[Gasp!] Epic Systems Decision Applies to FLSA Claims

No shocking outcome here. In Gaffers v. Kelly Services, Inc., Case No. 16-2210 (6th Cir. Aug. 15, 2016), the Sixth Circuit held that the Supreme Court’s decision in Epic Systems v. Lewis, 138 S. Ct. 1632 (2018) [which we blogged here] applies to claims under the Fair Labor Standards Act (FLSA). Gaffers itself was a garden-variety FLSA collective action in which a call center worker argued that he was not properly paid for the time it took him to log on and off the network each day. He sought to bring a collective action under the FLSA on behalf of himself and thousands of other call center workers, and 1,600 of those workers opted into the litigation. While the named plaintiff had not signed an arbitration agreement, about half the opt-in class members did. Those agreements provided that wage and hour claims must be arbitrated on an individual basis.

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The California Supreme Court To Decide Whether California’s Labor Laws Apply To Employees Who Work Only Partially In California

For a company that does 100 percent of its business in California and employs workers who perform 100 percent of their work in California, it would not be surprising for the workers’ employment to be governed by California’s labor laws. But what if the employer operates in multiple states and the employees work in multiple states, with only a small fraction of their work performed in California – do California’s labor laws apply then? That is the question the California Supreme Court recently agreed to answer.

The California Supreme Court was presented with this question in three cases involving airlines – Oman v. Delta Air Lines (Case No. S248726), Ward v. United Airlines (Case No. S248702) and Vidrio v. United Airlines (Case No. S248702). Oman and Vidrio involve flight attendants, while Ward involves pilots. In Oman, a sampling of data revealed the four plaintiffs spent at most 14 percent of their time working in California. The class member flight attendants in Vidrio spent an average of 17 percent of their time at work in airspace above California, while the class member pilots in Ward spent an average of 12 percent of their work time in airspace above California. Additionally, the class members in Vidrio and Ward are California residents who pay California’s state income tax on their income. Of the four plaintiffs in Oman, two resided in California and were based at California airports, a third was based at a California airport but was not a California resident, and a fourth was neither based at a California airport nor a California resident.

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Ninth Circuit Finds ERISA Fiduciary Duty Claims Not Arbitrable

But decision leaves open many questions . . .

With the Supreme Court’s Epic Systems decision laying to rest many of the primary arguments used to avoid arbitration, case law continues to develop regarding how arbitration may apply for claims under the Employee Retirement Income Security Act of 1974 (ERISA). [We blogged the Epic Systems decision here.] It isn’t all that surprising that the Ninth Circuit would hold that certain types of ERISA claims might not be arbitrable, but its July 24, 2018, decision in Munro v. University of Southern California, Case No. 17-55550, may represent something more than that court’s traditional hostility toward arbitration provisions.

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California State Court Rules That Loose Change Adds Up … and So Will the Penalties

We’ve all been there: You pull up to a parking spot, hop out to check whether the meter requires payment on Sunday and then grumble as you fish around in the coin tray. With any luck, you find a quarter or two. More often than not, however, you’re stuck with nickels and the nigh-useless penny. (Of course, the ensuing profanity of finding only 23 cents in your car will soon be a lost art, as most new parking meters accept credit cards or mobile payments.)

Many of us fill that coin tray with the loose change resulting from a purchase at Starbucks, and now a recent California Supreme Court ruling has ensured that California-based employees receive a little more of that earned loose change going forward. In Troester v. Starbucks Corp., 2018 WL 3582702 (Cal. Sup. Ct. July 26, 2018), plaintiff Douglas Troester was a shift supervisor at Starbucks. He filed the initial action in August 2012 on behalf of himself and others in a putative class of all nonmanagerial California employees who performed store closing tasks from mid-2009 through October 2010. Specifically, Troester claimed that on every closing shift, Starbucks’ computer software required him to clock out before initiating the software’s “close store procedure” on a separate computer terminal in the back office. After he completed that task, he activated the alarm, exited the store, locked the front door and walked his co-workers to their cars, in compliance with Starbucks’ policy. All of this, he alleged, happened off the clock.

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Ninth Circuit Affirms Dismissal of Wrongheaded Claim Challenging Discounted Meals for Employees

It turns out the lunch really is free.

With low-hanging fruit like claimed misclassification of low-level supervisors already plucked, plaintiffs increasingly turn to more novel claims. In many instances, these involve more technical violations of state and federal law, but some really call into question whether the suit is for the benefit of the employees or the attorneys.

Case in point. In Rodriguez v. Taco Bell Corp., Case No. 16-15465 (9th Cir. July 18, 2018), the employer provided 30-minute unpaid meal periods to employees in compliance with California law (and consistent with federal law as well). It also offered its employees discounted meals, as long as they consumed those meals on the premises. This requirement existed to ensure that the meals were actually eaten by the employees themselves and not purchased for friends or family.

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Federal Circuit Affirms Dismissal of Independent Contractor Misclassification Claims

My father grew up in Nazi-occupied Europe during World War II and would tell the story of how an official would come to his family’s home to modify their radio so they could not receive BBC broadcasts. Shortly after the official left, the family would open the radio box and fix the clumsy modifications that had been made so they could continue to receive outside news from a source not controlled by a fascist government.

In like fashion, during the Cold War, America broadcast its own messages behind the Iron Curtain through Voice of America. In response, some then-Communist countries tried to counter these broadcasts with jamming technologies. I hadn’t heard much about Voice of America since the fall of the Soviet Union, but it still exists as an independent federal agency. It has roughly a thousand employees and currently broadcasts the news in scores of languages around the world, drawing criticism from countries such as Russia and North Korea.

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Eighth Circuit Quashes Subpoena for Related Entities in FLSA Case

It’s fairly uncommon to see discovery issues make their way to courts of appeal, particularly in class action or wage and hour cases. Last week, however, the Eighth Circuit issued a decision regarding the scope of discovery in a wage and hour action that may be useful in both kinds of cases in the future.

The decision in Acosta v. La Piedad Corporation, Case No. 17-1845 (8th Cir. July 3, 2018), concerned a wage and hour investigation by the United States Department of Labor (DOL) of a chain of Mexican restaurants. The DOL subpoenaed information regarding related entities also affiliated with the company’s owners, in an obvious attempt to broaden the scope of its inquiries and to tie in additional related locations. The requests included basic information about the company’s owners that was not at issue. More importantly, they sought “all documents showing the names and addresses of all other businesses that are partially and/or fully owned by any of the owners … and the percentage of ownership.” The employer refused to produce anything on that subject, prompting the DOL to petition the district court for the enforcement of the subpoena, a petition that was granted.

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New York District Court Rejects Putative Class Settlement Involving Interns

An improper class still isn’t a class even if you settle

Here’s something you don’t see every day. A district court has rejected the settlement of a proposed class and collective action – not due to the usual reasons such as excessive attorney fees or other terms, but because the plaintiffs have not shown that there is any class in the first place.

Fraticelli v. MSG Holdings, L.P., Case No. 13 Civ. 6518 (S.D.N.Y. July 2, 2018), involved claims by unpaid interns working at Madison Square Garden since 2007. They contended that they were actually employees and should have received the minimum wage and overtime for the time that they worked. They filed their claims in 2013, when many such suits were being filed, but the district court denied conditional certification in 2014. We blogged about that initial decision here. The court’s decision was rooted in common sense – the test under the FLSA involves multiple factors, and the specific work and circumstances for each intern were likely to differ. The court concluded that conditional certification was pointless because even under the relaxed standard for conditional certification, there was no basis to conclude that there was any viable class. The parties then reached a settlement of the matter on a classwide basis.

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Illinois District Court Rejects Bid to Hold Jimmy John’s Liable for Franchisees’ Employees

Fast food enterprises are frequent targets for claimed wage and hour violations. Because in many instances the places where the plaintiff worked is actually a franchise, the scope of a claim or proposed class may be limited to a few locations, rather than the entire chain. It is therefore not uncommon to see efforts made to hold the large brand-name franchisor liable for what might happen in an individual franchisee’s store. In 2016, the Subway chain addressed that issue by adopting the novel approach of providing training to its thousands of franchisees, to help them comply with the FLSA. We blogged about that program here.

Like Subway, the competing Jimmy John’s sandwich chain has grown explosively through franchising. It has over 2,500 stores, over 95 percent of which are franchises. There are at least 700 franchisees, ranging in size from a single store to one owning over 50. Its marketing to potential franchises touts the earning potential of owning a store, but also emphasizes the need for hard work, long hours and adherence to brand standards.

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6th Circuit Rejects Crude Statistics Based on Small Sample

Case addresses scope of EEOC charge, too

The Sixth Circuit has issued an opinion involving a number of class action and employment issues in a case arising out of an unusual fact pattern and convoluted procedural history. The most important of these involve the use of small statistical samples and potential defects in the EEOC charges, but despite the odd history, there are other worthwhile holdings as well. We’ll skip over the contorted history and focus on just the parts of interest.

The decision in Peeples v. City of Detroit, Case No. 17-1222/1250 (6th Cir. June 1, 2018), arose out of the city of Detroit’s 2012 bankruptcy and its resulting layoffs of firefighters. On the eve of the city’s bankruptcy, it announced the need to lay off more than 2,000 workers in various departments. Pursuant to the terms of its labor agreement with the firefighters’ union, the city sent a notice containing a list of 22 firefighters to be laid off. Although the list was ranked by seniority – a seemingly objective basis – a dispute arose with the union over how that seniority should be calculated, resulting in a class action grievance filed by the union. The city capitulated and eventually laid off 27 firefighters based on the list the union advocated, which contained a higher number of minority firefighters than the city’s did. Less than three months later, the union changed its mind and agreed that the city’s initial list was correct. The city and union settled, or at least it seemed they had settled, the claims of those individuals for back pay. Approximately 10 of the affected individuals, however, contended that they were selected based on their race or national origin and filed suit against both the union and the city. The district court ultimately granted summary judgment against the plaintiffs on both procedural and merits grounds.

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