior rulings and decertified the class because the evidence at trial revealed that the duties of the assistant managers varied so much.  See Johnson v. Big Lots Stores, Inc.pdf, 561 F. Supp. 2d 567, 588 (E.D. La. 2008).  Further, the employer in Omiatek had submitted declarations reflecting that some assistant managers indeed did manage their stores and performed few hourly duties.  The diversity in job experiences led the court to deny even conditional certification of their claims.  Thus, the court, based on the evidence, denied conditional certification.

The plaintiffs also moved for certification of their New York state claims, but the court found certification inappropriate for much the same reasons.

The Bottom Line:  Differences in real life job experiences can defeat even conditional certification.

Overtime pay under federal law is calculated at one and a half times the employee’s regular rate.  Most employers are already aware that the “regular rate” is not simply the employee’s agreed upon hourly rate of pay, but may also include shift premiums, many bonuses, and other types of compensation.  See 29 U.S.C. § 207(e).   A recent case from the Tenth Circuit highlights that while the regular rate includes most types of remuneration, employees cannot include contractually agreed overtime and thus get a federal overtime premium on top of the contractually agreed one.

In Chavez v. City of Albuquerque.pdf, the plaintiffs, all city employees, brought two collective actions against the City of Albuquerque contending that it had miscalculated the regular rate and thus had failed to pay them appropriate overtime.  While they identified a number of issues, their primary claim rested on the overtime provisions negotiated by their unions.  In the case of police officers and firefighters, their claim was bolstered by differences in the number of hours entitling them to overtime.  Unlike most non-exempt employees, who receive overtime pay after 40 hours of work per week, for example, the FLSA entitles police officers to overtime only after 43 hours.  The Albuquerque police collective bargaining agreement, however, gave them the right to overtime over 40 hours.  Thus, the officers argued, they should be paid overtime pay after 40 hours under the contract AND then they were entitled to additional pay under the FLSA based on the the higher “regular rate” provided in the contract.  The remaining plaintiffs, who were firefighters, clerical workers, transit workers, and others, raised essentially the same claim.

The trial court held for the City as to this claim and the Tenth Circuit affirmed.  It held that the employees were entitled to only one dip of overtime compensation.  For each hour, they were entitled to the greater of the FLSA or contractual overtime, but nothing in the statute required that the City pay FLSA overtime on top of contractual overtime.  Similarly, it held that any overtime required by the contract would be calculated based on the contract and not based on federal law.

The court also addressed the employees’ claims that pay they received for unpaid sick and vacation time should be added back into the regular rate.  While this claim was smaller, the district court found in their favor on both counts.  The Tenth Circuit, however, reversed as to the vacation pay claim, citing long-standing Department of Labor regulations.  It noted the well-settled principle that courts should defer to the Department of Labor’s rulings and interpretations.  The DOL has indicated that a buy-back of sick pay is akin to an attendance bonus, which encourages certain behaviors wanted by the employer, and should be added to the regular rate.  By contrast, vacation time is generally scheduled in advance and is not abused in the way that sick time may be.  Deferring to this DOL distinction, the Tenth Circuit reversed the trial court’s finding with respect to the addition of reimbursement of unused vacation days to the regular rate.

The Bottom Line:   Plaintiffs can exploit even minor FLSA violations effectively through collective actions, but ultimately they still need to establish a violation of the FLSA to recover.

I wasn’t sure whether to caption this “Oh, How The Mighty Have Fallen” or “What A Difference A Decade Makes.”

Only ten years ago, in Bell v. Farmers Insurance Exchange, 87 Cal. App. 4th 805, cert. denied, 534 U.S. 1041 (2001), a California Court of Appeals sent shock waves through the insurance industry by affirming summary judgment against a major insurer on the issue of whether insurance claims adjusters were exempt from overtime.  The surprise was due in part to the fact that insurance claims adjusters were given as specific examples of employees performing administrative exempt work under 29 C.F.R. section 541.205(c), and because numerous federal courts had held that they were exempt under federal law.   To the extent, if any, that the opinion did not draw notice, the subsequent $90 million verdict against the company and later settlement well into the nine figures certainly did.  As a result, insurers across the country and especially in California were inundated with wage and hour suits, and hundreds of millions of dollars changed hands.

We were honored to be counsel in one of the cases stemming the tide in Palacio v. Progressive Insurance Co., 244 F. Supp. 2d 1040 (C.D. Cal. 2002), a case later picked up by the United States Department of Labor, which again concluded that claims adjusters should be treated as exempt.  See Opinion dated Nov. 19, 2002.  Within only a few years, courts increasingly, again, began to recognize insurance claims adjusters as exempt.  See, e.g., In re Farmers Insurance Exchange, Claims Representatives' Overtime Pay Lit'n, 466 F.3d 853 (9th Cir. 2006), amended by 481 F.3d 1119 (9th Cir. 2007); Robinson-Smith v. Government Employees Insurance Co., ___F.3d___ (D.C. Cir. 2010).

Most recently, in an unpublished decision, the Fifth Circuit held that claims adjusters are, indeed, exempt.  In Talbert v American Risk Insurance Co Inc.pdf Case. No. 10-20355 (5th Cir. Dec. 20, 2010), the plaintiffs brought a collective action under the FLSA for overtime pay, challenging their exempt status as administrative employees or, in one case, as an independent contractor.  The district court granted summary judgment on the  grounds that one of the named plaintiffs was administratively exempt and that the second was an independent contractor who was not even covered by the FLSA.  Amazingly, the first plaintiff did not even have the title of “claims adjuster,” but that of an “assistant claims adjuster,” a title that would have been viewed as highly suspect in the wake of the Bell case.  A Texas District Court granted summary judgment on both grounds, and the Fifth Circuit affirmed.

The Talbert case is remarkable for many, largely historical, reasons.  In the wake of Bell, it would have been difficult to predict that even assistant claims adjusters would be deemed exempt, or that a federal circuit court opinion on the topic would be of so little note that it would designate such an opinion as “unpublished.”  Still, many plaintiffs’ counsel developed expertise in handling wage and hour class and collective actions on cases against insurers and are using those skills to pursue claims against other industries.

The Bottom Line:  Contrary to some of the significant early cases, the law is increasingly settled that insurance claims adjusters are exempt.  The reversals of fortune involving that industry underscore the incredibly dynamic nature of class action employment litigation.

Much like the 2010 San Francisco Giants, at first glance, the court’s ruling in Dipasquale v. Docutek Imaging Solutions, Inc. et al.pdf Case No. 10-cv-60349-JEM (S.D. Fl. Nov. 12, 2010) appears to be nothing to write home about.  Upon closer inspection, however (and in the case of the Giants, eight months and a World Series championship later), the real value of Dipasquale becomes clear: The Southern District of Florida found an employee exempt even though the management duties took up a minority of his time.  In keeping with the baseball analogy, this is a home run for employers.

Dipasquale formerly worked as the service manager to Docutek Imaging Solutions, Inc.  In his Complaint, he alleged a violation of the FLSA for failure to pay minimum wage, failure to pay overtime, as well as a violation of Florida law regarding the payment of his commissions, and a declaratory judgment that the defendants willfully violated the FLSA.  In other words, his claims were typical of those frequently brought against employers in class/collective actions involving lower-level managerial employees.  And, like a call to swing away with a 3-0 count, the defendants unsurprisingly moved for summary judgment on the grounds that Plaintiff was exempt from the FLSA, and that he had been fully paid all his wages with regard to commissions.

The Court proceeded to perform a detailed analysis of Dipasquale’s job duties to determine whether or not he performed management activities.  Those activities, in no particular order, consisted of: running the service department of fifteen to twenty-five employees; interviewing potential service technicians; making recommendations regarding employee’s pay and position; directing the work of other employees; changing employees’ duties if necessary; communicating with the employees on a daily basis; traveling to the Miami office to ensure the employees there were “being on point like they were supposed to”; appraising employees’ productivity and efficiency; disciplining employees (although he never actually fired anyone); and apportioning work among his employees.  In response to the plaintiff’s furtive attempt to remind the court that he did not perform all of the various duties listed under 29 C.F.R. § 541.102, the court reiterated what many courts have stated before: One does not have to perform all of the duties, and that the list is intended to provide examples.

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Class and collective actions raise myriad ethical issues.  Many of these issues center on class communication issues and determining who is a client. Some relate to settlement tactics.  Others, relating to conflicts of interest, may be so serious that they result in the class not being certified under the Rule 23 requirements of commonality, typicality, adequacy of representation, or predominance.

For strategic reasons, some plaintiffs' attorneys may try to maintain large wage and hour cases, or a series of cases against the same defendant.  On the one hand, doing so helps counsel take advantage of what may be a steep learning curve regarding the employer's operations, and may also facilitate the sharing of information among various groups of employees.  Plaintiffs' counsel may also do so to maximize the pressure on the defendant to settle, but in doing so, may create both problems holding the class together and potential ethical concerns.

A recent case highlights the fine line that exists between the desire to assert multiple claims against the employer and potential ethical violations. (See McCauley v Family Dollar.pdf).  The Family Dollar Store chain has been the subject of several wage and hour class and collective actions, one of which resulted in a sizable verdict involving the alleged misclassification of its store managers.  (See Morgan v. Family Dollar Stores, Inc.pdf, 551 F.3d 1233 (11th Cir. 2008)).  Most recently, two putative class actions were brought against it in federal court in Kentucky under the Kentucky wage and hour laws.  The first was a claim asserting the the company's store managers were misclassified as exempt for overtime purposes.  The second, brought two months later by the same attorneys, was by a group of hourly employees claiming off-the-clock time.  Family Dollar store sought to disqualify the attorneys on the second case on the grounds that their representation of both classes presented real or potential conflicts of interest.

On November 1, 2010, the United States District Court for the Western District of Kentucky agreed (See McCauley Order.pdf) that the same attorneys could not represent both classes, for largely common sense reasons.  In the second case, because the store managers actually supervised the hourly employees, it was their decisions as to directing their workforces that were being challenged.  Further, those same managers would be receiving privileged information and would be potentially the most important witnesses for the defense to say that they did not require hourly employees to work without pay.  Thus, because of their representation of the managers in the first case, the plaintiffs' attorneys would have access to privileged information and to witnesses they would ordinarily have to depose.  Further, the managers themselves would be in a conflict situation because they might perceive the need to help "their" lawyers in the second case, potentially affecting their testimony.  The court emphasized the lack of any evidence that any collusion had already occurred, but recognized that the risk and the appearance of impropriety were simply too great.  It therefore disqualified the plaintiffs' attorneys on the second case.

The decision did not affect their representation of the managers in the first case, nor did it dismiss the second case, which can continue with different plaintiffs' counsel.

The bottom line: The same plaintiffs' firm cannot represent both employees and the managers who supervise them in class or collective wage and hour litigation.

On October 27, 2010, the Second Circuit affirmed a federal court’s refusal to certify a proposed class of Hertz Station Managers allegedly denied overtime under New York law.  (Myers v. Hertz Corp., No. 08-1037 (2d Cir. Oct. 27, 2010)).  In doing so, the court addressed the potential difficulties of certifying Rule 23 overtime exemption cases and expounded on the appropriate certification standard for FLSA exemption cases.  

In a case the court described as “procedurally convoluted,” the plaintiffs originally sought to proceeded as a collective action under the FLSA.  After the district court denied this motion, the plaintiffs then moved for certification under Rule 23 based on alleged violations of unpaid overtime under New York Labor Law § 191.  While the court found the plaintiffs’ state law claim to be nothing more than an alternative method of seeking redress for an underlying FLSA violation, it addressed the plaintiffs’ appeal by using the traditional requirements of Rule 23. 

Finding that it only needed to address Rule 23’s predominance requirement, the court determined the relevant “question of law and fact” to be whether the plaintiffs established they were entitled to overtime under the FLSA.  The court found this to be a “complex, disputed” issue whose resolution required answering a number of subsidiary questions involving whether the plaintiffs fell under the FLSA’s executive exemption.  The court noted that while the exemption issue may not be an inherently individualized inquiry, the exemption inquiry does require examination of actual duties performed and involve evidence that the plaintiffs’ jobs “were similar in ways material to the establishment of the exemption criteria.”

The plaintiffs relied on two categories of evidence to show the required common proof:  (1) Hertz decided to classify all station managers as exempt without an examination of each individual manager’s duties; and (2) testimony of Hertz representatives which, plaintiffs claimed, established that station managers’ duties did not vary materially across Hertz locations.  With respect to the first category, the court found that the existence of such a blanket exemption policy, standing alone, “is not determinative of the main concern in the predominance inquiry:  the balance between individual and common issues.”  The court further explained that such a policy does not establish whether all plaintiffs were actually entitled to overtime pay, and that the question of entitlement to overtime pay is still answered by examining the employee’s actual duties.  As to the second category, the court found that the proffered testimony was general, largely inconclusive, and only provided mixed support for the plaintiffs.  Thus, the court found that the district court did not abuse its discretion in declining to certify a class.

While the court declined to review the district court’s refusal to conditionally certify the plaintiffs’ FLSA claims, it elected to provide guidance on the standard district courts should apply to motions seeking certification of a collective action under § 216(b) of the FLSA.  The court noted that district courts of the Second Circuit have largely adopted a two-step method.  While not required, the court found this approach to be “sensible.”  The court stated that in FLSA exemption cases, plaintiffs make the showing necessary to send notice to potential opt-ins (the first stage) by “making some showing that ‘there are other employees . . . who are similarly situated with respect to their job requirements and with regard to their pay provisions,’ on which the criteria for many FLSA exemptions are based, who are classified as exempt pursuant to a common policy or scheme.”  The court cautioned that while this is a low standard of proof, it cannot be satisfied simply by “unsupported assertions.”  In the second stage, the district court must determine whether the collective action may go forward by determining whether the plaintiffs who have opted in are in fact similarly situated to the named plaintiffs.   

The bottom line:  As this case demonstrates, Plaintiffs seeking a Rule 23 overtime class do not show predominance simply because the employer used a blanket exemption policy.  Rather, the determinative issue should be whether the plaintiffs' job duties are similar enough so that the applicability of the overtime exemption(s) can be determined on a class-wide basis.

"Hey, Judge, You Don't Understand......I Just Wanted The Money!"

About two dozen people who opted into an FLSA collective action in Nevada federal court may soon be reminded that the pinch is usually in the fine print. Magistrate Judge Peggy A. Leen recommended sanctions against these individuals after they refused to respond to discovery. In fact, these lovable rapscallions apparently enjoy life on the wild side, as they even ignored the magistrate judge's order granting the employer's motion to compel.

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"......and Please Remember to Tip Your Bartender And Waitress."

The famous 21 Club in New York was on the Curly end of a Larry-esque double-slap from the Southern District of New York last week. Alderman v. 21 Club.pdf Case No. 1:09-cv-2418 (Aug. 20, 2010). By way of background, the plaintiff employees in Alderman are seeking to represent a proposed class of 21 Club banquet staff members on wage/hour claims under the Fair Labor Standards Act and New York law, based on their receipt of gratuities. Proposed class members who work a particular event at the restaurant share an automatic 18 percent gratuity charged on the total bill. The plaintiffs, who apparently don't believe that these gratuities are gratuitous, claim that the tips should be included in their regular rate for purposes of calculating overtime pay. And, because the only thing better than getting more is getting even more, the plaintiffs also claim that the 21 Club collects more than 18 percent in service charges on banquet bills, and that they should get the whole enchilada.

The class members, however, are all covered by a collective bargaining agreement as good hard-workin', dues-payin' members of UNITE Local 100. It seems this collective bargaining agreement, which the Court described as "comprehensively set[ting] forth the terms and conditions of employment," included a provision that "specifically" (again, in the Court's words) entitled to banquet service staff only to an 18 percent gratuity on the entire bill for an event. The employer surprisingly interpreted this provision as entitling banquet service staff only to an 18 percent gratuity on the entire bill for an event.

As it turns out, the agreement apparently wasn't as "comprehensive" or "specific" as the Court first intimated. Thus, the Court rejected the employer's argument that the plaintiffs' entitlement to the 18 percent gratuity charge was governed by the collective bargaining agreement, and held instead that their claims arose under a New York state law prohibiting an employer from withholding any portion of a restaurant employee's gratuities. So what's the big deal there, right? Isn't that the law, that federal preemption doesn't apply if it's a right created under state law rather than under the collective bargaining agreement?

The big deal is that the statute specifically excludes "banquets and other special functions where a fixed percentage of the patron's bill is added for gratuities." Yes, you read that right. Banquets are excluded. The rule against withholding gratuities does not apply to employees who work banquets. (That's why we put the quote in bold.)

Well, how in the halloumi cheese did the plaintiffs survive dismissal, you ask? Because, the Court held, "the statute is somewhat confusing because the assurance of the employee's rights in the first sentence is followed by the latter portion of the last sentence which states that the statute is not applicable to functions where an amount is added to the patron's bill for gratuities." And, the Court reasoned, the plaintiffs couldn't be asserting a claim under the collective bargaining agreement anyway because the agreement only entitled them to 18 percent and they wanted more than 18%. With all due respect to the Court, that seems a bit of a head scratcher. The statute seems pretty clear to us (and a number of New York state courts) in saying that it's not intended to create rights on behalf of banquet employees. Since the labor agreement is the only other potential source of rights, the field of possibilities seems pretty narrow.

But wait, there's more! For slap #2 in its role of Larry to the 21 Club's Curly, the Court also held that the plaintiffs were not obligated to arbitrate their FLSA claims. The Court noted in this regard that the 18 percent gratuity discussed above might not be a gratuity at all, and might instead be an automatic service charge that would have to be included in the FLSA regular rate. But, numerous New York state courts have recognized that automatic service charges aren't covered by the no-withholding-gratuities statute!

Well, at least we can take some solace in the words of plaintiffs' counsel in the case, who keenly observed that "[t]his is a very good decision that might stop defendants from making these types of motions in the future."

(The real burning question of the case is ignored. When did 18 percent become automatic? Does anyone remember when the generally accepted tip calculation was 15 percent? What happened there?)

 The bottom line: Beware the law in tip-pooling cases which is still unpredictable.

After nearly 8 years of litigation, the Court of Appeals of Oregon recently affirmed the decertification of a class of between 600 to 1900 former U.S. Bank employees who claimed they were not timely paid after their termination. Belknap v. U.S. Bank Nat’l Ass’n, 235 Ore. App. 658 (2010). Following extensive discovery, the court found that the previously certified class of “former employees who gave 48 hours or more notice of intent to terminate employment and who were not paid timely pursuant to the statute” was properly decertified where, among other things: 1) the plaintiffs failed to present a viable trial plan; 2) individual questions of facts would require numerous witnesses to be called; 3) in virtually all cases, the resolution of one individual’s factual issues would have no impact on resolving another plaintiff’s claim; and 4) the court could not conceive of a subclass that would eliminate these problems.

The bottom line: This case illustrates that while courts may be initially willing to certify an extensive wage class, an employer’s ability to demonstrate the immense difficulty in actually trying such a case can be an extremely persuasive tool in decertification briefing.