Duo of Unfavorable Class Certification Decisions Handed Down

Duo of Unfavorable Class Certification Decisions Handed Down

 Two steps forward, one step back. That seems to be the pace of wage and hour class certification decisions for California employers these days. In recent months, both the Ninth Circuit and some California Courts of Appeal have issued employer-friendly decisions holding that class certification is not proper on the facts of the wage and hour claims before them (see, e.g. Wang v. Chinese Daily News (9th Circuit) [an enhanced version of this opinion is available to lexis.com subscribers] and Dailey v. Sears Roebuck (California court of appeal) [enhanced version]. However, over the past week, two new decisions have been issued reminding California employers that class certification is far from dead in the wage and hour context.

Yesterday, the Ninth Circuit issued its decision in Leyva v. Medline Industries, Inc. [enhanced version], reversing a district court's denial of class certification and ordering that class certification be granted. The plaintiff in the case sought to represent a class of 538 hourly employees of Medline, alleging that the employer engaged in improper time rounding practices that resulted in employees performing work "off the clock" and without pay, and that the employer also failed to include bonus compensation in calculating the overtime rate. The district court denied class certification, holding that individual damage issues predominated over any issues common to the class and that litigating the case on a class basis would be unmanageable. The Ninth Circuit, without much factual discussion, held that the district court abused its discretion in denying class certification. More specifically, the Ninth Circuit held that the district court erred in relying almost exclusively on individual damage issues as the basis for denial of class certification. The Ninth Circuit held that the need for individual damage determinations does not defeat class certification and does not render a class proceeding unmanageable. In so holding, the Ninth Circuit made clear that it does not believe the United States Supreme Court's recent decision in Comcast v. Behrend [enhanced version], suggests otherwise. According to the Ninth Circuit, Comcast v. Behrend simply held that the proponent of class certification must demonstrate a model of proving damages attributable to the theory of liability. In Comcast, the proposed model did not isolate damages flowing from one theory of liability versus others. The Ninth Circuit contrasted the case before it and held that if liability was proven for rounding violations and/or improper overtime rate calculations, the damages sought would all flow from the same theory of liability. Furthermore, the employer had apparently demonstrated that classwide damages could be fairly easily calculated from the employer's payroll database (the employer had filed a notice of removal early in the case, which included the employer's own damages calculations). The Ninth Circuit emphasized that individual damage issues, almost categorically, are not enough to defeat class certification in any wage and hour case.

The Ninth Circuit mentioned but provided no real discussion of facts or evidence in the case proffered by the employer to demonstrate that individual issues predominate. For example, the employer apparently argued and/or submitted evidence that different employees had different types of bonuses-some being discretionary and some non-discretionary, which might impact whether such compensation even needed to be included in the overtime rate calculation. Additionally, it is unclear how it could be determined on a classwide basis whether any particular class member actually performed work that was uncompensated (regardless of any rounding practice) without individually questioning each class member. In any event, the Ninth Circuit's view on individual damages issues was certainly made clear. The full decision is here.

In another unfavorable class certification ruling, a California Court of Appeal issued its decision last week in Bluford v. Safeway Stores, also reversing a trial court's denial of class certification, this time in a meal break case. On the meal break claim, the employer's policy apparently did not specifically mention the employee's entitlement to a second meal break if the employee worked in excess of 10 hours per day. There was evidence, however, that some employees indeed knew they could take second meal breaks and did take such breaks. The trial court denied class certification, finding that individual issues predominated because a determination of liability would require questioning of the individual employees as to whether they were permitted to take such breaks and if they did not take them, why that was. The court of appeal disagreed, holding that class certification could properly be based on the employer's lack of a proper policy clearly authorizing and permitting second meal breaks for shifts in excess of 10 hours. In other words, the lack of a fully compliant policy supported class certification, regardless of evidence that at least some employees knew by unwritten policy that they were in fact entitled to such breaks.

There was also a rest break claim at issue in the Bluford case, but it was premised on unique facts different that rest break claims in typical cases (i.e. employees were not permitted to take rest breaks). Specifically, the rest break claim challenged whether Safeway provided paid rest breaks to its employees. Safeway paid these employees based on a piece rate formula utilizing mileage rates applied according to number of miles driven, the time when the trips were made and the locations where the trips began and ended. Pay was also based on fixed rates for certain tasks and hourly rates for other tasks and delays. According to the court, neither the mileage rate compensation formula nor the fixed rate formula compensated employees for rest period time. Safeway argued that the mileage and activity rates were designed to include compensation for rest periods. The court rejected this theory, holding that averaging pay is not allowed under California law as a means for complying with minimum wage obligations.

Notably, the driver employees at issue in the Safeway case were covered by a collective bargaining agreement that had meal and rest break provisions. The court rejected the argument that the claims were preempted by the Labor Management Relations Act. The Bluford case is available here [enhanced version].

These two cases serve as an unfortunate reminder that wage and hour class actions remain alive and well in California, and will continue to so remain. It is imperative that employers ensure that they have compliant wage and hour policies for California employees, as this remains one of the best tools for defeating class certification. In the meantime, it remains to be seen how other courts (besides the Ninth Circuit) will interpret Comcast v. Behrend and its impact on class certification in wage and hour cases, where damages issues are often highly individualized.

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