Co-authored by Robert S. Whitman and Needhy Shah

Seyfarth Synopsis: A judge in the Southern District of New York held that FLSA off-the-clock claims could not proceed collectively because the employer’s policy enforcement and approval of overtime compensation varied by supervisor.

In Lynch v. City of New York, Judge Katherine Forrest rejected an attempt to prosecute a single collective action for off-the-clock claims of employees in different units reporting to different supervisors. Ordering the case decertified, she held that the plaintiffs’ own testimony showed “critical differences in what supervisors told their employees about overtime.”

A group of five representative plaintiffs–current and former administrative assistants–asserted FLSA claims against the New York City Department of Homeless Services. The group had been granted conditional certification of a FLSA collective action, which requires only a modest showing that the employees were similarly situated with respect to alleged FLSA violations. A total of 30 opt-ins remained at the final certification stage.

Following discovery and motion practice, the court granted the City’s motion for decertification of the FLSA collective, determining that the plaintiffs were not similarly situated under the more stringent standard applicable after discovery is complete.

To determine whether plaintiffs could proceed collectively, the court analyzed whether the employees worked in disparate settings, whether the City would have individualized defenses to the employees’ claims, and the impact of fairness and procedural considerations. The court sided with the City on all of these factors due to the highly individualized nature of plaintiffs’ experiences with overtime compensation.

The core issues were whether the City had knowledge of plaintiffs’ uncompensated work outside regular hours and whether supervisors had uniform practices. Plaintiffs’ depositions revealed variations by supervisor on what employees were told about overtime and whether overtime compensation requests were approved. Employees were responsible for recording their hours in an electronic timekeeping system and submitting requests to be compensated for overtime hours. Plaintiffs claimed they did not always request to be compensated for overtime work, even though requests were routinely granted—98.5% of requests since July 2013 were approved.

These individualized factual issues and proof, the court said, meant there were few procedural benefits and little judicial efficiency to be gained through collective action. However, Judge Forrest left open the possibility of collective treatment of appropriate subclasses by supervisor or unit.

This opinion is another example of why employers should not get discouraged after an early pre-discovery grant of conditional certification. Even though courts regularly invoke the “lenient standard” at that stage, and sometimes decline to review the defendant’s evidence, all bets are off by the time the factual record is complete and the time for final certification arrives.

Co-authored by Christopher M. Cascino and Jennifer A. Riley

Seyfarth Synopsis: A federal district court last week decertified and effectively grounded a collective action of O’Hare Airport janitorial staff who claimed that their employer forced them to work off-the-clock without compensation. This decision, Solsol v. Scrub, Inc., stands out as a significant victory for employers because, even though all of the workers who joined the suit worked in one location and alleged off-the-clock work, the Court found their circumstances not similar enough to proceed to trial on a representative basis.

Case Background

Since at least October 2010, Scrub provided janitorial services at O’Hare airport. It did so pursuant to three types of contracts: (1) a contract with the City of Chicago to clean the domestic terminals; (2) contracts with airlines to clean gates; and (3) contracts with airlines to clean airplanes.

Plaintiffs, who worked for Scrub as janitors at O’Hare, sued Scrub, claiming that Scrub violated the FLSA in several ways. First, Plaintiffs claimed that Scrub only paid them for their scheduled, rather than actual, working hours. Second, Plaintiffs alleged that Scrub rounded their time in a way that undercompensated them. Third, Plaintiffs claimed that Scrub automatically deducted 30 minutes for meal breaks even when Plaintiffs worked during their breaks.

Plaintiffs alleged that Scrub did this to all its employees at O’Hare Airport, and the Court conditionally certified a collective action of Scrub employees who worked as janitorial staff at that airport. After discovery was complete, Scrub moved to decertify the collective action.

The Decision

In deciding that Plaintiffs’ collective action would not fly, the Court considered three factors. First, it considered whether the Plaintiffs and opt-ins had similar factual and employment settings. It found that, even though all opt-ins worked at O’Hare, it was at least questionable that all opt-ins worked in the same location given the size of O’Hare. The Court found that the opt-ins worked on different shifts for more than 40 different supervisors, weighing in favor of decertification.

The Court found that the claims of the opt-ins varied. Some claimed they were required to start work 15 minutes before their scheduled shift time every day; others claimed they worked only a few minutes before the start of their shift; still others claimed they did not work prior to the start of their shift. Some claimed their lunch breaks were interrupted for work about once per week; others claimed their lunch breaks were interrupted every day; others claimed they never took a lunch break; and others claimed they took full lunch breaks every day. Finally, the Court found that each supervisor had his or her own rounding policy. Given this, the Court found that Plaintiffs and the opt-ins had different factual and employment settings.

Second, the Court considered whether Scrub had individualized affirmative defenses. It found that Scrub could claim that it overpaid some opt-ins and that the unpaid time for some opt-ins was so minimal that it did not support a claim.

Third, the Court considered whether allowing the opt-ins’ claims to be decided in one proceeding would be fair. The court found that the only way to determine the number of hours that each opt-in worked without pay would be through individualized inquiries. Whereas Plaintiffs argued that the Court could determine the amount of off-the-clock work by comparing each employees’ time card with the time for which they were compensated, the Court found that this was, by necessity, individualized.

Finally, the Court found that the claims of the opt-ins could not be decided on the basis of “representative” testimony, especially in light of their different factual and employment settings. The Court, therefore, concluded that the collective action was not clear for trial and decertified the case.

Implications For Employers

The Court’s decision in Solsol provides a practical illustration of the fate that awaits many conditionally certified off-the-clock cases. Whereas employers facing conditionally certified collective actions have cause for concern, employers should remember that the standard at conditional certification is low and that plaintiffs often have a difficult time meeting the standard at decertification and showing that the claims of all opt-ins can be decided in one trial. This case provides a practical illustration of the shifting leverage that begins shortly after decertification as discovery shows that opt-ins assert different claims for different alleged violations at the hands of different supervisors.

Authored by Michael Kopp

With all the drama of a get-away chase, the Third Circuit recently brought to a screeching halt plaintiffs’ counsel’s elaborate maneuvers to end run repeated decertification of their FLSA actions, and held as a matter of first impression in Halle v. West Penn Allegheny Health System, Inc. that opt-in plaintiffs have no right to appeal decertification. The decision is important for three reasons. First, it offers a road block against the use of opt-in plaintiffs to appeal a decertification order, including where the named plaintiffs’ claims have been mooted. Second, it offers instruction on how to structure class notices to foreclose potential opt-in appeals. Third, it underscores the heightened strategic value of Rule 68 offers to named plaintiffs in FLSA actions after decertification to block appeals.

In a long and winding procedural path, plaintiffs’ counsel employed a “whack a mole” strategy to keep the possibility of a collective action alive after successive certification defeats. Counsel originally filed two separate FLSA collective actions, asserting claims that two hospitals and their affiliates failed to compensate work performed during unpaid meal period times. After conditional certification of the separate actions, over 3,000 and 800 individuals respectively opted into the two actions. In a happier moment in this narrative, the district court judges decertified the actions, due to differences in practices for reversing the 30-minute automatic deduction for meal periods, and differences in job duties and supervision that would impact whether work was performed during meal periods.

Plaintiffs’ first escape maneuver was a voluntary dismissal of their claims with prejudice, in the hopes of prompt appellate review of the interlocutory decertification orders. Instead, the Third Circuit rejected this “procedural slight-of-hand,” and held that by dismissing their claims, the named plaintiffs had mooted their claims (along with any right to challenge decertification). The appeals were dismissed for lack of jurisdiction.

Not to be deterred, plaintiffs’ counsel filed two new class actions against the same hospital defendants, with only slight modifications to the proposed class. The district courts promptly slammed the brakes, struck the collective allegations, and held that issue preclusion barred the named plaintiffs (who were opt ins in the prior actions), from re-litigating the prior decertification decision. In what appeared to be the end of the road, the employers then mooted the named plaintiffs’ claims by extending Rule 68 offers which were all accepted.

Not willing to give up the chase, plaintiff’s counsel deployed opt-in plaintiffs to appeal the order striking the collective allegations, claiming the opt-ins were “party plaintiffs” with full rights to appeal. The Third Circuit rejected these “procedural gymnastics,” finding that (1) the order striking the collective allegations effectively dismissed the opt-ins as parties to the action, and they therefore could not appeal the subsequent judgments, and (2) the opt-ins had signed consent forms ceding the individual authority to litigate, including the right to appeal. The Third Circuit recognized the claimed “unfairness” of leaving the opt-in plaintiffs without an opportunity to appeal where the employer “picked off” the named plaintiffs. Nonetheless, the court found that the “potential for unfairness” cannot trump an absence of jurisdiction.

Halle is, accordingly, important guidance in structuring class notices, and highlights the continuing strategic value of Rule 68 offers later in the action, including to moot claims and thereby potentially obtain expedited finality for a decertification order.

Authored by Eric Lloyd

Seyfarth Synopsis: Minor league baseball players took a swing at class certification, and they missed—badly.

In Senne v. Kansas City Royals Baseball Corp., et al., minor league baseball players across the country asserted wage and hour claims under the Fair Labor Standards Act (“FLSA”) and various state laws against Major League Baseball (“MLB”), the Commissioner of MLB, and a number of MLB franchises. The players sought allegedly unpaid minimum wages and overtime for “work” performed during the baseball season (such as travel to and from games and pre-game activities) and during the offseason (such as participating in spring training and offseason conditioning). The U.S. District Court for the Northern District of California conditionally certified the Plaintiffs’ proposed collective under the FLSA in October 2015.

Plaintiffs moved to certify their state law wage and hour claims in April 2016. In support of their class certification motion, Plaintiffs submitted declarations and testimony from two experts. Plaintiffs proposed that one of their experts would offer a damages model at trial based on estimates of the number of hours worked by each player during each work week in the class period. They further posited that these estimates would be based upon players’ responses to a survey devised by another expert, which asked players to provide information concerning the amounts of time they spent performing purportedly work-related activities. The Defendants asked the court to exclude the experts’ declarations and testimony on the ground that the proposed survey was flawed and would collect unreliable data.

The court denied Plaintiffs’ motion to certify their state law claims, and, decertified the FLSA collective. While this was obviously a welcome development for class action-weary employers, Chief Magistrate Judge Joseph C. Spero’s opinion stands out from other recent certification decisions given its extensive discussion regarding the use of representative evidence in class actions.

Judge Spero granted the Defendants’ motion to exclude Plaintiffs’ experts’ declarations and testimony, finding the proffered survey evidence to be “fundamentally flawed.” The court was troubled that the players’ survey responses would be unreliable insofar as the survey asked players to provide information concerning “mundane events” that may have happened years in the past, such as when they arrived and departed from a baseball stadium on a given day, whether their baseball-related activities were “rained out,” or whether they missed a practice due to injury or illness. The fact that no time records which could verify the players’ responses existed cemented the court’s conclusion that the survey data would be unsound. In addition, the court expressed concern that the survey responses would be tainted by self-interest bias given that “virtually all minor league players have a vested interest in the outcome of this litigation.”

The court also rejected the Plaintiffs’ argument that the U.S. Supreme Court’s recent decision in Tyson Foods, Inc. v. Bouaphakeo permitted the use of survey evidence given the absence of time records for the players. As Judge Spero noted, the players who comprised the putative class were not at all similarly situated—for instance, they played for different organizations, with different work requirements, in different states, with different laws—making it inappropriate to “paper over significant material variations [among the plaintiffs] that make application of the survey results to the class as a whole improper.” In other words, Tyson Foods was inapplicable because the players’ working conditions were simply too different to draw any reliable conclusions about class members’ claims based on purportedly representative survey evidence.

Senne is the latest case showing that courts are reviewing trial plans based on representative evidence with increased scrutiny, as discussed previously here. Judge Spero’s thorough 104 page opinion exposes a number holes in the use of survey evidence to support a trial plan—for instance, that it may be unverifiable and contaminated by the respondents’ self-interest—and it therefore provides employers with strong arguments to present in opposition to class certification.

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 Robert Whitman, Cameron Smith, and Meredith-Anne Berger

Former brokers of Fordham Financial Management will have to put this one in the “loss” column. Judge Paul Crotty of the Southern District of New York granted Fordham’s motion to decertify the FLSA collective in their lawsuit alleging they were misclassified as independent contractors.

The brokers initially succeeded in obtaining conditional certification of their misclassification claims under the relatively lenient FLSA standard in Griffith v. Fordham Financial Management, Inc. About a year later, the Plaintiffs moved for class certification under Rule 23, but the court denied the motion because they “failed to demonstrate that the primary dispute–whether Defendants ‘misclassified potential class members as independent contractors, rather than employees’–was capable of resolution by classwide proof.” Buoyed by that success, the Defendants then sought decertification of the FLSA collective action.

The court granted that motion. The court noted that plaintiffs must meet a higher standard at the second stage of the FLSA certification analysis – specifically, a burden “similar to Rule 23’s commonality requirement.” Taking the analogy further, Judge Crotty said that “functionally there is little difference” between the commonality inquiry and the second stage of FLSA certification.

Judge Crotty then held that the issue of employee vs. independent contractor status for the Fordham brokers “require[s] highly individualized inquiries.” Specifically, he noted that the deposition testimony of the opt-ins revealed widely differing schedules and contractual arrangements, as well as varying levels of control exercised over the plaintiffs’ daily responsibilities. On the whole, the court said, the case would require “individualized inquiries into each plaintiff’s work schedule, compensation, and the level of control Fordham exerted.”

Judge Crotty further noted that the low opt-in rate among the potential members of the collective, while not dispositive, suggested an “apparent lack of enthusiasm” and that individualized actions were more appropriate. (He did not state how low the rate was.)

Griffith is a potent reminder that all is not lost when FLSA conditional certification is granted. Where there is compelling evidence that the ultimate issue will require individualized factual determinations, employers can and should return to the judge to highlight those distinctions among the opt-in plaintiffs–and, if applicable, the low opt-in rate–in an effort to reverse their fortunes without the yoke of the “lenient standard” of stage one. Given the importance of certification to the outcome of cases, the effort can yield high dividends.

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!

Arkansas-Co-authored by Abad Lopez and Noah Finkel

The two-step “send notice now/worry later” approach to FLSA collective actions — in which courts approve notice to potential collective action members under the lenient standard but comfort defendant-employers with the bromide of “don’t worry, we can revisit the issue at the decertification stage under a more rigorous standard” — continues to leave a bad taste.

Those who follow FLSA collective action litigation are familiar with the recipe. Motions for conditional certification usually are subject to a “lenient standard” under which a plaintiff need carry only a “low burden” in making a “modest showing.” These motions thus typically result in a notice of collective action being issued to all those meeting the collective action definition. Dozens, hundreds, or even thousands then opt in to the case and substantially increase a defendant-employer’s potential exposure. Substantial discovery then occurs, and then the defendant-employer files a motion for decertification. Viewing that motion under a far more rigorous standard, courts often undo conditional certification and find that the collective action members are not in fact similarly-situated to each other. The dozens, hundreds, or even thousands who opted in then are dismissed from the case without prejudice.

So damage repaired, right? Unfortunately, no. Those former opt-ins — who would not exist but for the conditional certification order — can remain a significant cost and potential liability for an employer. They may file new lawsuits separately or in smaller groups, or they may even find their way back into the current lawsuit.

In other words, by refusing to conduct a meaningful analysis at the conditional certification stage, courts invite numerous individuals to join litigation through the collective action mechanism, even when their claims do not belong in the same lawsuit. Defendants then bear the burden of defending multiple lawsuits that, but for the ease of the two-step approach, probably would not have been brought to begin with.

A recent case in Arkansas illustrates this point. In Conners v. Catfish Pies, Inc., et al., an Arkansas federal judge conditionally certified a lawsuit accusing Gusano’s Chicago-Style Pizzeria restaurant operators of using illegal tip pools to pay waiters less than the minimum wage. Conners, who worked as a server at the Gusano’s location in Conway, Arkansas, claimed she was forced to pool her tips with cooks and other kitchen employees, who typically do not receive gratuities, in violation of the FLSA. Conners argued that because Gusano’s tip-sharing agreement was invalid, the company was required to pay her a minimum wage of $7.25 per hour, rather than the $2.75 plus tips that she was given.

Following conditional certification under the “lenient standard,” more than a dozen current and former waiters joined the lawsuit. Later, the court purportedly undid the damage when it decertified the lawsuit using the more rigorous analysis in the second step of the two-step certification process typically utilized for collective actions under the FLSA. In its decertification order, the court found that the plaintiffs were in fact not “similarly situated” because different workers were employed by different entities that operated the restaurants, and thus were subject to different pay practices.

But what seemed like a victory for the defendants turned out to be a headache. A few months later, the judge reconsidered part of his decision to decertify the collective action and split the case into four separate trials. Although the court had previously dismissed the claims of all opt-in plaintiffs in its decertification order, it allowed each opt-in plaintiff to join the lawsuit as a named plaintiff against the respective restaurant where he or she was employed. Instead of a victory, the restaurants now have to defend against multiple lawsuits by plaintiffs who were not properly before the court in the first place. For these restaurants, decertification didn’t undo the damage of the conditional certification order. Ultimately, decertification compounded their problem. And to add insult to injury, that is only after these restaurants spent a lot of time and money after conditional certification to get to decertification.

The Conners v. Catfish Pies litigation is a reminder that conditional certification, though it can be undone, has long-term consequences for defendant-employers. Even if the case ceases being a collective action, it nevertheless can transform into a multi-named-plaintiff case, or it can morph into dozens or more separate cases. Defendants need to continue to make this clear to judges when they oppose conditional certification.

Authored by Alex Passantino

It’s the week before Christmas, and we’ve accepted our mission,
The annual wage hour “sum-up” composition.
And to start it all off, we’ve got something nice,
‘Cause the Supreme Court addressed wage and hour stuff twice.

The year started out with the first one of those;
As Justice Scalia answered “What counts as clothes?”
With one simple phrase, the Court cleaned up a mess,
Clothes should be “commonly regarded as articles of dress.”

Gloves and hardhats, and fireproof suits,
And your shirt and your pants (and, presumably, boots),
They all count as clothes, from your toes to your face.
But not glasses, or plugs that can block out the bass.

Then later this year, the Court came back again,
To answer the question, “The clock, it starts when?
If you screen all your workers so they don’t steal your stuff,
And the clock stops before they’re in line, that’s enough.

The statute considered? ’Tis one that’s immortal.
The 68-year-old Portal-to-Portal.
With language so dated, it puts “whilst thou” to shame,
So we list the words here and we call them by name:

Principal Activity!  Integral! And Indispensable!
The words that define whether work is compensable.
The task’s required?  So what?  That’s not a fight you should pick.
You pay only those duties whose element’s intrinsic.

Now we leave SCOTUS cases and we turn to the rest,
The five or six topics our blog writers liked best.
Appearing so often, it borders on a fixation.
Are cases addressing increased decertification

And non-certification (you know what we mean).
Early on, or at trial, and all points in between.
Surveys kicked out.  Class reps were rejected.
Comcast has turned out to be nearly all we expected.

And even where Rio can dance on the sand,
Out came a case simply known as Duran.
If you’re asked to provide your trial proof logistics,
You can no longer just smile, shrug, and yell out “Statistics!”

So much litigation, so many cases to savor
And that’s only the issue of classbased arb waiver.
Add holding plaintiffs to standards when pleading a case,
And it kinda feels like employers are leading this race.

But just when you think wage claims might become less systemic,
We look at case numbers and declare “Epidemic!”
Interns, exemptions, independent contractor relations
Dominate dockets across the whole nation.

The government, too, makes employers squirm.
And this year, a new boss has gotten confirmed.
Those in restaurants, lodging, and others franchised,
Into DOL investigations, you’ll soon be baptized.

Now as we approach the end of the year,
And look forward to next, and the things we should fear,
At the top of the list, the elephant in the room,
Is the effort to make your exemptions go “Boom!

In early 2015, we’ll know what DOL may have planned,
If the rules out in Cali will apply ‘cross the land.
But before we say bye to the year that’s near past
Thanks for reading our blog.  You’ve made it a blast.

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

Co-authored by Gerald L. Maatman, Jr. and Matthew J. Gagnon

In a huge win for restaurant companies everywhere, Judge William Dimitrouleas of the U. S. District Court for the Southern District of Florida recently decertified a nationwide collective action against Darden Restaurants, Inc. – the corporate home of such iconic brands as Olive Garden and LongHorn Steakhouse – in Mathis et al. v. Darden Restaurants, Inc., Case No. 12-CV-61742, 2014 U.S. Dist. LEXIS 124631 (S.D. Fla. Sept. 1, 2014).  In July 2013, the Court had conditionally certified a nationwide collective action alleging that Darden required servers and bartenders to work “off-the-clock” and paid them the tip-credit wage for time spent on non-tip producing tasks.  The collective action spanned all 50 states and included over 218,000 putative class members.  More than 20,000 employees chose to opt-in to the suit.

While the Court may have been willing to certify a collective under the lenient standard applied at the conditional certification stage, anyone familiar with Darden and how it treats its employees knew that this collective action would ultimately be decertified.  And indeed, when Darden moved to decertify the collective action a year later, the Court sided with Darden, finding no evidence of a company policy that required employees to work off-the-clock or that resulted in employees being paid the tip credit rate improperly.

In a by-the-book decision, Judge Dimitrouleas applied the three factors identified by the Eleventh Circuit in Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1261 (11th Cir. 2008), as relevant to the decertification decision, including: (1) the existence of disparate factual and employment settings; (2) the existences of individualized defenses; and (3) fairness and procedural considerations.

The Court found that the opt-in plaintiffs worked under hopelessly disparate factual and employment settings.  The collective action encompassed two job titles, bartenders and servers, in over 1,995 restaurants spread across 50 states.  The relevant policies and practices relating to off-the-clock work and wages would differ by job title, state, brand (Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, and Red Lobster), specific restaurant, and manager.  Moreover, the opt-in plaintiffs asserted various combinations of claims relating to the tip-credit, off-the-clock work, and overtime.  This meant that there were six different combinations of claims that each opt-in plaintiff could make.  Given these differences, the Court found that this factor alone weighed heavily in favor of decertification.

Second, the Court held that Darden had multiple individualized defenses that would preclude collective adjudication.  For example, liability could depend on whether employees had received instructions from managers who were acting outside the scope of their authority and contrary to well-established company policies and practices.  Employees may also have voluntarily engaged in off-the-clock work in defiance of Darden’s official policies, or they may have unreasonably failed to avail themselves of the opportunities provided by the company to recover unpaid compensation.  In sum, although some factual issues – such as the existence and communication to employees of uniform nationwide policies – could be determined on a class-wide basis, the majority of material issues relating to Darden’s defenses were highly individualized.

Finally, the Court noted that a collective action of plaintiffs’ claims would be unmanageable and procedurally unfair to Darden.  In short, the circumstances of each individual employee were too dissimilar to justify a collective action, and plaintiffs’ proposed use of representative evidence or damage models could not account for the material distinctions among class members.  Yet, if the case were to proceed as a collective action, Darden would be subject to all-or-nothing liability for large groups of employees despite the material differences in working conditions and individual defenses.

Implications For Employers

This case shows how important it is for an employer not to give up even after an adverse conditional certification decision, and to move forward and present its evidence to the Court in a decertification setting.  In this case, the Court had concluded that although certification was warranted under the “fairly lenient standard” at the conditional certification stage, the more developed record at the decertification stage demonstrated that plaintiffs were not in fact similarly situated, and that a nationwide collective action would not be practical, efficient, or fair.  Although it took another year of hard-fought discovery, Darden’s willingness to stand its ground and defend its reputation paid off.