Order Sending Former Mail Sorter to Arbitration Teaches Some Lessons About Who Is a Transportation Worker and Agreement Coverage

Since 2019, we have been tracking the decisions struggling to interpret the scope of the Federal Arbitration Act (FAA) Section 1 exemption for transportation workers. In other words, we’ve looked at who qualifies as a transportation worker “actually engaged in the movement of goods in interstate commerce,” as Circuit City Stores Inc. v. Adams, 532 U.S. 105, 119 (2001) defined it, without explaining the definition.

Now Judge Beth Labson Freeman of the Northern District of California has applied the transportation worker definition in a class action case in which a former mail sorter for UPS Mail Innovations, Inc. (UPSMI) sued UPSMI and Staffmark Investment, LLC (Staffmark), a staffing agency, with five class action claims and a representative claim under the California Private Attorneys General Act (PAGA). Five of those claims related to failure to provide meal periods, rest breaks, wages and improper practices involving that conduct. In response, Staffmark and UPSMI sought to compel arbitration of the individual claims, to dismiss the class claims and to stay the PAGA claims. Judge Freeman ultimately rejected Tracee Sheppard’s argument that she was a transportation worker exempt from the FAA, granted the motions to compel arbitration, dismissed the class claims and remanded the PAGA claim to state court. Sheppard v. Staffmark Investment, LLC, No. 20-cv-05443 (N.D. Cal. Feb. 23, 2021). Continue Reading

Implicit Waiver of The Right to Arbitrate by Litigation – A Massachusetts District Court Addresses The Factors

Complex cases can present difficult legal issues but may also illuminate how courts evaluate questions such as when a party has waived its right to arbitrate. This is true regardless of the type of claims presented because the analytical framework spans diverse areas of law. District Judge Allison D. Burroughs’ recent Memorandum and Order addresses arbitrability issues and waiver of the right to seek arbitration in a  detailed fashion. In re: Intuniv Antitrust Litigation, Case No. 1:16-cv-12653-ADB, (D. Mass.), originally decided Jan. 29, 2021, but filed Feb. 11, 2021.

Judge Burroughs’ opinion arose from an agreement between the brand and generic manufacturers of a drug called Intuniv, an ADHD medication. Defendants Shire LLC and Shire U.S., Inc. (“Shire”) manufacture Intuniv, a brand name for extended release guanfacine hydrochloride. Defendants Actavis LLC and related entities (“Actavis”) and Shire together produce Intuniv’s generic counterpart. The plaintiffs claim they were forced to pay inflated prices for Intuniv because of an anticompetitive agreement to delay competition for brand and generic Intuniv in violation of the Sherman Act.

Important arbitration and waiver issues emerged from this antitrust class action environment. It is those issues that this blog article examines.

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Florida Court Denies Conditional Certification in Tip Credit Case

Court also rejects ‘fail-safe class’ allegations

The restaurant industry has been among the hardest hit during the current pandemic, but that has not prevented plaintiffs from pursuing class and collective action claims against it. A recent case, however, has rejected two fairly common problems inherent in these kinds of cases.

In Balassiano v. Fogo De Chao Churrascaria (Orlando) LLC, Case No. 6:19-cv-2140-Orl-78EJK (M.D. Fla.), the plaintiff worked at the Orlando location of the Fogo de Chao Brazilian-style restaurant chain. Because of the Brazilian theme and the serving of meat off of skewers, several roles inside the restaurants have Brazilian titles and the lines between preparing and serving food are different from those in a more traditional American restaurant. Continue Reading

Ninth Circuit Rejects Airline’s Constitutional Challenges to California’s Wage Statement Statute

Virtually by definition, many transportation workers, and many employees of airlines and railroads in particular, regularly travel and work in many states. For the most part, that does not impede their work or their employers’ businesses, but what if one state’s laws (read California’s) are unusually burdensome?

That issue arose in a pair of class action cases filed in California district courts in which the plaintiffs, airline employees who frequently traveled out of state, complained that their wage statements did not comply with the dictates of California Labor Code § 226. Both district courts granted summary judgment in favor of the defendant airline. When the cases reached the U.S. Court of Appeals for the Ninth Circuit, it certified the question of whether Labor Code § 226 applied to these employees under state law. In June of last year, the California Supreme Court answered that question and held that employees who perform duties across the country – pilots, flight attendants and other interstate transport workers – are entitled to California-compliant wage statements (under Labor Code § 226) so long as California serves as their base of work operations. Ward v. United Airlines, Inc. 466 P.3d 309, 325 (Cal. 2020).

With that question answered, the Ninth Circuit addressed, and largely rejected, a series of arguments by the employer that the application of § 226 would violate federal law and the federal Constitution. Ward v. United Airlines, Inc. Case No. 16-16415 (9th Cir., Feb. 2, 2021). Continue Reading

Seventh Circuit Fires Warning Shot, USERRA May Require Paid Military Leave

In a case that it characterized as one of first impression in the federal courts of appeals, the Seventh Circuit held last week that the Uniformed Services Employment and Reemployment Rights Act, 38 U.S.C. § 4301 et seq. (“USERRA”), may, in some circumstances, require employers to provide paid leave to employees absent from work due to military service. White v. United Airlines, Inc., Case No. 19-2546 (February 3, 2021).

The plaintiff in White was an airline pilot and a reserve member of the United States Air Force.  Periodically, the plaintiff took short-term leave from his employment to attend military training sessions required for individuals in reserve status. Although the employer’s policies offered pay for some types of leave such as for jury duty, the plaintiff’s military leave was unpaid.  In addition to lost pay, the plaintiff’s military leave also resulted in a reduction of his collectively bargained profit-sharing payments because such payments were calculated as a percentage of total wages. Continue Reading

Ninth Circuit Holds Employee Expense Per Diem Can Constitute ‘Wages’ to Determine the Regular Rate

In a case involving two certified classes, the Ninth Circuit Court of Appeals concluded this week that an employer’s per diem paid to traveling employees to reimburse for the cost of meals, incidentals and housing while working away from home can constitute a “wage.” Clark v. AMN Services, LLC, Case No. 19-55784 (9th Cir., Feb. 8, 2021). As such, the per diem payments should have been included in the calculation of the employees’ “regular rate of pay” for determining overtime compensation.

Under the federal Fair Labor Standards Act (FLSA), employees are entitled to overtime pay at 1.5 times an employee’s “regular rate of pay.” An employee’s “regular rate of pay” includes the employee’s ordinary hourly rate of pay, as well as other compensation, such as non-discretionary bonuses. Therefore, an employee’s “regular rate of pay” may be higher than an employee’s ordinary hourly rate of pay. Expense reimbursements are not included in an employee’s “regular rate of pay.” Class action cases involving the regular rate are now becoming more common. Continue Reading

Seventh Circuit Finds Class of 37 Does Not Meet Rule 23’s Numerosity Requirement

As numbers go, 37 isn’t as famous as, say, 1 or 13. It’s a prime number, the atomic number of rubidium and the age of the peasant Dennis in the movie Monty Python and the Holy Grail, but not much else. Now, however, it may also have significance as a number too small to meet Rule 23(a)’s numerosity requirement in the right circumstances.

In Anderson v. Weinert Industries, Inc., Case No. 20-1010 (7th Cir. Jan. 28, 2021), the plaintiff sought to pursue claims for unpaid overtime wages against a Wisconsin roofing company. The claims were initially brought under the Fair Labor Standards Act (FLSA) and appear to have been conditionally certified under FLSA section 16(b), but there were only three opt-ins. Faced with a tiny collective, the plaintiff changed tactics and sought Rule 23 certification under state law. Continue Reading

The Fifth Circuit Rejects Two-Stage Conditional Certification Procedure for FLSA Collective Actions

Court directs application of a more rigorous and more sensible standard.

Much of the current tsunami of wage and hour litigation across the country has been fueled by the use of a two-step procedure in Fair Labor Standards Act (“FLSA”) collective actions that simultaneously facilitates the bringing of such claims and puts unreasonable pressure on defendants to settle them. We’ve commented on this procedure and its effects on several occasions. (Read our August 21, 2019, June 14, 2019, July 31, 2017 blogs). That procedure is fraught with problems, is replete with inaccurate terminology, and feeds rather than streamlines litigation.

For decades, defendants have been hampered in their efforts by procedural hurdles to effective challenges, but on January 12, 2021, in Swales v. KLLM Transport Services, L.L.C., the Fifth Circuit expressly rejected that process. Instead, the Fifth Circuit rejected the two-step process and the lenient standard courts have applied in authorizing notice to the class in  favor of a more “rigorous” one-step standard. Continue Reading

Ninth Circuit Again Complicates CAFA Removal Standards

Congress enacted the Class Action Fairness Act to address perceived problems with the handling of class actions by courts. Among its provisions was one permitting removal of more class action claims to federal court. The Ninth Circuit in particular was unfriendly to these new provisions, but, we had thought, the Supreme Court put the matter to rest in 2014 (See our December 16, 2014 blog), and last year we noted that the Ninth Circuit seemed to have accepted and was applying the standards enunciated by the Supreme Court (See our September 30, 2019 blog).

We may have spoken too soon, at least with respect to some Ninth Circuit panels. Continue Reading

Once More Before the High Court – Henry Schein, Inc. v. Archer And White Sales, Inc. – But New Questions Emerge

We know now under Epic Systems that arbitration agreements with class action waivers can be enforced, but questions continue to emerge from specific arbitral agreements and instances where they are silent on certain issues, such as who determines whether a dispute is arbitrable in the first place.

In 2019, some may have thought that the certiorari-worthy issues in Henry Schein, Inc. v. Archer And White Sales, Inc. were resolved by the Supreme Court. The case arose from an antitrust action involving the manufacture and distribution of dental equipment. See the Supreme Court opinion at 139 S. Ct. 524, 529 (2019). We wrote about that unanimous January 8, 2019 opinion in our blog post of Jan. 15, 2019, noting that while that 2019 opinion “spelled the death knell for the ‘wholly groundless’ exception” as applied by the Fifth Circuit, “other issues lurk in the background.” Indeed, the court remanded the case for the Fifth Circuit to determine if the parties’ arbitration agreement “in fact delegated the arbitrability question to an arbitrator.” The Court of Appeals was also authorized to address “other arguments that Archer And White has properly preserved.” See 139 S. Ct. at 531. Continue Reading