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!

Exemption class actions, i.e. lawsuits alleging misclassification, continue to pop up in different contexts and concerning different classifications. A bank has just agreed to settle a case by paying more than $2 million to put a close to a Fair Labor Standards Act (FLSA) collective action based on a theory that the bank misclassified certain computer/IT workers. The case is entitled Schaefer Jr. v. M&T Bank Corporation, and was filed in federal court in the Southern District of New York.

Network switch and ethernet cables,data center conceptThe settlement will pay almost $2.5 million to more than two hundred IT workers across the country. The parties have filed a joint motion asking that the settlement be approved. The motion notes that the employer denied liability as well as that it even was the employer of the workers. The motion then asserts that the settlement was “reasonable in light of the considerable risk that Plaintiffs face.” Naturally, the motion seeks money for attorney’s fees that would amount to 33% of the gross settlement funds and money for a settlement claims administrator.

The motion provides the rationale for the settlement by stating that “first, although plaintiffs obtained conditional certification, maintaining the collective and certifying a class through trial may be difficult. Defendant would likely argue that the differences among various job titles, departments and other individualized questions preclude class certification and would warrant decertification of the collective. Moreover, defendant could argue that the computer exemption applies to plaintiffs and ultimately convince the court that plaintiffs were properly classified as exempt from overtime pay. Although Plaintiffs disagree, other defendants have prevailed on such arguments in similar cases.”

The theory of the suit was that the bank did not properly pay overtime to technology department network computing analysts and staff specialists. The lead plaintiff, James Schaefer Jr., alleged that he was such an IT worker for several years and was not paid overtime because he was misclassified as exempt.

The Takeaway

These exemption cases prove difficult to win, often times. On the computer exemption issue, numerous titles abound which may or may not connote an exempt classification. A lot of gray here. With that said, the need-for-individualized-scrutiny defense sometimes works. Sometimes it does not and then the stakes for the employer-defendant are dramatically escalated.

Much better to settle…

Whenever a class action is defended, the main defense is, always, too much individual scrutiny is needed to allow a class to be formed.  This is exactly what a group of defendants has just now urged a California federal court to find and thus decertify a conditional class of workers claiming they were denied overtime pay in violation of the Fair Labor Standards Act.  The case is entitled Sandoval et al. v. Ali et al.. and was filed in federal court in the Northern District of California.

Copyright: leaf / 123RF Stock Photo
Copyright: leaf / 123RF Stock Photo

The workers clam that they were not paid for non-repair-related tasks and they also claim that they were not properly compensated for downtime; the employers claim that each of these claims has to be assessed individually because they are not similar enough to belong to a single class or to opt in to the conditionally certified FLSA class.  Indeed, the defendants noted that the court itself already compared the theories of recovery to “shifting sands.”

The defendants brief aptly noted that “each variation has been tied to unique, individualized or specifically anecdotal scenarios based on cases that are dissimilar to the facts of this case, but there has not been any evidence of any class-wide policy, procedure or practice at use [in] all shops let alone a single shop that would warrant the FLSA conditionally certified class to continue as a class action.”

The defendants argued that the standard for conditional certification is much lower because that kind of certification is granted “not on the merits,” but rather because, in that limited and narrow setting, naked allegations can carry the day.  However, the defendants cogently argued that “by contrast, [for] the decertification of FLSA collective actions or final certification of FLSA collective actions, the burden on plaintiffs is substantially greater and requires a demonstration of substantial similarity between the plaintiffs and opt-ins.”  The defendants conclude by bluntly noting that “plaintiffs cannot meet this burden.”

The Takeaway

Anything that can be espoused that will tend to show individuality or that individual scrutiny is needed should be thrown up as a defense.  For example, in this case, there were several FLSA class members and a number of opt-in workers that allegedly had claims beyond the statute of limitations period, so their circumstances would also be different.  The employer here has cogently asserted that decertification is mandated because proving liability under these circumstances will necessarily default into making numerous individual inquiries over time worked.

Music to my ears.  Hope it works.

A FLSA class is usually conditionally certified.  The next tactical step for the employer is to seek that class’ decertification. If it succeeds in doing so, the case is over (subject to appeals).  The key to that effort is to convince the district court that too much individual scrutiny of class members is required so there does not exist the commonality, the “pattern or practice” that binds all class members together.

An employer has adopted this very technique in contending that a class of workers who claim they were misclassified as exempt should be de-certified because the court would be compelled to look at the duties discharged by each employee to ascertain what their primary duties were.  The Court would then have to determine they, that is to say, for each one of them, are exempt or not. The case is entitled Heffelfinger et al. v. Electronic Data Systems Corporation and was filed in federal court in the Central District of California.

The Ninth Circuit had upheld certification for one class of EDS workers but remanded this case to the district court judge, due to a concern relating to significant differences in the job duties/tasks of information technology employees.  The defense argued that ” the mere descriptions of those job categories” could not address or resolve the issue of whether all putative class members were exempt.  In this regard, the company contended that this class sought to include employees whose position descriptions were very similar to employees in another EDS class action where class certification was denied.

Thus, the company argued that individual scrutiny would be required for every member of the class, thus making its continuation as a class action inappropriate.  The plaintiffs have countered by alleging that these employees “do basically the same kind of thing, that is, computer programming, and that is the kind of duty the Ninth Circuit has said is not in and of itself qualitatively exempt.”

The issue has been joined on whether these employees fit within the administrative exemption, which is often the grayest and toughest to fit within.  This decision will turn on whether the putative class members performed administrative work for the Company’s customers.  The employer contends that this fact no longer supports a class, but rather the need for individualized scrutiny.

I can’t wait for the decision, hoping we get another defendant’s road map for finding our way to the need for individual attention, and, therefore, the dismissal of the plaintiffs’ FLSA collective action.

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.

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.

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.