Co-authored by Catherine M. Dacre, Tamara Fisher, and Simon L. Yang

When an employer has a denial of class certification remanded by an appellate court, it has a reason to worry. And while the employer might breathe a sigh of relief when the district court on remand again denies class certification, nothing is certain when that decision also is appealed. But FedEx might finally relax now that the Ninth Circuit earlier this week affirmed the Central District of California’s second refusal to certify a class of employees who alleged that they were not paid for off-the-clock work before shifts or during meal breaks.

After previously remanding the district court’s denial of class certification and instructing it to reconsider class certification in light of California law applicable to the plaintiffs’ claims, the Ninth Circuit blessed the lower court’s conclusion that individual issues predominated over both claims. As to pre-shift work, the Ninth Circuit found that the district court had properly considered whether common evidence demonstrated that FedEx exerted control over employees who had clocked in but were not paid for time prior to the start of their scheduled shifts and determined that “absent a policy that prevents the FedEx employees from using that time for their own benefit,” no common questions existed.  The mistaken belief of a few employees that they were not free to leave after clocking in did not equate to a policy of control, and the fact that employees would be paid for time worked prior to the scheduled start of shift, if reported, defeated the plaintiffs’ argument that common questions predominated.

Next, on the issue of off-the-clock work during meal breaks, the Ninth Circuit confirmed that California law requires an employer to pay for work during meal breaks only when it knew or reasonably should have known about the work.  It then explained the district court properly concluded that individual issues would predominate because FedEx did not know or have reason to believe employees worked through provided meal breaks.  Even though the plaintiffs argued that FedEx could have reviewed electronic data showing when packages were scanned to determine whether scans occurred during meal breaks, the Ninth Circuit confirmed this evidence wouldn’t establish liability.  Because employers are not required “to police employees’ meal breaks … FedEx had no obligation to sift through the volumes of electronic data produced by the scanning devices to determine whether its employees were actually taking their authorized breaks.”  In sum, even though employer data may have demonstrated that employees were working during meal breaks, the existence of such data did not support a finding that an employer knew or reasonably should have known about the work or provide common evidence supporting class certification.

At least on these facts, ignorance was bliss for the employer, but not for the employees. Because FedEx properly provided meal breaks, the fact that it maintained electronic data did not mean it knew or should have known employees performed work during their meal breaks.  By contrast, employees’ ignorance of their ability to do as they pleased during pre-shift time did not save their claims for off-the-clock pay where no company policy exerted control over them.

Authored by Simon L. Yang

Final approval of a class action settlement sometimes isn’t so final.

At least that’s what the Ninth Circuit reminded Labor Ready Southwest, Inc. and a class of current and former employees earlier this week. On Tuesday, the Ninth Circuit vacated an order granting final approval of their class settlement of FLSA and California Labor Code claims and asked the Central District of California for a redo.

The Ninth Circuit on several occasions made clear that it was expressing no opinion on the ultimate fairness of the class settlement negotiated by the parties. So what was the issue?

Acknowledging that a district court has to engage in a “difficult balancing act” when considering both the strong judicial policy in favor of settlements and the district court’s fiduciary duty owed to absent class members, the Ninth Circuit remanded the case based on the “high procedural standard” for settlements that occur without a certified class.

The Ninth Circuit said the district court provided inadequate assurance that it considered the fairness of the settlement, by failing to sufficiently inquire about certain aspects of the settlement: (i) defendant agreed to a “clear sailing” arrangement (where it would not object to a certain fee request), (ii) class counsel would “receive a disproportionate distribution of the settlement,” and (iii) unclaimed settlement funds would revert back to the defendant.

Again, the Ninth Circuit reiterated that the existence of any one (or even all three) of the above-identified settlement terms “does not mean the settlement cannot still be fair, reasonable, or adequate” but that it “required the district court to examine them, and adequately to develop the record to support its final approval decision.”

So, next time you have a final approval hearing, consider whether you might want to slow down to ensure there’s no doubt about either the fairness—or finality—of your settlement.

Co-authored by Coby M. Turner and Adam J. Vergne

In the Central District of California—often known as a magical kingdom for plaintiffs in wage-hour lawsuits—Judge Fernando Olguin brought everyone back to reality by denying class certification. Plaintiff Aladdin Zackaria alleged Wal-Mart incorrectly classified its Asset Protection Coordinators (“APC”) as exempt and moved to certify a class of all APCs that worked in California. After a close inspection of the evidence presented by Wal-Mart, however, Judge Olguin found the disparate experiences of APCs at different Wal-Mart stores prevented the case from being resolved by “common proof on a class-wide basis.”

Despite finding that APCs operated under uniform corporate guidelines, had identical training, and had the same pro forma job responsibilities, the court noted the “touchstone” of analysis under the executive and administrative exemptions is the way in which employees actually spend their time at work. Based on detailed statements in declarations from putative class members gathered by Wal-Mart, Judge Olguin concluded the day-to-day activities and level of discretion exercised by employees varied greatly from one APC to the next. With such individualized experiences, the court held there was no showing of common proof to support trying the case as a class action. Although it may be too early to say it’s a whole new world for employers in California facing misclassification class actions, employers presenting evidence employees’ experiences are varied can position themselves to defeat class certification.

Beyond California, the standard applied to motions for class certification continues to vary somewhat from jurisdiction to jurisdiction and even judge to judge. But as courts gain experience in wage-hour matters, the granting of class certification is not a forgone conclusion as some had treated it. Even when applying the two-step certification analysis for collective actions under the FLSA, courts have shown a willingness to consider testimony in the form of declarations from putative class members in order to defeat evidence in the form of self-serving declarations submitted by named plaintiffs. Employers should take note. By spending the time to gather evidence early, a substantive opposition to class certification can be made—as opposed to mere hypothetical arguments. Although the costs of mounting such an opposition can be substantial, the value of defeating class certification makes such a challenge worthwhile … even in California.

Authored by Gena D. Usenheimer

Hourly pharmacists for CVS in California were forced to swallow a bitter pill late last year when Judge S. James Otero of the Central District or California denied their motion for class certification on claims for unpaid off-the-clock and overtime work.

The plaintiffs alleged that they were forced to work additional hours without pay in order to serve the pharmacy’s customers.  They argued that they could establish their claims on a class-wide basis by relying on CVS’s “Rx Connect” software system, which allows pharmacy employees to perform various daily tasks such as obtaining prescription information, verifying insurance data, and printing labels.  To access the system, employees must enter a three-letter credential that is obtained by inputting employee ID and password information each day.  The plaintiffs claimed they could establish liability for off-the-clock (and overtime) work by cross-referencing time records with the prescription records tracked in the Rx Connect database.

Judge Otero found the plaintiffs’ argument deficient in two main respects.  First, during the class period, CVS used two different computer systems, both of which allowed for the sharing of log-on credentials among multiple employees, making it nearly impossible to determine who was working when.  Second, the Rx Connect system (used for the majority of the class period) did not keep a record of which credentials were active for which employee at any given time.  This, too, made it nearly impossible to determine who was working when.  The court thus agreed with CVS that the only reliable way to learn whether pharmacy employees actually performed off-the-clock work is to ask them.  The need for such individualized inquiries defeated Rule 23(a)’s commonality requirement.

The same problem plagued the plaintiffs’ proposed overtime class:  there was no reliable method to track hours worked, and the evidence varied from manager to manager as to whether pharmacy employees were permitted to work overtime.  The court also found that the proposed class representatives were inadequate based on an “inherent tension” between supervisory pharmacists and those with subordinate titles.

The decision, Howard v. CVS Caremark Corp., serves as another helpful reminder that the presence of individualized inquiries remains a powerful weapon in the fight against Rule 23 class certification.