Some months back, I blogged about a FLSA class action filed against Life Time Fitness based on a theory that personal trainers were compelled to work off-the-clock and were not paid.  Well, a federal judge has just denied the motion to conditionally certify a proposed class of personal trainers and instructors.  The Judge found that there allegedly improper working conditions varied too much from employee to employee to permit the conditional certification of the class.  The case is entitled Steger et al. v. LTF Club Operations Co. Inc. et al., and was filed in federal court in the Northern District of Illinois.

Fitness club and treadmill
Copyright: adam121 / 123RF Stock Photo

U.S. District Judge Sharon J. Coleman concluded that assessing the workers’ claims would mandate “highly individualized” scrutiny and defenses because the employees were paid pursuant to a complicated commission system, thereby rendering a collective action inefficient.  The Court noted that testimony from the workers demonstrated that their working conditions varied, again requiring individualized attention.

The Judge wrote that “the pressure that each [personal trainer] felt to work off the clock depended on his or her location, his or her job title and responsibilities, his or her department head at the particular moment, his or her productivity, and his or her personal decisions.”  She asserted that “although two putative plaintiffs might share one or two of these factors in common, a highly individualized analysis would nonetheless be necessary to determine the extent to which each employee worked off the clock and whether that conduct was attributable to Life Time.”

The proposed class would have stretched to more than one-hundred locations across the country, going back to 2011.  The Judge did find that the supervisors of the employees received commissions based on department revenues and she did note that some of these supervisors pressured their employees to report fewer hours so as to minimize the “draws” taken from their particular division’s cash flow.  Countered against this was the undisputed fact that the Employee Handbook required workers to report all hours worked.  Moreover, the testimony indicated that the five job titles sought for inclusion in the proposed class did not have “substantially identical” experiences.  Thus, the Court denied the motion.

The Takeaway

The employer’s best defense (sometimes, indeed, the only defense) is that a class is inappropriate because there is too much of a need for individual scrutiny.  Consider what was at stake here—more than one hundred locations, nationwide, and several hundred employees.  The potential liability for the employer would have been staggering, but now that possibility is (likely) gone forever.

The employer still has some stuff to clean up here, as noted by the Judge.  But now it has the time to do it.  Thanks to the magic bullet defense!

I have noticed that there are not many lawsuits (e.g. class actions) brought that test the limits of the professional exemption.  That exemption, geared towards anyone with an advanced degree (lawyer, doctor, CPA, engineer) is fairly well defined and a lawsuit easily defended.  That rule, however, has its exceptions, as demonstrated by the granting of conditional certification to a class of more than three-hundred PriceWaterhouse auditors who claim that, since they were not CPAs, they were not exempt and are entitled to overtime.  The case is entitled Kress et al. v. PriceWaterhouse Coopers LLP and was filed in federal court in the Eastern District of California.

This development is another in a long saga of claims by such employees that the Company has, in a wholesale manner, misclassified them and denied them overtime.  The employees contend that they typically worked fifty-five hours per week during the tax season but were always denied overtime.

The Company has defended with the only defense that it can, the professional exemption as there seems to be little dispute that these employees worked the hours that the Complaint alleges. In other words, the Company is in for a dime, in for a dollar—if the defense is successful, then every member of the class gets nothing.  If it is unsuccessful, the liability will be astronomical (in all likelihood).  The plaintiffs counter by alleging that the Company’s required training regimen for its auditors coupled with the absence of additional training requirements renders the professional exemption inapplicable, as there was no advanced course of study required for the position.

The Company has also defended by contending that the actual duties and work of each associate must be scrutinized on a weekly basis, which means that too much individual scrutiny (my favorite defense) is necessary, thus defeating the class action.  This may actually turn out to be a better defense than the exemption defense?

When defending a professional exemption case, I always ascertain if an advanced degree is required and held by the employees at issue or an advanced license, like a CPA license. The difference between “staff accountants” or “junior auditors” which are non-exempt jobs and an exempt professional is that degree.  Management side practitioners must always start and end the analysis with that inquiry.
 

I happily note that a positive trend, in my view, is continuing.  That is to say, the defeating of FLSA collective actions by defendants asserting that there is not enough similarity in the putative plaintiffs to warrant their conditional certification into a class.  A federal judge has just rejected a motion for conditional certification, in which 65,000 employees, nationwide, tried to sue Steak N Shake, for overtime.  The case is entitled Beecher v. Steak N Shake Operations Incorporated and was filed in federal court in the Northern District of Georgia.

This was another of these off-the-clock cases, where hourly employees charge that they were not paid for all time worked.  The suit also charged that managers altered time records in order to “save” the overtime that would have otherwise been due.  Parenthetically, I should note that in these chain-store cases, so-called Burger King cases, the individual stores run on tight labor budgets and managers are judged by whether they adhere to these budgets, so there is intense pressure to stay within budget, sometimes resulting in off-the-clock work being done, or allegedly being done.

With that said, the Court concluded that that the plaintiffs had not shown that they were similarly situated to each other or that there was not a commonality, a system wide policy or company practice that could be the “glue” to hold the action together.  This was particularly applicable to the contention that a nationwide practice to falsify and alter records existed.

The court concluded that “even assuming, arguendo, that there exists a nationwide practice of reviewing and sometimes revising hours clocked in and out, and tips received, that is not enough glue to hold this proposed class together; neither is the fact that defendant generally discourages managers from allowing overtime work.”

Thus, the court found that the plaintiffs’ allegations required individual scrutiny because to adjudge the claims would mean to be to call numerous supervisors to testify to their particular practices on these matters.  Merely showing that the putative class members all utilized the same reporting system (and that all of the stores used the same internal reporting system) would not answer the key question of whether the employees were similarly situated or treated.  Thus, given the size of the class and the individualized nature of the allegations, there would have to be several thousand mini-trials, which would make the case unmanageable.  Thus, dismissal was warranted.

What I take away from this is that when faced with a nationwide class action, with thousands (or hundreds of thousands) of possible plaintiffs, the opportunity to argue no commonality/need for individual scrutiny may be actually enhanced.  Instead of being the terrifying specter that such a suit initially raises, it could actually be the salvation of the defendant-employer.

When I begin defending a Fair Labor Standards Act collective action, one of the first strategies I look for is to find some way to kick the named plaintiff out of the lawsuit, whether through, perhaps, a Rule 68 Offer of Judgment or a contention that they are not a valid part of the lawsuit and so the whole thing must go away.  The Sixth Circuit has recently shown that this maxim still holds true. The Court dismissed a collective action in which the lead plaintiff, a Nurse, had not filed the required consent form, i.e. opt-in, prior to the running of the statute of limitations (for the named plaintiff).  The case is entitled Frye v. Baptist Memorial Hospital Inc. et al.

The plaintiffs contended that they were not paid for working through their lunch breaks. The Court noted that the failure of the lead plaintiff to file the opt-in, although, on one level, a minor detail, yet doomed the lawsuit.  The Court observed that “redundant though it may seem to require consents from the named plaintiffs in a class action, the FLSA’s mandate is clear.”  The Court also affirmed the lower court’s decertification of the class, as there was not enough evidence to show that all members of the putative class were similarly situated.

The theory of the plaintiffs was that the automatic deduction of time for a lunch violated the law, but the Court duly noted that such a policy was itself compliant with the FLSA.  As such, the mere existence of the policy could not serve as the linchpin of an argument that all employees were similarly situated.  I believe this is extremely important, as there has been an explosion of class action cases involving so-called automatic lunch deduction cases.

It is also significant from the perspective of attacking the propriety of class certification simply because off-the-clock work may occur amongst a group of employees.  This is because the circumstances that lead to an employee working off the clock or through lunch are individual in nature and cause and this require individual scrutiny, which (as I have often preached) is the anathema of a class action attempt for certification.

The lead plaintiff had argued that the FLSA did not require him to file an opt-in and also that his attorney-services agreement and his deposition satisfied the requirement in a de facto manner. The Sixth Circuit soundly rejected that claim, noting that there was a qualitative difference between an individual action and a collective action.  The Court also specifically stated that an unsigned deposition did not constitute a written consent, although the Court noted that the FLSA does not dictate a particular manner in which the written consent must be done.

In sum, here there was a confluence of two very strong defense tactics—knock out the named plaintiff, by any means necessary, and, hit hard at the need for individual scrutiny. ff

I have written several times about Assistant Manager class actions being quite difficult to defend because these employees often perform a great deal of “subordinate” type work, making the issue of “primary duty” a tricky one.  In a recent class action involving these employees, a federal judge has denied a motion for conditional certification (which does not often happen) on the basis that the lead plaintiff Assistant Manager was not similarly situated to the people he tried to represent. The case is entitled Guillen v. Marshalls of MA Inc and was filed in the Southern District of New York.

The plaintiff had claimed that the violations were willful, thereby entitling him (and the other opt-ins) to a third year of recovery.  Then, going after the primary duty requirement, the plaintiff alleged that he devoted the bulk of his time to non-exempt tasks such as janitorial work and unloading trucks.

The deficiency in the plaintiff’s motion, however, was that he failed to show that Assistant Managers throughout the country were performing their jobs in precisely the same manner.  Put differently, there was not a strong showing that Assistant Managers elsewhere were discharging non-exempt duties.  The court stated that “Guillen’s latest motion adds virtually no evidence suggesting that Guillen is similarly situated to ASMs in Marshalls stores nationwide with respect to the main contention in this case: that he was required to perform tasks that rendered him nonexempt from the FLSA’s overtime requirements.”

The court noted that there was nothing in the job description for this classification that required the performance of non-exempt work that the plaintiff alleged was done.  There was no evidence of any nationwide requirement(s) in this area as well.  The plaintiffs could not find a companywide policy that would apply to all of these employees.  As I have often noted, that is the anathema for an employer defending such a case. In this case, there could have been thousands of employees employed in these jobs across the country and without a showing of commonality (i.e. a policy), there would be a need for individual scrutiny of what each employee actually did.

What this case again reinforces for me is that the knee jerk reaction of any company defending a FLSA collective action should be to look for and solidify all evidence of the dissimilarity of the lead plaintiff and the “others.”  Company compensation policies should also be examined and, if need be, appropriately revised.

In a recent case, a federal judge in New York has allowed a class action to proceed for thousands of employees who allege that they were misclassified as exempt by an accounting firm.  The case is entitled Pippins et al. v. KPMG LLP and was filed in the Southern District of New York.  The judge also ordered that the Company turn over a computer-readable list of the names and contact information for possible opt-in plaintiffs.

The judge found there to be commonality because the accounting field is governed in large part by a number of regulations and standards that would render the plaintiffs as “similarly situated.”  The court noted, however, that “the uniformity does not mean audit associates are entitled to overtime.” The Company has claimed that these employees are exempt under the administrative and/or professional exemptions.  The Company also defended by asserting that, because each employee’s duties may have differed, there would be required an individualized scrutiny as to what each employee did, thus destroying the necessary element of commonality.

What is important is that the “individualized” defense may ultimately prove to be successful, although at the conditional certification step, a court is not focusing on these individual differences but rather looking at what elements of commonality may be present, such as similar educational backgrounds and similar training regimens.

The plaintiffs (naturally) contend that they performed clerical-type work, which was routine and repetitive.  They claimed that “all” they do is do basic reviews of documents and financial records.  I imagine the Company will defend not only on the individual scrutiny basis but will also try to knock out as many plaintiffs as it can but pointing to the higher levels of education they possess, the degrees and certificates, which will evidence that they do more than just “clerical” work and are using their advanced education (college or above) to conduct financial analyses, (which is the essence of an administrative or professional defense) and not just crunching numbers.

Amanda Haverstick just penned something in a recent edition of Employment Law 360 concerning the use by employers in FLSA collective actions of demanding an early trial plan from plaintiffs’ counsel.  She writes that by requiring counsel to submit a plan at an early stage in the proceedings, the court can review it and (hopefully) conclude that the proposal for proceeding on a class basis is insufficient, which would then impel the court to decertify the class or deny class certification.

The recent case of Espenscheid v. DirectSat USA LLC, 2011 WL 2009967 (W.D. Wis. May 23, 2011), is illustrative of this newly emerging phenomenon.  Although the trial court initially certified the classes, just before the trial was to begin, the court changed its position and de-certified the classes.  This followed the court’s examination of the plaintiffs’ trial plan.

Scrutiny of the trial plan convinced the court that the case would not be manageable.  The court believed that the rights of absent class members and, importantly, the employer, would not be protected.  This is because the plan outlined that approximately forty plaintiffs would give so-called “representative testimony” which would, in theory, be representative for 2300 class members.  The plan then outlined that damages could be determined by calculating another representative (i.e. average) number of overtime hours for the forty representative plaintiffs and then extrapolating that average to the balance of the class members.

The court deemed this to be unacceptable and held that, notwithstanding the commonality and uniformity evidenced in the complained-of practices, which warranted an initial class certification, the case could not proceed as a class action.  In other words, the court determined that proving the claims of the plaintiffs would be contingent upon individual scrutiny of how they conducted themselves under the uniform policies.

I have written many times that the best defense of the employer in collective and class actions is to argue that individual issues dominate and that individual scrutiny is needed.  This presents a variation on that theme.  By requiring the plaintiffs to present a trial plan, the details of that plan may evidence or be argued to evidence a need for individual scrutiny and then the class will fall.  This should be done, as Amanda writes, as early in the case as possible to cut the case (and the attorneys fees) off at the pass.
 

A group of asset protection coordinators had filed a class action against Wal-Mart Stores Incorporated, claiming they had been misclassified as exempt employees under the Fair Labor Standards Act; the plaintiffs sought a nationwide class.  They sought conditional certification of their class under the “modest factual showing” standard, which is, oftentimes, a very lenient standard for plaintiffs to initially prevail upon.  The case is entitled Bramble v. Wal-Mart Stores Inc. and was brought in federal court in the Eastern District of Pennsylvania.

In denying the motion, the judge referenced the deposition testimony of the plaintiffs, where they tried to cast the theory that they spent most of their time performing non-exempt work.  The court was unimpressed, as it found that this testimony was “largely specific to their own experiences at Wal-Mart.”  As such, the testimony could not support the contention that their work was the same as was performed by allegedly similarly situated employees across the country.

Moreover, the court ruled that the misclassification issue would necessarily have to center around a fact-intensive analysis of the duties and functions discharged by these employees all over the nation.  In other words, the need for individual scrutiny outweighed (significantly) any evidence that there existed a common policy or a common set of job duties for these employees, wherever they might be situate.  As the number of potential opt-ins totaled more than five thousand, spread out over more than three thousand stores, the court concluded that individual analysis would be needed and this would not allow for the “the economy of scale envisioned by the FLSA collective action procedure.”

The workers had claimed that they had the same position descriptions and that Wal-Mart evaluated and compensated them under a common set of policies.  The Company, however, countered by producing affidavits from twenty-three employees, in three States, that demonstrated that the employees performed a number of managerial functions, including hiring, firing, and training.

I have noted in other postings that the need for individual scrutiny is a solid and winnable defense against even the conditional motion for class certification, which plaintiffs often just support with almost identical affidavits or, as herein, boilerplate testimony about their performance of allegedly non-exempt duties.  A carefully mounted defense, which highlights the individual differences in supposedly similarly situated employees, especially if, as here, those employees are widely scattered can defeat class certification and deter the plaintiff’s lawyers from trying the same thing with a different grouping of employees.

A group of satellite television dish technicians suing for overtime under the Fair Labor Standards Act (“FLSA”) have been denied class certification based on the court’s finding that there was not sufficient commonality among the class members, or, put differently, there was too much of a need for individual scrutiny.   The case is entitled Shim v. Echosphere, LLC and was filed in the Southern District of Florida.

This is an important decision because, although the judge agreed that the putative class members had similar job descriptions and they were covered by the same corporate policies as the lead plaintiff, there existed enough “significant individual considerations” such as to negate the identity of the proposed class.

The lead plaintiff was a technician and, as such, he was clearly non-exempt and entitled to overtime. In addition to overtime monies, the lead plaintiff alleged that the company made routine/automatic deductions for lunch periods, whether or not the lunch periods were taken.

The judge also found, as another basis for denying the certification motion that the technicians at issue were employed at a number of locations throughout the country and thus the court would be compelled to analyze varied employment standards in the different jurisdictions.  The court stated that, in order to grant the conditional class certification it “would have to analyze the work experience and employment policies of each individual at each location across the nation.”

The judge also determined that since so many time periods were involved, the damage claims would be all over the board.  The differences between the different workers would also mean that some would be entitled to liquidated damages and others would not, another lack of the required commonality. The Court also stated that it was “wholly unclear whether the opt-in plaintiffs were subjected to the same lunch-break policies and practices, whether these policies and practices were established in the same manner by the same decision maker, and whether the FLSA violations allegedly experienced by the opt-in plaintiffs were sufficiently similar.”

This is the key to an employer’s successfully defending a class action.  Dig into the facts and find as many distinguishing factors amongst the putative class members and bang away at those in the opposition to the motion for conditional certification.  The greater need for individual scrutiny the better the chances of defeating the class motion.

A federal judge has conditionally certified a class action which was instituted by a group of production line workers in a turkey processing plant.  They claim they are owed compensation for donning and doffing activities as well as other activities that they claim were “working time.”  They claim compensation for changing into protective gear (the donning and doffing component) washing their tools and time spent in travel to and waiting at their production lines.  The case is entitled McLaurin v. Prestage Foods Inc. and was filed in the District of North Carolina.

The plaintiffs claim that the Company paid them only for time that the production lines were supposed to be operating.  The plaintiffs estimate 300-1,000 members in the class and wanted individuals who worked “on or near” the processing line to be part of the class.  The Company is contending that the class definition proposed was too broad because employees working “near” the line were paid differently than those who actually worked on the line.

Naturally, the plaintiffs wanted the broader definition to apply, contending that the true parameters could be worked out “later.”  The defendants also contended that there were factual differences in the kinds of protective gear worn by the workers, which hearkens to the individual scrutiny defense, but the judge rejected this contention.  The court held that if there was a common policy or practice that applied to all of the workers, the fact that there might be individual differences from worker to worker would not detract from the validity of the class.

There will be probably considerably more discover in this matter.  The case will likely be settled sometime in the future, as these working time cases are different than and harder to win than an exemption misclassification issues.  In the exemption case, if the employer has strategized correctly and preemptively and is proved correct on the exemption question, the entire class evaporates in a flash.  With working time cases, where there lies any modicum of employer compulsion or compulsion by an outside government agency that operates through the employer (e.g. FDA, Health Department) then there likely will be recovery by the plaintiffs and attorneys fees for their counsel.