The Wage and Hour Litigation Blog

Co-authored by Brett Bartlett and Kevin Young

This week, a federal judge in the Southern District of New York confirmed that an FLSA plaintiff cannot win certification of a sweeping collective action by talking only about himself. 

In Ikikhueme v. Culinart, Inc., [here] a Sous Chef originally sought to represent a class of all food services employees, not just fellow Sous Chefs, that Culinart employed across 200 locations.  By the time briefing closed, he’d limited his proposed class to just Sous Chefs, whom he claimed Culinart misclassified as overtime-exempt.  The court denied his motion, finding that his evidence was not enough to satisfy a lenient conditional certification standard.

Perhaps by virtue of cases like Comcast, which we’ve reported on several times before, it seems most plaintiffs’ attorneys are beginning to understand that evidence regarding the experience of one individual is unlikely to merit certification of a class of droves more.  The plaintiff in this case anticipated otherwise. 

In support of his bid for conditional certification, the Sous-Chef-turned-plaintiff served up two self-serving declarations.  As the Court acknowledged, they spoke only of his own employment and circumstances at the single location where he worked as the only Sous Chef.  He made “no allegations regarding the responsibilities or pay practices of the Sous Chefs who preceded him or succeeded him” at his location, much less at the hundreds of other locations.  “This,” wrote the Court, “is exactly the type of ‘unsupported assertion[]’” that falls short in the Second Circuit.

In sending this flawed conditional certification bid back to the kitchen, the judge offered several instructions that are sure to whet future defense counsel’s appetites.  Among them was a recognition that while a plaintiff’s burden for conditional certification “is lax, and their burden modest, a court must nonetheless take a measured approach when addressing [such] a request . . . , mindful of the potential burden associated with defending against an FLSA claim involving a broadly defined collective group of plaintiffs.”

Certainly, the plaintiff in this case was left wanting much more.  He will now be forced to litigate the question of whether he, individually, performed duties as a Sous Chef that qualified him for exemption from the FLSA’s overtime requirements.  On his motion for conditional certification, however, his proof should have been in the pudding. . . it was not.

By Noah Finkel and Richard Alfred

We have long argued that the best path for defeating a hybrid state law wage and hour claim is not through a motion to dismiss but by making a strong lack of superiority argument to defeat class certification.

It is therefore not surprising to us that the Ninth Circuit joined several other Circuits last week in finding that the opt-in requirement of an FLSA collective action does not mandate dismissal of a state law opt-out class action.  In Busk v. Integrity Staffing Solutions, Inc., [HERE] a Nevada district court had dismissed a state law overtime class action under Fed. R. Civ. P. 12(b)(6) on the basis of the conflicting mechanisms of the FLSA’s opt-in and Rule 23(b)(3)’s opt-out requirements. But the Ninth Circuit reversed, reasoning that nothing in the FLSA’s text or legislative history suggests that a hybrid state opt-out claim must be dismissed or that permitting such a hybrid state class action would thwart Congressional intent.

Some plaintiffs’ attorneys and even some courts may now believe that hybrid wage-hour lawsuits -- those that are brought under both the FLSA’s collective action mechanism and under state wage-hour laws pursuant to Rule 23 -- may proceed together so long as plaintiffs are able to meet their burden of meeting the Rule 23(a) and 23(b)(3) factors. 

Of course, adding a class claim to an FLSA collective action dramatically increases the exposure for defendants and the settlement value of the case.  This is because FLSA opt-in rates are typically between 10% and 20% of the potential plaintiffs, while the opt-out rates of class members are negligible. The effect of this is that collective members who choose not to opt-in may nevertheless find themselves included in a class in the very same lawsuit unless they take affirmative steps to write and file an opt-out notice.   

Employers defending hybrid FLSA collective and state law class actions have in the past tried to eliminate the state opt-out class claim at the early stages of litigation through a motion to dismiss or to strike, usually arguing that collective and class actions are “inherently incompatible.” Those efforts have met some success, but the Ninth Circuit’s decision in Busk, the fifth Circuit Court to rule similarly, increases the headwinds for the success of such an approach.  This by no means portends clear sailing for plaintiffs asserting hybrid state law class claims.

Enter Rule 23(b)(3)’s superiority requirement.  Under this requirement, a plaintiff must prove that a state class action is “superior to other available methods of the fair and efficient adjudication of the controversy.” The FLSA’s opt-in procedure is just such an “other available method.”  How can a plaintiff argue that including class members by default is superior to allowing those same individuals the free choice to join or not to join the same lawsuit by opting-in?

We view this rhetorically.  In the vast majority of cases it will be very difficult for a plaintiff to demonstrate that an opt-out class action asserting overtime or minimum wage violations is superior to the FLSA’s straight-forward collective action mechanism, especially with the low burden of proof that most courts currently apply in ruling on a plaintiff’s motion for conditional certification/to facilitate notice.  Even in cases where state overtime or minimum wage laws provide additional remedies or a longer limitations period, superiority usually cannot be established because there is nothing that prevents an FLSA opt-in plaintiff, once in the case, from asserting a state law claim in addition to an FLSA claim.  

The only circumstance that may allow for a plaintiff to prove superiority of a class claim is where there is sufficient evidence of actual or threatened retaliation that chills potential plaintiffs from joining the lawsuit.  But, this must be shown with actual evidence not a plaintiff’s frequent unsupported claim of retaliation “in the air.”

As the Supreme Court has repeatedly emphasized, most recently in Comcast Corp. v. Behrend as we have discussed in recent posts [HERE and HERE], a class action is “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only” and that Rule 23 “does not set forth a mere pleading standard.”  Rather, Rule 23 must be satisfied through “evidentiary proof” rigorously analyzed by the courts.  This is especially the case for Rule 23(b)(3) class actions, which the Supreme Court has called an “adventuresome innovation” designed for situations in which “class-action treatment is not as clearly called for.” 

Rulings such as Busk that reject an employer’s attempts to dismiss class claims at the pleading stage should not be read as a green light for hybrid wage-hour collective/class actions.  Rather, defendants should focus on the demanding  hurdles for class certification including, in this context, superiority.

Co-authored by Laura Reasons, Giselle Donado, and Noah Finkel

In an opinion likely to make it more difficult for wage-hour plaintiffs to certify a class action and maintain certification of a collective action, the Seventh Circuit affirmed the Western District of Wisconsin’s decertification decision in Espenscheid v. DirectSat USA, LLC on the grounds that trial was not manageable under the plan submitted by plaintiffs, where determining damages would require 2,341 separate evidentiary hearings.  We previously discussed the District Court’s decision here (and thus will not rehash the background facts).  Espenschied is a very important decision that could shape the wage-hour certification landscape because of its holding that ultimate certification of a collective action is subject to the same standard as a Rule 23 class action, its requirement that damages in a wage-hour case be capable of being determined through common proof, and its emphasis on a workable, trial plan as a predicate for class and collective action certification.

In the Seventh Circuit’s opinion, Judge Posner started from the premise that, for certification purposes, there is no reason to treat a state-law wage-hour class action brought pursuant Federal Rule of Civil Procedure 23 differently from a collective action under Section 216(b) of the FLSA.  It explained that the district court correctly held that plaintiffs had not presented a feasible trial plan.  Determining damages would require 2,341 separate evidentiary hearings.  This was not a case where, for example, each technician worked from 8 a.m. to 5 p.m. and was forbidden to take a lunch break.  The court reasoned that, in such a case, damages could be calculated formulaically by a computer program.  But in this case, damages for each individual plaintiff would have to be determined separately by a trier of fact, as such determinations would turn on individual facts such as a workers’ effort and efficiency, different tasks performed, and the reasons the workers did not record certain tasks.  Those same factors are present in several off-the-clock collective or class actions

The Seventh Circuit also upheld the district court’s rejection of plaintiffs’ proposal to present trial testimony from 42 “representative” members of the 2,341-person class.  This proposal was problematic because it did not appear that the “representatives” were chosen in a statistically sound manner.  Moreover, extrapolating damages of the “representatives” to the whole could result in conferring a windfall on some, while shorting others.  Indeed, plaintiffs themselves acknowledged at argument that it would be “[d]ifficult for Plaintiffs to provide an objective framework for identifying each class member within the current class definitions without making individualized findings of liability.”

The court stated that class counsel “must think that like most class actions suits this one would not be tried -- that if we ordered a class or classes certified DirectSat would settle.  That may be a realistic conjecture, but class counsel cannot be permitted to force settlement by refusing to agree to a reasonable method of trial should settlement negotiations fail.”  The court wrote that class counsel essentially had “asked the district judge to embark on a shapeless, free-wheeling trial that would combine liability and damages and be would virtually evidence free as far as damages were concerned.”  This, the Seventh Circuit would not allow and thus upheld the district court’s decertification decision.

With this opinion, the Seventh Circuit has given employers some improved tools to defend against class and collective claims.  This decision demonstrates an emerging trend to treat Section16(b) collective actions and Rule 23 class actions as one for purposes of analyzing certification.  Judge Posner expressly stated that “there isn’t a good reason to have different standards for the certification of two different types of action, and the case law has largely merged the standards, though with some terminological differences.”  With that in mind, Judge Posner reviewed the district court’s decision to decertify the three subclasses, treating “the entire set of suits before [the court] as if it were a single class action.”  Few appellate courts, or district courts for that matter, have set forth the level of common proof that collective action plaintiffs must set forth at the ultimate certification stage.  The Sixth Circuit, for example, has suggested that it may be similar to the standard for joinder under Federal Rule 20.  O’Brien v. Ed Donnelley Enterprises, Inc. 575 F.3d 567, 584-86 (6th Cir. 2009).  The Seventh Circuit takes the different view that the standard is more in line with the rigorous standard under Rule 23.  In doing so, Espenschied  brings the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes into the fold for 216(b) collective actions by using Rule 23’s commonality standard to drive the certification decision. 

This decision also puts the onus on plaintiffs seeking certification of large classes based on a “representative” sample to provide evidence that the claims and damages of all class members can be readily ascertained from the sampling in order to satisfy Rule 23’s commonality standard.  Indeed, plaintiffs’ inability to articulate how their “representative” sample was truly representative was fatal to certification.  Importantly, Judge Posner suggests that even differences in damages among the class members might be reason enough not to allow certification.  Offering a purportedly “representative” sample of class members, without more, likely will no longer be sufficient.  Here, Dukes’ guidance on statistical evidence will prove useful to employers by providing a high threshold for what statistical evidence plaintiffs may use as the glue that binds the claims and damages of class members.  With that in mind, employers would be wise to prepare a discovery plan that demands that plaintiffs establish the validity of the “representative” nature of their class sample with respect to their claims and damages.  This strategy may prove useful in limiting the class to the individual representatives, and foster an early settlement given the heavy burden plaintiffs will face to validate their “representative” sample. 

Finally, Espenschied makes clear that practical considerations are not to be ignored at the ultimate certification stage.  The Seventh Circuit gave much weight to the fact that the plaintiffs did not offer a feasible way for determining liability and damages based upon their representative sample, and noted that while, as a practical reality, most certified classes do go on to settle, that does not obviate the need to provide evidence that plaintiffs are able to calculate damages in a meaningful way for all class members.  Employers would be wise to demand a trial plan from plaintiffs explaining how they will attempt to ask the court to determine liability and damages for the class, particularly in those cases where plaintiffs rely on a representative sample.  Any failure by plaintiffs to provide a feasible plan to ascertain the claims and damages should prove useful in opposing certification.  Indeed, these practical considerations also may be worth raising at the conditional certification stage.  While the standard is a lenient one, alerting the court that plaintiffs’ claims present significant practical hurdles that cannot be cured may sway the court.  The court’s message in Espenscheid  was clear--judicial resources should not be wasted simply to facilitate a settlement of a class whose claims are not ascertainable and damages are not readily calculable without individualized findings.

Authored by Alex Passantino

'Twas the week after Christmas, and all through the land     

Our readers were focused on their year '13 plans;                                                                  

And though we've no desire to knock you off track,                                                             

We thought that 2012 deserved one last look back.                                                             

Hours, exemptions, pay rates, and more;                                                                         

Nearly 100 posts (for those keeping score).                                                                           

We know every issue will not give you your kicks,                                                                  

So we considered them all, and we picked out just six.

At the top of the list, one case, it stood out.                                      

And our blog frequently mentioned what it was all about.                                                      

We note it again, cause it's not every day                                                                        

That the SCOTUS addresses the FLSA.                                                                          

Pharma Sales Reps were the source of debate                                                                    

As the justices considered their overtime fate. 

But beyond the exemption lay a larger issue,                                                                

Which brought Roberts, CJ, and eight justices, too.                                                               

A unanimous ruling that courts won’t defer                                                                          

To an agency brief that's made up on the spur.                                                                   

No Auer.  No Skidmore.  No Seminole Rock.                                                                           

No deference at all, which came as a shock.                                                                      

And five Justices found that sales’ “other disposition”                                                    

Includes what happens with drugs ‘tween sales rep and physician.

Our second big item for the past year                                                                             

Gives hospitals all over a reason to cheer.                                                                 

Automatic break cases have been oh so scary                                                                    

But departments and managers and practices vary,                                                            

And faced with these cases, this giant morass                                                               

Increasingly, courts have been saying "no class."

Third -- a crucial pairing that’s been quite hot of late                                                   

Collective wage claims and the word “arbitrate”                                                                  

Attacks on class waivers have sunk like a stone                                                                 

Since SCOTUS approved them in Concepcion.                                                           

Employment class waivers should have the same fortune                                                    

But first must maneuver around D.R. Horton.                                                                        

In Sutter, the Supremes decide if arbitrations are class-y,                                                      

While California, it seems, is contrary -- so sassy.

The fourth of our topics is only beginning,                                                                      

Soon SCOTUS will decide if Genesis is winning                                                                       

By offering a plaintiff all possible pay                                                                              

Then moving the court:   “Make this case go away.”                                                          

With the case fully briefed, and the arguments heard,                                                          

It won’t be ‘til next year that we learn the last word. 

Our fifth and sixth issues go hand-in-hand,   

It’s the wage-hour wave that’s been sweeping the land.                                                     

Whether it’s agency efforts or plaintiff-filed cases,                                                             

FLSA violations will get thrown in your faces.                                                               

Aggressive enforcement might lay you down flat.                                                               

Will your customers know?  Well, there’s an app for that.                                                   

And these targeted efforts to cause course correction,                                                       

Won’t be going away, due to Barack’s re-election.                                                             

And the plaintiffs’ bar will also be sticking around,                                                               

As their wage-hour case filings continue to abound.

So make sure that next year, you review all this “stuff.”    

And thanks for the page views; we can’t thank you enough.                                                

We wish you success in 2013.                                                                                        

From your favorite blogging (and book-writing) team.

THANKS TO ALL OF OUR READERS. BEST WISHES FOR A HAPPY, HEALTHY, AND PROSPEROUS NEW YEAR!

Co-authored by Noah Finkel, Kristin McGurn, and Laura Reasons

The United States District Court for the Northern District of Illinois recently decertified an FLSA collective action and denied certification of a Rule 23 class in Camilotes v. Resurrection Health Care Corporation, No. 10-cv-366 (Oct. 4, 2012).  Camilotes is part of a rash of cases filed around the country over the last several years against hospitals and other health care providers alleging that defendants’ policies or practices of automatically deducting thirty minutes for an unpaid meal period violate the FLSA and various state wage and hour laws.

In Camilotes, Resurrection’s policy states that non-exempt employees scheduled for a shift of at least 7.5 hours will receive a thirty-minute unpaid meal period.  Instead of requiring an employee to clock out for the meal period and then back in, Resurrection’s time keeping system automatically deducts 30 minutes of work time for the meal period from an employee’s hours, unless that employee reports that he or she did not take an uninterrupted meal period.  The policy also directs employees to obtain manager approval to work through a meal period.  Plaintiffs allege that they were regularly required to work through all or part of their meal periods without being paid for the time worked.

In decertifying the FLSA collective action, the court discussed at length the differences in how the policy was implemented and enforced by different managers in different departments.  It found that individual issues would predominate over any common issues and, moreover, individualized defenses revealed in discovery made continued certification inappropriate.  Specifically, the plaintiffs reported to over 200 supervisors and performed divergent nursing duties on different shifts; the number of meals they allegedly missed varied greatly; the rate at which they canceled the deduction varied widely; the methods of reporting a missed meal varied by department; the defendant’s knowledge of missed meals varied by Plaintiff; and whether missed meals actually resulted in overtime varied by Plaintiff.

The facts of Camilotes are very similar to those in a number of cases brought around the country by the same (and other) plaintiffs’ class action counsel.  The Camilotes decision is especially significant for employers -- both in the health care setting and in other industries -- for a number of reasons.

First, Camilotes contains an employer-friendly recitation of the standard for certification of a class action under Rule 23 in wage and hour cases.  It does not cite the Seventh Circuit’s decision in Ross v. RBS Citizens, which is the first and, to date, only federal appellate court decision to assess the application of the Supreme Court’s Wal-Mart Stores, Inc. v. Dukes case in the wage and hour class context.  In Ross, the Seventh Circuit held that Dukes had no impact on a district court’s decision to certify under Rule 23(b)(3) a class of 1,100 individuals, most of whom claimed that they worked off the clock.  The Seventh Circuit found that Dukes’ broad language regarding Rule 23’s commonality requirement has no application outside the case’s exceptional facts -- a class of millions asserting discrimination claims that required proof of individual intent.  That court also concluded, in a footnote, that the due process concerns described in Dukes apply only to 23(b)(2) classes, not (b)(3) classes.  Not only does Camilotes not cite to Ross, or incorporate its reasoning, but it cites instead to Dukes, albeit only for recitation of the standard for class certification.  See previous blog discussion of Dukes and Ross.

Second, Camilotes delivers a significant setback to automatic meal period deduction cases, ruling that it would be “impractical and unfair” to proceed to trial as a collective action.  The facts relied on and legal analysis in Camilotes seem to signal that so-called “meal break” cases are not sustainable as class cases.  Although in Camilotes there were huge differences in the Plaintiffs’ experiences (for example, the class covered 8 different hospitals), most of the facts that the Court found compelling present in virtually every hospital setting.  Accordingly, it appears that courts may be sending the message that automatic meal period deduction cases are difficult to try on a class-wide or collective basis.  The Sixth Circuit’s decision decertifying an FLSA collective action in Frye v. Baptist Memorial Hospital, Inc., No. 11-5648 (6th Cir. Aug. 11, 2012), also suggested the same.

Third, Camilotes is yet another illustration of the burden on employers imposed by the very lenient standard for initial collective action certification adopted by many courts, a phenomenon discussed frequently in this blog.  Although the parties in Camilotes stipulated to initial certification, courts often grant, sometimes as a matter of course, hotly-contested motions for conditional FLSA certification.  While employers have a very good chance of eventually getting the FLSA class decertified and defeating Rule 23 certification (as illustrated by Camilotes), these victories come at a great cost and often only after countless months and dollars are spent on litigation of the case, including burdensome discovery.  In a case like Camilotes, where ultimate certification is unsustainable, it makes little sense for a court to grant initial certification,  allow notice to the purported class, and engage in full discovery.  Nonetheless, courts often hold that they cannot look to the merits or apply the more stringent second-stage standard on a motion for conditional certification.  Accordingly, extensive resources are often spent on these cases, only to have them ultimately fail as class or collective cases.

This case is certainly a victory for Resurrection and, hopefully, a promising sign for other employers faced with automatic meal period deduction claims.  It also serves, however, to illustrate the high cost of litigation inherent in the collective action mechanism as it currently is interpreted by most courts.

Authored by Alfred L. Sanderson, Jr.

Can a group of retail store managers who were uniformly classified as exempt under the executive exemption, who worked under the same job description, and who were all subject to the same company policies maintain a collective action for the nonpayment of overtime?  According to a District Court in Kansas, that evidence alone is not sufficient to meet the “similarly situated” standard at the second stage of the certification process.

Harbor Freight sells tools and related products at over 400 retail stores throughout the United States.  In Green v. Harbor Freight Tools USA, Inc., five store managers filed a collective action under the Fair Labor Standards Act against the company, alleging they had been misclassified as exempt from overtime.  Two years ago, Kansas District Judge Julie Robinson conditionally certified the collective action as the first step under the now common two step method as applied in the Tenth Circuit.   Eighty-one additional plaintiffs opted in, but 50 were dismissed, leaving 36 in the action.  All 36 responded to discovery and were deposed.  Two years later to the day, on August 17, 2012, Judge Robinson granted Harbor Freight’s motion to decertify, finding that the plaintiffs were not “similarly situated.” 

In opposing the motion to decertify, the plaintiffs contended they were similarly situated because Harbor Freight classified as exempt all store managers as a group without performing an individualized exemption analysis, and gave them all the same job descriptions listing the same job duties.  The court found that while this argument may have been persuasive at the conditional certification stage, it was insufficient to meet the plaintiffs’ burden at the second stage.  The court also pointed out that the plaintiffs had testified that their job description did not accurately reflect their day to day duties.  Moreover, Harbor Freight’s decision to classify all store managers as exempt without considering individualized differences in factual employment settings did not eliminate the need to make a factual determination as to whether they were in fact performing similar duties.

Plaintiffs also argued that store managers were similarly situated because they were managers in name only and actually spent the majority of their time performing manual labor.  Again, based on the testimony of the plaintiffs, the court pointed out that the amount of manual labor allegedly performed by store managers varied considerably, some testifying that their managerial duties were more important than manual labor, others testifying that manual labor took precedence over managing. 

The court also rejected plaintiffs’ argument that they were similarly situated because managerial discretion was severely limited by district managers through strict payroll budgets, specific product location direction, and Human Resources and corporate policies.  According to the court, the determination of whether an executive employee’s judgment is so constrained as to be misclassified is a highly fact-intensive and nuanced inquiry into the particularized circumstances of the job.  Here, there was a lack of uniformity with respect to how much control the various district managers actually exercised over store managers. 

Finally, the potential defenses of Harbor Freight involved individual credibility determinations, and reliance on the plaintiffs’ contradictory deposition testimony and discovery responses.  The plaintiffs’ testimony established, among other things, that it was not possible to develop common evidence regarding daily responsibilities and duties, or the weight given their recommendations on hiring, firing and discipline.

Overall, although the plaintiffs made a general showing of similarity with respect to some aspects of their job, it ultimately was not sufficient to satisfy the court that they were sufficiently similarly situated to make collective treatment of their claims proper and efficient under the FLSA. 

Harbor Freightprovides a very helpful road map for retail employers challenging certification in wage and hour collective actions.  Indeed, the factual variations cited by the court as problematic to certification are present in virtually every retail operation.  In opposing certification in an exempt status classification case involving store managers, employers should keep in mind the factors that resulted in the decertification of the conditionally certified collective in Harbor Freight, as well as other factors that may present individualized determinations.  

Co-authored by David Kadue and Abad Lopez

For janitors cleaning Wal-Mart stores after business hours, the differences among members of the proposed class doomed their FLSA collective action.  Although the janitors worked for Wal-Mart’s cleaning contractors, the janitors claimed that they were also employees of Wal-Mart and sued for unpaid wages.  Zavala v. Wal Mart Stores, Inc. The Third Circuit’s decision delineates the two-part test for FLSA collective actions, which it recently adopted in Symczyk v. Genesis Healthcare Corp., a case that will be reviewed by the Supreme Court next term, as we reported in a blog post last June.

At the first stage, the Third Circuit affirmed its prior ruling that, to meet the conditional certification standard of making a “modest factual showing,” the named plaintiffs are required to present evidence “‘beyond pure speculation,’ of a factual nexus between the manner in which the employer’s alleged policy affected [them] and the manner in which it affected other employees.”  At the second stage—final certification—the district court must determine whether the plaintiffs who have opted-in are in fact “similarly situated” to the named plaintiffs.

Until now, the Third Circuit had left “specifically unresolved” the “exact test” for final certification of an FLSA collective action.  The Third Circuit articulated that test in Zavala, holding that final certification depends on a factual finding—made in light of the claims and the defenses and “all the relevant evidence”—that the proposed plaintiffs are “similarly situated.”  By adopting this standard, the Third Circuit endorses the “ad-hoc approach,” adopted by all other circuit courts to decide this issue, which considers such factors as whether the plaintiffs work in the same department, whether they advance similar claims, whether they seek substantially the same relief, and whether they have similar circumstances of employment.  As to this finding, the plaintiff has the burden of proof by a preponderance of the evidence.  Individualized defenses, the Third Circuit found, may result in a finding of dissimilarity. 

The Third Circuit also expounded upon the appellate standard for reviewing a district court’s certification decisions.  Although courts have used “abuse of discretion” to describe the appellate standard, the Third Circuit clarified that an FLSA final certification actually has two components:  (1) selecting the right legal standard to see whether the proposed plaintiffs are similarly situated, and (2) applying that standard to make the required factual finding.  The standard of review for a district court’s selection of a legal standard is de novo, as a pure issue of law, while the district’s factual finding is reviewed only for clear error.  As to the impact of the factual finding, the Third Circuit concluded, “We do not believe that the statute gives the district court discretion to deny certification after it has determined that plaintiffs are similarly situated.”

In applying these standards, the Third Circuit upheld the district court’s decertification of the janitors’ claims because, although Wal-Mart had a maintenance manual that specified cleaning procedures, and some Wal-Mart employees directed cleaning crews in their work, the janitors worked at 180 stores in 33 states for 70 cleaning contractors.  In addition, the individuals worked varying hours and for different wages depending on the contractor.  Moreover, the district court noted that Wal-Mart had different defenses available, including that Wal-Mart was not the individual janitors’ employer under the FLSA and that Wal-Mart paid cleaning contractors an adequate amount to support an appropriate wage for the cleaners.  The Third Circuit reasoned that “common links are of minimal utility in streamlining resolution,” because “[l]iability and damages still need to be individually proven.”  The court explained that similarly situated does not mean “simply sharing a common status” such as an illegal immigrant.  Rather, similarly situated means that proposed plaintiffs were subjected to “some common employer practice that, if proved, would help demonstrate a violation of the FLSA.”  The Third Circuit concluded:  “The similarities among the proposed plaintiffs are too few, and the differences among the proposed plaintiffs are too many.”  

This lawsuit was an overzealous exercise on behalf of thousands of janitors, claiming they were illegal immigrants, against an entity that was not their formal employer but rather was the company contracting with the cleaning companies for which the janitors worked.  The lawsuit also featured creative theories of liability, including civil RICO and false imprisonment claims, both of which were dismissed.  The FLSA claim faced the hurdle of proving that Wal-Mart—the principal of the cleaning contractors who employed the janitors—was an employer of the janitors.  Proving employment status on an agency theory or a joint-employer theory depends on multiple factors that could hardly be the same across a purported class comprising the employees of 70 cleaning contractors at almost 200 stores. 

If the lawsuit was doomed to failure from the outset, it did provide the Third Circuit with an excellent opportunity to clarify its standards for FLSA certification.  Notably, the Third Circuit did not opine on how the Supreme Court’s decision in another Wal-Mart case, Wal-Mart Stores, Inc. v. Dukes, relates to the Third Circuit’s singular focus on whether proposed plaintiffs are “similarly situated.”  Nonetheless, like Dukes, the Third Circuit struck another blow to plaintiffs seeking expansive relief against the world’s largest private employer. 

Authored by:  Noah Finkel, Brett Bartlett, Andrew Paley and Richard Alfred

Members of Seyfarth Shaw's Wage and Hour Litigation Practice Group have authored Wage & Hour Collective and Class Litigation, the first-of-its kind treatise on wage and hour litigation. Published by American Lawyer Media's Law Journal Press, the 912-page volume is the most comprehensive guide published to date that focuses on litigation strategy through all phases of wage and hour lawsuits, the area of high-stakes litigation that, as readers of this blog well know, has plagued employers in recent years.  Indeed, wage and hour lawsuits have outpaced all other types of workplace class actions in recent years, and have surged by more than 325% since the early 2000s.

The book blueprints the mechanics of wage and hour cases, examines how employers in multiple industries are targeted for wage and hour lawsuits, and provides substantive procedural and practical considerations that determine the outcome of such actions in today’s courts.  Principally designed to assist employment litigators and in-house counsel, Seyfarth’s book should also prove useful to senior management seeking to fend off wage-hour actions before they strike.

The guide has already received praise from the Honorable Elaine L. Chao, the 24th U.S. Secretary of Labor, who stated: “Given the recent explosion of wage and hour litigation, both management- and plaintiff-side attorneys will find this publication to be an invaluable reference. With its painstaking attention to the law and procedure, this treatise will certainly be the go-to resource when practitioners ponder questions of strategy and substance in the context of wage and hour cases.”

The book was authored by Noah Finkel, Brett Bartlett and Andrew Paley, who practice in the firm’s Chicago, Atlanta and Los Angeles offices respectively. Richard Alfred, Boston-based chair of  Seyfarth’s national Wage & Hour Litigation Practice, served as senior editor.  More than 70 other Seyfarth attorneys, many of them regular contributors to this blog, contributed to the book, which will be updated regularly.

Wage & Hour Collective and Class Litigation takes up 27 chapters and covers the complex rules surrounding all types of wage and hour lawsuits. These include claims under the Fair Labor Standards Act, claims under state wage and hour laws, or hybrid cases involving both, as well as special issues involving government contractors. It advises employers on:  how to respond to a wage and hour complaint; what to consider when deciding whether to remove a case to federal court; how to assess the particular merits of a claim; whether to settle; how to oppose plaintiffs' motion to facilitate notice for conditional certification; what kinds of affirmative defenses are best; and how to tilt the odds in favor of the defense.

Among topics covered by the book:

• The certification process and the impact of conditional certification
• Decertification and its sometimes unexpected consequences
• Defending against state law wage and hour class actions brought under Federal Rule of Civil Procedure 23
• Discovery issues and strategies in class and collective actions
• Special considerations under California law, one of the country’s leading venues for wage-hour cases
• Issues raised by ERISA claims in wage and hour cases
• Coordinating or consolidating multiple simultaneous class actions
• Meeting the duty to preserve information, including electronically stored information
• The pros and cons of arbitration
• Motions for summary judgment and the optimal time to file
• Civil remedies, including calculation of unpaid overtime and liquidated damages
• Actions by the Secretary of Labor to recover unpaid wages and overtime
• Defending  "independent contractor"  cases
• Calculating the  "regular rate"  for purposes of the FLSA

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Co-authored by Andrew Paley and Kevin Young

In the six weeks since the Supreme Court’s monumental decision in Dukes v. Wal-Mart, the FLSA arena has been abuzz with speculation as to whether the decision’s rationale can be used to defeat large-scale FLSA collective actions as early as the conditional certification stage.  On July 22, 2011, in an order denying conditional certification of a nationwide class in MacGregor et al. v. Farmers Insurance Exchange, a South Carolina federal district court answered that it can.

While the MacGregor court acknowledged that Rule 23 and the FLSA’s collective action provisions are different, it found Dukes “nonetheless illuminating” as early as the initial certification stage, where the asserted commonality between the plaintiffs and those whom they purport to represent is rooted in “decentralized and independent action by supervisors that is contrary to the company’s established policies.”  In such a case, the court explained, Dukes teaches that “individual factual inquiries are likely to predominate and judicial economy will be hindered rather than promoted by [collective treatment].”  

This was the case in MacGregor, where three former claims representatives asked the court to approve notice to a nationwide class of all property claims representatives.  At the heart of their dispute was an overtime-preapproval policy under which they were to seek their respective supervisor’s approval to work overtime hours.  This requirement was separate, however, from the company’s policy that employees must accurately record their actual hours on their timecard, even non-preapproved overtime. 

To show that they were “similarly situated,” a threshold for FLSA collective action certification, the plaintiffs had to demonstrate that they and the potential class members were victims of “a common policy or plan that violated the law.”  Attempting to demonstrate this nexus, they argued that their supervisors frequently refused to preapprove overtime, and discouraged claims representative from reporting any unauthorized overtime. They also acknowledged, however, that company policy prohibited them from working “off the clock” and required that all hours worked, preapproved or not, be paid.

At the heart of the court’s assessment was its finding that the plaintiffs’ allegations were not rooted in a common policy that itself was unlawful, but rather in the enforcement decisions of individual supervisors, which, if true, contradicted company policy.  Based on this finding, the court cited and sided with various FLSA decisions in which collective treatment has been denied due to the inextricability of the alleged violations and the actions of individual supervisors.  And while the court noted that it could have ended its analysis there, it proceeded to draw upon Dukes, a decision it described as “clearly reasoned” and instructive where the grounds for certification rest upon “decentralized and independent action” that violates company policy.

Dukes is still just six weeks old, and it is all but certain that decisions addressing the case in the FLSA arena will continue to follow.  For now, MacGregor stands as the most thorough decision applying Dukes to an FLSA collective action, and it did so in denying conditional certification.  The court’s decision represents a clear win for employers, who have over the past decade been subject to a growing tide of massive FLSA collective actions and a lenient conditional certification standard.  Of course, it is by no means novel for employers to argue that collective treatment is inappropriate where individualized inquiries abound.  Nevertheless, with Dukes now supporting this argument, other courts may very well follow MacGregor’s lead in finding that Dukes limits the appropriateness of collective certification.

Authored by Mary Ahrens

In Omiatek v. Big Lots Inc., No. 09-CV-0352 (W.D.N.Y., January 20, 2011), a magistrate judge recommended that the district court deny the plaintiff’s motion for conditional certification under the Fair Labor Standards Act and for certification of the New York state claims under Federal Rules of Civil Procedure Rule 23.  In this misclassification/unpaid overtime case, the judge ruled that the job duties of the plaintiff assistant store managers (ASMs) differed so significantly that the plaintiffs’ claims could not be litigated on a collective or class basis. 

In making his ruling, the magistrate judge largely relied on a virtually identical nationwide lawsuit, Johnson v. Big Lots Stores, Inc., 561 F. Supp. 2d 567, 588 (E.D. La. 2008), in which the court ruled, after a seven-day bench trial, that the plaintiff ASMs’ claims against Big Lots could not be litigated in a collective action because their job experiences varied too much.  The Omiatek court agreed with this analysis and noted that the declarations and deposition testimony presented by the parties likewise showed that the ASMs’ job duties differed significantly.  Among other things, they differed in terms of the amount of managerial responsibility each ASM had (including hiring, firing and evaluating employees) and the amount of time that each ASM spent on non-managerial duties. 

Importantly, the ASMs who submitted declarations all stated that they perform non-managerial work at their discretion and that they continue to perform their managerial duties (such as supervising, directing work, training, and overseeing store operations) while they perform non-managerial work.  Although the procedural history in this line of cases is relatively rare, this opinion is useful in arguing that, where job duties vary, an analysis of each employee’s individual job experiences is necessary to determine his or her qualification for exempt status.  Further, by recognizing that an ASM could, concurrently with performing non-managerial work, perform management job duties, the court expressed an understanding of the realities of the workplace that courts too often have overlooked.