Consistent with a trend that started roughly four years ago, a California District Court has refused to certify a class of retail store managers seeking overtime pay under California law on the grounds that individual issues would necessarily predominate. Deane v. Fastenal, Inc.pdf., Case No. 11-CV-0042 YGR (N.D. Cal. Sept. 27, 2012). This case also reflects potential perils for plaintiffs in wage and hour cases when they try to pursue simultaneous state law class and federal law collective claims.
Not that long ago, cases challenging the exempt status of retail store managers or assistant managers were a staple of California class action litigation. Virtually every major retailer was faced with lawsuits arguing that the managers did not spend sufficient time managing, or that they did not exercise sufficient discretion, to satisfy the executive employee exemption under California law. These claims were bolstered by the fact that, unlike federal law, the California wage and hour law uses a quantitative primary duties test that requires that the manager spend at least fifty percent of their time performing exempt duties.
Fastenal has over 2,000 locations nationwide. It is basically a hardware store for construction and industry, selling things like fasteners (as the name implies), tools, and protective gear. Unlike a traditional consumer hardware store, often, store managers and staff must go out to make sales calls, and do not simply service customers that come into the store through the front door.
In Deane, the plaintiffs sought to represent a nationwide class of store managers who claimed that they had been misclassified as exempt and were entitled to overtime pay. The district court granted conditional certification under the FLSA. Afterwards, the plaintiffs moved to certify a class of California managers under California law and the defendant moved to decertify the conditionally certified FLSA class. Thus, the judge was being asked to address certification while the case was in a unique procedural posture.
What was also unique was that the employer relied on three exemptions, the executive (which you would expect of for a manager), administrative and outside sales. The outside sales exemption was asserted because of the need for some employees to go out to customers to make the necessary sales.
The district court denied the motion for class certification, which might once have been considered a foregone conclusion given the fact that the case involved a frequent topic of class action litigation, was pending in the Northern District of California and had already been conditionally certified for FLSA purposes. The court found that while it appeared that some of the managers might have been misclassified, it also appeared that there was a wide variation in the amount of discretion given to individual managers, as well as differences between the business traffic of the individual stores.
Citing Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011), the court refused to adjudicate the case by representative proof. Thus, the court found that class issues did not predominate and that the state law claims should not be certified.
The Deane decision is of note for several reasons. First, of course, it represents a decision refusing to certify an employment class action by a court traditionally viewed as friendly to such cases. It also related to a type of claim, misclassification of retail managers, which had also been successful in California in the past. But the case also represents a potential problem for plaintiffs who seek to pursue combined FLSA and state law wage and hour claims. By pressing state law class claims, they gave the opportunity to the defendant to demonstrate at an earlier stage that the FLSA claims should not proceed as a class. And they also made it easier for the defendant to make arguments based on the Dukes case that sampling and similar methods were inappropriate.
The Bottom Line: Certification of classes of retail store managers is no longer a foregone conclusion, even in jurisdictions perceived to be pro-plaintiff. Pursuing hybrid state and federal claims may present the defendant with additional opportunities to decertify the class.