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

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

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

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

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

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

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