Wage & Hour Litigation Blog

The $10.10 Minimum Wage for Employees Servicing and Supporting Federal Contracts Moves a Little Further on Down the Road: DOL Sends Final Rule to OMB for Review

Posted in DOL Enforcement

Authored by Alex Passantino

Last Friday, the Department of Labor’s Wage & Hour Division (WHD) submitted to the White House Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) its Final Rule to implement a $10.10 minimum wage for federal contractor employees pursuant to Executive Order 13658.  The Final Rule will address comments made by the regulated community in response to WHD’s Notice of Proposed Rulemaking.

The Executive Order requires that the Labor Department issue regulations by October 1, 2014.  Review by OIRA is the final step in the process prior to publication of the Final Rule in the Federal Register.  It is unclear whether OIRA will have sufficient time to review the Final Rule in time to meet the October 1 deadline or whether it will need to let that deadline slide.

As we have written previously, once the Final Rule is published, the minimum wage for federal contractor employees and the implementing rules are expected to apply to covered contracts where the solicitation has been issued on or after January 1, 2015.  We will, of course, keep you updated on the status and effective date of the minimum wage obligations.

 

Bittersweet Victory: Court Affirms $3.4 Million Attorney’s Fee Award Despite Plaintiffs’ Defeat on Majority of Claims

Posted in Damages, Overtime

Co-authored by Abad Lopez and Noah Finkel

Even in the face of an apparent victory, a company may be stuck with an unexpected and outsized attorneys’ fees tab.  In a recent case that highlights the multifaceted perils of drawn out litigation, the Tenth Circuit affirmed a $3.4 million attorneys’ fees award—even though the jury rejected the majority of plaintiffs’ claims and where the fees “substantially exceeded” plaintiffs’ actual damages award.

The case involved workers who sued under the Fair Labor Standards Act and the Kansas Wage Protection Act, which proceeded as a class and collective action.  At trial, the jury awarded the workers approximately $503,000 in damages under the FLSA and state law, a sum far less than that sought by the plaintiffs.  The jury found the company liable on a class-wide basis for systematically undercompensating employees for the time they spent putting on and taking off protective clothing and equipment and walking to and from their work stations.  However, the jury found that plaintiffs failed to prove their meal and rest break claims.  The district court then proceeded to award plaintiffs’ counsel $3.4 million in attorneys’ fees despite their rather limited success.

In affirming the district court’s full attorney’s fees award, the Tenth Circuit afforded considerable leeway under the “abuse of discretion” standard.  By doing so, it allowed fees for the time spent on plaintiffs’ successful donning and doffing claims, in addition to any time spent on their unsuccessful meal and rest break claims.  Even though plaintiffs’ claims ostensibly involved different legal theories, the court found that they were “interrelated.”  The court also had no concerns about the size of the award, even though plaintiffs only recovered 8% of the damages they sought and the award “substantially exceeded” the actual damages award by a 7 to 1 ratio.

As evident from this decision, litigation through trial may prove undesirable even in the face of an apparent victory.  Although at times warranted, defending a case at all costs, even where the actual potential damages are palatable, carries the added risk of an unexpected (and decidedly unpalatable) attorneys’ fees award.  As such, decisions about an “exit strategy,” including via early resolution, defeating certification, or early dismissal of particular claims through dispositive motions, are critical in light of these risks.  Even where defendants decide that victory at trial is the only acceptable outcome, this decision should be made with eyes wide open about the potential cost of a victory.

Court Slams the Brakes on “Black Car” Drivers’ Misclassification Case

Posted in Misclassification/Exemptions

Co-authored by Robert S. Whitman and Howard M. Wexler

Trying to catch a cab in New York City is not for the faint of heart.  In addition to the traditional “yellow cabs,” which often treat the city streets like a NASCAR track, there are many “Black Car” companies that offer rides through dispatch systems that allow for scheduled pickups.  In Saleem v. Corporate Transportation Group, Judge Jesse Furman of the Southern District of New York held that drivers for a group of “Black Car” companies were properly classified as independent contractors, not employees.

The plaintiffs in Saleem were drivers who were parties to franchise agreements ranging in value from $20,000 to $60,000.  To obtain work, drivers log into the dispatch system, indicate that they are available for work, and then accept or reject jobs when they become available.  The drivers are responsible for procuring the car, paying for vehicle maintenance, and obtaining the appropriate licenses and insurance.  Pursuant to the franchise agreements, they receive a percentage of the total fare charged to the client; are prohibited from soliciting or doing business with any of the franchisor’s clients directly; and had to follow a set of rules that subjected them to penalties depending on the infraction.  Notably, the drivers were not prohibited from working for competitor “Black Car” companies or driving their own private customers.

The drivers filed a putative class/collective action alleging that they should have been classified as employees, and thus were entitled to overtime pay.  The court conditionally certified their FLSA claim in June of 2013, but denied class certification of their state law claims under Rule 23 of the FRCP.  At the close of discovery, both parties filed motions for summary judgment.

The Court applied the “economic reality” test for whether the drivers were employees or independent contractors under the FLSA.  The factors were:  (1) the degree of control exercise by the employer; (2) the workers’ opportunity for profit or loss; (3) the degree of skill and independent initiative required to perform the work; (4) the permanence or duration of the working relationship; and (5) the extent to which the work is an integral part of the employer’s business.

Judge Furman held that the factors overall weighed in favor of independent contractor status.  He noted that the drivers:

  • Were completely free to set their own schedule of work and were under no obligation to accept a particular job;
  • Were free to—and frequently did—work for other car services and provide transportation to private customers;
  • Made numerous decisions that affected their overall profitability, such as whether to rent or buy a franchise, whether to hire other drivers, whether to work for other car service companies, and whether to solicit private clients;
  • Made substantial investments in their businesses through purchasing franchises as well as on their own private vehicles;
  • Exercised a significant degree of independent initiative in order to be a successful driver; and
  • Could terminate the franchise agreements at will.

Although the New York Labor Law test required Judge Furman to assess several additional factors, he reached the same conclusion, that the drivers were properly classified as “all five NYLL factors favor independent contractor status.”

Together with a decision earlier this week involving U.S. Open tennis umpires, this case is a welcome development for defendants in the tricky world of independent contractor classification.  Nonetheless, companies should continue to pay careful attention to this area, especially in light of the U.S. Department of Labor’s September 15, 2014 announcement that it awarded $10.2 million to 19 states “to implement or improve worker misclassification detection and enforcement initiatives.”  Diligent compliance in classifying workers as independent contractors rather than employees remains as important as ever.

We’re Talking About Practice: Court Finds Document-Reviewing Temp Attorney is Engaged in Practice of Law and Therefore Exempt

Posted in Misclassification/Exemptions, Overtime

Authored by Kevin Young

On Monday, a federal judge in New York dismissed a proposed FLSA collective action filed by an hourly temp attorney on the grounds that the temp was exempt from the FLSA’s overtime requirements.  In a decision that might not sit well with basketball star Allen Iverson, who once chided the media for “talking about practice,” Judge Richard J. Sullivan of the Southern District of New York offered a detailed analysis of what it means to “practice” law, as the applicable exemption requires, and found that even a temp relegated to document review fits the mold.

The case was filed by David Lola, an attorney residing in North Carolina and licensed to practice law in California, against his former employer, Tower Legal Staffing, and a law firm it contracted with, Skadden Arps.  As an employee of Tower, Lola was assigned to a doc review project for a large case in Ohio being handled by Skadden.  He had standard doc review duties: reviewing documents for predetermined keywords; placing them into preset categories; redacting based on protocols.  He was paid $25 per hour and allegedly worked 45 to 55 hours a week.

Lola filed suit under the FLSA seeking overtime pay for himself as well as all others who worked on the same project.  Rather than answering Lola’s allegations, the defendants moved to dismiss the case, arguing that Lola fell within the overtime exemption for professionals. Among other professionals, that exemption applies to any lawyer who is (i) “the holder of a valid license … permitting the practice of law,” and (ii) “actually engaged in the practice thereof.”  Unlike under other hotly-litigated exemptions, a lawyer need not be salaried for the exemption to apply.

Agreeing with the defendants, Judge Sullivan found that Lola was exempt as a matter of law and dismissed the case.  There was no question, the court explained, that Lola held a law license. Instead, the analysis turned on whether he was “engaged in the practice [of law].”  Similar to the accountants we reported on in July who unsuccessfully argued to the Second Circuit that they were not exempt, like other accountants, because they performed only entry-level accounting duties, Lola claimed he was not engaged in the practice of law because his doc review work was “mechanical” and “did not involve the use of any legal judgment or discretion.”

The court proceeded through a four-step analysis to determine that Lola was engaged in the practice of law and therefore exempt:

  1. The phrase “engaged in the practice of law” is not defined by federal statute or regulation.
  2. Although interpreting the phrase is a federal matter, given that it arises from a federal overtime exemption, the meaning of the phrase should be determined under state law, given that the practice of law is state-regulated and can mean different things in different states.
  3. To determine what the phrase “engaged in the practice of law” means in this case, North Carolina law applies.  While there are competing arguments for California (where Lola was licensed), Ohio (where Skadden’s case was pending), or New York (where the defendants were based), North Carolina prevails because that is where Lola performed the work at issue.
  4. Based on North Carolina statutes as well as a North Carolina State Bar ethics opinion, someone like Lola who performs doc review, whether “mechanical” or otherwise, is engaged in the practice of law.

Judge Sullivan’s decision is important for a number of reasons.  First, Judge Sullivan’s detailed analysis of what it means to practice law should prove relevant and beneficial to firms that employ licensed temp attorneys to perform legal tasks. Second, the decision continues a trend in the Second Circuit of using a by-the-book reading of the FLSA’s exemptions to assess the claims of professionals who allege that their duties are too mechanical or low-level to be exempt.  And third, at a time when FLSA lawsuits have a reputation for being fact-sensitive and drawn out, the decision shows that an early dismissal on the merits is attainable under the right circumstances.

Game, Set, and Match: USTA Aces Umpire Misclassification Case

Posted in Misclassification/Exemptions

Co-authored by Robert S. Whitman and Howard M. Wexler

Although the U.S. Open came to an end earlier this month in Flushing Meadows, New York, match point remained to be played for the tournament’s umpires.  In Meyer v. United States Tennis Association, Judge Andrew Carter of the Southern District of New York shot a cross-court winner for the USTA, holding that the umpires were properly classified as independent contractors, not employees, and granting summary judgment on their wage claims under the FLSA and NY Labor Law.

The plaintiffs in Meyer were umpires who worked at the U.S. Open pursuant to independent contractor agreements prepared by the USTA.  Each umpire received a fixed daily rate (between $115 and $200 per day) as well as reimbursement for some travel, meal and equipment costs.  They filed a putative class/collective action alleging that they should have been classified as employees, and thus were entitled to overtime pay.

The court conditionally certified the FLSA claim in April 2013.  The parties then took part in a dizzying volley that included “extensive class certification and merits discovery” and culminated in dueling motions for summary judgment.

The Court applied the “economic reality” test for whether the umpires were employees or independent contractors under the FLSA.  The factors were:  (1) the degree of control exercise by the employer; (2) the workers’ opportunity for profit or loss; (3) the degree of skill and independent initiative required to perform the work; (4) the permanence or duration of the working relationship; and (5) the extent to which the work is an integral part of the employer’s business.  Although no one factor alone would “break serve,” Judge Carter held that the factors overall weighed in favor of independent contractor status.  Effectively declaring “Advantage: USTA,” Judge Carter noted that the umpires:

  • Had full discretion and authority under the laws of the game of tennis to call the game as they saw fit, including the authority to penalize a player for a rule violation;
  • Decided whether to officiate at the U.S. Open in a given year, and if so, how many days to work;
  • Required a high degree of skill and independent initiative, including at least some level of certification; and
  • Could work for other tennis associations throughout the year.

Although the New York Labor Law test required Judge Carter to assess several additional factors, he reached the same conclusion under that statute as well:  that the umpires were properly classified as independent contractors.

The case should be an object lesson for employers:  the mere fact that a worker is labeled an “independent contractor” and willing to work as such (without receiving minimum wage or an overtime premium) is not by itself enough to remove the worker from the coverage of wage-hour laws.  This was by no means a straight-sets victory for the USTA given the litigation costs it incurred and risks it faced in the event Judge Carter ruled that it doubled faulted on its classification decision.  Careful compliance for employers in classifying workers as independent contractors rather than employees, with an eye toward eliminating any unforced errors, remains as important as ever.

Unreliable Survey Dooms IBM Workers’ Bid for Class Certification

Posted in Misclassification/Exemptions, Overtime, Rule 23 Certification

Co-authored by Steve Shardonofsky and Rebecca DeGroff

Last week, in Sirko v. IBM, a federal district court in California rejected the plaintiffs’ efforts to use a rudimentary survey to establish Rule 23 class certification because the survey — designed and administered by plaintiffs’ counsel — “lack[ed] basic indicators of reliability.”  The case is yet another example of the trend by class action plaintiffs to use surveys and statistical evidence to avoid issues of individual proof and establish common liability at the certification stage.  More importantly, it reaffirms (like the recent Duran decision from the California Supreme Court discussed here and here) that any such surveys must be sufficiently reliable to be considered as part of the court’s rigorous analysis under Rule 23.  Striking the survey, the court denied the plaintiffs’ bid for class certification, because resolving the misclassification issues in the case would require too many individual inquiries.

Surveys and Other Types of Statistical Evidence at Class Certification Must be Reliable

The Sirko plaintiffs were employed by IBM to service Kaiser Permanente’s health information computer systems.  They sought to certify a Rule 23 class of exempt California-based IT employees who were allegedly misclassified and denied overtime by IBM.  To support their bid for class certification, plaintiffs’ counsel designed and sent a 47-question survey regarding work duties to the putative class members.  This, according to U.S. District Judge Dolly M. Gee, was “their foundational evidence in support of their motion for class certification.”  Judge Gee struck the survey, however, because it “lack[ed] basic indicators of reliability.”

The survey’s fatal flaws included:

  • Plaintiffs’ counsel, created and administered the survey, but admittedly was not an expert in survey methodology;
  • The vast majority of questions allowed only for “yes” or “no” responses, yet included questions (like one regarding the exercise of discretion and independent judgment) that required “a less binary response;”
  • The cover letter accompanying the survey told recipients the purpose of the survey was to support a class action seeking overtime wages for employees who had been misclassified as exempt.  As Judge Gee observed, this information “undermine[d] any possible inference that the survey responses were objective,” because the survey recipients “had to have been aware they would be potential beneficiaries of such a lawsuit.” (Consider, for example, how the workers’ answers may have differed if they had been told the survey would be used to determine merit pay raises or promotions.)

These flaws rendered the survey unreliable, leading the court to strike portions of plaintiffs’ experts reports based on the survey.

Individual Inquiries Doom Class Certification Yet Again

Having struck the plaintiffs’ survey, Judge Gee turned to analyze the putative class members’ job duties based on declarations submitted by the parties.  This evidence revealed that while putative class members shared a job code, they actually performed a variety of duties in different positions.  For example, one named plaintiff spent all of his time assembling teams that responded when Kaiser’s computer systems experienced outages.  By contrast, the other named plaintiff spent most of his time making upgrades and installing updates to IT systems.  In addition, the declarations submitted by IBM also revealed differences in the work duties and responsibilities of putative class.  Thus, Jude Gee found, to determine whether the plaintiffs’ work satisfied the requirements of the administrative exemption could “only be answered on an individualized basis.”  Absent “common proof on a class-wide basis,” Judge Gee held that Plaintiffs could not establish commonality or superiority under Rule 23(b).

Implications For Future Wage/Hour Cases

Like the recent Duran case, the Sirko ruling is another example of class action plaintiffs misusing surveys and statistical evidence to establish Rule 23 certification.  Yet, in another welcomed ruling for employers, the case reaffirms that any such evidence must be reliable, and carefully evaluated and scrutinized by the court, before it can be considered even at the class certification.  Using surveys is somewhat common in wage and hour cases.  Surveys require time: time to carefully construct, time to properly test, and time to challenge and dispute.

A WRONG IS RIGHTED: DARDEN’S POLICIES VINDICATED IN DECERTIFICATION OF NATIONWIDE COLLECTIVE ACTION

Posted in Decertification

Co-authored by Gerald L. Maatman, Jr. and Matthew J. Gagnon

In a huge win for restaurant companies everywhere, Judge William Dimitrouleas of the U. S. District Court for the Southern District of Florida recently decertified a nationwide collective action against Darden Restaurants, Inc. – the corporate home of such iconic brands as Olive Garden and LongHorn Steakhouse – in Mathis et al. v. Darden Restaurants, Inc., Case No. 12-CV-61742, 2014 U.S. Dist. LEXIS 124631 (S.D. Fla. Sept. 1, 2014).  In July 2013, the Court had conditionally certified a nationwide collective action alleging that Darden required servers and bartenders to work “off-the-clock” and paid them the tip-credit wage for time spent on non-tip producing tasks.  The collective action spanned all 50 states and included over 218,000 putative class members.  More than 20,000 employees chose to opt-in to the suit.

While the Court may have been willing to certify a collective under the lenient standard applied at the conditional certification stage, anyone familiar with Darden and how it treats its employees knew that this collective action would ultimately be decertified.  And indeed, when Darden moved to decertify the collective action a year later, the Court sided with Darden, finding no evidence of a company policy that required employees to work off-the-clock or that resulted in employees being paid the tip credit rate improperly.

In a by-the-book decision, Judge Dimitrouleas applied the three factors identified by the Eleventh Circuit in Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1261 (11th Cir. 2008), as relevant to the decertification decision, including: (1) the existence of disparate factual and employment settings; (2) the existences of individualized defenses; and (3) fairness and procedural considerations.

The Court found that the opt-in plaintiffs worked under hopelessly disparate factual and employment settings.  The collective action encompassed two job titles, bartenders and servers, in over 1,995 restaurants spread across 50 states.  The relevant policies and practices relating to off-the-clock work and wages would differ by job title, state, brand (Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, and Red Lobster), specific restaurant, and manager.  Moreover, the opt-in plaintiffs asserted various combinations of claims relating to the tip-credit, off-the-clock work, and overtime.  This meant that there were six different combinations of claims that each opt-in plaintiff could make.  Given these differences, the Court found that this factor alone weighed heavily in favor of decertification.

Second, the Court held that Darden had multiple individualized defenses that would preclude collective adjudication.  For example, liability could depend on whether employees had received instructions from managers who were acting outside the scope of their authority and contrary to well-established company policies and practices.  Employees may also have voluntarily engaged in off-the-clock work in defiance of Darden’s official policies, or they may have unreasonably failed to avail themselves of the opportunities provided by the company to recover unpaid compensation.  In sum, although some factual issues – such as the existence and communication to employees of uniform nationwide policies – could be determined on a class-wide basis, the majority of material issues relating to Darden’s defenses were highly individualized.

Finally, the Court noted that a collective action of plaintiffs’ claims would be unmanageable and procedurally unfair to Darden.  In short, the circumstances of each individual employee were too dissimilar to justify a collective action, and plaintiffs’ proposed use of representative evidence or damage models could not account for the material distinctions among class members.  Yet, if the case were to proceed as a collective action, Darden would be subject to all-or-nothing liability for large groups of employees despite the material differences in working conditions and individual defenses.

Implications For Employers

This case shows how important it is for an employer not to give up even after an adverse conditional certification decision, and to move forward and present its evidence to the Court in a decertification setting.  In this case, the Court had concluded that although certification was warranted under the “fairly lenient standard” at the conditional certification stage, the more developed record at the decertification stage demonstrated that plaintiffs were not in fact similarly situated, and that a nationwide collective action would not be practical, efficient, or fair.  Although it took another year of hard-fought discovery, Darden’s willingness to stand its ground and defend its reputation paid off.

Uniform Break Policies Are Not Uniformly Suited for Class Treatment

Posted in Meal/Rest Breaks, Rule 23 Certification

Authored by Michael W. Kopp

Ordonez v. RadioShack, Part II is the end-of-summer sequel you do not want to miss. It features our protagonist, the “uniform rest break policy,” a sinister cast of declarations of similar treatment, a harrowing finding of unlawfulness, a dramatic second run by plaintiff at class certification, and the court’s emphatic second opinion denying plaintiff’s certification gambit. Sequels can be more satisfying than the original. Ordonez, Part II delivers the welcome message that identifying a uniform employer policy, even one that is likely unlawful, is not the end of the story. Where there are difficulties in proof as to the application and impact of a uniform policy on the class, Ordonez serves notice that certification should be denied.

Ordonez claimed that RadioShack’s rest break policy shorted sales associates their rest breaks when they worked between six to eight hours. In taking a second run at class certification, plaintiff offered more evidence of the uniformity of the rest break policy at issue, which provided “one paid 15-minute break for every four hours.” Nineteen employee declarations uniformly (no surprise) attested to missing second breaks for work performed between 6-8 hours.  In response, the court found that plaintiff had established that RadioShack maintained “a uniform stated policy . . . that is likely inconsistent with California law.” But plaintiff could not take that finding to the bank, because issues of individualized proof and manageability made class certification the wrong choice. The takeaway from Ordonez is so important, that we dare not dilute it with a paraphrase: “[I]n spite of the evidence that RadioShack had a uniform rest break policy that may have violated California law, substantial manageability concerns remain regarding proof of whether and how this policy was actually implemented.”

What were the manageability concerns? Chief among them was plaintiff’s inability to identify any way to prove whether any class member took or failed to take a break. There were no reliable electronic records logging actual breaks taken, and RadioShack was not required to keep such records. Not even the plaintiff’s supplemental submission of RadioShack’s electronic scheduling records could do the trick because, “at most, they reflect when RadioShack scheduled rest breaks for its employees”, and not when employees actually took rest breaks. That would require testimony from each RadioShack employee. Another key takeaway was the court’s rejection of the “this is a damages issue” argument. “Here the issue is whether classwide methods of proof exist to show that California law was actually violated.”

Ordonez also discusses recent California Appellate Court decisions certifying wage and hour classes where the underlying claims challenged uniform employer policies. Benton v. Telecom Network Specialists, Inc.; Faulkinbury v. Boyd & Assocs., Inc.; Bradley v. Networkers Int’l, LLC. But these decisions were all cases where the employer had never implemented a rest break policy. In other words, the uniform rest break policy applicable to the class was the absence of any such policy. These courts were not faced with claims that required a more individualized inquiry as to each class member’s rest break usage.

Ordonez rejects the argument that class certification is required whenever the claim challenges a uniform policy. Rather, the court noted “[i]t is an abuse of discretion for the district court to rely on uniform policies to the near exclusion of other relevant factors touching on predominance.” The court also helpfully pointed to a recent rising tide of decisions denying class certification in actions alleging rest break violations based on a stated uniform policy, with Cummings v. Starbucks Corp., and In re Taco Bell Wage and Hour Actions serving as examples.

Ordonez underscores that manageability and predominance issues do not simply vanish whenever the plaintiff takes a run at an employer’s uniform policy. These concerns must still be satisfied, particularly as to whether a method exists for establishing common proof on a classwide basis that the policy was implemented unlawfully.

The New Comcast Decision: Not Hungry? No Meal Break Waiver Needed.

Posted in Decertification, Meal/Rest Breaks

Co-authored by Jacob Oslick and Timothy Rusche

California requires written waivers if an employee misses a second meal break, right? Not exactly, clarified the California Court of Appeal in Fayerweather v. Comcast Corp. Instead, a waiver only is needed if the employer makes an employee miss a second meal break and not if the break is voluntarily skipped. The court also reaffirmed that off-the-clock class actions require proof of a uniform, companywide policy that violates the law.

The Fayerweahter plaintiffs were Comcast service technicians. They installed cable, internet, and phone service in homes and businesses. Much like customers whom Comcast hoped would take a break from the grind to watch TV and surf the web, Comcast policies directed technicians to take breaks, required them to fill out waivers if they skipped a second meal break, and obligated them to accurately record their hours worked. However, because technicians spent their days in the field, Comcast couldn’t know which of them actually took their TV timeouts.

The plaintiffs seized on this. Like the do-it-yourselfer who ignores direction and hangs a flat screen with the wrong screws, they alleged that their failure to follow policy and complete meal break waivers proved they were denied breaks. They argued that a device the company provided to communicate their status in the field more accurately reflected their hours than time records they had completed themselves.

The court panned the show and affirmed the decision to cancel the series. In brief:

  • The plaintiffs admitted that, under Comcast policy, they were supposed to sign written waivers every time they chose to skip a second meal break. They claimed that they neglected to, and insisted that this failure violated Labor Code § 512. The Court held that the law, unlike Comcast policy, didn’t require written waivers, and that “[i]f an employee voluntarily chooses to continue working through a provided meal break, no waiver is required.”  And, because figuring out whether they chose or were forced to miss a break would “require individual analysis of every instance,” this theory wasn’t appropriate for class treatment.
  • The plaintiffs also sought class certification on the grounds that Comcast didn’t maintain a formal policy to provide premium pay for denied breaks. However, as the Court noted, Labor Code § 226.7 only requires that premium pay get paid; it does not require a written policy to pay it. Whether the plaintiffs were actually denied breaks , or voluntarily skipped them, remained an individualized issue.
  • The plaintiffs further alleged that they widely underreported their hours and that entries from a communication device called TechNet showed that Comcast should have known about this underreporting. The Court found that TechNet was used to communicate about availability, not to track time, and that there was no evidence that the plaintiffs’ self-reported time records were less reliable than their TechNet entries. Nor did it find “substantial evidence point[ing] to a uniform, companywide policy” of encouraging technicians to underreport their time. Accordingly, the Court found that TechNet’s data could not be used to impute knowledge to Comcast, or to justify findings on a class-wide basis.

Employer Take-Aways

Though Fayerweather currently is an unreported decision, which limits its precedential value, it establishes that meal break waivers are different than voluntary decisions to skip breaks, and reiterates that class certification requires evidence of uniformly applied, unlawful company policy. Now that’s a show worth tuning into.

NO “DEAL” ON SALES REPS’ CLASS CERTIFICATION BID AGAINST GROUPON, BUT THEY ARE INVITED TO TAKE A SECOND BITE AT THE APPLE

Posted in Rule 23 Certification, State Laws/Claims

Co-authored by Timothy F. Haley and Arthur J. Rooney

A federal court in Chicago recently denied class and collective action certification in a wage-hour case brought by sales representatives for Groupon.  But the court did so without prejudice to allow plaintiffs to take a second bite at the apple — albeit, a smaller apple.  The court’s decision denying plaintiffs’ motion is here.

There is much for employers to like about this case.  Although the plaintiffs will have an opportunity to renew their motion based on a narrower class definition, the decision illustrates the hurdles that plaintiffs should have to overcome to move forward with a proposed class or collective action.  Most significantly, plaintiffs must be able to provide a feasible trial plan for calculating damages on a class-wide basis to prevail on a class-certification motion.

In denying plaintiffs’ motion for class certification (which the court also treated as a motion for collective action certification), the court first addressed the merits of plaintiffs’ claims.  Plaintiffs argued that Groupon misclassified its sales reps as exempt; Groupon argued that its sales reps qualified for the administrative exemption under both the FLSA and Illinois law.  Plaintiffs sought to certify a class of virtually all sales reps who had worked at Groupon as far back as 2008.  Based on the evidence provided, however, the court concluded that the sales reps’ actual day-to-day job duties varied widely over the proposed class period depending on each employee’s geographic market and supervisor.  Because of these individualized experiences, the court concluded that plaintiffs failed to satisfy both the commonality and predominance requirements of Rule 23.

Turning to the issue of damages, the court found that individualized damages issues provided an alternative basis for denying plaintiffs’ motion.  There was no company-wide policy on work hours and the sales reps did not have accurate records of the time that they worked.  So, calculating potential damages would require hundreds, or even thousands, of individualized hearings.  Each sales rep would have to recreate from memory the hours that he or she worked.  These individualized damages questions alone did not doom plaintiffs’ class-certification motion.  Instead, the court refused to certify the class because the plaintiffs failed to propose some alternative method that would avoid thousands of damages hearings.

Because the court noted that it may be possible for the plaintiffs to cure the problems by the sales reps’ varying job duties (e.g., through a narrower proposed class) and the individual damages questions, it denied the motion for class certification without prejudice and granted plaintiffs leave to renew their motion if they should choose to do so.

The court’s decision is useful for employers in various ways.  The court applied Rule 23’s more stringent analysis to the plaintiffs’ FLSA claims and held the plaintiffs to their burden of proof under Rule 23.  But the most significant aspect of the decision likely will be the court’s refusal to certify a class or collective action where the plaintiffs failed to propose a specific plan for calculating damages — an issue that many plaintiffs simply ignore or relegate to a footnote in their class-certification motion.  Although the court did not cite to the Supreme Court’s decision in Comcast Corp. v. Behrend, the court applied its reasoning in the wage and hour context.  The Groupon decision, like other wage-hour cases that have expressly followed Comcast, provides further support for employers to argue that plaintiffs must present a feasible trial plan for calculating damages before being allowed to proceed with a class or collective action.