Authored by Cheryl Luce

Employers often grapple with what to do when their policies prohibit off-duty work, like working on mobile devices after hours, that employees don’t follow. Even if it has a policy prohibiting off-duty work, if the employer knows (or should know) an employees is working, the employer must compensate the employee for the off-duty work. The same can be said if an employer has a policy requiring employees to report all off-duty time worked but knows (or should know) that employees are not reporting it. As the regulations put it, employers cannot “sit back and accept” work without compensating it, even though the employer has rules against it. 29 C.F.R. § 785.13.

But what about when the employer knows that employees are working off-duty, but does not know that employees aren’t reporting their time? Does the requirement that an employer must exercise “reasonable diligence” to unearth unreported work mean the employer has a responsibility to check what it knows of employees’ off-duty work against the time they report? Earlier this month, the Seventh Circuit agreed that the FLSA’s “suffer or permit to work” standard does not go so far.

In Allen v. City of Chicago, police officers at the Chicago Police Department’s Bureau of Organized Crime claimed that they were owed overtime pay for off-duty work on their BlackBerrys, even though they failed to report the overtime using the police department’s time slip reporting system. The trial court concluded that the Bureau supervisors knew the officers sometimes worked off-duty on their BlackBerrys, but they did not know or have reason to know that the officers were not submitting time slips for such work. Affirming the judgment in favor of the police department, the Seventh Circuit held that the trial court reasonably concluded that requiring the police department to check what they knew of the officers’ off-duty work against officers’ time slips they approved would be “extremely impractical.”

The Allen police officers also contended that the police department discouraged them from seeking overtime payment for off-duty BlackBerry work, which stopped them from submitting time slips for the work. Neither the trial court nor the Seventh Circuit were moved by the evidence in support of this argument. No supervisor ever told plaintiffs not to submit time slips for BlackBerry work, and no officer was disciplined for submitting such time slips. The plaintiffs’ de facto policy theory failed.

This case serves as a reminder that employers are only required to pay for off-duty work that they know or should have known was performed—not what they could have known was performed. Assuming it has no reason to believe an employee who sometimes works off hours is working off the clock, an employer in the Seventh Circuit is generally not required to cross-check the employee’s timecards to make sure they are reporting all time worked.

Supreme-Court-seaslCo-authored by Kara Goodwin and Noah Finkel

Pending before the United States Supreme Court is a petition for writ of certiorari asking the Court to determine whether an employer may use payments for bona fide meal periods as an offset/credit against compensable work time. If the Supreme Court accepts the case, it would also provide an excellent opportunity for the Court to address repeat questions regarding the level of deference owed to statutory interpretations by agencies advanced for the first time in litigation and whether pay practices not expressly prohibited by the FLSA are permissible.

Case Background and Circuit Split

In Smiley v. E.I. DuPont De Nemours & Company, the plaintiffs filed an FLSA collective action seeking compensation for unpaid time spent donning and doffing uniforms and safety gear and performing other activities before and after shifts. This unpaid time averaged approximately 30 to 60 minutes per day. The plaintiffs worked 12-hour shifts and were paid for three 30-minute breaks per shift. The company counted the paid break time as hours worked for overtime purposes, even though the FLSA did not require it to do so, and included the payments in the calculation of the employees’ regular rate of pay. The paid break time always exceeded the amount of unpaid pre-shift and post-shift off-the-clock work (i.e., it was undisputed that the plaintiffs were paid for more hours than they actually worked—the employees had a total of 11 to 11.5 hours worked per day, including pre- and post-shift activities and excluding the paid break time, and were paid for 12 hours worked per day). The district court held that the employer could “completely offset the plaintiffs’ unpaid donning and doffing and shift relief activities with plaintiffs’ paid meal periods,” and granted summary judgment for the employer.

On appeal, the Third Circuit rejected the offset argument and overturned the dismissal. Giving deference to an amicus curiae brief submitted by the DOL, the Third Circuit held that the company’s pay practice violated the FLSA because “[n]othing in the FLSA authorizes the type of offsetting [the company] advances here.”  Although acknowledging that the FLSA is silent and does not “expressly prohibit offsetting,” the Third Circuit nonetheless determined that the company’s pay practice was contrary to the goals and broad remedial purpose of the FLSA.

The Third Circuit’s decision conflicts with decisions by the Seventh Circuit Barefield v. Village of Winnetka and the Eleventh Circuit in Avery v. City of Talladega, which both upheld the use of compensation paid for non-work time as a credit against overtime compensation owed for pre- and post-shift work time. More specifically, in Barefield, the employer required its employees to attend a 15-minute roll call before the scheduled start of their shifts but also paid employees for a 30-minute bona fide meal break each day. The Seventh Circuit held that “the meal periods are not compensable [hours worked] under the FLSA and [defendant] may properly offset the meal break against the compensable roll call time worked by plaintiffs.”

Similarly, in Avery, the Eleventh Circuit held that an offset/credit is appropriate when an employer pays for bona fide meal breaks under the FLSA: “If the meal break is not compensable time under the FLSA, then the [employer] should be allowed to offset the amount it pays for the meal break against any amount it owes the plaintiffs for pre- and post-shift time at work.” Thus, under the current state of the law, an employer who compensates employees for bona fide meal breaks (even though the FLSA does not require it) may properly offset that meal break against alleged off-the-clock work for an employee who works in Illinois or Florida, but the same pay practice, if used for an employee in New Jersey, would violate the FLSA. The Supreme Court has been asked to resolve this Circuit split to “restore uniformity to this important area of federal law.”

Other Important Questions To Be Resolved

The Supreme Court also has an opportunity to resolve an important question (and one causing division among courts of appeals and federal district courts) regarding the level of deference owed to statutory interpretations by agencies advanced for the first time in litigation, such as in amicus briefs. Here, the DOL’s amicus curiae briefs were its first statement on the offset pay practice at issue—the DOL has never promulgated a regulation prohibiting the use of compensation for non-work time included in the regular rate as an offset/credit; has not issued any opinion letters, published statements of policy, or guidance on this subject; has not taken any enforcement actions with respect to this issue; and before this case, has never submitted an amicus curiae brief on this issue. Nonetheless, and even though it did not find the statute at issue to be ambiguous, the Third Circuit accorded Skidmore deference to the DOL’s position that the employer’s pay practices ran afoul of the FLSA. Although the Supreme Court recently has criticized attempts by the DOL to offer guidance or positions not subject to notice and comment rulemaking or that reverse long-standing practice, the Supreme Court has not squarely addressed whether Skidmore deference is owed to an agency’s statutory interpretation expressed for the first time in litigation. The answer to this question is especially important given that amicus positions can flip-flop quickly with a change in administration and, as another appellate court has noted, “[t]he Secretary of Labor has been particularly aggressive in attempt[ing] to mold statutory interpretation and establish policy by filing ‘friend of the court’ briefs in private litigation.”

Finally, if the Supreme Court accepts this case, it would provide an opportunity to confirm that only practices Congress has prohibited in the FLSA can constitute violations of that Act. Put another way, if there is no express prohibition of a practice in the FLSA (i.e., the FLSA is silent concerning whether compensation paid for breaks that is included in the regular rate may be used as an offset/credit against compensable work time), the practice is permissible.

Co-authored by Kyle A. Petersen and Molly C. Mooney

Seyfarth Synopsis:  The Second Circuit recently upheld a district court order denying a bid for class certification by personal bankers claiming their managers refused to approve timesheets with overtime hours, shaved reported overtime hours, and pressured them to work off the clock. Because the company’s policy governing (and limiting) overtime work was lawful on its face, the bankers’ claims hinged on the exercise of managerial discretion in applying those policies. The district court concluded that the plaintiffs failed to demonstrate sufficient uniformity in the exercise of managerial discretion, and the Second Circuit affirmed.

As noted earlier, the trial court’s decision reflects reluctance by some trial courts to certify nationwide class actions based on local or even regionalized evidence of rogue managers deviating from company policy. The Court of Appeals has now given its seal of approval to that approach.

In Ruiz v. Citibank, N.A., personal bankers from several states alleged that Citibank had a strict policy limiting overtime hours while also setting rigorous sales goals and quotas for the bankers that could not be achieved in a forty-hour workweek. The bankers also alleged that branch managers refused to approve timesheets with overtime hours, or shaved overtime hours off of the bankers’ timesheets.

The bankers sought certification of a class consisting of bankers with claims under New York, Illinois, and District of Columbia law. Their attempt to establish commonality — primarily through anecdotal evidence of pressure to work off the clock and a not uncommon and entirely legal goal of reducing overtime work — fell short and was rebutted by putative class member testimony of variations across branches. For example, putative class members testified that individual branch managers had differing management styles for incentivizing and motivating employees to meet their sales goals — some plaintiffs were rewarded for positive sales performance, with no reference to overtime hours they worked in doing so, while others failed to achieve sales goals with no admonition. This, said the court, showed that the pressure to work off the clock was not uniformly felt and precluded the case from proceeding as a class. On appeal, the Second Circuit wholeheartedly agreed with the district court’s “lucid and accurate analysis” and affirmed denial of class certification.

While not a game changer, this decision reaffirms the need for plaintiffs to come up with more than anecdotal evidence of allegedly systemic problems, and highlights how employers can use class member depositions to defeat class certification.

Co-authored by Sherry Skibbe and Andrew Paley

Allstate Insurance Company “insured” a major victory last week in an off the clock class action pending in Los Angeles Superior Court, vindicating employers’ argument that plaintiffs cannot simply intone the magical incantation of “statistical sampling” as a means of collective proof in a class action. Rather, plaintiffs must proffer a detailed and manageable trial plan that relies on sound statistical science. Likening Plaintiff’s trial plan to a house built on a poor foundation, Judge John Shepard Wiley rejected the statistically unsound trial plan because it would be “an enduring source of grief.”

After almost nine years of litigation, Judge Wiley granted Allstate’s motion to decertify both an off-the-clock and wage statement class because none of the multiple trial plans suggested by Plaintiff complied with the requirements in the California Supreme Court’s 2014 decision in Duran v. U.S. Bank National Association or last month’s U.S. Supreme Court decision in Tyson Foods, Inc. v. Bouaphakeo.

Over the past two years, Plaintiff offered several trial plans based on statistical sampling and extrapolation suggested by two different experts. The court, however, found that each of the plans failed to comply with sound statistical methodology and were “premised on invalid logic.” Recognizing that a 95% confidence interval and a 5% margin of error is the common convention, the court roundly criticized Plaintiff’s expert who proposed an 84% confidence interval and anywhere from a 10-20% margin of error. The court also rejected Plaintiff’s plea to let him proceed with trial and enter a directed verdict if he could not prove his claims because such a plan was “doomed to be an expensive waste of time.” Under proper sampling methodologies, the case would be unmanageable at trial as the sample size would require testimony from at least 495 class members.

Significantly, the court’s decision implicitly rejects the Plaintiff’s argument that not all members of his proposed survey need to testify at trial. The decision is therefore powerful ammunition to counter plaintiffs’ oft repeated argument that a “sample of a sample” is sufficient to testify at trial. If sound statistical methodology requires a sample of 495 class members in order to extrapolate the results to the larger class consistent with the proper confidence interval and margin of error, then all 495 class members need to testify at trial so that the jury can determine their credibility and assess their testimony. Plaintiffs cannot simply propose that their expert will testify at trial as to the results of a survey of the sample. If this means that the trial will be unmanageable, then the case should be decertified.

Although Plaintiff argued that Tyson Foods was a “game changer,” the court found Tyson Foods to be entirely consistent with Duran. The court recognized that Tyson Foods and Duran prohibit the use of statistically inadequate evidence such as that presented by Plaintiff. Although representative proof sometimes can be used in a certified class action, statistical evidence only can be used if the proof is reliable.

This case provides employers with several important “take-aways.” Defense counsel should aggressively challenge a plaintiff’s proposed trial plan to ensure that the trial plan is statistically reliable. Additionally, neither Tyson Foods nor Duran stands for the proposition that statistical sampling and surveys can be used to prove liability in every case. Whatever the supposed benefits of a class action may be, they cannot defeat a defendant’s right to due process. Trial plans must be tailored to the specific facts of the claims alleged and an unmanageable trial plan that is not scientifically sound should be rejected.

Co-authored by Dennis Clifford and Rachel Hoffer

From December 2011 to September 2012, Ambrea Fairchild was living the new All American dream: hired by All American Check Cashing, Inc. as an hourly manager trainee in its Hattiesburg, Mississippi store, Fairchild was soon promoted to manager, a salaried position, in March 2012. But Fairchild performed poorly in her new role; after six written warnings in as many months, All American demoted her back to the manager trainee position. In January 2013, Fairchild’s parabolic career path inevitably brought her back to zero; All American fired her for her below par performance.

Fairchild sued All American, looking to square accounts with the company for overtime she claimed she worked but was not paid as a manager trainee. Of course, All American had a system in place to keep overtime in check: company policy required employees to obtain prior approval before working overtime. All American’s policy also required hourly employees to accurately record the hours they worked in its timekeeping system. In a bench trial, Fairchild told the judge that she worked additional hours off the clock that she did not report to All American.

After Fairchild finished presenting her case, All American asked the court for judgment in its favor, and the judge obliged. Fairchild appealed and, after losing her appeal, asked the Fifth Circuit to rehear her case. Instead, on March 18, 2016, the panel of Fifth Circuit judges withdrew its prior opinion and issued a new one, revising its opinion as to Fairchild’s Fair Labor Standards Act claim. But it didn’t change its mind: while the district court judge had applied the wrong standard when he dismissed the claim—applying Federal Rule of Civil Procedure 50(a), which applies to jury trials and was more favorable to Fairchild, instead of Rule 52(c), which applies to bench trials—the decision to enter judgment in All American’s favor was right on the money.

In affirming the district judge’s decision, the Fifth Circuit relied heavily on a case old enough to buy beer, Newton v. City of Henderson. Newton was a police officer, working on a task force with the U.S. Drug Enforcement Agency, but the city was responsible for paying him. The city required employees to obtain approval before working overtime and to report overtime hours on a special payroll form. The city paid Newton for the time he reported on the payroll forms but not for unauthorized overtime he failed to report. Newton argued he should still be paid overtime because, while he didn’t use the correct form or specify the number of hours he worked, he reported his work activities to the city on a daily basis; thus, the city had constructive knowledge of his overtime work. The Fifth Circuit didn’t buy that argument: the city had ordered Newton not to work overtime; Newton ignored the procedures for reporting overtime; and Newton failed to establish that his supervisors should have known he was required to work overtime.

Relying on Newton, the Fifth Circuit held that the trial court did not clearly err in finding that All American didn’t have actual or constructive knowledge that Fairchild was working overtime without compensation. With regard to her first period as a Manager Trainee, Fairchild didn’t seek approval to work overtime or report her overtime hours in the timekeeping system; instead, she admittedly chose not to report unauthorized overtime because the company prohibited working overtime without advance approval. Nevertheless, Fairchild argued that, because her computer usage reports showed she was still working after she clocked out, All American had constructive knowledge of her off-the-clock work. But All American would only have constructive knowledge if it “should have known” about Fairchild’s off-the-clock work. And the district court did not clearly err in finding that, just because All American could have known about the overtime work from the computer usage reports, does not mean that All American should have known about it.

Employers faced with off-the-clock claims like Fairchild’s might be eager to try the arguments All American used to obtain judgment in its favor, and to rely on the Fifth Circuit’s opinion in Fairchild in seeking judgment for themselves. But before they bet their bottom dollar on a motion for summary judgment or a motion for judgment as a matter of law, employers should remember this: the standards of review for both motions require the trial court to view the evidence in the light most favorable to the non-moving employee, and to draw any inferences in the employee’s favor. But Fairchild involved a Rule 52(c) judgment on partial findings, in which the trial court makes factual findings according to its own view of the evidence and the appellate court reviews those factual findings for clear error. We know from the procedural history of the case that the district judge didn’t see the facts any differently when viewing them in the light most favorable to Fairchild. The judge in your case, however, might view similar evidence differently when wearing employee-colored glasses. This is all the more reason for employers to implement and enforce clear policies and procedures on overtime (including requests to work overtime), timekeeping, and compensation.

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!

sealCo-authored by Laura E. Reasons and Noah A. Finkel

BlackBerry devices may be a thing of the past; but smartphones–and their ability to allow employees to be constantly connected–certainly aren’t going away any time soon.

On Thursday, a judge in the Northern District of Illinois held in Allen v. City of Chicago that the Chicago Police Department (CPD) did not violate the FLSA by failing to pay law enforcement employees for time spent off-duty performing work on their CPD-issued BlackBerry devices. The ruling provides several lessons to employers on how to protect themselves against so-called “BlackBerry claims” by non-exempt employees carrying smartphones that many have been predicting may soon flood the courts.

Plaintiff, a sergeant in CPD’s Bureau of Organized Crime (BOC) filed suit alleging that he and other CPD officers should have been paid for time they spent off-duty reading and responding to emails on their BlackBerrys, and performing related follow-up work.

The Court conditionally certified an opt-in collective action of sworn BOC officers below the rank of Lieutenant who had a BlackBerry device and who would have incurred overtime had their off-duty work on a BlackBerry device been recorded, and then also denied the City’s decertification and summary judgment motions. Thus, the case proceeded to an approximately 4-day bench trial last August on the claims of 51 plaintiffs in the collective action. On December 10, the Court issued an opinion ruling in favor of the City and against the plaintiffs.

The Court said that, to succeed on their FLSA claims, plaintiffs must prove by a preponderance of the evidence, that (1) they performed overtime work for which they were not properly compensated, and (2) the City had actual or constructive knowledge that plaintiffs worked overtime without compensation. While plaintiffs succeeded on the first point, the City prevailed because plaintiffs failed to prove it had knowledge of their off-the-clock work.

Plaintiffs argued that the City maintained an unwritten policy to deny plaintiffs payment for their off-duty work on their Blackberry devices. This policy was enforced, they reasoned, through pressure not to incur overtime, a requirement that they receive prior approval to work overtime, and a Department-wide “understanding” that off-duty BlackBerry work would not be compensated.

The Court found that the plaintiffs performed off-duty work. They monitored their BlackBerrys, responded to time-sensitive messages to supervisors and co-workers and made and received phone calls. Although some of these activities were de mimimis and thus non-compensable the Court held that some of the BlackBerry activities were compensable work activities.

But the Court then looked at whether the City knew or should have known that the plaintiffs were working off-the-clock. Because the officers’ schedules varied day-to-day, and because they were often in the field, their supervisors typically did not know when an officer was responding to an email or call off-duty, as opposed to during working time. Moreover, much of the off-duty BlackBerry activity was between the officers and their coworkers or others, giving the City even less opportunity to learn of the off-duty work.

Witnesses also testified–and the Court found–that some officers did fill out “time due slips,” pursuant to CPD’s procedures, seeking overtime pay for the BlackBerry work. Whenever this happened, the time was compensated and no one was disciplined for seeking this compensation.  Because of the volume of “time due slips” supervisors reviewed each day, and the lack of detail on the “time due slips,” it was difficult to determine whether overtime was paid for off-duty BlackBerry work versus other work. It also would have been difficult for the City to determine if a “time due slip” was submitted for known off-duty work, since the slips were sometimes reviewed days later and contained very little detail. Some of the plaintiffs contended that they did not submit “time due slips” for off-duty BlackBerry work because the City maintained an illegal, unspoken policy not to pay for such work. But the Court rejected this argument.

It is a principal tenet of the FLSA that the law “stops short of requiring the employer to pay for work it did not know about, and had no reason to know about” so the officers’ claims failed.

This case has several important take-aways for employers, even outside the public-safety context:

  • Off-duty work on mobile devices can be found to be compensable. Employers who provide mobile devices to non-exempt employees (or allow them to perform work on their own devices), must ensure strong policies are in place prohibiting off-the-clock work, and must have mechanisms in place to encourage reporting of after-hours work.
  • Minimal activity such as simply monitoring emails likely will not amount to compensable work. It is more akin to being “on call” since employees can passively monitor a mobile decide while still using their time for their own benefit. Any time likely won’t be found compensable unless something more is required–such as responding to emails, making phone calls, or doing any follow-up research.
  • Proving employer knowledge of off-duty work is a very difficult burden for plaintiffs to meet, especially if the mobile communications are not with a supervisor. This is particularly so on a class or collective basis. Nonetheless, employers cannot turn a blind eye if they have reason to believe employees are working off-the-clock, and should address issues through policy, coaching, and–if necessary–discipline.
  • The Court, here, recognized that each side failed to take basic steps to eliminate ambiguity about CPD’s approach to compensating off-duty BlackBerry work. The plaintiffs, it reasoned, should have obtained clarity by submitting “time due slips” to see if CPD would pay overtime and test their assertion that it would not. CPD, on the other hand, could have had a written policy clarifying that all off-duty BlackBerry work should be reported, and would be compensated–like all other work.
  • Finally, the Court recognized that our reliance on devices that allow work to be performed remotely isn’t going away any time soon. Therefore, it behooves employers to review their policies and practices and ensure they work cooperatively with employees to prevent litigation.

 

Co-authored by Richard Alfred, Patrick Bannon, and Daniel Whang

Companies burdened by an avalanche of wage and hour class and collective actions have been hoping that Tyson Foods, Inc. v. Bouaphakeo might be the game-changing decision they have been waiting for.  If the oral argument before the Supreme Court this morning is an accurate indication (and it may not be), they may have to wait a little longer.

In thousands of cases over the last ten years, federal courts have struggled to decide when an employee can convert an ordinary wage dispute into a class action under state law or a collective action under the Fair Labor Standards Act.  Despite the frequency with which these issues arise, and their importance, Tyson Foods is the Supreme Court’s first opportunity to weigh in on the subject.

As we have described in our earlier posts, [here, here, and here], several named plaintiffs claimed that Tyson Foods failed to pay a class of more than 3,000 employees in a pork processing plant for time spent “donning” and “doffing” various kinds of sanitary and protective gear and for other pre- and post-shift activities.  The trial judge allowed the case to proceed as a class action under Iowa law and allowed several hundred employees to opt in to an FLSA collective action.  At trial, the plaintiffs presented an expert witness who videotaped employees at the beginning and end of their shifts and calculated the average time they spent on various tasks.

The jury reached a $5.9 million lump-sum verdict in favor of the certified class.  Significantly, however, the jury’s verdict was much less than the amount plaintiffs’ experts had calculated by averaging the donning, doffing, and walking time spent by about several hundred of the class members.

In its Supreme Court briefing, Tyson Foods attacked (1) the determination of liability and damages by averaging the experiences of dissimilar class members, and (2) the inclusion in the class of individuals who never suffered any lost pay.  Underlying these issues are important questions regarding whether plaintiffs in a class action may satisfy the predominance requirement of Rule 23(b)(3) merely by alleging an unlawful compensation practice or policy, even if the challenged policy affects different proposed class members differently–and some not at all; and whether the “similarly situated” standard of FLSA §216(b) incorporates the requirements of Rule 23.

At oral argument, the Justices, although animated in their questioning of both sides (as well as of the government’s attorney who argued as a friend of the court for the Department of Labor), mostly bypassed these broad questions, focusing instead on more FLSA- and case-specific issues.

Much of the argument focused on whether the case should be decided, not on the application of Rule 23(b)(3) or the “similarly situated” standard for FLSA collective actions, but on the application of a 1947 Supreme Court decision, Andersen v. Mt. Clemens Pottery Co.  From nearly the beginning of the argument, first Justice Kagan and later Justices Kennedy, Breyer, and Sotomayor, peppered Tyson Foods’ attorney with questions about that case and whether it, rather than Rule 23, should drive the Court’s decision.  Relying on the part of Mt. Clemens Pottery in which the Court decided that evidence of the average time spent on a task could be used to determine FLSA damages if the employer did not keep records of actual time worked, these Justices questioned whether averaging might be proper because Tyson Foods had not kept records of the exact time spent by each class member putting on and taking off each specific article of gear.  In response, Tyson Foods’ attorney argued that Mt. Clemens Pottery only applied to the damages phase and should not be extended to a determination of liability.  Responding to questions from Justices Alito and Kennedy about whether it would be fair to penalize employers for not having records of time spent on activities that they believed in good faith were non-compensable, the Assistant Solicitor General arguing for the government in support of the plaintiffs, contended that Mt. Clemens required that result.

Several of the Justices seemed interested in whether it would be possible for the district court judge on remand to sort out which employees had and had not been injured and how the damages the jury awarded should be allocated.  Justices Kagan and Kennedy seemed to think that task would be easy.  Justices Roberts, Sotomayor and Alito pointed out, however, that the jury must have rejected some aspects of the plaintiffs’ evidence because of the large discrepancy between the verdict and the experts’ calculation of damages.  Would it be possible, these Justices wondered, for the district court judge to determine damages for specific class members when she could not know the reason for the jury’s damages reduction–whether the jury had concluded that the average times for donning and doffing specific items were inflated or whether some averages were accurate and others way off the mark?  And, these Justices worried that, without knowing which tasks were undercompensated, the judge would not know which class members the jury decided had been denied overtime pay.

The Justices also discussed whether Tyson Foods has standing to object to how the district court allocates the judgment among class members.  Even if some class members are overcompensated and others undercompensated, the employees’ counsel argued, the mistakes will not increase Tyson Foods’ liability.  Tyson Foods responded, however, that the legal peace that is created when an employee is paid all the wages he or she is owed gives the company standing to object if the employee’s share of the judgment is reduced because of payments to employees who were not truly injured.

Finally, several of the Justices devoted significant time to a surprisingly detailed discussion of the extent of variation among class members as to the clothing and protective gear they used and how long it took them to put on or take off specific items.  So specific were the Justices’ questions that, at one point, laughter broke out in the courtroom when Justice Ginsberg rehearsed the exact sanitary gear worn by class members (“hard hats, ear plugs or ear muffs, and boots”) and then chided class counsel, along with Chief Justice Roberts and Justice Scalia, for omitting “boots” from his list.

Forecasting a Supreme Court decision based on oral argument is a hazardous proposition.  Whether it is a game-changer or not, we will report on this case again when the Supreme Court issues its decision–most likely in Spring 2016.

Authored by Michael W. Kopp

In a case that is certain to provide an important sequel to the Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend decisions, the Supreme Court will hear argument next week on Tyson Foods Inc. v. Bouaphakeo, to address (1) the use of statistical averaging in class actions to prove liability and damages, and (2) whether courts may certify a class that includes individuals with no injury.

Tyson Foods is important because it likely will set further limits on use of statistical proof in Rule 23(b)(3) cases, and address for the first time the standard for certification of collective actions under the Fair Labor Standards Act.

The road to the Supremes. Tyson Foods reached the Supreme Court by way of a divided Eighth Circuit opinion affirming a $5.8 million verdict on an off-the-clock class claim. Plaintiffs claimed that Tyson’s Iowa meat processing facility had not paid over 3,000 plant workers for the time they spent changing in and out of various types of work gear and walking to and from the production line. The district court found there was a common question as to whether the challenged time was compensable, and certified the case as a collective action as to the FLSA claim, and as Rule 23 class action as to the state law wage and hour claims.

Tyson unsuccessfully attempted to decertify the class, and argued neither liability nor damages were “capable of classwide resolution … in one stroke,” as required by Dukes. Tyson pointed to variations in the type and amount of equipment worn by employees in the hundreds of classifications at issue, and highlighted the disparities in the routines and amount of time employees spent on these tasks. Unpersuaded, the district court permitted a nine-day jury trial on the class claims, where plaintiffs used an expert’s model to calculate the “average” time employees spent on the donning, doffing and walking activities at issue. These average activity times were then extrapolated to the class members. Although plaintiffs’ expert conceded that the actual times for these activities varied considerably – and more than 200 class members suffered no injury at all – the jury nonetheless awarded a lump sum verdict, to be divided among all class members.

Divided approaches to Dukes. The divided Eighth Circuit panel’s majority opinion and dissent highlight the inconsistent approaches lower courts have taken in interpreting Dukes. The panel majority found that there was a common question concerning whether the activities were compensable under the FLSA and state law, and that plaintiffs had “prove[n] liability for the class as a whole, using employee time records to establish individual damages.”

The dissent took the majority to task for ignoring the considerable differences in donning and doffing times, employee routes to their work stations, the amount of time Tyson allotted for such activities, shortened time shifts, “and a myriad of other relevant factors.” The dissent highlighted the fact that a rigorous inquiry into Rule 23’s requirements may overlap with the merits, and that in a wage-hour case the merits may be intertwined with damages questions. Using statistical models to gloss over differences pertinent to both liability and damages violated Dukes’ requirement that the action generate “common answers apt to drive the resolution of the litigation” and its prohibition against “trial by formula.”

For example, an employee who clocks 38 hours and alleges another 1.5 hours of off-the-clock work does not have a claim under federal law so long as he is paid no less than minimum wage for all of his work time taking into account his uncompensated time. If he claims a total of 2.5 hours of off-the-clock work, however, he would allege an FLSA violation that, if proven, would result in an hour of pay at the appropriate overtime rate. In such cases (and commonly for wage-hour claims), determining liability and damages is an inherently intertwined inquiry requiring the same evidence. For this reason, the common issues involved in determining liability would predominate over any individualized damages issues under Rule 23(b)(3), and bifurcation of a liability-only class would be inappropriate.

Why This Case Matters. First, the Supreme Court will have the opportunity to clarify the extent of Dukes’ limitations on the use of statistical techniques to establish damages and liability under Rule 23. Second, the case has particular significance in the wage and hour context, because it provides the opportunity for the Supreme Court to weigh in for the first time as to the standards that apply to certification of FLSA collective actions. Third, the case provides the opportunity for the court to address Tyson Foods’ constitutional argument that an award of monetary damages to uninjured class members is impermissible.

Stay Tuned … This case is set for oral argument on Tuesday, November 10, so be on the lookout for a follow up blog post here when a decision is reached.

Co-authored by Richard Alfred, Patrick Bannon and Esther Slater McDonald

In a case that could change how wage and hour class and collective actions are litigated, Tyson Foods, Inc. recently filed its opening Supreme Court brief. Tyson seeks reversal of a $5.8 million judgment in favor of meat processing employees who claimed to have worked off the clock.

As we reported in June, the Tyson Foods case is likely to have a profound impact on wage and hour litigation. It could result in the Supreme Court’s first discussion of what it means for employees to be “similarly situated” under FLSA Section 216(b) and of how the standards for certifying a Rule 23(b) class action apply to wage and hour cases.

As expected, Tyson’s opening brief parallels its cert petition. The case should not have been certified as a class action or as an FLSA collective action, Tyson argues, because the plaintiffs relied on “statistical evidence that masks, rather than accounts for, differences among individual class members.” In certifying the class, the court relied on expert testimony as to the average time employees spent donning and doffing equipment, even though the expert acknowledged that the actual times varied widely among class members, depending on their job classifications and their equipment combinations.

“[T]he standards governing certification of a collective action under the FLSA can be no less stringent” than those articulated in Wal-Mart Stores, Inc. v. Dukes for certification of a Rule 23(b)(3) class, Tyson argues. e Thus, the company argues, the variations described above mean the litigation would not provide common answers to the questions of (1) whether an employee worked more than 40 hours per week and, (2) if so, whether Tyson properly paid the employee for that overtime. Although the lower courts found that common issues predominated because Tyson’s compensation policy for donning and doffing time applied to all of the employees, Tyson point out that the time variations are “outcome determinative because they control whether or not a particular plaintiff worked any unpaid overtime at all.”

In addition, Tyson states that using statistical averages violated the Rules Enabling Act and the Due Process Clause. “No court would allow an individual employee to meet his ‘burden of proving that he performed work for which he was not properly compensated by submitting evidence of the amount of time worked by other employees who did different activities requiring a different amount of time to perform,” Tyson writes (quotation marks omitted). “Yet that is exactly what happened here.” Tyson explains: plaintiffs obtained classwide damages by applying the expert’s average times to all class members despite evidence that some class members spent less time donning and doffing equipment.

This “trial by formula” deprived Tyson of its right to raise individualized defenses in violation of Due Process and the Rules Enabling Act, Tyson argues. “Rather than challenging whether individual class members suffered any injury or damages, Tyson could only attack plaintiffs’ supposedly ‘representative’ evidence as biased, unreliable, and not actually representative of anyone in the class.” Tyson also notes that using averages to prove liability for the class as a whole conflicted with the Court’s command in Wal-Mart Stores, Inc. v. Dukes that class-wide liability cannot be based purely on extrapolation from unproven assumptions about individual class members.

Finally, Tyson argues that class certification was improper because the class includes hundreds of uninjured plaintiffs who, as a result, can collect damages under the jury’s verdict. Under Article III, “federal courts cannot order money to be paid to an uninjured plaintiff,” and the FLSA limits a court’s authority under the Act to providing redress for “unpaid overtime compensation.” Thus, Tyson argues, class or collective actions including uninjured members cannot be certified.

We continue to follow the briefing in this case. The brief of the respondent employees is currently due on September 22, 2015.