Authored by Alex Passantino

‘Twas the week before Christmas, 2-0-1-5
When the poetry elves on the blog came alive.
Crafting their rhymes with a purpose so clear:
Presenting the wage-hour gems of the year.

In January, for new regs in this year our breath bated.
Then for six painful months, we speculated and waited.
And just as we geared up to celebrate Independence,
Out came a proposal that will create more defendants.

With a salary level that for 10 years has been flat,
They looked at New York’s and said “higher than that.”
More than double the old; and then they got clever …
The proposed sal’ry level will increase for forever.

Anticipated changes to duties caused quite a fuss
When DOL said “If you’ve got some ideas, just tell us.”
Of the Department’s proposal, employers were understandably wary,
So we wrote down some ideas on how to make it less scary.

Nearly 300 thousand comments they have to review,
It will be late into next year before they are through.

Next up on the list of your wage-hour joy,
Are the efforts to change what it means to employ:
ContractorsJoint employment. Fissured industry.
Interns. The “third way” and gig economy.

Economic realityRight to control.
They’re integral to your business? Now you’re in a deep hole.
So many angles, it can drive you berserk.
As agencies and courts figure out what is “work.”

And if divergent decisions bring you a sense of elation,
Then please focus attention on class certification.
Approvals, denials, and some decerts, too.
No matter the side, there’s a case for you.

But as summer approached, there arose quite a stir,
A case that’d explain what the class cert rules were.
A Supreme explanation, o my-o, o me-o
We’d learn about class via Bouaphakeo.

They’ve argued, but there’s no decision, not yet,
And a limited ruling on records might be all that we get.
But the cases keep coming. Their numbers broke the charts.
Whether giant class actions or cases broken in parts.

And the response to those filings? The employers’ retort?
A wide range of ways to get them out of court.

Some cases get mooted. Some cases do not.
At Genesis’s open question, SCOTUS might take a shot.
Does an offer of judgment that’s not been accepted
Mean the plaintiff cannot proceed with his class as expected?

Increasingly used as a litigation life saver
Arbitration agreements with a class action waiver;
And when asked if state laws could class waivers prevent, yo,
The Supremes laid the smack-down to dear Sacramento.

With all of these options, it comes as a surprise then,
That one resolution keeps on getting the Heisman.
For reasons that many cannot understand,
To settle wage claims courts think they must hold your hand.

That’s our year in review, we whipped you right through it.
Next year? The new regs and a mad dash to review it.
But before 2015 joins the past’s ranks,
You keep on reading our blog, and for that we give thanks!

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

Co-authored by Dennis Clifford and Rachel Hoffer

Beloved burrito-maker Chipotle Mexican Grill has found itself in a situation messier than the finger foods that brought the company more than $4 billion in revenue last year. A magistrate judge in Scott v. Chipotle Mexican Grill, Inc. recently ordered that a report prepared by a human resources consultant, Cinda Daggett, is not protected by the attorney-client privilege because she wasn’t an agent of the law firm Chipotle hired back in 2011 to assess whether its Apprentices and Assistant Managers should be paid overtime. The report, or “job function analysis,” examines the work lives of a handful of Apprentices to, in the words of a Chipotle compensation analyst, “get a really good understanding of what Apprentices do in their day-to-day jobs” and provide the law firm “information on the ground so that they could give us an opinion on what we were asking.”

The plaintiffs in Scott—and there are almost 600 of them—claim that the quick-service giant misclassified its Apprentices and Assistant Managers as exempt from federal and state overtime laws. So, if that report helps them show that Chipotle willfully violated wage-hour laws by failing to pay these employees overtime, it could mean mucho dinero for the plaintiffs.

But why wasn’t that report—which was addressed to the lawyers, not Chipotle—privileged? After all, while the applicable standard varies, courts across the country have found that the attorney-client privilege can apply to communications with a non-lawyer hired by a law firm, as long as the communication is made confidentially for the purpose of providing legal advice. Well, for starters, the law firm that received the report had already offered its opinion on whether the position was exempt from overtime laws. In fact, by the time the report came out, Chipotle had already hired a second firm for a second opinion—and had received that second opinion.

Moreover, the court felt that the report didn’t tell the lawyers anything essential to their legal analysis that they couldn’t figure out on their own. Daggett was not, for instance, interpreting complicated scientific concepts beyond the realm of the lawyers’ expertise so that the lawyers could turn around and provide legal advice. No, at the end of the day, she was explaining job duties to employment lawyers, and that’s something the lawyers could have learned through direct communications with the client. Plus, Chipotle couldn’t point to any evidence that Daggett was in fact hired to assist the lawyers in providing legal advice. When Chipotle told the Apprentices it had hired a consultant, it explained the consultant was coming to their stores to “study what it is that really good Apprentices do at our restaurants.” There was no indication that communications with the consultant were confidential or for the purposes of obtaining legal advice. So, the magistrate judge ruled in March, the Daggett report was not privileged.

Still hoping to keep the report under wraps, Chipotle objected to the magistrate judge’s order, then asked her for permission to file a motion for post-judgment relief. After accepting short statements from both sides, the judge let Chipotle know that she wasn’t going to change her mind based on the additional information Chipotle provided. First, “newly discovered” emails Chipotle found between Daggett and the lawyer served only to show that Daggett was not sure whether her report was supposed to go to the attorney or straight to Chipotle. In other words, even Daggett was not certain she was hired to assist with providing legal advice. Similarly, the unsigned, undated confidentiality agreement Chipotle apparently sent to Daggett only underscored that she was working directly for the company, not its lawyers. After the court’s most recent ruling, it seems Chipotle will be forced to spill the refried beans about Daggett’s findings.

With the Department of Labor poised to issue new regulations on the Fair Labor Standards Act’s white-collar exemptions, proactive employers across the country, like Chipotle, soon will take a long, hard look at whether employees previously classified as exempt still qualify under the new rules. But if they hope to keep those reviews privileged, they’ll learn from Chipotle’s example and hire a lawyer, not a consultant.

Generic Seal.bmpCo-authored by:  Jeremy W. Stewart and Kyle Petersen

On January 10, 2013, U.S. District Judge Barbara Crabb of the United States District Court for the Western District of Wisconsin issued an order denying the plaintiffs’ motion for class and collective action certification of unpaid meal period claims in Boelk, et al. v. AT&T Teleholdings, Inc., et al., No. 3:12-cv-0040-bbc (W.D. Wis. 2013).   This decision is significant for employers because the Court follows the instruction given by the Supreme Court in Wal-Mart Stores, Inc. v. Dukes to perform a “rigorous analysis” to determine if Rule 23(a)’s commonality requirement has been met, and because it provides guidance for defeating conditional certification — a challenging task — of a FLSA collective action under 29 U.S.C. § 216(b).

The Boelk plaintiffs are current and former non-exempt, field service technicians who claim that defendants failed to pay them and other field service technicians all wages owed because: (1) the defendants’ restrictions on where technicians take breaks and what they can do during their breaks are such that the breaks are not bona fide, and are therefore compensable, and (2) defendants’ efficiency rating system compels employees to work through meal breaks without reporting the time as hours worked.  Plaintiffs attempted to pursue these claims as a “hybrid” collective action under the FLSA and Rule 23 class action under Wisconsin’s Wage Payment Act.

Plaintiffs argued that their first claim satisfies the commonality requirement of Rule 23(a) because the primary question to be resolved as to all proposed class members is “whether the restrictions limited technicians’ breaks so much that the breaks should have been compensated.”  Judge Crabb held that this “common question” is insufficient because it is not framed in terms of the actual elements of a claim under state or federal law, which is critical because, “as the Supreme Court made clear in Dukes, commonality is not simply a matter of common questions, ‘even in droves,’ but rather, whether the class proceeding can generate ‘common answers, apt to drive the resolution of litigation.’”  Here, the plaintiffs cited no law supporting the proposition that an employer must pay employees for meal breaks because employer restrictions prohibit employees from doing what they want on break, regardless of whether employees are performing work or activities that predominantly benefit the employer.  The failure to properly frame the common question in terms of whether the meal period restrictions result in technicians engaging in activities that predominantly benefit defendants, which is compensable, coupled with a lack of individual or classwide evidence that the restrictions resulted in such activities, doomed the first claim. 

In reaching her decision, Judge Crabb, who also decided Espenscheid v. DirectSat USA (discussed here) and Ruiz v. Serco, Inc., two of the most employer friendly wage and hour decisions in recent memory, distinguished this case from the Seventh Circuit’s decisions in Ross v. RBS Citizens, N.A. (overtime), and McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (race discrimination), by noting that, unlike Ross and McReynolds, the plaintiffs failed to offer proof of companywide policy that resulted in the alleged violation.  Instead, the evidence suggested that local supervisors were charged with significant discretion in the enforcement of meal break restrictions.  Accordingly, the plaintiffs failed to show that common questions could be resolved on a classwide basis using common proof.

Judge Crabb also held that plaintiffs’ second claim – defendants’ efficiency rating system compels employees to work through meal breaks without reporting the time as hours worked – fails to satisfy the commonality requirement of Rule 23.  With respect to this claim, Judge Crabb identified the “crucial question” as “why plaintiffs and other technicians worked through all or part of their meal breaks without reporting their doing so.”  According to Judge Crabb, this question is incapable of resolution on a class-wide basis because the answer turns on fact-intensive, individualized inquiries as to why a technician worked during a meal period on any given day. 

After determining that  Rule 23 class certification was inappropriate for the Boelk plaintiffs’ state law claims, the Court turned to plaintiffs’ FLSA claim.  Because the plaintiffs were seeking conditional certification, they urged the Court to apply the lenient standard typically used by Courts at the first stage of the two-step certification process.  The Court rejected the plaintiffs’ argument because “the parties have conducted significant discovery.”  Specifically, the record contained declarations, all six named plaintiffs had been deposed, two potential opt-ins had been deposed, and plaintiffs had taken a Rule 30(b)(6) deposition.  The Court held that, accordingly, “it is appropriate to apply more scrutiny to plaintiffs’ claim than would normally be applied at the conditional certification stage.”  In doing so, the Court referred to its Rule 23 commonality analysis and concluded that the plaintiffs failed to establish that they and the putative class members “were victims of a common policy or plan that resulted in common injuries.”  Rather, the  “plaintiffs’ experiences with respect to the meal break restrictions were not common and varied depending on their individual practices and particular supervisor.”  Thus, the Court held that plaintiffs were not similarly situated to the putative class they sought to represent and denied plaintiffs’ motion for conditional certification under the FLSA.

This case shows that, despite the so-called lenient standard, courts are willing to scrutinize motions for conditional certification, especially where discovery has been taken.  Employers defending collective actions should consider taking early discovery aimed at identifying individualized issues that may ultimately result in a determination that a common answer(s) cannot resolve the claims at issue.

 

Authored by Mary Ahrens

In Winans, et al. v. Starbucks Corp., Case No. 08-3734 (S.D.N.Y. Dec. 15, 2010), a group of assistant store managers, brought a potential class action against Starbucks, claiming that they were wrongly left out of participating in tip pools.  In defending the case, Starbucks asked certain employees to provide statements favorable to Starbucks, and Starbucks made a few of those employees available for deposition.  During the depositions, Starbucks’ attorneys told the employees not to answer questions about the conversations they had had with Starbucks’ counsel or about signing the declarations.  Plaintiffs asked the court for an order forcing the employees to answer those questions.  Starbucks argued that the communications were protected by the attorney-client privilege. 

The court ruled in favor of Starbucks and found that the communications between Starbucks and its employees were protected by the attorney-client privilege.  The court explained that a corporation must question its employees to gather the information it needs in order to seek legal advice in defending a lawsuit.  In such cases, the attorney-client privilege belongs to the corporation and not to the employees.  Even if a class were certified at some point in the future, only the corporation, and not its employees, could waive the privilege.  The corporation therefore can reasonably expect that its communications with its employees would be confidential.  Therefore, the court ruled that the communications were protected by the attorney-client privilege and that the employees were not allowed to reveal any of their communications with Starbucks’ counsel, unless Starbucks gave them permission to do so.