We’ve commented several times in the past on the importance of the second phase of the two-step procedure now commonly employed by district courts in Fair Labor Standards Act cases.  Under that procedure, courts will typically apply a lenient standard for “conditional certification,” really notice to the class, at the first stage.  Following an opt-in period, the defendant may then file a motion to decertify the class, at which time a higher standard applies.  While plaintiffs often prevail at the first stage, those cases that reach the second stage, or even the eve of trial, are frequently decertified as demonstrated by a recent decision from the Northern District of Ohio.

In Creely v. HCR ManorCare, Inc., Case No. 3:09:CV2879 (N.D. Ohio, Jan. 31, 2013), the defendant employer operated hundreds of long- and short-term rehabilitation facilities across the United States and employed over 44,000 hourly exempt employees in positions such as registered nurses, LPNs, nursing assistants, and administrative functions.  The employer employed an “auto-deduct” policy for meal periods, deducting 30 minutes unless the employee who missed their meal completed a form advising it of that fact. 

Such policies, incidentally, are used by many employers because of their general ease of administration and because many employees, particularly those in professional or paraprofessional positions, would prefer not to be required to “punch in” or “punch out” for breaks or meals throughout the day.  Despite their popularity, such policies are frequent targets for wage and hour claims.  These claims, like those asserted in the Creely case, generally allege that such policies place the burden of timekeeping on the employee (which would be true of the need to punch in or out in any event) or that they were subtly or even overtly discouraged from reporting missed meal periods.

In 2009, the district court conditionally certified the case under the lighter, first-step of the procedure.  Creely v. HRC ManorCare Inc., 789 F. Supp. 2d 819 (N.D. Ohio 2009).  Interestingly, rather than provide notice to the entire proposed class, notice was only sent to approximately 3200 employees, of whom about 10% opted in, a relatively low rate.  Discovery was conducted on roughly 20% of that group, as well as on how the company’s auto-deduct policy was implemented at the various locations.  Following the additional discovery, the defendant moved to decertify the class and the plaintiff filed a motion to “confirm” the prior conditional certification.

The district court found that while the employer had a uniform “auto deduct” policy, the manner in which it was implemented varied based upon the facility, type of employee, and even individual manager.  Further, the ability to take uninterrupted meal periods varied based upon the type of work the employee performed.  The court was also persuaded that while the employer automatically deduct time for meals, it had several policies reflecting the employee’s right either to take their meal at a different time or to override the deduction through the submission of a form.  It noted several other cases in which courts had decertified such cases in the past, including Frye v. Baptist Memorial Hospital, Inc., 2012 WL 3570657 (6th Cir. 2012), as well as cases from many other district courts.  It likewise found that the employer’s defenses varied among the employees and that, as a result, treatment of the case as a collective action would be difficult to manage.

The court thus decertified the case and dismissed the claims of all of the opt-in plaintiffs with prejudice.

While the ending was a positive result for the employer, the Creely case demonstrates the growing difficulty with using an overly low burden at the first stage.  Even on inspection, it is obvious that a 300-facility, 44,000-employee class is going to have difficulties surviving the second stage analysis.  That is particularly true when the employer’s policy is facially lawful and the plaintiffs are asserting “off-the-clock” or similar issues that are almost inherently individual.  In this case, the parties were in litigation for years, took dozens of depositions across the country, and now have to manage the after-effects of a decertified group of over 300 opt-in plaintiffs.  Courts should consider the likelihood that the class can actually meet the higher standard, and the cost and inconvenience to the parties through the second stage before relying solely on a recitation of the discretionary lower standard at the first phase.

The bottom line:  Another court has decertified a wage and hour case challenging the employer’s use of an “auto-deduct” policy based on differences in the manner in which it was implemented.