Tyson Foods v. Bouaphakeo: U.S. Supreme Court Affirms Judgment for Employees in Wage and Hour Class Action

In Tyson Foods, Inc. v. Bouaphakeo (SCOTUS 3/22/16), many, including me, expected the U.S. Supreme Court to place further limits on the use of class actions. Instead, both Justice Kennedy, who authored the opinion, and Chief Justice Roberts joined the Court's four liberals in affirming a district court judgment in favor of a class of employees.

The plaintiffs filed a putative collective action under the Fair Labor Standards Act (FLSA) and class action under Iowa state law, seeking overtime compensation for time spent donning and doffing protective gear. The district court certified both the collective action under the FLSA (29 U.S.C. section 216) and the class action under F.R.C.P. Rule 23.

At trial, the parties stipulated that Tyson owed the plaintiffs for donning and doffing certain gear, but left other liability and damage questions for the jury. The plaintiffs introduced anecdotal evidence, video recordings of employees donning and doffing, and an expert's testimony regarding his study of the average time spent donning and doffing. A second expert analyzed Tyson's records of time worked and amounts paid and calculated amounts owed.

The jury found for the plaintiffs and awarded $2.9 million of the $6.7 million requested. Tyson appealed, and the Eighth Circuit Court of Appeals affirmed. The Supreme Court also affirmed, holding as follows:

Assuming, without holding, that a section 216 collective action is no more difficult to certify than a Rule 23 class action, certification of both actions can be analyzed under Rule 23 standards.

"Representative evidence," including statistical sampling, may be introduced in class actions, as in other actions, to establish or defend against liability. Admissibility depends not on whether the case is a class action, but on whether the evidence is "reliable in proving or disproving the elements of the relevant cause of action." The representative evidence here filled a gap left by Tyson's failure to keep records of donning and doffing time and was a permissible means of proving each employee's individual damages. Use of such evidence did not deprive Tyson of its ability to litigate individual defenses.

Wal-Mart Stores, Inc. v. Dukes, 564 U. S. 338 (2011), "does not stand for the broad proposition that a representative sample is an impermissible means of establishing classwide liability." Certification in Dukes failed because the plaintiffs could not show any common policy of discrimination. The plaintiffs could not use representative evidence to show such a policy in a class action any more than they could have used it to show discrimination in an individual action. In contrast, the representative evidence offered here would be admissible in an individual action to prove liability.

Representative evidence is subject to challenge under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U. S. 579 (1993) as being "statistically inadequate or based on implausible assumptions," but Tyson did not raise such a challenge in the district court.

The Court declined to issue "broad and categorical rules" regarding the use of representative and statistical evidence.

In FLSA actions, inferring the hours an employee has worked from a study such as Mericle’s has been permitted by the Court so long as the study is otherwise admissible. Mt. Clemens, supra, at 687; see also Fed. Rules Evid. 402 and 702. The fairness and utility of statistical methods in contexts other than those presented here will depend on facts and circumstances particular to those cases.

The Court did not address the argument, raised in the petition for certiorari but not briefed, that a class may not be certified if it contains class members who suffered no damages.

The Court also did not address Tyson's alternate argument that the plaintiffs cannot ensure that no damages are paid to class members who were not injured. The question is not yet ripe because the damages have not been disbursed, nor has the district court indicated how they will be disbursed. The Court remanded for the district court to determine this issue. The Court also noted that the plaintiffs requested bifurcation of liability and damages in order to ensure that uninjured class members did not recover, and Tyson "argued against that option and now seeks to profit from the difficulty it caused."

Chief Justice Roberts concurred in the opinion in full and wrote separately, expressing skepticism that the district court can devise a means of disbursing funds only to injured class members. Because the court cannot tell how the jury arrived at the $2.9 million verdict, it cannot determine which class members the jury found to have suffered actual injury. Without such a means, the verdict cannot stand, as Article III would not permit a court to award damages to one who did not suffer an injury. Justice Alito joined in this portion of the concurring opinion.

Justice Alito also joined in the dissenting opinion authored by Justice Thomas. Justice Thomas would have held as follows: 

Before class-action plaintiffs can use representative evidence [as common proof of an otherwise individualized issue], district courts must undertake a rigorous analysis to ensure that such evidence is sufficiently probative of the individual issue to make it susceptible to classwide proof. The District Court did not satisfy that obligation here, and its failure to do so prejudiced defendant Tyson Foods at trial. The majority reaches a contrary conclusion by redefining class-action requirements and devising an unsound special evidentiary rule for cases under the [FLSA].

Whether any particular employee worked more than 40 hours in a given workweek is an individual issue, and the district court erred in failing to analyze whether this individual issue would be susceptible of common proof. Plaintiffs' evidence demonstrated that the donning and doffing for each employee varied, that individual issues predominated, and that class certification was not appropriate. 

The opinion is available here.  

Oregon Restaurant and Lodging Ass'n v. Perez: Ninth Circuit Revisits Tip Pooling

Just a quick word on Oregon Restaurant and Lodging Association v. Perez (9th Cir. 2/23/16). The opinion itself does a good job of stating the holding:

Under the Fair Labor Standards Act of 1938 (“FLSA”), as amended in 1974, an employer may fulfill part of its hourly minimum wage obligation to a tipped employee with the employee’s tips. 29 U.S.C. § 203(m). This practice is known as taking a “tip credit.” Section 203(m) of the FLSA obligates employers who take a tip credit to (1) give notice to its employees, and (2) allow its employees to retain all the tips they receive, unless such employees participate in a valid tip pool. Id. Under section 203(m), a tip pool is valid if it is comprised exclusively of employees who are “customarily and regularly” tipped. Id.

In both cases before this court, Employer-Appellees did not take a tip credit against their minimum wage obligation; they paid their tipped employees at least the federal minimum wage. Employer-Appellees required their employees to participate in tip pools. Unlike the tip pools contemplated by section 203(m), however, these tip pools were comprised of both customarily tipped employees and non-customarily tipped employees.  

In 2010, we held in Cumbie v. Woody Woo, Inc. [discussed here] that this type of tip pooling arrangement does not violate section 203(m) of the FLSA, because section 203(m) was silent as to employers who do not take a tip credit. 596 F.3d 577, 583 (9th Cir. 2010). In 2011, shortly after Cumbie was decided, the Department of Labor (“DOL”) promulgated a formal rule (“the 2011 rule”) that extended the tip pool restrictions of section 203(m) to all employers, not just those who take a tip credit. 76 Fed. Reg. 18,832, 18,841–42 (April 5, 2011).

The United States District Court for the District of Oregon held that Cumbie foreclosed the DOL’s ability to promulgate the 2011 rule and that the 2011 rule was invalid because it was contrary to Congress’s clear intent. Or. Rest. & Lodging v. Solis, 948 F. Supp. 2d 1217, 1218, 1226 (D. Or. 2013). The United States District Court for the District of Nevada followed suit. Cesarz v. Wynn Las Vegas, LLC, No. 2:13-cv-00109-RCJ-CWH, 2014 WL 117579, at *3 (D. Nev. Jan. 10, 2014). For the reasons set forth below, we reverse both district court decisions.

In other words, under the 2011 DOL rule, a tip pool is valid only if it is comprised exclusively of employees who are “customarily and regularly” tipped, whether the employer takes a tip credit or not. The opinion is available here.  

Navarro v. Encino Motorcars: Ninth Circuit Defers to Federal Regulations, Holds that Car Dealership's "Service Advisors" Are Not Exempt from FLSA Overtime Requirement

A quick word on Navarro v. Encino Motorcars, ___ F.3d ___ (9th Cir. 3/24/15), which I missed earlier in the year. The plaintiffs worked as service advisors at a car dealership. Their job was to greet customers, evaluate service needs, suggest required services, and suggest additional services above and beyond those required to resolve the customers' complaints. They filed suit for payment of overtime wages under the Fair Labor Standards Act (FLSA). The district court dismissed their overtime claim, holding that they fell within the FLSA's exemption for "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles." The Ninth Circuit reversed, holding as follows:

The FLSA requires covered employers to pay their employees minimum wage and overtime compensation. The FLSA exempts "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" from the overtime requirement. Federal regulations define these terms, and the parties agreed that the plaintiffs were not "salesmen, partsmen, or mechanics" as defined within the regulations. The question then was whether the Court should defer to the regulations.

First, the FLSA does not define the terms "salesman, partsman, or mechanic" and it is ambiguous as to their meaning. This is particularly so given that the exemptions are to be applied only to those "plainly and unmistakably within their terms and spirit."

Second, because the regulation was duly promulgated after a notice-and-comment period and has not changed since its promulgation in 1970, the Court reviewed the regulation under the "reasonableness" standard set forth in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). 

Third, the regulation represents a reasonable interpretation of the statute and is consistent with the presumption that the exemptions should be construed narrowly. The Court noted that "there are good arguments" supporting the defendant's reading of the exemption, "But where there are two reasonable ways to read the statutory text, and the agency has chosen one interpretation, we must defer to that choice."

The opinion is available here.

Balestrieri v. Menlo Park Fire: Time Moving Gear to and from Temporary Assignments Is Not Compensable under the FLSA; Compensation for "Annual Leave Buyback" Need Not Be Included in Employees' Regular Rate of Pay for Overtime Purposes

Just a quick word on Balestrieri v. Menlo Park Fire Protection District, ___ F.3d ___ (9th Cir. 9/4/15), which includes two points of interest.

First, applying Integrity Staffing Solutions, Inc. v. Busk, ___U.S. ___, 135 S.Ct. 513 (12/9/14) (discussed here) the Court held that firefighters are not entitled to compensation for time spent moving their gear to and from temporary work assignments at fire stations other than their home stations. Under the Fair Labor Standards Act (FLSA), firefighters are "engaged in the prevention, control, and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk." Time spent moving their gear from their permanent assignments to temporary assignments was not "integral and indispensable" to these principal activities and therefore was "preliminary" or "postliminary" under the FLSA, as amended by the Portal-to-Portal Act, and such "preliminary" and "postliminary" time is not compensable.

Second, the Court held that the District need not include amounts paid for "annual leave buyback" within its calculation of the employees' regular rates of pay for purposes of determining their overtime rates of pay. This is important because overtime compensation is 1 1/2 the regular rate of pay, so determining the regular rate of pay is critical to determining whether an employer is paying the proper overtime rate. I will not delve into the details of this part of the decision, but note it so that anyone interested can find the case.

The opinion is available here.

U.S. Department of Labor Issues Administrator’s Interpretation on Independent Contractor Classification under the Fair Labor Standards Act

On July 15, 2015, the U.S. Department of Labor's Wage and Hour Division (WHD) issued Administrators Interpretation 2015-1: "Application of the Fair Labor Standards Act's 'Suffer or Permit' Standard in the Identification of Employees Who Are Misclassified as Independent Contractors."

The Interpretation's stated goal is to provide "guidance regarding the application of the standards for determining who is an employee under the Fair Labor Standards Act [FLSA] ... to the regulated community in classifying workers and ultimately in curtailing misclassification."

In order to make the determination whether a worker is an employee or an independent contractor under the FLSA, courts use the multi-factorial “economic realities” test, which focuses on whether the worker is economically dependent on the employer or in business for him or herself. A worker who is economically dependent on an employer is suffered or permitted to work by the employer. Thus, applying the economic realities test in view of the expansive definition of “employ” under the Act, most workers are employees under the FLSA. The application of the economic realities factors must be consistent with the broad “suffer or permit to work” standard of the FLSA.

The Interpretation discusses each of the factors in the multi-factor test, which it lists as follows:

A. Is the work an integral part of the employer's business?  

B. Does the worker's managerial skill affect the worker's opportunity for profit or loss?  

C. How does the worker's relative investment compare to the employer's investment?  

D. Does the work performed require special skill and initiative?  

E. Is the relationship between the worker and the employer permanent or indefinite? 

F. What is the nature and degree of the employer’s control? 

This is the fifth Administrator's Interpretation since the Obama Administration began issuing them in 2010. Prior to 2010, the DOL had issued opinion letters in response to specific questions from the public. The WHD's web page for Administrator's Interpretations is here. 

Tyson Foods v. Bouaphakeo: Supreme Court Will Revisit Class Action Standards

In Bouaphakeo v. Tyson Foods, Inc., ___ F.3d ___ (8th Cir. 2014), the plaintiffs sued their employer, Tyson, under the federal Fair Labor Standards Act (FLSA) and state law. They alleged that Tyson failed to compensate them for time spent donning and doffing personal protective equipment and clothing and time spent transporting these items from lockers to the production floor.

The district court certified the case as a FLSA collective action under 29 U.S.C. § 216(b) and a class action under Federal Rule of Civil Procedure 23. At trial, the plaintiffs "proved liability and damages by using individual timesheets, along with average donning, doffing, and walking times calculated from 744 employee observations." The jury returned a verdict in favor of the employees, and the court entered judgment. Tyson appealed, and the Eighth Circuit Court of Appeal affirmed, holding as follows:

The district court did not err in granting certification. Tyson had uniform policies that affected all class members, and time studies showed that the employees were underpaid. Certification was proper even if evidence at trial showed that some employees worked no overtime and could not recover damages.

The employees did not rely improperly on a formula to prove liability and damages at trial. The employees proved liability "for the class as a whole, using employee time records to establish individual damages." Because Tyson had no records of actual donning, doffing, and walking time, the employees could show their damages "as a matter of reasonable inference."

The Eighth Circuit opinion is available here.

The United States Supreme Court granted certiorari on June 8, 2015. Tyson Foods, Inc. v. Bouaphakeo, case no. 14-1146, will be heard next term. SCOTUSblog, which is the best resource for all things SCOTUS, has a page for the case here. 

Integrity Staffing Solutions, Inc. v. Busk: SCOTUS Holds that Security Check Time is not Compensable under FLSA

In Integrity Staffing Solutions, Inc. v. Busk, ___U.S. ___ (12/9/14), the plaintiff filed a putative collective action under the federal Fair Labor Standards Act (FLSA), alleging that the defendant failed to compensate its employees for time that they spent waiting for and going through the employer's mandatory end-of shift security checks.

The Ninth Circuit, in Busk v. Integrity Staffing Solutions, Inc., 713 F. 3d 525 (9th Cir. 4/12/13) (discussed here), had held that such time was compensable. The Supreme Court reversed, holding as follows:

The Portal-to-Portal Act, 29 U. S. C. §251(a), provides that an employer need not pay an employee for the following:

(1) walking, riding, or traveling to and from the actual place of performance of the principal activity or activities which such employee is employed to perform, and

(2) activities which are preliminary to or postliminary to said principal activity or activities, which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal activity or activities.

"At issue here is the exemption for 'activities which are preliminary to or postliminary to said principal activity or activities.'"

The term "principal activities" includes all activities that are "integral and indispensable part of the principal activities." An activity is "integral and indispensable" if it is "an intrinsic element of [the principal] activities and one with which the employee cannot dispense if he is to perform his principal activities."

The time spent waiting for or engaged in security checks was not compensable. Waiting for and engaging in security checks were not the "principal activity or activities which [the] employee is employed to perform." Nor were they integral and indispensable to the employees' duties as warehouse workers. Integrity Staffing could have done away with the security screenings without impacting the employees' ability to perform their work.

Neither the fact that the employer required the employees to undergo the screening, nor that fact that the employer could have reduced the waiting time to a de minimis amount by adding more screeners change the analysis. Neither of these facts would make the screening time integral and indispensable to the employees' principal activities as warehouse workers.

Justice Thomas wrote the opinion for a unanimous Court. Justice Sotomayor wrote a concurring opinion, in which Justice Kagan joined. The opinion is available here. 

Landers v. Quality Communications: US Supreme Court Denies Cert in Case Involving FLSA Pleading Standards

On April 20, 2015, the US Supreme Court denied certiorari in Landers v. Quality Communications, Inc., ___ F.3d ___ (9th Cir. 11/12/14). In Landers, the Ninth Circuit affirmed an order dismissing a collective action under the federal Fair Labor Standards Act (FLSA) for failure to meet the heightened pleading standards set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009).

[T]o survive a motion to dismiss, a plaintiff asserting a claim to overtime payments must allege that she worked more than forty hours in a given workweek without being compensated for the overtime hours worked during that workweek... A plaintiff may establish a plausible claim by estimating the length of her average workweek during the applicable period and the average rate at which she was paid, the amount of overtime wages she believes she is owed, or any other facts that will permit the court to find plausibility. However, like the other circuit courts that have ruled before us, we decline to make the approximation of overtime hours the sine qua non of plausibility for claims brought under the FLSA. After all, most (if not all) of the detailed information concerning a plaintiff-employee's compensation and schedule is in the control of the defendants. 

We further agree with our sister circuits that, at a minimum, a plaintiff asserting a violation of the FLSA overtime provisions must allege that she worked more than forty hours in a given workweek without being compensated for the hours worked in excess of forty during that week. 

The opinion is available here.

Gomez v. Campbell-Ewald Co.: Rejected Settlement Offer Does Not Moot Individual or Putative Class Claims

Gomez v. Campbell-Ewald Company, ___ F.3d ___ (9th Cir. 9/19/2014) concerns an issue that has arisen more frequently in employment class actions: whether a rejected settlement offer moots individual and/or class claims. See Genesis Healthcare Corp. v. Symczyk, ___ U.S. ___, 133 S.Ct. 1523 (2013) (discussed here).

In Gomez, the plaintiff filed an individual and putative class action under the Telephone Consumer Protection Act (TCPA). The defendant made a Rule 68 offer of judgment for the full amount of the plaintiff’s individual claim, and the plaintiff rejected the offer. After the district court dismissed the action on grounds not relevant here, the plaintiff appealed. The defendant then moved to dismiss the appeal for lack of jurisdiction, arguing that the personal and putative class claims were mooted by Gomez’s refusal to accept the settlement offer. The Ninth Circuit rejected this argument, holding as follows:

Under Ninth Circuit precedent, "an unaccepted Rule 68 offer that would fully satisfy a plaintiff’s claim is insufficient to render the [individual] claim moot," and such an offer, even if made before the plaintiff moves for class certification, does not render the class claims moot. Slip op. at 6-8.

Genesis Healthcare did not change this result. Genesis Healthcare was a putative collective action under the Fair Labor Standards Act (FLSA), rather than a Rule 23 class action, and the precedents established in FLSA collective actions do not apply in Rule 23 class actions. Slip op. at 8-9. 

The opinion is available here.

Avila v. LAPD: Ninth Circuit Affirms FLSA Retaliation Award for LAPD Officer

In Avila v. Los Angeles Police Department, ___ F.3d ___ (9th Cir. 7/10/14), plaintiff Leonard Avila, a police officer, sued the Los Angeles Police Department and the City of Los Angeles (collectively, City) for retaliation under the Fair Labor Standards Act (FLSA), alleging the following facts: Avila periodically worked through his meal period but did not request overtime; Avila testified for another police officer, Maciel, in support of Maciel's claim that LAPD failed to compensate him for overtime hours worked; and LAPD terminated Avila after he testified, alleging that Avila was insubordinate for not claiming his own overtime. 

A jury found in favor of Avila on his FLSA anti-retaliation claim, and the City appealed. The Ninth Circuit affirmed, finding as follows:

The determination by the LAPD Board of Rights (BOR) that Avila was guilty of insubordination and should be fired was not entitled to preclusive effect. Slip op. at 7-8. The BOR did not decide whether Avila was terminated in in retaliation for testifying in the Maciel action, and Avila was entitled to have the issue determined in court. 

The district court properly instructed the jury on Avila's retaliation claim. Slip op. at 8-17. 

The district court properly refused to instruct the jury on the same decision defense because the uncontested evidence was that the City would not have fired Avila had he not testified. Slip op. at 10-11. Given this uncotested evidence, the court had no evidentiary foundation for giving a same decision instruction.

The district court did not err in refusing to instruct the jury that an employee who engages in protected activity is not immune from adverse employment action for violating workplace rules and is not immune from termination if the employee's conduct warrants termination. Slip op. at 11-17. These instructions would have supported the City's argument that it did not fire Avila because he testified, but rather because he failed to request overtime. As stated earlier, the City was not entitled to a same decision instruction, nor was it entitled to an instruction that it could fire Avila for not claiming overtime. 

[T]he only issue for the jury in this case was whether the City was telling the truth in claiming that it fired a model employee (who was hired by another police force even as the termination action was pending), for not seeking all the pay that he might have. The district court did not abuse its discretion in declining to give the requested supplemental instructions. 

Slip op. at 17. 

Finally, the district court did not abuse its discretion in awarding Avila his attorney fees and liquidated damages under the FLSA. Slip op. at 18-19. 

The opinion is available here. 

Haro v. City of Los Angeles: Ninth Circuit Affirms Overtime Award to Fire Department Employees

In Haro v. City of Los Angeles, ___ F.3d ___ (9th Cir. 3/18/14), the plaintiffs worked as dispatchers or aeromedical technicians for the City of Los Angeles Fire Department. They alleged that the City improperly classified them as employees "engaged in fire protection" and improperly failed to pay them weekly overtime compensation under the federal Fair Labor Standards Act (FLSA). 

The district court granted summary judgment to the plaintiffs, finding that they were not engaged in fire protection work. The City appealed, and the Ninth Circuit affirmed, finding as follows: 

Dispatchers do not have the "responsibility to engage in fire suppression" and do not qualify for the FLSA overtime exemption for employees "engaged in fire protection." Slip op. at 17-18. Aeromedical technicians also do not "engage in fire suppression" and also do not qualify for the FLSA overtime exemption. Slip op. at 19. 

The FLSA's three year statute of limitations applied because the City's violation of the FLSA was "willful," meaning that the City "either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute." Slip op. at 19-21. 

The plaintiffs were entitled to liquidated damages in the amount of the unpaid overtime compensation (i.e. double damages). Slip op. at 21-22. 

The City was entitled to credit overtime payments already made to employees against overtime payments owed to them under the FLSA. However, such offsets must be calculated and could be applied only on a workweek-by-workweek basis. Slip op. at 22-25. 

Haro v. City of Los Angeles is available here. 

Sandifer v. U.S. Steel: Supreme Court Clarifies FLSA Donning and Doffing Rules

In Sandifer v. United States Steel Corp., ___ U.S. ___ (1/27/14), the Supreme Court of the United States considered the meaning of the phrase "changing clothes" in the Fair Labor Standards Act (FLSA). 29 U.S.C. section 201 et seq.

Clifton Sandifer sued U.S. Steel under the FLSA for time spent donning and doffing various pieces of protective gear. U.S. Steel argued that the time was not compensable under the parties' collective bargaining agreement (CBA) and under section 203(o) of the FLSA, which allows parties to agree, as part of a CBA, that "time spent in changing clothes . . . at the beginning or end of each workday" is not compensable.

The district court granted summary judgment on those grounds and also on grounds that any time donning and doffing non-clothing protective gear was de minimis. The Seventh Circuit Court of Appeals affirmed, as did the Supreme Court, holding:

The term "clothes" is given its ordinary meaning in the FLSA: "items that are both designed and used to cover the body and are commonly regarded as articles of dress;" and "[c]overing for the human body; dress; vestments; vesture." "Clothes" does not include items such as tools and accessories, which would include necklaces and knapsacks.

The term "changing clothes" is not given the "usual meaning" of substituting certain clothing items for others, but takes on a broader meaning that includes "time spent in altering dress."

As a result, donning and doffing certain items, such as a flame-retardant jacket, pants, and hood; a hardhat; a snood; wristlets; work gloves; leggings; and metatarsal boots constitutes "changing clothes." Donning and doffing other items, such as safety glasses; earplugs; and a respirator, does not.

The court declined to apply the de minimis doctrine to the compensable time spent donning and doffing non-clothing items. Instead, the Court held:

If an employee devotes the vast majority of the time in question to putting on and off equipment or other non-clothes items (perhaps a diver's suit and tank) the entire period would not qualify as "time spent in changing clothes" under §203(o) , even if some clothes items were donned and doffed as well. But if the vast majority of the time is spent in donning and doffing "clothes" as we have defined that term, the entire period qualifies, and the time spent putting on and off other items need not be subtracted. 

Sandifer v. U.S. Steel is available here. 

Wang v. Chinese Daily News: Ninth Circuit Vacates Prior Order, Again Remands to District Court for Reconsideration of Certification Order in Light of Wal-Mart

In 2004, the plaintiffs in Wang v. Chinese Daily News filed a putative class and collective action against defendant Chinese Daily News (CDN), alleging violations of the federal Fair Labor Standards Act (FLSA), the California Labor Code, and the Unfair Competition Law (UCL). The district court certified the FLSA claim as a collective action and certified the state-law claims as a class action under Federal Rule 23. After a sixteen-day jury trial and a three-day bench trial, the district court entered judgment for the plaintiffs for damages, but denied their request for injunctive relief.

The Ninth Circuit affirmed. Wang v. Chinese Daily News, 623 F.3d 743 (9th Cir. 2010) (discussed here). In 2011, the United States Supreme Court vacated that decision and ordered the Ninth Circuit to reconsider it in light of Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011) (discussed here). On remand, the Ninth Circuit reversed the judgment for the class members on remanded to the district court to reconsider its certification order. Wang v. Chinese Daily News, 709 F.3d 829 (9th Cir. 3/4/13) (discussed here).

On September 3, 2013, the Ninth Circuit vacated its opinion of March 4, 2013, denied rehearing and rehearing en banc, and issued a new opinion, which largely tracks its earlier opinion.  The Court held as follows:

CDN could challenge the district court's finding that the commonality requirement of Federal Rule 23(a)(2) was satisfied, even though it originally did not brief the issue. "We conclude that the [Supreme] Court’s decision in Wal-Mart presents a sufficiently significant legal development to excuse any failure of CDN to discuss the commonality requirement of Rule 23(a)(2) in its opening brief." Slip op. at 9.

Although Wal-Mart differed substantially from Wang, the district court should reconsider its commonality finding in light of Wal-Mart:

On remand, the district court must 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.” Plaintiffs need not show that every question in the case, or even a preponderance of questions, is capable of classwide resolution. So long as there is “even a single common question,” a would-be class can satisfy the commonality requirement of Rule 23(a)(2). Wal-Mart, 131 S. Ct. at 2556 (alteration and internal quotation marks omitted).

Slip op. at 11. The Court here deleted language from its earlier opinion that the plaintiffs must show "significant proof that [CDN] operated under a general policy of [violating California labor laws]."

The plaintiffs conceded that class certification for their monetary claims under Rule 23(b)(2) could stand in light of Wal-Mart, but the possibility of a Rule 23(b)(2) class seeking injunctive relief remained. As former employees, none of the named plaintiffs had standing to pursue injunctive relief, but "because the Rule 23(b)(2) class was certified by the district court while they were current employees, the class certification with respect to injunctive relief may survive if there are identifiable class members who are still employed by CDN." Slip op. at 12. In another change from its earlier opinion, the Court remanded this issue to the district court for reconsideration.

The Court remanded to the district court for reconsideration of the propriety of class certification under Rule 23(b)(3) for three reasons:

1. The district court must reconsider commonality under Rule 23(a)(2), as discussed above. 
2. The district court improperly "create[d] a presumption that class certification [was] proper when an employer’s internal exemption policies are applied uniformly to the employees," and the Ninth Circuit recently has held that an employer's uniform policy of classifying all reporters and account executives as exempt employees is not sufficient to support Rule 23(b)(3) certification in and of itself. See In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 958–59 (9th Cir. 2009) (discussed here); Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944–48 n.14 (9th Cir. 2009). 
3. The district court should consider the impact of the California Supreme Court's decision in Brinker v. Superior Court (2012) 53 Cal.4th 1004 (discussed here). 

Slip op. at 13-16. 

Departing from its prior decision, the Ninth Circuit this time declined to address the calculation of damages, if the district court should find certification appropriate on remand. Slip op. at 16. 

The latest opinion is available here. 

Busk v. Integrity Staffing Solutions: Plaintiffs May Pursue Both FLSA Collective Action and State Law Class Action

Busk v. Integrity Staffing Solutions, Inc., ___ F. 3d ___ (9th Cir. 4/12/13), addresses an issue that has come up fairly frequently in the last few years, especially since passage of the Class Action Fairness Act (CAFA): whether a plaintiff can bring both a Rule 23 class action and a Fair Labor Standards Act (FLSA) collective action in the same case. According to Busk, the answer is yes.

The plaintiffs worked as hourly employees in warehouses in Nevada. They sued their employer, Integrity, for violations of both the FLSA and Nevada labor laws, alleging that required security screenings resulted in unpaid time. The district court granted Integrity's Rule 12(b)(6) motion to dismiss, and the plaintiffs appealed.

The Ninth Circuit reversed, holding that although FLSA collective actions utilize an opt-in procedure, while Rule 23 class actions utilize an opt-out procedure, "FLSA’s plain text does not suggest that a district court must dismiss a state law claim that would be certified using an opt-out procedure," and "a federal lawsuit combining state and federal wage and hour claims is consistent with FLSA." Slip op. at 7. Addressing the concern that allowing both classes to proceed simultaneously would confuse class members, the Court held that district courts "should be able to 'work[] out an adequate notice in this type of case.'" Slip op. at 9.

On the merits, the Court held that the district court erred in holding that the plaintiffs failed to state a claim under FLSA for passing through security clearances at the end of the day. The plaintiffs alleged that Integrity required the security screenings, which must be conducted at work, and which served to benefit Integrity by preventing employee theft. The Court held that such time, as alleged, was compensable under the FLSA. Slip op. at 9-12.

However, the district court did not err in dismissing the plaintiffs' claim for shortened lunch periods. The Court noted that the FLSA does not require compensation for an employee's lunch period, but that the employee must be "completely relieved from duty for the purposes of eating regular meals." It then held that the plaintiffs' allegation here -- that they were not relieved of duty because they had to clock out and then walk from the time clock to the lunch room -- did not state a claim for relief: "Walking to the lunchroom is not necessary to the plaintiffs’ principal work as warehouse employees." Slip op. at 13.

Busk v. Integrity Staffing Solutions, Inc., is available here. 

Convergent Outsourcing, Inc. v. Zinni: Supreme Court Declines to Hear Follow-Up to Genesis Healthcare on Effect of Settlement Offer to Representative Plaintiff

Thank you to Andrew Frisch of the FLSA Overtime Law Blog for noting that the Supreme Court has denied a petition for certiorari in Convergent Outsourcing, Inc. v. Zinni:  

On the heels of last month’s Genesis Healthcare Corp. v. Symczyk, the Supreme Court had the chance to decide a case which actually would help define the true parameters of the mootness doctrine, vis a vis cases where the plaintiff claims finite (and typically relatively small) individual damages, but seeks to represent a putative class. However, as in Symczyk, the Supremes left some observers scratching their heads and declined to answer the question posed to it. Although the Zinni case was a case brought under the Fair Credit Reporting Act (FCRA) and not the FLSA, the issue presented is common in FLSA cases. Specifically, the issue presented by the Zinni case was: 

Does an offer to provide a plaintiff with all of the relief he has requested, including more than the legal amount of damages plus costs and reasonable attorney’s fees, fail to moot the underlying claim because the defendant has not also offered to agree to the entry of a judgment against it? 

As noted in the Eleventh Circuit's decision below, Zinni v. ER Solutions, Inc., 692 F.3d 1152 (11th Cir. 2012) (available here), there is a split among the Circuit Courts of Appeals on the question presented.  

The SCOTUSblog page for the case is here.  

Guerrero v. Superior Court: Court of Appeal Reverses Order Sustaining Demurrer on Joint Employment Issues

In Guerrero v. Superior Court (Weber) (2/11/13) --- Cal.App.4th ---, the plaintiff, Guerrero, was employed to provide in-home support services (IHSS) to eligible recipients in Sonoma County (County) under the In-Home Support Services Act. Cal. Welf. & Inst. Code § 12300 et seq. She sued the County and its In-Home Support Services Public Authority (the Authority) for violation of federal and state wage law, alleging that they jointly employed her along with the individual to whom she rendered services.

The trial court sustained without leave to amend the demurrer of the County and the Authority. The Court of Appeal reversed, holding:

Although providing IHSS-funded care does not constitute employment for all purposes, the County and the Authority were Guerrero's joint employers for FLSA purposes because: (1) "their power over the employment relationship by virtue of their control over the purse strings was substantial"; (2) her wages were determined and paid by the state and its agents, the County and the Authority; (3) the County and the Authority maintained employment records on Guerrero; and (4) the County had an inherent role in in supervising the provision of services by IHSS providers such as Guerrero. Slip op. at 12-30. The Court relied heavily on Bonnette v. California Health and Welfare Agency (9th Cir. 1983) 704 F.2d 1465 (state and counties were employers under California's IHSS program) and distinguished Moreau v. Air France (9th Cir. 2003) 356 F.3d 942 (airline was not joint employer of service workers hired by outside entities for purposes of FMLA and CFRA).

Because Guerrero alleged that she "performed general household work exceeding twenty percent of her total weekly hours worked," the trial court erred in sustaining the demurrer on grounds that her job was exempt from FLSA minimum wage and overtime protections pursuant to the domestic service companionship exception. 29 U.S.C. section 213. "Determining whether or not all of the elements of the exemption have been established is a fact-intensive inquiry. The appropriateness of any employee's classification as exempt must be based on a review of the actual job duties performed by that employee." Slip op. at 30-34.

The Court rejected the concern that allowing such wage claims on a joint employment basis make the County and the Authority "liable for wages that they have no power to control."  

The IHSS program pays for specified services delivered to qualified recipients up to a maximum number of hours. Where a qualified provider delivers services other than those authorized and covered by the program or for a greater number of hours than authorized and real parties have no knowledge that such is occurring and are realistically unable to inform themselves of such, we agree it would be inappropriate to impute the recipient's knowledge to real parties so as to require real parties to pay for such services. 

However, this was a factual issue not ripe for adjudication on demurrer.  Slip op. at 34-36.

The County and the Authority were Guerrero's employers for purposes of California wage law because: (1) California's protections cannot be any less protective of employees than federal law; (2) while they did not directly hire, fire or supervise providers, through their "power of the purse" and quality control authority, the County and the Authority had "the ability to prevent recipients and providers from abusing IHSS authorizations both as to the type of services performed and the hours worked." The trial court thus erred in finding that they did not suffer or permit Guerrero to work and were not her employers.  Slip op. at 36-45. 

Public agencies are not exempt from the provisions of Wage Order No. 15-2001.  Slip op. at 45-50. 

The trial court erred in holding that the personal attendant exemption barred Guerrero's claims because whether she rendered services as a personal attendant was a question of fact. Guerrero's allegation that she spent more than 20 percent of her time performing "general household work" raised an issue of fact as to her personal attendant status under the wage order.  Slip op. at 50-52.  

The opinion is available here.  

The County and the Authority just last week filed their petition for review in the California Supreme Court. The Court last year granted review in Patterson v. Domino's Pizza (discussed here), in which the Court of Appeal held that a franshisor may be liable for a franchisee's alleged violations of the Fair Employment and Housing Act, but denied review in Aleksick v. 7-Eleven (2012) 205 Cal.App.4th 1176, in which the Court of Appeal held that 7-Eleven is not liable for allegedly failing to pay its franchisees' employees their earned wages. If I had to wager, I would say that the Court will deny review, particularly because Guerrero arises on the defendants' demurrer.  

Genesis Healthcare Corp. v. Symczyk: SCOTUS Rules on Justiciability of "Headless" FLSA Collective Action

Genesis Healthcare Corp. v. Symczyk has been on our Watch List for a while, and on April 16 we got the decision.

Laura Symczyk brought a FLSA putative collective action against her former employer, Genesis Healthcare. Genesis answered and served a Rule 68 offer to pay Symczyk $7,500, plus attorney fees and costs set by the court. Symczyk ignored the offer, Genesis asked the district court to dismiss the case. The district court did so, holding that it lacked subject-matter jurisdiction because no other plaintiffs had joined the action. 

The Third Circuit reversed, holding that Symczyk's individual case was moot, but that she should have the opportunity to move for conditional certification. If conditional certification were granted, that decision should relate back to the filing of the complaint, thus avoiding the question of mootness.

In a 5-4 decision authored by Justice Thomas, the Supreme Court reversed. 

The Court began by noting that "Article III, §2, of the Constitution limits the jurisdiction of federal courts to 'Cases' and 'Controversies,' which restricts the authority of federal courts to resolving 'the legal rights of litigants in actual controversies.'" Slip op. at 3-4. The Court then held that Symczyk had waived her right to contest that the unaccepted settlement offer mooted her individual claim:

While the Courts of Appeals disagree whether an unaccepted offer that fully satisfies a plaintiff’s claim is sufficient to render the claim moot, we do not reach this question, or resolve the split, because the issue is not properly before us. The Third Circuit clearly held in this case that respondent’s individual claim was moot. Acceptance of respondent’s argument to the contrary now would alter the Court of Appeals’ judgment, which is impermissible in the absence of a cross-petition from respondent. Moreover, even if the cross-petition rule did not apply, respondent’s waiver of the issue would still prevent us from reaching it. In the District Court, respondent conceded that “[a]n offer of complete relief will generally moot the [plaintiff’s] claim, as at that point the plaintiff retains no personal interest in the outcome of the litigation.” Respondent made a similar concession in her brief to the Court of Appeals, and failed to raise the argument in her brief in opposition to the petition for certiorari. We, therefore, assume, without deciding, that petitioners’ Rule 68 offer mooted respondent’s individual claim. 

Slip op. at 5 (citations omitted). Having assumed this point without deciding it, the Court then held that the relation back doctrine did not apply, and the action did not remain justiciable based solely on the collective action allegations made in the complaint.  The Court distinguished cases arising in the Rule 23 class action context, "both because Rule 23 actions are fundamentally different from collective actions under the FLSA ... and because these cases are, by their own terms, inapplicable to these facts."  Slip op. at 6.  

First, the Court held that Symczyk did not retain a personal stake in the case because she had not yet moved for conditional certification before her case became moot.  Slip op. at 7-8.  Second, the Court held that the action was not inherently transitory and likely to evade review because un-joined plaintiffs remain capable of bringing their own actions to enforce their rights.  Slip op. at 8-10. Third, because Symczyk had conceded that her case was moot, she "failed to assert any continuing economic interest in shifting attorney's fees and costs to others," and therefor she could not argue that "the purposes served by the FLSA's collective action procedures ... would be frustrated by defendant's use of Rule 68 to 'pick off' named plaintiffs before the collective-action process had run its course."  Slip op. at 10-11.  

In dissent, Justice Kagan questioned the underlying premise that the majority opinion "assumed without deciding," that Symczyk's individual case became moot when she rejected Genesis's settlement offer.  

We made clear earlier this Term that “[a]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot.” “[A] case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” By those measures, an unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect.  As every first-year law student learns, the recipient’s rejection of an offer “leaves the matter as if no offer had ever been made.” Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that “[a]n unaccepted offer is considered withdrawn.” So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted. 

Slip op. at 3 (internal citations omitted).  

The opinion is available here, and SCOTUSblog has its coverage here. 

Genesis HealthCare Corp. v. Symczyk: Supreme Court Hears Oral Argument in FLSA Action

The Supreme Court of the United States yesterday heard oral argument in Genesis HealthCare Corp. v. Symczyk (Case No. 11-1059), which presents the following issue:  

Whether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff's claims. 

The Court's docket sheet is here, transcripts of the oral argument are here, and SCOTUSblog has a report on the argument here.  

I have mentioned before that I am organizing a series of webinars on new decisions for the State Bar of California's Labor and Employment Law Section.  Genesis HealthCare is one of the decisions that we will cover, likely within a week or two of the Court issuing the decision.  Stay tuned for more information. 

Bell v. HF Cox: Court of Appeal Holds That Truck Drivers Are Subject To Motor Carrier Exemption

In Bell v. H.F. Cox, Inc. (9/5/12) --- Cal.App.4th ---, truck drivers filed a class action against their employer, Cox, alleging wage and hour violations. The trial court summarily adjudicated three counts in favor of Cox, a jury found in favor of Cox on another count, and the trial court found that plaintiffs were exempt from federal overtime compensation requirements and awarded attorney fees to Cox. Plaintiffs appealed, and the Court of Appeal affirmed in part and reversed in part.

The Court affirmed the trial court's grant of summary judgment on the count for failure to pay promised vacation benefits to current employees, but reversed on the count for failure to pay vacation benefits on termination of employment. Slip op. at 9-17. First, a triable issue of fact (whether the employer pays vacation benefits from its general funds or from a separately maintained account) precluded summary judgment on ERISA grounds. Slip op. at 10-13. Because this was the trial court's sole basis for summary judgment on the claim for payment of vacation funds on separation, the Court reversed as to this count. Ibid. Second, because Labor Code section 227.3 prohibits the forfeiture of vested vacation benefits upon the termination of employment, Cox's policy of paying its drivers $500 (and later $650) per week of unused vacation time did not violate section 227.3, as applied to current employees. Slip op. at 13-17.

The Court affirmed the trial court's order denying the plaintiffs' motion to exclude certain witnesses from trial. Slip op. at 17-18. In short, the plaintiffs had asked Cox to identify witnesses, and Cox had identified "the shippers," but the plaintiffs failed to dig further, and the court properly denied the plaintiffs' motion to exclude individual representatives of "the shippers" from testifying at trial. Ibid.

The Court held that the plaintiffs were exempt from the Fair Labor Standards Act (FLSA) overtime requirements because they fell within the motor carrier exemption as employees "with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service pursuant to the provisions of section 31502 of Title 49." 29 U.S.C. section 213(b)(1). Slip op. at 19-24. The Court held that substantial evidence supported the trial court's finding that the drivers "reasonably could be expected to be called on to drive an interstate route," and did not discuss the more interesting issue of whether the drivers' intrastate deliveries were "part of the continuous movement of goods in interstate commerce." Slip op. at 22.

The Court rejected the plaintiffs' argument that the trial court committed instructional error. Slip op. at 24-27. "Because plaintiffs have not shown that any particular proposed instruction was proper, we conclude that they have shown no error in the denial of any of their proposed instructions." Slip op. at 26.

Finally, the Court reversed the award of attorney fees to Cox because its reversal in part "compels the conclusion that there is no prevailing party at this time and therefore no basis for an attorney fee award under section 218.5." Slip op. at 28.

The opinion is available here. 

Genesis HealthCare Corp. v. Symczyk: US Supreme Court Will Decide Whether a Full Value Offer of Compromise to a Class Representative Renders FLSA Collective Action Moot

In Symczyk v. Genesis HealthCare Corp., 656 F.3d 189 (2011), the Third Circuit Court of Appeals held that a collective action brought under § 216(b) of the federal Fair Labor Standards Act (FLSA) does not become moot when the defendant makes a Rule 68 offer of compromise to a putative representative before the representative moves for "conditional certification" and before any other plaintiff opts into the action.

The Supreme Court of the United States granted the employer's petition for certiorari on June 25, 2012, under the name Genesis HealthCare Corp. v. Symczyk (Case No. 11-1059). The Court states the question presented as follows:

Whether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff's claims.

Based on the composition of this Court and the phrasing of the question, I would assume that the answer will be in the affirmative. If that is the case, it will be very difficult if not impossible to prosecute FLSA collective actions in the future.

The Court will hear the case in the term that begins in October, 2012, and we can expect a ruling by the end of June, 2013. The Court's docket sheet is here.