Class Actions

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I often preach that, when dealing with a class action, the employer should try to pick off the named plaintiff, perhaps overpaying to do so (or maybe not).  In this interesting case, the parties settled (i.e. with the named plaintiff) right after the class had been decertified.  The plaintiff had argued that he was misclassified as an independent contractor.  The case is entitled Roberson et al. v. Restaurant Delivery Developers LLC et al., and was filed in federal court in the Middle District of Florida.

The settlement came after the Judge held that the named plaintiff had not shown that there was sufficient similarity between he and the other workers he wanted in the collective action.  Thus, the Court granted the employer’s motion to decertify the collective action due to this dissimilarity between the employees.

The suit began in March 2017, on the theory that the Company had misclassified the workers as independent contractors and was not paying overtime.  The Judge granted conditional certification in September 2017.  The Company defended by asserting that it never hired Roberson (or anyone else) and was a consulting company that assisted local restaurant delivery entities in getting off the ground and which would use the Doorstep Delivery in a manner similar to being a franchisee.  These new companies would then use delivery drivers who were deemed to be independent contractors.

Mr. Roberson contended that this company gave out a manual to its customers, the licensed restaurant delivery companies.  The Judge, however, concluded that did not mean that the discrete delivery companies had put the polices into operation.  The Judge also noted that the manual did not have any guidance for significant components of the job, such as whether they could face penalties for refusing deliveries.

Thus, the Court dismissed claims of the opt-in plaintiffs, but allowed Mr. Roberson to continue to pursue his own claims.

The Takeaway

This is an excellent result.  All the more better if it can be done sooner, rather than later, in the litigation “process.”

And a lot cheaper…

When will employers learn?  They keep classifying retail Store Managers and Assistant Managers as exempt, when these workers are often misclassified, not intentionally, but because the nature of their duties often tends to undermine the primary duty test and render them non-exempt.  Another example is a recent case where Store Managers have been granted conditional certification in their FLSA collective action.  The case is entitled Spack et al. v. Trans World Entertainment Corp. and was filed in federal court in the Northern District of New York.

The plaintiffs can now send out notices to current and former store managers so they might opt in to the case.  The plaintiffs also want a class of Assistant Managers for alleged off the clock work.  The Company, however, won that round, convincing the Judge that it was too soon to certify such a class, asserting that it had not yet been ascertained if these workers were non-exempt, which would allow them to make these claims.

The Judge appeared to reserve decision on a combined class and also indicated that the class could also be de-certified.  The Court stated that “should additional discovery demonstrate the existence of significant differences between the SMs or between the SMs and SAMs, the court can choose to deny any future motion seeking conditional collective certification of the SAMs, or, at the second stage of the analysis, decertify the collective.”

The plaintiffs met the “modest” burden at this conditional stage by submitting twelve Certifications from opt-in plaintiffs who claimed they worked 50-70 hours per week and spent the vast majority of their time performing non-exempt, low-level tasks that were not managerial in nature.  The Company also submitted statements from managers that showed they performed managerial (i.e. exempt) work and tried to undermine the plaintiffs’ statements but the Court would not allow these manager statements to bear the weight that the Company urged they should be accorded.

The Takeaway

My advice to employers is to test the duties of their management personnel, especially lower level managers, against the criteria in the FLSA regulations.  This can be done via a “self-audit” or internal audit, of which I have conducted dozens.  You also need to check the law of the particular state in which the controversy may be litigated, as the state law may be tougher than the FLSA standards, such as in California or New York.

In a very interesting and off-beat decision, the Third Circuit has thrown out one class of loan officers who alleged misclassification but let stand the lower court’s decision that certified the case as a collective action under the Fair Labor Standards Act.  The case is entitled Reinig et al. v. RBS Citizens NA, and issued from the Third Circuit Court of Appeals.

The panel overruled the decision that had given certification to Loan Officers across ten States who alleged that they were not properly paid for time off the clock.  However, the Court allowed the decision granting collective action certification to stand as it opined that it did not have jurisdiction over that issues as a component of the Employer’s interlocutory appeal.

The Court addressed the issue of “pendent appellate jurisdiction.”  This means that the appellate court is allowed in certain scenarios to assert jurisdiction over issues that are not allowed to be appealed independently but that are “intertwined” with matters over which the Court has jurisdiction.  The Court herein first observed that FLSA collective certification orders are not appealable because they are not final and further concluded that the order in this case was not “inextricably intertwined” with the Rule 23 class certification determination.  Thus, the Court would not exercise pendant jurisdiction over it.

The Court stated that “in so holding, we are persuaded by our prior precedent and the Second Circuit’s well-reasoned decision in [Myers v. Hertz Corp. ] that Rule 23 class certification and FLSA collective action certification are fundamentally different creatures.  Further, judicial efficiency notwithstanding, the myriad problems that could result from exercising jurisdiction in this context counsel against expanding the narrow doctrine of pendent appellate jurisdiction in the way Citizens proposes.”

The legal requirements for conditional certification of FLSA claims is less onerous than securing class certification under Rule 23.  The Court also noted that if it concluded that pendant jurisdiction could be asserted over FLSA certification, then, in the future, a party could “abuse the doctrine” by filing insipid interlocutory appeals so that litigant could get appellate review before a final decision on that issue has been rendered by the district court.

In another (very) interesting twist, the Third Circuit criticized the lower court for not doing its job of specifying the particular classes and claims that were involved.  Indeed, the Court stated that it was compelled to “comb through and cross-reference multiple documents in an attempt to cobble together” the classes and claims that might be amenable to class adjudication.

The Takeaway

Rule 23 claims are harder for a plaintiff to establish as a class.  The danger is that the Rule 23 action is an opt-out, not an opt-in, as a FLSA collective action is; everybody is in except for a handful that might opt out.  It is an interesting twist because I think the Court is right—there would be defendants/employers who would utilize this vehicle as a poor man’s way of getting the collective action certification issue examined sooner rather than later.

Sounds only like good lawyering…

It is not often when an employer defends a FLSA lawsuit by asserting that it is in an illegal business and therefore immune to suit. Sound funny? Well, that is precisely what a Colorado employer that furnishes security services to legal cannabis growers/sellers has pressed on the Tenth Circuit. The employer’s theory is that the workers are not entitled to allegedly unpaid overtime under the Fair Labor Standards Act because their work is illegal under federal law. The case is entitled Kenney v. Helix TCS, and was argued before the Court of Appeals for the Tenth Circuit.

The Company’s counsel argued that the collective action cannot proceed as the FLSA only applies to legal businesses. The lawyer claimed that all job functions engaged in by the workers amount to trafficking in illegal drugs. This case is fascinating because it highlights the tension between a state legalizing cannabis and its continuing illegality under federal law. The lawyer for the Company argued that this controversy entered the “legally ambiguous” sphere in which legal cannabis businesses operate.

The named plaintiff, an armed security guard who guarded growers and sellers, claimed he worked overtime many weeks and was not paid properly. He sought class certification for all such guards, going back three years. The Company moved to dismiss, arguing that the employee’s work (as he was dealing with a Schedule 1 drug under federal law) violated the federal Controlled Substances Act and was thus outside of FLSA coverage.

The district court Judge denied the motion and observed that other courts have not endorsed this concept. The Judge noted that in other cases involving businesses that violate federal laws, e.g. immigration, courts have ruled that these violations did not mean the businesses could not comply with other federal laws. However, the Judge certified the ruling for immediate appeal and thus it went (quickly) to the Tenth Circuit.

The lawyer for the plaintiff asserted that the FLSA does not have a requirement that employees subject to its jurisdiction must be engaged in “only” legal businesses. There was no outright mention of “lawfulness” in the law and there was nothing in the state statute that voided the dictates of the FLSA.

The Takeaway

Maybe Congress should make an exception to the FLSA for this industry, but it has not done so. Consider the implications of granting the employer’s motion to dismiss—it would be giving a business illegal under federal law an advantage over legal businesses by sanctioning the avoidance of paying overtime.

Hmm. Food for thought…

When a class action is filed, often times there are issues (for the plaintiff and their counsel) as to who should be in the class. Often, the named plaintiff will seek to reach out to other putative class members, but it is not every day when a Judge orders that the plaintiff may telephone or email these other class members, despite a claim that this would unfairly facilitate the plaintiff’s case. That is what a New Jersey federal judge has just ordered. The case is entitled Sanchez v. Santander Bank NA et al., and was filed in federal court in the District of New Jersey.

computer-email

The theory of the case is that the employer coerced employees into not filing for overtime; the named plaintiff claims the information will help her figure out if the workers are class members. The Judge denied Santander’s bid to limit contact and now the plaintiff can contact Branch Operations Managers at more than 600 banks spread across nine states. The Judge allowed this unrestricted access to facilitate the plaintiff’s discovery efforts. There are more than 1100 other possible class members.

The Judge observed that the plaintiff “is already in possession of the contact information for potential opt-ins, and the court sees no basis to prevent plaintiff from investigating whether or not these employees are similarly situated to plaintiff by limiting the scope or means of communication.”

The theory of the suit was that the Bank prohibited these employees from reporting extra hours worked or ostensible overtime. There were also allegations that the Bank punished/disciplined employees who did attempt to report the extra time worked. The named plaintiff asserted that she implored upper management to hire more employees or dispatch help from other branches, but these initiatives went nowhere. The named plaintiff claimed she had to work 10-12 extra hours per week, without pay.

The Bank had argued that Sanchez’ contact with potential plaintiffs should be limited to those Branch Managers she worked with or who were in the immediate geographical area. The Bank also opposed Sanchez calling or emailing other workers, contending that any communications should be confined to the letter that the Judge had approved.

The Takeaway

I don’t like this. It seems that the courts often make it easier for plaintiffs to do the “best” job that they can in securing the biggest class they can. The plaintiff already had the addresses so these people could have easily been contacted in the more traditional manner.

Seems the pendulum swings a little far to the left on this one…

This is an interesting case because it combines the elements of necessary, but not proven, commonality of situation for class certification and a quirky element of overtime calculation based on a unique FLSA provision.  The bottom line is that the two workers who sought a class action on both the federal and state levels lost both because of the need for too much individual scrutiny of worker claims.  The case is entitled Sinclair et al. v. PGA Inc., and was filed in federal court in the Western District of Wisconsin.

The Judge rejected the claim, for a class, that the Company should have paid the higher wage rates for skilled labor (e.g. trade work, such as carpentry) as opposed to generic wage rates.  The Judge also agreed to decertify a FLSA collective whose overtime rates were allegedly miscalculated or underestimated.  The Judge opined that the state-law part of the suit did not possess several elements of a viable class action under Rule 23, citing to the need for too much individual attention needed for each worker’s situation.  The Judge also observed that no other worker had opted into the suit, and this fact “undermines the entire purpose of a collective action.”

The theory was that the employer violated the Wisconsin prevailing wage law by paying workers at a lower, general for work done to support more skilled work.  The plaintiffs alleged that this practice violated the FLSA because the rate should have been that which they earned before overtime kicked in as opposed to the lower-rated work they were actually performing in the overtime hours.

Importantly, the Judge denied the request for class certification on the prevailing wage claims.  The Court held that the workers failed to meet the numerosity requirement, as they could not make a showing as to the actual number of workers who worked the lower-rated support work.  They also could not meet the “predominance” requirement, meaning that the underpayment theory applied to most members of the class.

The Judge stated that the claim of the employees is based “not just on the amount, but also on the type of work” each class member did, and would force the court to make “an individual determination of whether an employee’s work on a specific week, day and even hour made possible, supported or cleaned up after a skilled trade worker.”  The Court added that a trial would focus on individual workers’ “unique work on an hourly, daily or weekly basis” and whether it should have been paid at higher wages, the workers did not meet the “superiority” requirement that they show a single class case would be better than a series of individual cases.

The Takeaway

Here, the workers lost the federal and state class actions.  The state case is quite interesting because it shows a path for employers sued in class actions in prevailing wage cases how they can defeat the motion for class certification.  I have preached this dogma for years and repeat it proudly now, again.

Individual scrutiny destroys a class!

This is an interesting case.  A class action that was denied certification, appealed to the Second Circuit, which reversed because the lower court did not properly interpret the job description on the key issue of duties qualifying for the employer to claim the protection of the Part 541 exemptions.  The employees were salesmen and installation technicians.  Now, they get another shot to prove they are worthy of class status. The case is entitled Sydney et al. v. Time Warner Entertainment-Advance/Newhouse Partnership and issued from the Court of Appeals for the Second Circuit.

plastic black toolbox with tools over white backgroundThe lower court had relied upon the outside sales exemption.  The panel, however, concluded that the jobs seemed much more inclined to be installation jobs, rather than selling jobs.  Therefore, it was too early and improper to grant summary judgment as there were issues of fact.  The Court stated that “we conclude that the district court erred in holding on summary judgment that plaintiffs’ primary duties were exempt sales, as opposed to nonexempt installations, and accordingly in its ultimate conclusion that the outside sales exemption applied.”

These workers, dubbed territory sales representatives, or TSRs, contacted apartment building owners in upstate New York.  Their role was to urge these owners to funnel their tenants to the Employer for their cable TV, internet and phone service needs.  They received a small salary and commissions.  The plaintiffs allege they spent some time making calls to get business but the majority of their time was supposedly spent doing the actual installations (which would obviously be non-exempt work).  They asserted that they worked 55-70 hours per week.

They sued but the lower court rejected their claims, relying on the outside sales exemption, finding that that “based on [the] undisputed facts, the court finds that plaintiff’s primary duty was making sales.”  The Second Circuit disagreed.  That Court noted that the men went to work in hard hats and safety glasses.  They also carried tool boxes full of different tools.  Also, there were other employees whose job was to focus on door-to-door sales.

The Takeaway

The issue on summary judgment was whether the facts, i.e., the job description, undisputedly showed that the men were outside salesmen.  If, however, the facts on the ground differ from the printed description, that job description will be worthless as a defense in proving the exemption.  In other words, if the workers spend the majority of the time at work performing nonexempt work, such as installations they are non-exempt.

Simple as that…

When hit with a wage hour suit, class action or single, employers are well advised to look for a preemption argument, whether from a union contract (e.g. National Labor Relations Act) or a statutory construct.  If the preemption argument is successful, the entire suit goes away.  Therefore, such an argument can become the proverbial “magic bullet” that defense practitioners (i.e. myself) yearn for.  The Third Circuit has just ruled that a federal law that confines state regulation of the trucking industry does not preempt the Illinois Wage Payment and Collection Act.  Thus, the claims of a class of drivers asserting that illegal deductions were made stays alive.  The case is entitled Lupian et al. v. Joseph Cory Holdings LLC, and issued from the Third Circuit Court of Appeals.

Trucking and the motor carrier exemption
Copyright: vitpho / 123RF Stock Photo

The appellate court affirmed the lower court ruling, where Judge Martini found that the state law was not preempted by the Federal Aviation Administration Authorization Act, a law that preempts any state law “relating to a price, route or service of any motor carrier.”  The Court stated that “the IWPCA claims here are too far removed from the [FAAAA’s] purpose to warrant preemption.  With no record to demonstrate otherwise, we hold that the impact of the IWPCA is too tenuous, remote and peripheral to fall within the scope of the FAAAA preemption clause.”

The plaintiffs sued in August 2016 on a theory that they were not independent contractors and had suffered illegal wage deductions.  They charged that the Company violated the section of the Wage Payment Act that required a written authorization in order to deduct from their compensation.  The lower federal court rejected the preemption defense, asserting that the state law’s “effect on motor carriers does not warrant preemption.”

The Third Circuit agreed and was guided by similar cases from the Seventh and Ninth Circuits.  The Court stated that these kinds of laws (e.g. Wage Payment laws) are “a prime example of an area of traditional state regulation.”  The Court observed that “while the fact that the IWPCA does not regulate affairs between employers and customers is not dispositive, it does demonstrate that the operation of the IWPCA is steps away from the type of regulation the FAAAA’s preemption clause sought to prohibit.  We cannot say, particularly at this procedural juncture, that the IWPCA has a significant impact on carrier rates, routes or services of a motor carrier or that it frustrates the FAAAA’s deregulatory objectives.”

The Takeaway

Well, sometimes the magic works and sometimes it doesn’t…

Often, when a class of workers petitions for conditional certification in FLSA collective action, and such certification is granted, it usually is for the entire class being asked for.  Sometimes it is not and when that happens, it is “news.”  That has happened in a recent Pennsylvania case where the proposed class was more than two-hundred workers and the certified class was less than forty.  The case is entitled Hunt v. McKesson Corp., and was filed in federal court in the Western District of Pennsylvania.

The Judge slashed the sought-after class from all McKesson employees in the “grade 103″ category to only the workers in the grade whose job descriptions matched concerning the use and levels of discretion and judgment.  The Judge noted that “this is a conditionally certified collective that is comprised of a group of employees for whom McKesson itself describes the scope of their discretion and judgment identically.  It is McKesson’s grouping of different titles with identical definitions of discretion and judgment (which plaintiff attests were accurate in practice) and McKesson’s identical treatment of that group for purposes of overtime exemptions that makes those job positions sufficiently similarly situated at the conditional certification stage.”

The plaintiff alleged that her duties lacked the requisite discretion and independent judgment needed for the administrative exemption.  The named plaintiff asserted that her job entailed that she “[follow] policies and procedures in analyzing situations or data from which answers can be readily obtained,” and that similar language was found in the description for other grade 103 jobs.  If that was borne out, it certainly would not be discretion as contemplated by the regulations.

close-up of a judge hitting mallet at deskThe Judge made specific note that many of the job descriptions at issue had language different than the plaintiff’s and these differences impacted whether or not discretion was utilized by the workers. The Judge found that “plaintiff continues to lump together ‘readily obtained’ job positions with ‘appropriate action’ job positions, but plaintiff has no evidence to show how those two ‘sub-categories’ of grade 103 are similarly situated to one another other than they share the same grade 103.”  Then, he cut the class.

The Takeaway

This Judge really delved into the minutiae of this matter and made a very reasoned decision that the class being asked for was an overreach.  This could well be a sound tactic for defense counsel to utilize when attacking a class and trying to whittle it down, if not eliminate/defeat it entirely.

It’s a start…

 

I had blogged about this case when it first came out. It struck me as very interesting because not only is the subject matter unique, it also raises the whole thorny issue of what is (or is not) working time. This latest case involves Parking Production Assistants (PPAs). These people worked for CBS and their function was to guard parking spaces. Now, the employer will settle this class action for $9.98 million to settle the case where the theory was unpaid overtime. The case is entitled Hines et al. v. CBS Corporation and was filed in federal court in the Southern District of New York.

Empty parking lotThis settlement parallels other similar settlements for these employees at other production companies. In fact, there are approximately twelve of these cases working their ways through the various pipelines of litigation. The motion by the parties to the Judge, seeking his approval on the settlement, stated “while the other settled PPA cases generally contain similar factual and legal allegations, they were brought against different movie and/or television production studios.  Although not binding, presently there is substantial precedent of both preliminary and final approval of settlements … similar to the one presented here.”

The plaintiff attorneys assert that they met with in excess of one-hundred potential plaintiffs and reviewed at least 20,000 weeks of payroll records. They further assert that more than one hundred people have already joined the lawsuit, although the opt-in notice has not even been sent out. On that basis, the lawyers seek 33% of the gross settlement amount for their fees.

The case started three years ago when the named plaintiffs sued, alleging that they were not paid proper overtime when they secured various sets and lots on production sites in New York for TV shows. They claimed that they worked up to 100 hours per week but were only paid a day rate or per diem rate.

The Takeaway

Working time is when an activity is directed or controlled by an employer or inures to that employer’s benefit. The “guarding” of the parking spots accomplished an important goal for the employer and therefore was of (considerable) benefit to the employer. That meant it was working time. The fact that the employer settled this case for almost ten million dollar shows that it came to understand this.

A little bit too late…