Conditional Certification

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By: Robert S. Whitman and Howard M. Wexler

Seyfarth Synopsis: A New York federal court once again denied a motion for conditional certification of a nationwide collective action against Barnes & Noble.  The ruling highlights that, even though the burden for “first stage” certification is modest, courts are willing to apply a “modest plus” approach after discovery relevant to conditional certification has taken place.  It also shows the potential positive impact the Supreme Court’s recent Encino Motorcars decision may have for employers opposing conditional certification.

Foreword

Once upon a time, we blogged about a decision in the Southern District of New York denying conditional certification of a nationwide collective of café managers at Barnes & Noble.  Undeterred, the managers again sought conditional certification, this time after the parties conducted extensive discovery focused on issues pertinent to conditional certification.  Magistrate Judge Katharine H. Parker concluded this story by again denying conditional certification, finding that “the solicitation of additional opt-ins will raise more questions and prolong the resolution of this case” given the differences between putative class member.

Chapter 1:  The First Denial

Our tale concerns claims that the café managers were misclassified as exempt under the FLSA.  In her prior decision, Judge Parker denied conditional certification without prejudice given the lack of evidence as to whether the named plaintiffs were similarly situated to the putative class.  She held that she could not “infer that Defendant had a de facto policies of requiring all 1,100 café managers to perform non-exempt work based on the personal experiences of the nine people who have joined this suit” and “nor can it infer such a policy from general assertions” and “cookie-cutter declarations.”

Chapter 2:  Discovery Ensues

Seeking an alternate ending, the plaintiffs advanced the plot, taking extensive discovery focused on conditional certification, including the production of more than 25,000 pages of documents, more than ten depositions, several written statements from opt-ins concerning their job duties, and obtaining contact information for 200 putative members of the putative collective so they could interview them about their job duties.  Given this extensive discovery, Judge Parker held that she would apply a “modest plus” standard in this chapter to determine whether conditional certification was appropriate, rather merely requiring a “modest factual showing.”

Chapter 3:  The Second Denial

Judge Parker began her analysis with a flashback to the Supreme Court’s April 2018 decision in Encino Motorcars.  In that gripping drama, the Court rejected the longstanding notion that FLSA exemptions should be construed narrowly.  Although not faced with deciding whether the managers were in fact misclassified as exempt, Judge Parker cited to Encino Motorcars to set the stage for her decision on certification, stating that she would be guided by “the Supreme Court’s recent pronouncement about FLSA exemptions when evaluating whether Plaintiffs have met their burden of demonstrating the existence of common nationwide policies.”

Under this “modest plus” standard, Judge Parker again denied conditional certification.  In relevant part, Judge Parker held:

In sum, even accepting as true that BN scheduled and directed Café Managers to perform non-exempt tasks, the evidence presented by Plaintiffs does not demonstrate that it is more likely than not that Plaintiffs were subject to a common policy applicable to all Café Managers nationwide requiring them to primarily perform non-exempt duties. It is not enough for Plaintiffs to present policies that BN scheduled or directed Café Managers to perform some non-exempt tasks, because the core issue is whether Plaintiffs have raised an inference that Café Managers’ primary duties were non-managerial.

The plot thickened. Judge Parker further noted that, “Plaintiffs’ varying testimony suggests that some Plaintiffs may have performed more managerial duties than others underscoring the likelihood that…the Court may need to evaluate each Plaintiff individually to determine their primary duties.”

In her final pages, Judge Parker once again dispelled the oft-cited theory advanced by plaintiffs that the reclassification of a position from exempt to non-exempt shows that the position was uniformly misclassified previously.

Epilogue:  What’s Next?

It remains to be seen whether Plaintiffs will try to make this duology into a trilogy by challenging Judge Parker’s decision to the District Judge.  Regardless, this decision, like the one before it, may become a “best seller” for employers in fending off conditional certification motions given its adoption of the “modest plus” standard and reliance on Encino Motors by, in effect, requiring Plaintiffs to show that the putative collective is subject not just to a common practice, but one that would actually violate the FLSA.

Book that says JusticeCo-authored by Robert S. Whitman and Howard M. Wexler

Seyfarth Synopsis: A New York federal court denied a motion for conditional certification of a nationwide collective action against Barnes & Noble. The ruling highlights that, even though the burden for “first stage” certification is modest, courts may not approve such motions without evidence that the named plaintiffs are similarly situated to the putative collective action members they wish to represent.

Foreword

Plaintiffs’ counsel frequently cite the “low” burden required for conditional certification under the FLSA. But a recent decision in the Southern District of New York denying conditional certification highlights that some courts are willing to “do the reading” and not “skip pages,” and will actually review the plaintiffs’ proffered evidence to ensure that there is a factual nexus to bind the pages of the certification motion together.

Chapter 1: The Complaint

In Brown v. Barnes and Noble, Inc., the plaintiffs are former Barnes & Noble, Inc. café managers. They allege that they, and similarly situated others, were misclassified as exempt, and sought unpaid overtime and other pay under the FLSA and the New York Labor Law.

Chapter 2: The Conditional Certification Motion

Two months after filing the complaint, and before conducting any discovery, the plaintiffs moved for conditional certification of their FLSA claim. They argued that, because the café managers had been uniformly classified as exempt, were all reclassified as non-exempt, work under the same job description, and because Barnes & Noble maintains detailed policies, procedures and rules that control how the café managers, regardless of location, performed their work, that all such managers are “similarly situated” to the named plaintiffs.

Chapter 3: The Court’s Decision

Magistrate Judge Katharine H. Parker authored the court’s decision. Before getting to the main plot of this conditional certification story, Judge Parker dispelled three oft-cited theories advanced by plaintiffs to obtain conditional certification:

  1. that a uniform classification of exempt status, standing alone, can satisfy the low threshold for conditional certification;
  2. that the employer’s reclassified of a position from exempt to non-exempt shows that the position was uniformly misclassified previously; and
  3. that a common job description means the position is the same everywhere.

Judge Parker had little trouble untangling the plot on the first point, holding that a uniform classification of exempt status is not sufficient, in and of itself, to establish the commonality required for conditional certification. She was equally unpersuaded on the second point, and held that “there could be many legitimate business reasons for an employer to reclassify employees.” On the third point, Judge Parker reiterated prior decisions holding that “a common job description does not mean that conditional certification is per se warranted in every case.” In this case, she added, the job description “is of little utility…when, under Plaintiffs’ own theory of the case, [it] did not accurately reflect the duties they personally performed.”

In her final pages, Judge Parker held that based on the evidence before her, she could not “infer that Defendant had a de facto policies of requiring all 1,100 café managers to perform non-exempt work based on the personal experiences of the nine people who have joined this suit” and “nor can it infer such a policy from general assertions” and “cookie-cutter declarations.”

Epilogue: What’s Next?

Brown is another reminder that, despite the lenient standard for conditional certification under the FLSA, courts may assess the evidence rather than simply read the “Cliffs Notes” version of the parties’ submissions, and that, where appropriate, they will deny certification if plaintiffs have failed to show that they are similarly situated to others. It remains to be seen whether the plaintiffs will propose a sequel by filing a new motion with additional evidence or simply choose to litigate on behalf of the named plaintiffs alone. This decision—while perhaps not a scintillating beach read for summer—may still become a “best seller” for employers in fending off conditional certification motions.

driving car on highway, close up of hands on steering wheel

Co-authored by Gerald L. Maatman, Jr., Gina Merrill, Brendan Sweeney, and Mark W. Wallin

Seyfarth Synopsis: A New York federal court in Durling, et al. v. Papa John’s International, Inc., Case No. 7:16-CV-03592 (CS) (JCM) (S.D.N.Y. Mar. 29, 2017), recently denied Plaintiffs’ motion for conditional certification of a nationwide collective action in an FLSA minimum wage action against Papa John’s International, Inc. (“PJI”), in which the drivers alleged that they have not been sufficiently reimbursed for the cost of their vehicle expenses.  This ruling shows that even though the burden for “first stage” conditional certification is modest, employers can defend their pay practices by showing the absence of any evidence of a common policy or plan that violates the FLSA. This is especially so when plaintiffs seek to certify a nationwide collective action, for as the court held in Durling, conditional certification is not proper when plaintiffs submit evidence pertaining to only a small sub-set of the putative collective action members.

In 2016, approximately 80% of conditional certification motions were granted in the Second Circuit.  Plaintiffs undoubtedly have a low bar to hurdle to obtain conditional certification under section 16(b) of the FLSA.  It is a hurdle nonetheless, and some courts have shown a willingness to look closely at plaintiffs’ proffered evidence to ensure that a factual nexus exists that binds together the members of a putative collective action.  In Durling, et al. v. Papa John’s International, Inc., Judge Cathy Seibel of the U.S. District Court for the Southern District of New York rejected Plaintiffs’ motion for conditional certification of a nationwide collective action that would have included drivers employed at corporate-owned stores and stores operated by franchisees.  The Court concluded that Plaintiffs’ evidence did not support a finding that the named plaintiffs were similarly situated to thousands of drivers employed by hundreds of different employers.

By highlighting Plaintiffs’ failure to show that Papa John’s International, Inc. (“PJI”) dictated a common corporate policy to franchisees, or any significant factual nexus among the members of the putative collective action across corporate and franchise stores, PJI won a significant victory.

Case Background

Plaintiffs are five delivery drivers who work for either PJI or one of two restaurants owned by independent franchisees. Each Plaintiff delivered pizzas in his own vehicle, and alleged that PJI and the franchisees under-reimbursed delivery drivers for wear and tear, gas, and other vehicle expenses such that PJI violated the FLSA.  Pointing to the practice of one franchisee, as an example, Plaintiffs averred that they were paid $6 per hour plus $1 per delivery, which, at an average rate of five deliveries per hour, amounts to wages of approximately $11 per hour.  Applying the IRS standard mileage rate, Plaintiffs claim that they paid $13.50 per hour for upkeep on their vehicles, resulting in a net loss of $2.50 per hour.  Accordingly, Plaintiffs asserted that they earned less than minimum wage in violation of the FLSA and corresponding state minimum wage laws.

There are over 3,300 Papa John’s restaurants in the United States.  Approximately 700 are owned and operated, at least in part, by PJI.  The remaining 2,600 plus restaurants are owned and operated by 786 independent franchisees.  Although four of the five Plaintiffs worked for franchisees, they did not sue any franchisees in this litigation — only PJI.  Plaintiffs claimed that PJI is a joint-employer of the drivers at all franchised Papa John’s.  They alleged that PJI disseminated policies to the franchisees that caused the drivers to be under-reimbursed in a uniform way.  Plaintiffs supported this theory with purported evidence that all stores, both corporate and franchise, use the same point-of-sale (“POS”) technology to record deliveries and calculate reimbursements, and use the same logos and uniforms.

Plaintiffs filed their Complaint on May 13, 2016, which they amended on July 12, 2016.  On October 14, 2016, Plaintiffs filed a motion for conditional certification of their FLSA collective action, seeking to represent all delivery drivers on a nationwide basis.

The Court’s Decision

The Court denied Plaintiffs’ conditional certification motion.  While the Court declined PJI’s invitation to apply a heightened standard in assessing the motion (due to the discovery that had been undertaken in the case), the Court found that Plaintiffs failed to satisfy even the modest standard generally used in step one conditional certification motions.  The Court also declined to decide whether PJI was in fact a joint-employer, finding this to be a merits issue.  Framing the conditional certification issue, however, the Court reasoned that Plaintiffs could show that they were similarly-situated with the other members of the proposed collective action in two ways: (1) by demonstrating that PJI dictated a common reimbursement policy for all delivery drivers working at both corporate and franchise-owned restaurants, or (2) by showing that a common policy existed across the entire proposed collective action.

As to the first issue, the Court found that while PJI admitted that it reimbursed the drivers it employs at corporate-owned stores by paying them a specific amount per delivery (without conceding that the rate is so low as to violate the FLSA), Plaintiffs failed to offer any evidence that PJI was involved in its franchisees’ policies for reimbursing delivery drivers.  According to the Court, the mere use of the same POS system, with the corresponding ability to access data on how drivers are paid, “in no way indicates that [PJI] dictated a nationwide delivery driver payment policy.”

In analyzing the question of whether Plaintiffs could show a common policy across the collective action that would bind the putative members together, the Court answered it in the negative.  The Court rejected Plaintiffs’ attempt to show common policies regarding issues wholly unrelated to the purported practice of under-reimbursement.  The Court reasoned that proffering common policies “such as wearing the same uniforms, or use of the Papa John’s logo, or even the general use of personal vehicles to make deliveries, is not sufficient to demonstrate a common policy with respect to the payment of drivers.”

The Court determined that while Plaintiffs arguably had made a “modest showing” of a common policy across PJI corporate-owned stores and the two franchises for which Plaintiffs work, this “evidence is insufficient to infer a nationwide policy.”  The Court rejected Plaintiffs’ conclusory averments that other franchisees had the same policy, observing that witnesses as to this claim lacked personal knowledge.  The Court also found that Plaintiffs failed to offer evidence of a common policy that violated the FLSA, noting that while the evidence showed that a few more franchisees do not use the IRS reimbursement rate, “there is no evidence that these franchisees do not pay a rate reasonably related to driving and wear and tear costs, or that what they pay is so low that the drivers end up getting less than the minimum wage.” The Court also opined that it had found no similar cases where plaintiffs succeeded in certifying a nationwide collective action involving hundreds of franchisees where the declarations offered descriptions of only two stores, and no evidence existed that the franchisor dictated the policy at issue to all franchisees.  Thus, even recognizing that the Plaintiffs’ modest burden at the conditional certification stage, the Court declined to certify the collective action by “infer[ring] from the policy of two franchisees, that a nationwide 780-something other franchisees reimburse delivery drivers on a per-delivery basis that results in compensation below the minimum wage.”  Consequently, the Court denied Plaintiffs’ motion for conditional certification of a nationwide collective action, holding that Plaintiffs failed to meet their modest burden of showing that delivery drivers were similarly-situated.

Implication for Employers

FLSA collective actions are ubiquitous due in large part to the low burden for conditional certification — especially compared to class certification under Rule 23.  Indeed, the vast majority of FLSA collective actions are conditionally certified, which can have the effect of driving large early settlements.  Members of the plaintiffs’ class action bar have attempted to stretch the conditional certification device to cases that involve joint employer theories, in the hopes that the court will certify a large collective action without scrutinizing the novel aspects of the case.  Employers facing FLSA collective action allegations in situations involving a decentralized policy across multiple locations can add this ruling to their defensive arsenal.  And although the Plaintiffs’ bar will likely continue to pursue FLSA collective actions as long as the burden for conditional certification is so low and the benefit of a substantial settlement is so high, this ruling shows that certification is far from automatic.

Authored by Gerald Maatman, Jr. 

Seyfarth Synopsis: Workplace class action filings were flat overall and even decreased as compared to levels in 2015. However, that is apt to change in 2017. In the 4th in a series of blog postings on workplace class action trends, we examine what employers are likely to see in 2017.

Introduction

Overall complex employment-related litigation filings increased in 2016 insofar as employment discrimination cases were concerned, but decreased in the areas of ERISA class actions, governmental enforcement litigation, and wage & hour collective actions and class actions. For the past decade, wage & hour class actions and collective actions have been the leading type of “high stakes” lawsuits being pursued by the plaintiffs’ bar. Each year the number of such case filings increased. However, for the first time in over a decade, case filing statistics for 2016 reflected that wage & hour litigation decreased over the past year.

Additional factors set to coalesce in 2017 – including litigation over the new FLSA regulations and the direction of wage & hour enforcement under the Trump Administration – are apt to drive these exposures for Corporate America. To the extent that government enforcement of wage & hour laws is ratcheted down, the private plaintiffs’ bar likely will “fill the void” and again increase the number of wage & hour lawsuit filings.

Complex Employment-Related Litigation Filing Trends In 2016

While shareholder and securities class action filings witnessed an increase in 2016, employment-related class action filings remained relatively flat.

By the numbers, filings for employment discrimination and ERISA claims were basically flat over the past year, while the volume of wage & hour cases decreased for the first time in over a decade.

By the close of the year, ERISA lawsuits totaled 6,530 filings (down slightly as compared to 6,925 in 2015 and 7,163 in 2014), FLSA lawsuits totaled 8,308 filings (down as compared to 8,954 in 2015 and up from 8,066 in 2014), and employment discrimination lawsuits totaled 11,593 filings (an increase from 11,550 in 2015 and a decrease from 11,867 in 2014).

In terms of employment discrimination cases, however, the potential exists for a significant jump in case filings in the coming year, as the charge number totals at the EEOC in 2015 and 2016 reached record levels in the 52-year history of the Commission; due to the time-lag in the period from the filing of a charge to the filing of a subsequent lawsuit, the charges in the EEOC’s inventory will become ripe for the initiation of lawsuits in 2017.

The Wave Of FLSA Case Filings Finally Crested

By the numbers, FLSA collective action litigation filings in 2016 far outpaced other types of employment-related class action filings; virtually all FLSA lawsuits are filed and litigated as collective actions.  Up until 2015, lawsuit filings reflected year-after-year increases in the volume of wage & hour litigation pursued in federal courts since 2000; statistically, wage & hour filings have increased by over 450% in the last 15 years.

The fact of the first decrease in FLSA lawsuit filings in 15 years is noteworthy in and of itself. However, a peek behind these numbers confirms that with 8,308 lawsuit filings, 2016 was the second highest year ever in the filing of such cases (only eclipsed by 2015, when 8,954 lawsuits were commenced).

Given this trend, employers may well see record-breaking numbers of FLSA filings in 2017.  Various factors are contributing to the fueling of these lawsuits, including: (i) new FLSA regulations on overtime exemptions in 2016, which have been delayed in terms of their implementation due to legal challenges by 13 states; (ii) minimum wage hikes in 21 states and 22 major cities set to take effect in 2017; and (iii) the intense focus on independent contractor classification and joint employer status, especially in the franchisor-franchisee context. Layered on top of those issues is the difficulty of applying a New Deal piece of legislation to the realities of the digital workplace that no lawmakers could have contemplated in 1938. The compromises that led to the passage of the legislation in the New Deal meant that ambiguities, omitted terms, and unanswered questions abound under the FLSA (something as basic as the definition of the word “work” does not exist in the statute), and the plaintiffs’ bar is suing over those issues at a record pace.

Virtually all FLSA lawsuits are filed as collective actions; therefore, these filings represent the most significant exposure to employers in terms of any workplace laws.  By industry, retail and hospitality companies experienced a deluge of wage & hour class actions in 2016.

This trend is illustrated by the following chart:

The Dynamics Of Wage & Hour Litigation – Low Investment / High Return

The story behind these numbers is indicative of how the plaintiffs’ class action bar chooses cases to litigate. It has a diminished appetite to invest in long-term cases that are fought for years, and where the chance of a plaintiffs’ victory is fraught with challenges either as to certification or on the merits. Hence, this reflects the various differences in success factors in bringing employment discrimination and ERISA class actions, as compared to FLSA collective actions.

Obtaining a “first stage” conditional certification order is possible without a “front end” investment in the case (e.g., no expert is needed unlike the situation when certification is sought in an ERISA or employment discrimination class action) and without conducting significant discovery due to the certification standards under 29 U.S.C. § 216(b).  Certification can be achieved in a shorter period of time (in 2 to 6 months after the filing of the lawsuit) and with little expenditure of attorneys’ efforts on time-consuming discovery or with the costs of an expert. As a result, to the extent that litigation of class actions by plaintiffs’ lawyers are viewed as an investment, prosecution of wage & hour lawsuits is a relatively low cost investment without significant barriers to entry relative to other types of workplace class action litigation. As compared to ERISA and employment discrimination class actions, FLSA litigation is less difficult or protracted, and more cost-effective and predictable. In terms of their “rate of return,” the plaintiffs’ bar can convert their case filings more readily into certification orders, and create the conditions for opportunistic settlements over shorter periods of time. The certification statistics for 2016 confirm these factors.

What Is In Store For 2017

Has the wage & hour litigation crested for good, or will 2017 see more case filing? My bet is that employers will see more case filings.

An increasing phenomenon in the growth of wage & hour litigation is worker awareness. Wage & hour laws are usually the domain of specialists, but in 2016 wage & hour issues made front-page news.  The widespread public attention to how employees are paid almost certainly contributed to the sheer number of suits.  Big verdicts and record settlements also played a part, as success typically begets copy-cats and litigation is no exception. Yet, the pervasive influence of technology is also helping to fuel this litigation trend. Technology has opened the doors for unprecedented levels of marketing and advertising by the plaintiffs’ bar – either through direct soliciting of putative class members or in advancing the overall cause of lawsuits. Technology allows for the virtual commercialization of wage & hour cases through the Internet and social media. These factors all suggest that 2017 will see an increase in wage & hour lawsuit filings.

And state court cases are not to be forgotten. In 2016, wage & hour class actions filed in state court also represented an increasingly important part of this trend.  Most pronounced in this respect were filings in the state courts of California, Florida, Illinois, Massachusetts, New Jersey, New York, and Pennsylvania.  In particular, California continued its status in 2016 as a breeding ground for wage & hour class action litigation due to laxer class certification standards under state law, exceedingly generous damages remedies for workers, and more plaintiff-friendly approaches to class certification as well as wage & hour issues under the California Labor Code.  For the fourth year out of the last five, the American Tort Reform Association (“ATRA”) selected California as one of the nation’s worst “judicial hellholes” as measured by the systematic application of laws and court procedures in an unfair and unbalanced manner. Calling California one of the worst of the worst jurisdictions, the ATRA described the Golden State as indeed that for plaintiffs’ lawyers “seeking riches and the expense of employers …” and where “lawmakers, prosecutors, and judges have long aided and abetted this massive redistribution of wealth.”

 

SDFLAuthored by Christopher Kelleher and Noah Finkel

Seyfarth Synopsis: Federal court denies motion for conditional certification for a proposed class of employees working at separate Subway franchises.

Earlier this year, the DOL’s Wage-Hour Division issued a much-publicized Administrator Interpretation on what employers constitute joint employers, including an explanation of how two or more employers under common ownership can constitute “horizontal” joint employers.  As articulated by the WHD’s sweeping pronouncement, it appeared that virtually any jointly-owned entities might constitute joint employers, at least in the eyes of the WHD.

But in a victory for employers in the battle over joint employer status, a federal district judge in the Southern District of Florida recently denied a motion for conditional collective action certification for a group of Subway employees of different franchises with common ownership.  In Aguiar, et al. v. Subway 39077, Inc., Timothy E. Johnson, et al., plaintiff Yirandi Aguiar sought collective action certification for the overtime claims for all “Store Managers” working at approximately 38 Subway franchises owned and operated as separate corporate entities by Timothy Johnson in Southern Florida.

Applying the usual “fairly lenient standard” to determine whether conditional collective action  certification was warranted, the Court rejected Aguiar’s attempt to certify the collective on several levels.  First, the proposed collective was comprised of individuals employed by approximately 38 separate, non-party corporate entities.  Second, Aguiar only provided “Consent to Join” forms and affidavits from three individuals including herself, and thus failed to sufficiently show the existence of other employees who wished to opt into the action.

Third, and most significantly, even if Aguiar could satisfy these first two elements, the Court found that the putative plaintiffs were not similarly situated.  In making this determination, the Court noted that the individuals worked at separate corporate entities, and Aguiar did not show that she or other employees were authorized to sell or make sandwiches at any other of the 38 franchises.  Additionally, the franchises were spread throughout Southern Florida, and thus were not geographically concentrated.  And finally, Aguiar failed to provide information regarding a joint payroll department or joint supervision over the proposed collective action members.

This case demonstrates that even under the “lenient standard” described above, merely alleging common ownership over a number of franchises is not enough to show joint employment status or to obtain a broad conditional certification order.

Authored by Hillary J. Massey

Employers have a new tool for opposing conditional and class certification of overtime claims by financial advisors and other exempt employees—last week, a judge in the District of New Jersey denied conditional and class certification of such claims because the plaintiffs failed to show that common issues predominated. The court, pointing to other decisions denying class status to financial advisors in recent years, concluded that the advisors’ duties varied significantly and required individual treatment. While recent headlines have announced large settlements of class claims by financial advisors, this decision bolsters employers’ opposition to those and other purported wage and hour class and collective claims.

The four named plaintiffs brought suit under the FLSA and the laws of New Jersey, New York, and Connecticut, claiming that they and the purported class members were entitled to overtime pay and business expenses, and proposing three classes and an opt-in federal collective. Plaintiffs contended the bank’s uniform categorization of financial advisors as exempt was improper because the advisors regularly made sales “cold calls,” regularly attended networking events to attract new clients, were paid based on their ability to generate sales, were heavily supervised, and had no role in managerial decisions affecting the bank’s business.

Denying plaintiffs’ motions, the judge first concluded that plaintiffs failed to establish their claims were typical and they were adequate representatives of the class because, unlike the plaintiffs, many proposed class members had signed releases of all claims.  The court explained it was unclear how the class representatives would challenge releases they did not sign.

On predominance, the judge concluded that the bank’s policies, plaintiffs’ depositions, and the declarations submitted with the bank’s opposition demonstrated that financial advisors varied in:

  • how often they sold financial products;
  • how they were supervised;
  • how they were paid;
  • what types of clients they served; and
  • how much autonomy they enjoyed.

For example, one plaintiff testified that some advisors did cold calling while others did not, and plaintiffs testified that as their business became more established, they spent less time generating sales.  The record also showed that some managers were involved in the day-to-day work of their financial advisors, but others were more hands off.  Thus the court concluded that common questions did not predominate.

As in another case we recently discussed, where the Sixth Circuit upheld the dismissal of a proposed collective action of bank loan underwriters, the court here also rejected plaintiffs’ heavy reliance on the DOL’s 2010 Administrative Interpretation concerning mortgage loan officers’ non-exempt status, noting that that the Interpretation did not apply to financial advisors.

Finally, despite a “lenient standard,” the judge denied plaintiffs’ motion for conditional certification under the FLSA.  Plaintiffs could not meet their burden by merely showing that the bank had a uniform policy of treating financial advisors as exempt, and the significant class discovery record revealed that financial advisors’ duties varied greatly.

The case will now proceed on the merits of the claims of the four individual plaintiffs only.

EDNY-SealCo-authored by Robert S. Whitman and Howard M. Wexler

Plaintiffs’ counsel frequently speak of the “low” burden necessary at first stage for conditional certification under the FLSA.  However, a recent decision from the Eastern District of New York highlights that plaintiffs may win the battle over conditional certification but still lose the war for final certification at second stage.

In Mendez v. U.S. Nonwovens Corp., the plaintiffs succeeded in obtaining conditional certification based on their claim that the defendants enforced several “policies” that adversely affected employees’ wages, including failure to timely pay, failure to pay employees based on timecard punches, and requiring pre-shift work without additional compensation.  At the close of discovery, they moved for class certification under Rule 23, which the court denied except as to a subclass of employees who claimed they were entitled to spread of hours pay under the New York Labor Law.

The defendants concurrently moved for decertification of the FLSA collective action.  Magistrate Judge Steve I. Locke granted the motion.  He  noted the “heightened scrutiny” that must be applied at second stage certification, in contrast to the “modest factual showing” of similarity at the first stage.  While the Second Circuit has not yet set forth a particular method for deciding second stage certification, Judge Locke noted that district courts generally look at the following factors:  (1) disparate factual and employment settings of individual plaintiffs; (2) defenses available to defendants which appear to be individual to each plaintiff; and (3) fairness and procedural considerations.

Because Judge Locke found that the defendants’ policies were not facially unlawful, he required the plaintiffs to provide sufficient evidence that the defendants’ implementation of these policies violate the FLSA.  Based on a review of the evidence, he found “no generalized or representative proof of such a policy that would establish liability on a collective-wide basis.”

While the court said that each plaintiff may have a claim to unpaid overtime, “those claims may only be established through individualized evidence” given their varied experiences.  He also noted that “anecdotal evidence of individual failures” in paying certain employees does not constitute “proof of a company-wide policy or practice.”  And given the disparate factual claims of liability, the defenses would “necessarily vary” on a plaintiff-by-plaintiff basis as well.

Mendez is yet another reminder that all is not lost when FLSA conditional certification is granted. Where there is compelling evidence that a trial would require individualized factual determinations and an assessment of individual defenses, employers can and should return to the judge to highlight those distinctions among the opt-in plaintiffs in an effort to reverse their fortunes without the yoke of the “lenient standard” of stage one.

Co-authored by Molly C. Mooney and Noah Finkel

Last week, a federal judge in the Northern District of Illinois lifted the weight of collective action certification off Life Time Fitness, Inc. and refused to certify a proposed collective of more than 6,000 personal trainers because each trainer’s employment varied too much to resolve their potential claims on a collective basis.

The trainers in Steger v. Life Time Fitness, Inc. alleged that Life Time had an unofficial policy of intimidating and pressuring trainers to work off the clock. Life Time trainers are paid based on commissions. The trainers presented evidence that some managers encourage trainers to underreport their hours in order to prevent “draws” against those commissions. According to the trainers, this evidenced a broader, common policy discouraging trainers from reporting all hours worked. Life Time, however, argued that its corporate policies mandate accurate timekeeping, and any encouragement of off-the-clock work was highly individualized based on a trainer’s location, job title and duties, productivity, and personal decisions.

The district court agreed with Life Time, since plaintiffs’ evidence that some managers pressured employees to underreport hours also demonstrates that some managers did not. It also credited Life Time’s corporate policies, which require all employees to accurately report their time, and of which, at least some class members were aware. Ultimately, the district court found certification inappropriate, as the resolution of class members’ claims would require a highly individualized analysis to determine the extent to which each trainer worked off the clock.

This case comes on the heels of a pair of wage and hour certification decisions in the Seventh Circuit relating to off-the-clock work. In both Ross v. RBS Citizens, N.A., which this blog covered here, and Bell v. PNC Bank, plaintiffs alleged that their employers had unofficial policies encouraging off-the-clock work. After the Seventh Circuit affirmed class certification in Ross, the Supreme Court vacated the lower court’s judgment and remanded the case to the Court of Appeals “for further consideration in light of Comcast Corp. v. Behrend,” a decision in which the Supreme Court determined that an inability to show that damages can be measured on a class-wide basis may be fatal to a collective action.

Although Ross settled before the Seventh Circuit could apply Comcast, the Seventh Circuit chimed in again in Bell. There, it affirmed class certification, reasoning that whether plaintiffs can ultimately prove the existence of an unofficial policy encouraging off-the-clock work is irrelevant at the certification stage. Rather, plaintiffs simply must show that the denial of overtime pay came from an alleged broader, informal company policy rather than from the discretionary decisions of individual managers.

Bell suggests that a way to defeat class or collective action certification of an “unofficial policy” claim is to show that the pressure to work off the clock was the result of individual decisions by managers at the local level. That is precisely what happened here. The district court reasoned that the claim at issue was driven, not by a uniform unwritten corporate policy, but rather by the individual actions of specific managers acting contrary to corporate policy. Moreover, and encouragingly for employers defending collective actions and used to the invocation of the phrases “lenient standard” and “modest showing” at the conditional certification stage, the district court was able to recognize this at the early stage of the case and deny notice to the putative collective action members.

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:
Contractors. Joint employment. Fissured industry.
Interns. The “third way” and gig economy.

Economic reality. Right 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.