Wage & Hour Counsel

New York Federal Court Denies Class Certification to Unpaid Interns

Wage and Hour Practice Group — Mon, 13 May 2013 12:41:28 -0800

On May 8, 2013, in Wang v. Hearst Corp., the U.S. District Court for the Southern District of New York denied certification under Rule 23 of a class of unpaid interns at Hearst Magazines.

First, the court found that Rule 23(a)(2)’s commonality requirement was not satisfied under the Supreme Court’s standard in Dukes v. Wal-Mart Stores, Inc. because the plaintiffs could not “show anything more than a uniform policy of unpaid internship.” The plaintiffs’ evidence of a corporate-wide policy of classifying the proposed class members as unpaid interns was insufficient to establish commonality because the duties of the interns varied greatly from each other and from magazine to magazine. The court acknowledged that even after Dukes, “courts of this district have routinely found commonality in analogous misclassification cases,” but distinguished this case because the plaintiffs were not able to show a company-wide policy regarding their duties in addition to a company-wide policy regarding their classification. The court rejected the interns’ argument that the court should look to "the nature of the work that interns performed" to find commonality, stating that the “glaring problem” is that there is no common proof from which the court could determine the "nature" of the interns' work.

Next, the court found the interns failed to satisfy the predominance requirement, which the court noted is even more demanding than the commonality requirement, because there was no uniform policy among the magazines regarding the interns’ training, duties, and supervision. Thus, individualized analysis would be required to determine four of the six DOL factors used to determine whether the interns were required to be paid. “Because the content of the internships, which is the core of the dispute, cannot be evaluated based on common proof,” the court concluded, “individual issues clearly overwhelm the common ones here.”

The court noted that its conclusion regarding lack of predominance did not even take into account any problems related to damages calculation, citing the U.S. Supreme Court’s holding in Comcast Corp. v. Behrend that common questions cannot predominate when individual damage calculations will inevitably overwhelm questions common to the class. The court rejected the plaintiffs’ argument that Comcast was limited to antitrust cases, finding that the Supreme Court had explicitly rejected that proposition when it stated: “This case [] turns on the straightforward application of class-certification principles.” In addition, referring to the Supreme Court’s decision in RBS Citizens, N.A. v. Ross, the court stated that “one must pause at least for a moment” when the Supreme Court has vacated and remanded a Seventh Circuit decision in an employee misclassification case “in light of Comcast.”

While the district court’s class certification decision did not ultimately turn on individualized damages issues, the court’s commentary on the applicability of Comcast in wage and hour class actions is another favorable development for employers, particularly in the Southern District of New York, which, as the court itself noted, has been fertile ground for certification of wage and hour class actions. As discussed in a prior post, two other New York federal courts also recently denied class certification or granted decertification based on Comcast – Roach v. T.L. Cannon Corp. and Tracey v. NVR, Inc.

California Federal Court Relies on Comcast to Deny Class Certification of Off-The-Clock and Meal Period Claims

Wage and Hour Practice Group — Wed, 08 May 2013 10:11:27 -0800

By Bill Allen

Relying on the U.S. Supreme Court’s recent decision in Comcast Corp. v. Behrend, the U.S. District Court for the Central District of California denied Rule 23 class certification of California state law claims for off-the-clock work and unpaid work time during meal periods in Forrand v. Federal Express Corp.*

First, the plaintiff alleged that she and other hourly employees were not paid for work performed during the time between their clock-in times and their scheduled start times. The district court had previously denied class certification on this claim, but in 2010 the Ninth Circuit reversed and remanded that decision to “determine whether the level of FedEx’s control over employees within the proposed general class when they are on-the-clock but off-shift” was sufficient to render that time compensable under California law. On remand, the district court noted that Comcast requires a plaintiff “to bring forth a measurement method that can be applied classwide and that ties the plaintiff’s legal theory to the impact of the defendant’s illegal conduct.” The court found that the plaintiff’s proposed damages methodology, which assumed the entire gap between clock-in and the start of paid time was compensable, could be applied classwide, but failed “to tie California law to liability and a reliable measure of damages.” The court found that the plaintiff’s proposed class claim raised factual questions regarding whether each individual employee was in fact working and/or under the employer’s control during the gap period, and therefore individual factual inquiries predominated over classwide inquiries.

Second, on her meal period class claim, the named plaintiff alleged that she never received an uninterrupted 30-minute lunch break, presented testimony of another employee who claimed he had been required to work through unpaid meal breaks, and described data from earlier litigation purporting to show that 23.1 percent of unpaid breaks were interrupted by work. Under California law, an employer must relieve its employees of all duty for an uninterrupted 30-minute period but need not actually ensure its employees take meal breaks and need only pay for interrupted or missed meal breaks when it knows or should have known that an employee was working through the meal period. Again, the district court found Comcast instructive, stating that while the plaintiff’s “evidence and method of proof was applicable to the class as a whole, it does not adequately tie [her] allegation . . . to a proper and reliable measure of damages for work done on those breaks,” particularly because of the requirement to prove the employer knew or should have known of the work during the unpaid meal periods.

The Forrand decision represents at least the fourth wage and hour decision applying Comcast’s requirement that plaintiffs establish “damages are capable of measurement on a classwide basis” and denying class certification for failure to satisfy Rule 23(b)(3)’s predominance requirement. As discussed in a prior post, two of these decisions were in district courts in the Second Circuit – Roach v. T.L. Cannon Corp., and Tracy v. NVR, Inc. – and one was in a district court in the Ninth Circuit – Ginsburg v. Comcast Cable Communications Management. In addition, on April 1, 2013, the U.S. Supreme Court vacated and remanded Ross v. RBS Citizens, N.A. for further consideration in light of Comcast. In Ross, the Seventh Circuit had affirmed the district court’s decision certifying a class action involving off-the-clock and misclassification claims.

However, in Martins v. 3PD, Inc., a federal district court in Massachusetts certified a wage and hour class action and distinguished Comcast on the grounds that the parties in Comcast had conceded that the individual damages calculations fell within the “Herculean task” category and therefore warranted denial of class certification under the predominance requirement. The court interpreted Comcast “not to foreclose the possibility of class certification where some individual issues of the calculation of damages might remain, as in the current case, but those determinations will neither be particularly complicated nor overwhelmingly numerous.”

These decisions are likely only the start of a potential flood of decisions discussing the application of Comcast to class certification decisions in wage and hour cases. We will keep you posted as significant developments occur.

*The case was litigated by Federal Express’s in-house legal department.

Citing Comcast and Dukes, a New York Federal Judge Denies Class Certification in Outside Sales Misclassification Case

Wage and Hour Practice Group — Mon, 06 May 2013 15:43:33 -0800

By Stephen Fuchs

In a welcome decision for employers, Tracy v. NVR Inc., the federal District Court for the Western District of New York granted the employer’s motion to decertify a collective action under the FLSA and denied the plaintiffs’ motion to certify a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure. The case involved a putative class of Home Sales and Marketing Representatives (SMRs) who claimed they were misclassified as exempt outside sales representatives.

The key issue in the case was whether the SMRs satisfied the outside sales exemption requirement that they work away from the employer’s business for the requisite period of time each week. In denying certification of the Rule 23 state law class action, the Tracy court cited the U.S. Supreme Court’s recent decisions in Comcast Corp. v. Behrend, which held that class certification requires a classwide method of measuring damages, and Dukes v. Wal-Mart Stores Inc., which held that commonality requires not only common questions, but also common answers to those questions. Applying these principles, the court found that because the SMRs worked in different locations, under different supervisors, and performed duties outside of their offices in varying degrees and in different ways, their claims “as well as any determinations to be made concerning damages – are too highly individualized to form the basis for a class action.” Moreover, the court concluded, “the interests of judicial economy would not be served by the hundreds of fact-intensive ‘mini-trials’ that a class action of this nature would require.”

Similarly, as to the FLSA collective claims, the court reasoned that the broad variations in the SMRs’ work activities made it “impossible to make a blanket determination concerning the FLSA exempt status of the entire class of putative plaintiffs in this case . . . .” In this regard, the court noted that the evidence demonstrated a wide variety of employment practices and time management requirements among the SMRs so that dozens of mini-trials would be required to determine whether individual SMRs satisfied the outside sales exemption.

The Tracy decision is significant for a number of reasons. First, the decision is a notable exception to the many decisions by the district courts in the Second Circuit, which have generally granted certification in both FLSA collective actions and Rule 23 class actions. Although the court specifically noted that “it seems beyond peradventure that the Second Circuit’s general preference is for granting rather than denying class certification,” the court relied on Comcast and Dukes to buck the trend. In doing so, the Tracy court joins the court in Roach v. T.L. Cannon Corp.,* the only other decision to date within the Second Circuit to apply Comcast to deny class certification in a wage and hour case.

Second, the decision is important because of its potential application to other outside sales misclassification cases in other industries, in which sales and marketing representatives who call on customers typically engage in varied activities, in different locations, for varied periods of time outside of the office.

While it remains to be seen how the Second Circuit and courts in the Southern and Eastern Districts of New York will apply Comcast to Rule 23 wage and hour class actions, and how all courts will apply Comcast to FLSA collective actions, so far Comcast has raised the burden on plaintiffs seeking class certification to show not only commonality as to their claims but also that their damages must be measurable on a classwide basis.

*Littler attorneys represented the defendant in that case.

Photo credit: MBPhoto, Inc.

Eighth Circuit Holds Plaintiffs Must Provide Evidence of Actual Damages Even when Employer Doesn't Keep Accurate Time Records

Wage and Hour Practice Group — Mon, 29 Apr 2013 08:52:07 -0800

By Matthew Hank

In Carmody v. Kansas City Board of Police Commissioners, the Eighth Circuit Court of Appeals addressed the standard of proof in a wage and hour case when an employer fails to maintain accurate timekeeping records. The court held that, even under the “relaxed standard” established by the U.S. Supreme Court in Anderson v. Mt. Clemens Pottery Co., plaintiffs in a wage and hour case must still provide evidence of actual damages.

Carmody involved a group of police officers who sued the Kansas City Board of Police Commissioners, claiming they were given flextime instead of overtime wages as required by the Fair Labor Standards Act (FLSA). Neither the officers nor the city tracked the accrued flextime. In response to discovery requests, the officers failed to provide information about the number of uncompensated hours they claimed to have worked or the amount of money they alleged was owed. Only after the close of discovery, and after the defendants moved for summary judgment, did the officers come forth with evidence of damages: the officers’ affidavits containing precise estimations, week by week, of unpaid hours worked.

The district court granted the defendants’ motion to strike the untimely affidavits, reasoning that the late production of the affidavits was prejudicial to the defendants because the city’s entire litigation posture might have been different if these numbers had been provided earlier. In addition, the court noted, allowing the officers to put forth untimely evidence of damages would prolong the litigation by forcing the district court to allow the defendants to re-open discovery and re-depose the officers, which would be unfair to the defendants, waste judicial resources, and fail to deter future violations of discovery obligations. The district court then granted summary judgment for the defendants because, without the affidavits, the court concluded that the officers could not satisfy their burden of proving the amount and extent of their alleged overtime work.

On appeal, the Eighth Circuit affirmed, finding that the district court did not abuse its discretion in striking the affidavits. Perhaps even more significantly, the Eighth Circuit delineated the standard of evidence required when the employer has not kept accurate time records. The court pointed out that the “relaxed” evidentiary standard under Mt. Clemens only applies when the existence of damages is certain. Thus, in this case, the plaintiffs had an initial burden of showing they carried flex hours forward into a new work week (in violation of the FLSA), or went entirely unpaid for those hours – a burden they did not satisfy. Although the officers provided evidence of the flextime practice, without the untimely affidavits there was no evidence of specific dates and hours worked, or money owed. “The city’s failure to provide accurate time records reduces the officers’ burden, but does not eliminate it,” the court stated. “Even though [Mt. Clemens] relaxes the burden of proof, the officers must still prove the existence of damages . . . . Without record evidence of a single hour worked over forty hours that did not receive overtime wages or flextime, the officers’ unsupported estimations of the unpaid hours due are not enough.”

Carmody provides welcome clarity to the often misconstrued “relaxed” evidentiary standard to be applied when, as in flextime or misclassification cases, employers have not maintained records of hours worked by employees they believed, in good faith, were not entitled to overtime wages.

Photo credit: Matthew John Hollinshead

U.S. Supreme Court Tackles Rule 68 Offers of Judgment Made to a Lead Plaintiff in an FLSA Collective Action

Wage and Hour Practice Group — Mon, 22 Apr 2013 10:20:57 -0800

By Martha Keon and Bill Simmons

Last week, a divided U.S. Supreme Court ruled in Genesis HealthCare Corporation v. Symczyk, that if the Fair Labor Standards Act (FLSA) claim of a lead plaintiff in an FLSA collective action becomes moot before anyone else opts in, the mere presence of collective action allegations in the complaint is not sufficient to make the FLSA claim justiciable, and the FLSA claim should be dismissed for lack of subject matter jurisdiction.

Background

Laura Symczyk was employed as a registered nurse by Genesis Healthcare Corp. in Philadelphia for eight months during 2007. Two years after she left, Symczyk filed a collective action against Genesis in federal district court, claiming Genesis had violated the FLSA by automatically deducting 30 minutes of time per shift for meal breaks, during which she claimed compensable work had been performed. Symczyk asserted her claims on behalf of herself and all employees similarly situated, seeking back pay, liquidated damages and attorney's fees. When it answered the complaint, Genesis served Symczyk with an offer of judgment under Federal Rule of Civil Procedure 68, offering her $7,500 for alleged unpaid wages, plus attorney's fees, costs, and expenses as determined by the court. Under Rule 68, a plaintiff who rejects an offer of judgment and then secures less at trial is liable for post-offer costs (such as mileage fees to subpoenaed witnesses, court filing fees, and costs for transcripts and photocopying). Symczyk did not accept Genesis' offer of judgment, and it expired.

Genesis then moved to dismiss for lack of subject matter jurisdiction, arguing that because it had offered Symczyk complete relief on her individual claim for damages, she no longer possessed a personal stake in the outcome of the suit, rendering it moot. Symczyk did not dispute that Genesis had offered her full relief, but instead argued that courts disfavor attempts to "pick off" a plaintiff before ruling on a motion for conditional certification. Symczyk relied on Weiss v. Regal Collections, 385 F.3d 337, 340 (3d Cir. 2004) in which the Third Circuit rejected the defendant's attempt to dismiss a Rule 23 class action by making an offer of judgment before the class certification motion was decided. The Weiss court allowed the plaintiff to file a class certification motion, which would vest him with the procedural right to act on behalf of the class, despite the prior Rule 68 offer, relying on the "relation back" doctrine. This doctrine allows a court to retain jurisdiction over a dispute considered so transitory that it may become moot and evade review before a court reaches the merits. Evidently to advance this argument based on Weiss, Symczyk filed an amended complaint adding a state law claim and seeking class action status under Rule 23.

In ruling on Genesis's motion to dismiss, the district court considered the federal court precedents on the issue and found they could be harmonized to support the conclusion that a Rule 68 offer of judgment can moot an FLSA collective action where, as here: (1) the motion for conditional certification had not yet been filed, (2) no others had opted in, and (3) there was no dispute that the Rule 68 offer of judgment satisfied Symczyk's claims. The district court ruled that the Rule 68 offer of judgment mooted the collective action, which should be dismissed for lack of subject matter jurisdiction. The district court dismissed Symczyk's FLSA claim, and after Symczyk conceded that the court lacked supplemental jurisdiction over her state law Rule 23 claim, that claim was remanded to state court.

On appeal, the Third Circuit considered whether an FLSA collective action becomes moot when (1) the putative representative receives a Rule 68 offer in full satisfaction of her individual claim, (2) no motion for conditional certification has been filed, and (3) no other potential plaintiff has opted in to the lawsuit. The Third Circuit reversed the district court, holding that allowing a Rule 68 offer of judgment to moot a collective action claim before the motion for conditional certification was decided would frustrate the purposes of the FLSA. Relying on the reasoning of Weiss, the Court ruled that absent undue delay, the district court should relate back the motion for conditional certification to the filing of the initial complaint.

Supreme Court’s Decision

On further appeal, Justice Thomas, writing for a divided (5-4) Supreme Court, reversed the Third Circuit. As an initial matter, the Supreme Court declined to reach the argument made by Symczyk that her claim was not moot because she never accepted the offer of judgment (and never received the money offered). The Court reasoned that even though there was a Circuit split on whether an unaccepted offer of judgment could moot a plaintiff's claim, Symczyk had waived the issue in the lower courts. The Court assumed, without deciding, that Symczyk's claim was moot, and then turned to whether the FLSA action remained justiciable based on Symczyk's collective action allegations. The Court held that a straightforward application of mootness principles compels the answer that absent anyone else opting in, the suit became moot when Symczyk's individual claim became moot. In so ruling, the Court rejected Symczyk's reliance on Rule 23 cases. The Court explained that a grant of conditional certification in an FLSA collective action only triggers sending notice to putative collective action members who must then file consents to opt in to the action. It "does not produce a class with an independent legal status, or join additional parties to the action" as does a Rule 23 class certification. The Court also rejected the Third Circuit's reliance on the relation back doctrine, noting this doctrine applies to save from dismissal, on mootness grounds, cases involving transitory conduct that may otherwise evade court review. The Court explained this case sought damages, not injunctive relief, and could not evade review, as Symczyk's being made whole by an offer of judgment only foreclosed the putative collective action members from pursing their claims in Symczyk' s case, not in their own cases.

In a vigorous dissent, Justice Kagan argued that even though Symczyk had waived the issue in the lower courts, the Supreme Court should have decided whether an unaccepted offer of judgment could moot a claim because otherwise the Court's decision was so narrow as to be of little utility. Justice Kagan argued that an unaccepted Rule 68 offer of judgment should not moot a claim because Rule 68 does not provide for that and because the offer of judgment on Symczyk's individual claim did not give Symczyk all that she had requested in the complaint because it did not address her collective action allegations.

What Now?

To assess the utility of this decision in any given case, at least the following factors should be considered:

First, has a motion for conditional certification been filed? The Court's decision suggests this may not matter, as conditional certification only results in notice to the putative collective action members, not to the creation of a "class with an independent legal status" or a joining of "additional parties to the action."
Second, has anyone else opted in? If so, the case will not be mooted, but an employer may want to consider making another offer of judgment to subsequent opt-ins.
Third, does the offer of judgment provide for full relief? While this issue was not disputed in Symczyk, in many cases it will be disputed, so care must be taken in formulating any offer of judgment.
Fourth, if other claims are also alleged, what are the ramifications of a successful offer of judgment as to the FLSA claim? For example, if there is a Rule 23 claim, is there an independent basis for federal court jurisdiction or is there a significant risk of remand of the Rule 23 claim to state court?
Fifth, if there is a state law Rule 23 claim, is there a way to use an offer of judgment also to moot the named plaintiff's state law claim prior to class certification? The Court suggests this may be possible if the relation back doctrine would not be triggered (i.e. damages are sought and the actions are not inherently transitory and likely to evade court review).
Sixth, if the plaintiff does not accept the offer of judgment, does an unaccepted offer of judgment that provides for full relief moot the plaintiff's claim? The answer to this question varies by Circuit. Stay tuned for a forthcoming Blog post on this issue!

Relying on Concepcion, the Fourth Circuit Reiterates Broad FAA Preemption and Holds Class Action Waiver in Arbitration Agreement Is Enforceable

Wage and Hour Practice Group — Wed, 03 Apr 2013 14:25:21 -0800

By Bill Allen and Steven Kaplan

Relying on AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), the U.S. Court of Appeals for the Fourth Circuit held on April 1, 2013 that an arbitration provision in a franchise agreement prohibiting signatories from participating in class and collective actions is lawful in light of the clear federal directive in support of arbitration. In Muriithi v. Shuttle Express, Inc., the Fourth Circuit further found that: (1) an agreement that provides for a split in the cost of arbitration must be analyzed on a case-by case basis; and (2) a truncated statute of limitations contained outside of the arbitration clause should be reviewed by the arbitrator. The court’s decision overturned the District Court of Maryland’s March 2011 pre-Concepcion ruling that the arbitration agreement was “so permeated by substantively unconscionable provisions” that it was unenforceable. The plaintiff, a driver for a passenger shuttle service, had alleged that he and other putative class members were improperly classified as “franchisees” or “independent contractors,” and were therefore entitled to minimum wage and overtime pay under the FLSA.

The court first addressed the enforceability of the class action waiver in light of Concepcion. In Concepcion, the U.S. Supreme Court upheld a class action waiver in an arbitration agreement and invalidated a state law that conditioned the enforceability of such an agreement on the availability of class-wide arbitration. Although the plaintiff argued that Concepcion was inapposite because its holding should be limited to the preemption of a California state law, the Fourth Circuit found that “Concepcion sweeps more broadly,” and that its holding “was not merely an assertion of federal preemption, but plainly prohibited application of the general contract defense of unconscionability to invalidate an otherwise valid arbitration agreement.”

Next, the court found that the plaintiff failed to meet his burden to show that the fee-splitting provision would prevent him from vindicating his statutory rights (he merely offered evidence of what arbitrators were charging in another locale and offered no evidence of the value of his claim). Lastly, the court found that the challenge to the one-year limitations provision should not have been decided by the district court because the term was applicable to the franchise agreement generally and not part of the arbitration clause. As a result, and because the scope of a motion to compel arbitration is restricted to challenges specific to the arbitration clause, the plaintiff’s challenge to the limitations period should be decided by an arbitrator.

This opinion is significant because it is yet another federal appellate court opinion upholding a class action waiver in the context of a collective action, and it articulates an expansive view of the holding of Concepcion.

Photo credit: Logan Simmons

Supreme Court Vacates Key Seventh Circuit Wage and Hour Class Certification Decision For Further Consideration in Light of Comcast

Wage and Hour Practice Group — Wed, 03 Apr 2013 12:48:30 -0800

By Bill Allen

Less than one week after issuing its decision in Comcast Corp. v. Behrend, 2013 U.S. LEXIS 2544 (Mar. 27, 2013), the Supreme Court granted a writ of certiorari in Ross v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir. 2012), vacated the Seventh Circuit’s decision, and remanded the case for further consideration in light of Comcast. The Court’s action may have a significant impact on class action wage and hour law, as Ross has been frequently cited by wage and hour class action plaintiffs to limit the reach of the Supreme Court’s landmark class certification ruling in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. __, 131 S. Ct. 2541 (2011).

In Ross, the Seventh Circuit affirmed the district court’s pre-Dukes certification of a class of hourly bank employees who alleged off-the-clock work and a class of assistant branch managers who alleged they were misclassified as exempt. The court of appeals found that the Supreme Court’s discussion of the Rule 23(a)(2) commonality standard in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. __, 131 S. Ct. 2541 (2011), a gender discrimination class action, did not change the commonality analysis in the case. Specifically, the Seventh Circuit distinguished Dukes as a case requiring individual inquiry into the discriminatory intent of thousands of managers, whereas it found that plaintiffs’ assertion of an “unofficial policy” of not paying for all time worked was susceptible to a “common answer that potentially drives the resolution of this litigation.” With respect to the exemption claims, the Seventh Circuit stated that “an individualized assessment of each [class member’s] job duties is not relevant to a claim that an unlawful company-wide policy exists to deny [class members] overtime pay.” Finally, the Seventh Circuit rejected the company’s argument that, in accordance with Dukes, it was entitled to present individualized affirmative defenses to the exemption claims, reasoning that Dukes only applied to claims for equitable relief under Rule 23(b)(2) and not claims for monetary relief under Rule 23(b)(3).

The employer sought a writ of certiorari on the following two questions: (1) Whether it was consistent with Dukes to hold that a defendant in a Rule 23(b)(3) class action has no right to raise statutory affirmative defenses on an individual basis if the class seeks only monetary relief; and (2) whether the Rule 23(a)(2) commonality standard is satisfied when a class claims the denial of overtime pay, without resolving whether dissimilarities in the class would preclude it from establishing liability on a class-wide basis.

Because the Seventh Circuit’s Ross decision did not expressly discuss the common proof of damages as an aspect of class acertification, it is unclear how Comcast will be applied on remand. However, the district court concluded that individualized damages issues were generally not relevant to certification decisions, stating: “Courts have not traditionally found individualized questions of damages to prevent class certification.” After Comcast, that may no longer be true.

Pennsylvania Federal Court Decertifies FLSA Off-the-Clock Collective Action Against Citizens Bank

Wage and Hour Practice Group — Mon, 01 Apr 2013 15:13:03 -0800

By Bill Allen

In Martin v. Citizens Financial Group, Inc., No. 2:10-cv-00260 (E.D. Pa. Mar. 27, 2013), Judge Goldberg of the Eastern District of Pennsylvania decertified an FLSA collective action involving 843 opt-in plaintiffs who had worked in a variety of hourly positions at over 1,000 bank branches in nine states. The plaintiffs alleged that the defendant’s unlawful practices included prohibiting employees from recording all time worked in excess of 40 hours in a week, erasing or modifying employees’ time records to eliminate or reduce overtime hours, providing “comp time” in subsequent weeks in lieu of paying overtime, and requiring employees to work during unpaid breaks. The district court held that the plaintiffs had failed to establish they met the FLSA’s “similarly situated” requirement.

Although the court found the plaintiffs’ evidence tended to establish that the putative class members may have been denied overtime, the plaintiffs were unable to produce “substantial evidence of a single decision, policy, or plan” that affected employees in the same way. Rather, the plaintiffs reported that the overtime denial decisions were made independently, either at the branch or regional level, and were in direct conflict with the company’s written policy requiring compliance with all state and federal overtime compensation rules. The court noted that the 435 declarations submitted by the plaintiffs themselves showed frequent disparities in the methods in which the plaintiffs alleged they were denied overtime.

The district court also found that the company’s individualized defenses weighed against certification. First, the district court noted contradictions between the plaintiffs’ and managers’ declarations as to whether overtime was denied. “In order to resolve the question of liability, a fact-finder would need to determine whether the employee or the manager was being truthful,” and resolving the dispute as to one plaintiff and one manager would not resolve the issue for any of the others. Second, the district court found that cross-examination about statements by particular plaintiffs in their declarations and depositions would not resolve credibility disputes as to other plaintiffs. Such individualized defenses “destroy the efficiency sought to be gained through a collective action.”

Finally, the court found that a representative sampling of plaintiffs would prejudice the parties. The court stated that “the multitude of differences in the factual and employment settings of Plaintiffs, Plaintiffs’ inability to provide evidence of an overarching illegal policy, and concerns of individualized defenses, . . . [as well as] fairness and procedural considerations” required decertification. Although mindful of the potential problem that would result if hundreds of opt-in plaintiffs initiated suits on an individual basis, the court noted that “lower costs and pooling of resources are not the only considerations. Any efficiency gained through bringing this action collectively would be outweighed by the substantial likelihood of ‘mini-trials’ and the risk of prejudice to both parties.”

While this case provides additional case authority to support decertification arguments such as individualized factual settings and the resulting “mini-trials,” it is perhaps most helpful in its commentary on the need to resolve, on an individualized basis, factual disputes and credibility issues.

Photo credit: Alina555

California Appellate Court Rules that Piece Rate Workers Are Entitled to Separate Hourly Compensation

Wage and Hour Practice Group — Fri, 22 Mar 2013 15:23:56 -0800

In Gonzales v. Downtown LA Motors, LP, a California Court of Appeal dealt another blow to employers this month when it held automobile mechanics, who earned at least minimum wage for every hour worked, were entitled to separate hourly compensation for any time not spent performing auto repairs. The attorneys for Downtown LA Motors argued it "can't be right" to find that employers who guarantee their employees the minimum wage for every hour worked somehow failed to satisfy their minimum wage obligation. The appellate court disagreed, awarding the class in excess of $1.5M. To learn more about the decision, please see Littler's ASAP, "That Can't Be Right!" California Appellate Court Rules that Piece Rate Workers Are Entitled to Separate Hourly Compensation, by Richard Rahm, Julie Dunne, and Michelle Heverly.

New York Ruling Gives Support to Private FLSA Settlements

Wage and Hour Practice Group — Wed, 13 Mar 2013 16:07:33 -0800

By Stephanie Gail Lee

On February 22, 2013, the U.S. District Court for the Eastern District of New York held that parties may privately settle a Fair Labor Standards Act (FLSA) case without judicial approval or Department of Labor (DOL) supervision. While it is uncertain that such settlement agreements will be upheld upon challenge, defense attorneys should feel more confident in counseling their clients regarding the option to settle their FLSA case out of court. Doing so may ameliorate employers’ fear of publicly filing settlement agreements, which can instigate copycat lawsuits and media attention, and rid the need for added litigation expenses in connection with fairness proceedings.

In Picerni v. Bilingual Seit & Preschool, Inc., the district court ruled that a teacher could dismiss her FLSA lawsuit pursuant to a private settlement agreement with her former employer. Just a few months prior, before the parties had participated in a status conference and before the defendant answered the plaintiff’s complaint or otherwise appeared, the court found just the opposite. When the plaintiff notified the court that she accepted a settlement offer from the defendant, the court rejected the parties’ agreement, citing case law that holds that stipulated settlements in a FLSA case must be approved by the court for fairness when an out-of-court settlement was not directly supervised by the DOL.

The court reversed itself in light of two United States Supreme Court cases: Brooklyn Savings Bank v. O’Neil, and D.A. Schulte, Inc. v. Gangi. These cases hold that an employer who settles an FLSA claim without either court approval or DOL supervision is at risk of a subsequent suit by the same employee, despite receiving a release as part of the settlement agreement. The Picerni court distanced itself from the vast majority of courts that have refused to permit parties to voluntary dismiss their suits after privately settling. The court observed that neither Brooklyn Savings, Gangi, nor their progeny expressly prohibited voluntary dismissal. The court observed it was one thing to say that releases obtained via private settlements will not be enforced in later litigation under certain circumstances, and another to say that courts will not permit parties to privately settle and risk the settlement being ineffective.

In so distinguishing, the court took care to examine the plain language of the FLSA to glean the legislature’s intent. While some federal statutes expressly require court approval for voluntary dismissal of cases, the FLSA does not. The court determined, therefore, that subjecting the parties’ private settlement agreement to a fairness hearing “to achieve some Platonic form of the ideal of judicial vindication [does] not seem necessary to accomplish any purpose under the FLSA.” This ruling marks a significant step for employers and defense attorneys who wish to engage in private settlement agreements to resolve FLSA cases.

Photo credit: MBPhoto, Inc.

Significant Ninth Circuit Decision Applies Dukes to State Wage Law Class Claims

Wage and Hour Practice Group — Mon, 11 Mar 2013 16:08:00 -0800

By Jennifer Ciralsky and Sophia Behnia

In Wang v. Chinese Daily News, Inc., on remand from the U.S. Supreme Court, the Ninth Circuit Court of Appeals applied the Supreme Court’s decision in Dukes v. Wal-Mart to reverse and remand a federal district court decision certifying a California state wage law class action. Like Dukes, Wang has had a somewhat protracted history. Following certification as an FLSA collective action, and prior to the Supreme Court’s decision in Dukes, the district court certified the plaintiffs’ state wage law claims as a class action under Rule 23(b)(2) of the Federal Rules of Civil Procedure (FRCP) or, in the alternative, under Rule 23(b)(3). Following a 16-day jury trial, the plaintiffs were awarded over $2.5 million. The company appealed and the Ninth Circuit affirmed. On appeal to the U.S. Supreme Court post-Dukes, the Court vacated the Ninth Circuit decision and remanded for reconsideration in light of its decision in Dukes.

On remand, the plaintiffs conceded that, based on Dukes, class certification of their claim for monetary damages under Rule 23(b)(2) could not stand. Accordingly, the court reversed its decision on that issue and focused its analysis on the commonality standards for class certification under Rule 23(a) and the requirement under Rule 23(b)(3) that common questions predominate over individual issues.

Noting that the district court had determined commonality under Rule 23(a) based solely on the allegations in the complaint, the Ninth Circuit remanded and asked the district court to determine whether the claims of the proposed class “depend upon a common contention . . . of such a nature that it is capable of classwide resolution – which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke,” as required by Dukes. The court emphasized that the plaintiffs “must show significant proof” that the company operated under a general policy of violating California labor laws.

As to the predominance requirement under Rule 23(b)(3), the Ninth Circuit held that the district court erred by basing its conclusion that common questions predominated on the fact that the employer had a uniform policy of classifying all reporters and account executives as exempt employees. The Ninth Circuit noted that it previously held in In re Wells Fargo Home Mortgage Overtime Pay Litigation that “a presumption that class certification is proper when an employer’s internal exemption policies are applied uniformly to the employees . . . disregards the existence of other potential individual issues that may make class treatment difficult if not impossible.”

The Ninth Circuit also asked the district court to reconsider certification of the plaintiffs’ meal break claim in light of the California Supreme Court’s recent opinion in Brinker Restaurant Corporation. v. Superior Court, in which the court held that an employer is obligated to “relieve its employee of all duty for an uninterrupted 30-minute period,” but need not actually ensure that its employees take meal breaks.

Finally, and perhaps most significantly, the Ninth Circuit emphasized the U.S. Supreme Court’s disapproval of “Trial by Formula,” in which damages are determined for a sample set of class members and then applied by extrapolation to the rest of the class “without further individualized proceedings.” Echoing Dukes, the court held that employers are entitled not only to “individualized determinations of each employee’s eligibility” for monetary relief, but also are “entitled to litigate any individual affirmative defenses they may have to class members’ claims.”

This case is significant for employers facing state wage law class actions because, in addition to confirming the applicability of Dukes to wage-and-hour cases, it strongly suggests that class actions may not be the appropriate means of adjudicating misclassification, meal and rest break, or other claims in which individualized issues, such as an employee’s actual duties or the manner in which a particular pay practice is administered, predominate.

Massachusetts High Court Rules that Discretionary Payments Do Not Extinguish Wage Claims

Wage and Hour Practice Group — Mon, 11 Mar 2013 10:12:28 -0800

By Christopher Kaczmarek

On March 4, 2013, the Massachusetts Supreme Judicial Court resolved a dispute regarding the effect of after-the-fact gratuitous payments on wages due under state law. In Dixon v. City of Malden, the court held that gratuitous, after-the-fact payments by the City did not extinguish the City’s obligation to pay an employee for the value of his accrued, unused vacation time.

The plaintiff in the case had been the director of a nursing home owned by the City of Malden. After over 20 years of employment, the City’s board voted not to reappoint him to the position. The City agreed to negotiate regarding retirement and severance issues, but the parties were unable to reach an agreement prior to the employee’s departure. At the time, he had accrued 50 days of unused vacation time, amounting to $13,615.54.

In the wake of the employee’s departure, the City authorized the continuation of his salary and benefits for an additional three months. At trial, the mayor testified that the City made these additional gratuitous payments in hopes that the employee would feel fairly treated and would abandon his claims. The employee had received a total of $19,700 in salary continuation, which exceeded the $13,615 in vacation pay he was owed.

The plaintiff filed suit, seeking payment under the Massachusetts Weekly Payment of Wages Law for the accrued, unused vacation pay. The court dismissed his claim, and the plaintiff appealed.

On appeal, the City argued that the employee had been fully compensated for the vacation pay due him via the $19,700 in salary continuation payments he had received, and that he would receive an impermissible windfall if he received an additional $13,615 (the value of the vacation pay). The Supreme Judicial Court rejected this argument and reversed the lower court’s dismissal, stating that “failure to pay unpaid wages . . . cannot be mitigated by gratuitous, after-the-fact payments.” The court noted that the City never designated any of the salary continuation payments as payment for the accrued vacation time and that, to the contrary, the paystubs he received during that timeframe continued to reflect the fact that he still had a balance of accrued vacation time. Significantly, the court stated that “had the city paid the plaintiff payments labeled as vacation pay, and merely been late in those payments, the city would not have been foreclosed from offsetting those payments from what was owed.”

Second Circuit Rejects FLSA Gap Time Claim, Explores Pleading Requirements

Wage and Hour Practice Group — Fri, 08 Mar 2013 16:00:08 -0800

In Lundy v. Catholic Health System of Long Island, Inc., 2013 U.S. App. LEXIS 4316 (2d Cir. Mar. 1, 2013), the Second Circuit Court of Appeals recently held for the first time that the Fair Labor Standards Act (FLSA) does not provide a claim for uncompensated "gap" time wages even when employees work overtime, provided the alleged uncompensated time does not drop employees' wages below the minimum wage. Gap time is time worked under 40 hours in a week. For example, an employee may work 39 hours in a week but be paid for only 35, in which case she has four hours of uncompensated gap time. If she works 42 hours in a week but is paid for only 38, she has two hours of uncompensated gap time (hours 39 and 40) and two hours of unpaid overtime (hours 41 and 42). In Lundy, the Second Circuit held that employees must plead "some" amount of uncompensated but compensable time worked over 40 in a week, but left open the possibility, depending on the case, that employees may need to also plead an approximation of overtime hours to establish a plausible claim. The decision also bolsters employers' arguments that district courts may exercise supplemental jurisdiction to decide state law claims even where the court dismisses all federal law claims.

To learn more about the decision, please see Littler's ASAP, Second Circuit Rejects FLSA Gap Time Claims and Explores FLSA Pleading Requirements, by Bradley Strawn.

Supreme Court to Consider Meaning of "Changing Clothes" Amid Changing DOL Interpretations

Wage and Hour Practice Group — Fri, 22 Feb 2013 16:52:10 -0800

By Alex Frondorf

On February 19, 2013, in Sandifer v. U.S. Steel Corp., the U.S. Supreme Court agreed to resolve a circuit split over the meaning “changing clothes” under the Fair Labor Standards Act (FLSA), 29 U.S.C. section 203(o).

Under the FLSA, employees are not entitled to compensation for time “spent in changing clothes . . . at the beginning or end of each workday” if excluded from working time under a collective bargaining agreement. While the meaning of “clothes” might seem obvious, the FLSA does not provide a definition and circuit courts have provided differing interpretations.

In Sandifer, U.S. Steel employees sued their employer for the time spent putting on and taking off protective gear in a locker room, and walking to and from the locker room to their work stations. The employees worked under a collective bargaining agreement, which did not require compensation for changing clothes. The district court found that the workers were not entitled to compensation under section 203(o).

On appeal, the Seventh Circuit held that the clothes at issue in this case – flame-retardant pants and jacket, work gloves, work boots, a hard hat, safety glasses, ear plugs, and a hood – are clothes under section 203(o), and therefore the time spent putting on and taking off such items are not compensable. To the extent the hard hat, glasses, and ear plugs were not technically “clothes,” the court noted that putting on these items did not qualify as compensable “work” because the time spent in such activity was de minimis. Accordingly, U.S. Steel was not required to compensate its employees for the time spent changing into and out of work clothes.

The conclusion reached by the Seventh Circuit in Sandifer conflicts with Ninth Circuit authority holding that “special protective gear [is] different in kind from typical clothing” and is not “clothes” under section 203(o). Still, the Fourth, Sixth, Tenth, and Eleventh Circuits have adopted a different definition – one that includes anything one “wears,” including “accessories” such as ear plugs and safety glasses.

The time it takes for an individual employee to don or doff work related clothing may seem inconsequential, but when such time is aggregated in class and collective actions it can be significant. Thus, the Supreme Court’s resolution of what constitutes “changing clothes” in the context of section 203(o) may have a significant impact on employers nationwide.

Photo credit: Matt Collingwood

Another Auto-Deduct Meal Break Case Against a Healthcare Provider Decertified by Federal Court

Wage and Hour Practice Group — Wed, 20 Feb 2013 10:06:55 -0800

Building upon a growing body of case law finding automatic-deduction meal break claims are not suitable for class or collective action treatment, an Ohio federal judge decertified a collective action against a national system of medical and rehabilitation care facilities by registered nurses, licensed practical nurses, certified nursing assistants, and admissions coordinators who claimed they were not paid for missed or interrupted meal breaks that were automatically deducted from pay. In Creely v. HCR ManorCare, Inc., Littler attorneys convinced the court that the employees’ experiences were too diverse to allow the case to proceed as a collective action under the Fair Labor Standards Act. To learn more about the decision, see Littler's Healthcare Employment Counsel blog.

Decision May Pave Way for More Stringent FLSA Collective Action Certification Standard

Wage and Hour Practice Group — Mon, 11 Feb 2013 16:16:55 -0800

In a decision that may significantly impact certification and decertification decisions in FLSA collective actions, a three-judge panel of the Seventh Circuit Court of Appeals upheld the decertification of a Rule 23 class and FLSA collective action, essentially applying the standards set forth by the U.S. Supreme Court in Dukes v. Wal-Mart to an FLSA collective action.

In Espenscheid v. DirectSat USA, 2013 U.S. App. LEXIS 2409 (7th Cir. Feb. 4, 2013), Judge Posner, writing for the panel, expressly stated that "despite the difference between a collective action and a class action and the absence from the collective-action section of the Fair Labor Standards Act the kind of detailed procedural provisions found in Rule 23, there isn't a good reason to have different standards for the certification of the two different types of action. . . ." Noting that simplification is favored in the law and that one of the intentions of both FLSA collective actions and Rule 23 class actions is to promote efficiency, the court concluded that "we can, with no distortion in our analysis, treat the entire set of suits before us as if it were a single class action."

To learn more about the decision, please see Littler's ASAP, New Seventh Circuit Decision May Pave the Way for More Stringent Certification Standards in FLSA Collective Actions, by Laurent Badoux, Adam Wit, and Kathryn Siegel.

Good News from the Eastern District of New York for Class Action Waivers

Wage and Hour Practice Group — Thu, 07 Feb 2013 11:00:02 -0800

By Edward Berbarie and Henry Lederman

Last week, the U.S. District Court for the Eastern District of New York upheld a class action waiver in an employment arbitration agreement, sending the plaintiffs’ FLSA collective action claims to arbitration on an individualized basis. The plaintiffs, former sales representatives for United HealthCare, claimed that the class action waiver was unenforceable for several reasons. First, the plaintiffs claimed that participating in a collective action under the FLSA is a statutory right that cannot be waived. The court disagreed, finding that nothing in the FLSA or its legislative history establishes that the right to participate in a collective action is a non-waivable right. To the contrary, the court reasoned that because an employee is required to file a consent form in order to participate in a collective action under the FLSA, an employee certainly has the power to waive their participation in such an action. The plaintiffs next attempted to rely upon the Second Circuit’s opinion in In re American Express Merchants’ Litigation, 667 F.3d 204 (2d Cir. 2012), which found a class action waiver to be unenforceable because the practical effect of enforcing the waiver in that case would have precluded the plaintiffs from bringing their claims. The court also rejected this argument, noting that the Second Circuit made clear that class action waivers are not per se unenforceable, and finding that the plaintiffs in this case failed to show that arbitrating their FLSA claims on an individual basis would have been cost prohibitive. Lastly, the court rejected the plaintiffs’ argument, under the NLRB’s D.R. Horton decision, that class action waivers violate employees’ rights to engage in concerted activity. The court instead agreed with the Eighth Circuit’s recent decision in Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. Jan. 7, 2013), which rejected the NLRB’s rationale in D.R. Horton and held that class waivers are enforceable in relation to claims brought under the FLSA.

Photo credit: Logan Simmons

DOL's Wage and Hour Division Seeks Input on Proposed Worker Classification Survey

Governmental Affairs Team — Fri, 11 Jan 2013 09:58:52 -0800

By Ilyse Schuman

The Department of Labor’s Wage and Hour Division (WHD) is seeking public comments on the agency’s proposal to collect information “about employment experiences and workers’ knowledge of basic employment laws and rules so as to better understand employees’ experience with worker misclassification.” According to a notice published in the January 11, 2013 edition of the Federal Register, the proposed Worker Classification Survey is intended to “provide critical information to Department policymakers on whether workers have knowledge of their employment classification and whether they understand the implications of their classification status.” A copy of the proposal can be obtained by contacting Karen Livingston, the WHD’s director of the Division of Strategic Planning and Performance, at (202) 693-0023.

The WHD notes that this is the first time the agency has attempted to survey workers based on their knowledge of worker misclassification, and that federal law does not currently require employers to notify their workers of their employment status, the basis for their status determinations, or pay. One of the WHD’s long-term goals is to draft a rule that would amend an employer’s recordkeeping requirements under the Fair Labor Standards Act (FLSA) to provide employees with greater information about their employment status. According to information on this “Right-to-Know” proposal filed with the Office of Management and Budget (OMB), the purpose of this rule would be to:

enhance the transparency and disclosure to workers of their status as the employer's employee or some other status, such as an independent contractor, and if an employee, how their pay is computed. The Department also proposes to clarify that the mandatory manual preparation of "homeworker" handbooks applies only to employers of employees performing homework in the restricted industries.

Since this is a long-term rule-making proposition, it is unclear if the agency’s new proposed information collection request related to employee misclassification is a means of testing the necessity of a new rule.

The types of comments the WHD are seeking would address the necessity, burdensomeness, and clarity of the information that would be collected through this proposed worker classification survey. Comments on the proposal must be received on or before March 12, 2013, and contain the agency name and document number 2013-00389 or any other identifier. Comments may be submitted by email to: WHDPRAComments@dol.gov, or by mail or hand-delivery to: Division of Regulations, Legislation, and Interpretation, Wage and Hour, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, NW., Washington, DC 20210.

Photo credit: PressFoto

Hilda Solis Resigns as Labor Secretary

Governmental Affairs Team — Thu, 10 Jan 2013 10:44:50 -0800

By Ilyse Schuman

Shortly after the Department of Labor released its ambitious regulatory agenda, Labor Secretary Hilda Solis announced her resignation from the agency. Solis was confirmed to the post in February 2009. Under her direction, the DOL has significantly stepped up its regulatory and enforcement activities, particularly in the areas of wage and hour, worker misclassification, and whistleblower protection. Solis reportedly notified President Obama of her decision to step down on Wednesday. According to her resignation notice, Solis has decided to leave Washington to be closer to her family in California. This blog will report on any replacement nominees as soon as they are known.

Massachusetts High Court Holds Wage Claim Releases Are Valid and that Overtime Can Be Recovered Under Wage Payment Law

Wage and Hour Practice Group — Thu, 03 Jan 2013 11:34:01 -0800

The Massachusetts Supreme Judicial Court (the “SJC”) recently answered two important questions that have vexed lower courts, and employers, in recent years. First, the SJC concluded that employees may release claims under the Massachusetts Payment of Wages Law, Mass. Gen. Laws Chch. 149, § 148 (the “Wage Act”), provided that the release is “stated in clear and unmistakable terms” and specifically refers to the Wage Act. Second, the SJC held that, although plaintiffs may pursue claims for overtime under the Wage Act, which has a longer statute of limitations than the state overtime law, a plaintiff only may recover the straight-time value of such claims, not the premium rate provided for by the overtime law. To learn more about the decision, please see Littler's ASAP, Massachusetts High Court Permits Employees to Release Wage Claims, by Christopher Kaczmarek and Jeanne Barber.