Jackson Lewis Class Action Trends Report Summer 2016 Now Available

Below is a link to the latest issue of the Jackson Lewis Class Action Trends Report.  This report is published on a quarterly basis by our firm’s class action practice group in conjunction with Wolters Kluwer.  We hope you will find this issue to be informative and insightful.  Using our considerable experience in defending hundreds of class actions over the last few years alone, we have generated another comprehensive, informative and timely piece with practice insights and tactical tips to consider concerning employment law class actions.

Jackson Lewis Class Action Trends Report (Summer 2016)

 

Employers Gain Support For Additional Defense to Class Actions After Court Denies Class Certification for Union Members in Light of “Individualized Questions” Necessary To Resolve Claims

Employers recently gained support for one of their defenses to class claims, and in a case against a union no less, after a federal court in Illinois found that union members’ claims may require individualized questions and therefore were not appropriate for class treatment. See Riffey v. Rauner, et al., 10-cv-02477 (N.D. Ill. June 7, 2016).

The dispute stemmed from SEIU Healthcare Illinois & Indiana’s practice of deducting “fair share” union dues from home health aides’ Medicaid reimbursements. Previously, SEIU received more than $32 million in dues from approximately 80,000 current and former home health aides from 2008 to 2014.  However, in 2014, the Supreme Court declared that the collection arrangement was unconstitutional as a violation of individuals’ First Amendment rights.  It held the health aides and child-care workers weren’t “full-fledged” public employees and couldn’t be compelled to pay dues to a union recognized by the state as their bargaining agent. See Harris v. Quinn, 134 S. Ct. 2618 (2014).

Based upon the ruling in Harris, a prospective class action was created in which workers sought to claw back the $32 million paid to SEIU.  The plaintiffs moved for class certification under Rule 23.  The Court denied the motion, stating that certification was not appropriate because the plaintiffs sought to represent thousands of union members who supported SEIU and would have voluntarily paid their “fair share” dues.  Additionally, the Court determined that too many individualized questions existed, such as the fact a large percentage of the prospective class likely was not injured by the conduct, and for those that were harmed, individualized determinations predominated over common questions.  As a result, the Court ruled class certification was inappropriate.   Plaintiffs have stated they plan to appeal this decision to the Seventh Circuit Court of Appeals.

While the ultimate outcome of this case is yet to be determined, this decision highlights the importance of fighting overbroad class definitions when defending class actions, especially when dealing with potentially thousands of class members. Although unionized employers still need to meet their requirements under the applicable collective bargaining agreement, employers can use this case when defending against class certification for the proposition that certification should be denied because, even if all class members are in the same union, all union members “are not equal” and may not suffer the same injury based upon a common policy or procedure.  Watch this space for further developments.

Department of Labor’s New Overtime Final Rule Carries Class Action Risk

The U.S. Department of Labor’s new Final Rule as to the Fair Labor Standards Act’s “white collar” exemptions to overtime could open employers up to class action liability as previously exempt employees fail to meet new salary requirements.

On May 18, 2016, President Obama and Secretary of Labor Thomas Perez announced the Department of Labor’s publication of a new Final Rule governing overtime under the executive, administrative, and professional exemptions to the FLSA’s overtime provisions—commonly referred to as the “white collar” exemptions. Readers interested in the finer details of the Final Rule should review the Jackson Lewis Wage and Hour Practice Group’s post on the subject.

In brief summary, the new Final Rule, which becomes effective on December 1, 2016, more than doubles the required salary threshold for the white collar exemptions to apply, increasing the annual salary threshold from $23,660 ($455 per week) to $47,476 ($913 per week). The Final Rule also raises the minimum threshold for an employee qualify under the “highly compensated employee” exemption from $100,000 to $134,004 in total annual compensation. Per the terms of the Final Rule, these thresholds will be automatically adjusted every three years.

These changes will effectively “un-exempt” large swathes of employees nationwide—the Department of Labor estimates over four million in the first year. As a result, following the effective date of the Final Rule, larger employers may be particularly vulnerable to class actions filed by employees who have been rendered non-exempt by the new salary thresholds. Lower level managers, administrative employees, and other professionals working for larger nationwide employers may be ripe for class certification where the common issue affecting all potential class members would be the simple question of whether each employee earns enough compensation to meet the new requirements.

Given these new developments, employers would be well-served to engage in wage and hour audits to identify possible exposure and review potential courses of action to address the issue before the Final Rule goes into effect.

The Jackson Lewis Wage and Hour Practice Group has published a useful webinar as to the Final Rule, which can be found here. Employers seeking advice should contact the Jackson Lewis attorney with whom they regularly work for further information.

Supreme Court Review Likely After Seventh Circuit Creates Split on Class and Collective Action Waivers

Setting the stage for U.S. Supreme Court review, the U.S. Court of Appeals for the Seventh Circuit has held that arbitration agreements that prohibit employees from bringing or participating in class or collective actions violate the National Labor Relations Act. Lewis v. Epic Systems Corp., No. 15-cv-82-bbc (7th Cir. May 26, 2016). This holding is contrary to that of the Second, Fifth, Eighth, and Ninth Circuit Courts of Appeals.

For complete information about the decision and a summary of its potential implications for employers, click here.

Fourth Circuit Allows Casino Workers to Proceed With Putative Class and Collective Action For Unpaid Training Time at “Dealer School”

The Fourth Circuit recently decided in Harbourt v. PPE Casino Resorts Maryland, LLC that casino workers may proceed with a putative class action alleging that their unpaid attendance at a Maryland casino’s “dealer school” violated the Fair Labor Standards Act (“FLSA”) and Maryland wage laws.

Background

Plaintiffs alleged that the Casino advertised for dealer positions after Maryland authorized the operation of table games.  The Casino invited approximately 830 applicants, including the named plaintiffs, Claudia Harbourt, Michael Lukoski and Ursula Pocknett, to attend a free twelve-week “dealer school” to be “held in conjunction with Anne Arundel County Community College” and aimed at teaching them “how to conduct table games” at the Casino.

The dealer school was scheduled for twenty hours per week over twelve weeks. Plaintiffs alleged that the advertised community college had no involvement in the school and the Casino authored the materials and provided the instruction.  Attendees completed new hire paperwork, submitted to a drug test and provided the Casino with information to conduct background checks required for the attendees to obtain gambling licenses.

Plaintiffs Harbourt and Pocknett attended the dealer school for eight and eleven weeks, respectively, and were not paid for their attendance.  Plaintiff Lukoski attended the dealer school for the full twelve weeks and began working as a dealer at the Casino.  He received minimum wage of $7.25 per hour for the last two days of his attendance at the dealer school.

Plaintiffs filed a putative class and collective action lawsuit asserting violations of the FLSA and Maryland wage laws claiming their time spent at the dealer school was compensable.  The district court granted the Casino’s motion to dismiss, finding that Plaintiffs “failed to show that the primary beneficiary of their attendance at the training was the Casino rather than themselves” and therefore the time spent at the dealer school was not compensable.

Decision on Appeal

The Fourth Circuit reversed, finding that Plaintiffs sufficiently alleged that those who attended the training school were employees performing “work” for the Casino within the meaning of the FLSA and Maryland wage and hour laws.  The Court relied on the Plaintiffs’ allegations that the Casino received an immediate benefit in a trained workforce of over 800 dealers, “the training was unique to the Casino’s specifications and not transferrable to work in other casinos” and attendees were paid minimum wage for the last two days of the dealer school, which suggested that the Casino considered the attendees working for at least those two days.  The Fourth Circuit also found sufficient allegations to conclude that the Casino “conceived or carried out” the dealer school in an effort to avoid paying minimum wage by advertising that the school was associated with a community college, when in fact the college had no involvement.

Takeaway

While the Fourth Circuit did not express an opinion about the likelihood of Plaintiffs’ success on the merits and noted that “[t]he fact that table games were not in operation during the training well may prove an insurmountable obstacle[,]” Harbourt is an important reminder for employers that  training may constitute compensable time under the FLSA and state wage and hour laws, particularly where the primary purpose of the training is to benefit the employer.

Ninth Circuit Affirms Dismissal of Wage-Hour Class Action Where Employees Could Edit Their Own Time Entries

In a case that could be of significant benefit to employers in California and elsewhere around the country, the Ninth Circuit Court of Appeals recently affirmed a ruling that plaintiffs failed to satisfy the “commonality” requirement essential to a collective action on their wage-hour claim where they had the authority to edit the time entries that served as the basis for their claim. Coleman v. Jenny Craig, Inc., 2016 U.S. App. LEXIS 7164 (April 6, 2016).

Plaintiff Hashonna Coleman brought suit against Jenny Craig, Inc. on behalf of herself and other current and former employees for alleged violations of the Fair Labor Standards Act (“FLSA”) and various California Labor Code sections providing for overtime payments and premiums for failure to provide or pay for meal and rest periods. With respect to the proposed Meal and Rest Break Class, Coleman alleged that Jenny Craig had a common practice of forcing hourly employees to miss meal breaks or take short or late meal breaks, and that the payroll system only paid the (California) required premium when employees’ timecards showed an entirely-missed meal break.

The evidence showed that Jenny Craig’s uniform compensation system was not programmed to automatically pay employees the premiums for short or late lunches, because employees were able to submit time edit requests for premiums whenever their meal breaks were short or late. The district court concluded that this feature of the Company’s payroll system did not amount to a policy or practice of non-payment of premiums for short of late lunches, because employees themselves could edit and correct any time entries they believed did not accurately reflect their hours worked. The district court concluded that the plaintiffs did not satisfy the “commonality” requirement for class certification and therefore it denied Plaintiff’s motion to certify a class.

The Ninth Circuit affirmed the lower court’s ruling and held that, for Coleman to show commonality on her claims, she must show a common practice of Jenny Craig to force employees to take short or late meal breaks, but that a common practice of simply not paying wage premiums, standing alone, is insufficient to show commonality under the FLSA and California statutes. Since the lower court found that Jenny Craig did not have a common practice of forcing employees to take short or late meal breaks, the Ninth Circuit held that the court was correct in finding that Coleman had not proven the existence of a common practice necessary to maintain a class claim.

The pivotal fact upon which the class certification question turned for the Ninth Circuit was that employees had the opportunity to edit their own time entries to ensure that they were paid for time worked if they had short or late meal breaks. Any employer with a time keeping system which provides employees the opportunity to review, edit and certify their time entries will arguably be in a position to assert that fact as a defense to any collective action wage claims they may face.

Employers Beware of Phishing Scams

On April 20, 2016, a class action lawsuit was filed in the United States District Court, Southern District of California against Sprouts Farmers Market, Inc. The lawsuit was initiated by a former employee whose W-2 was allegedly disclosed as part of a phishing scam that occurred in late March 2016 amid reports that Sprouts’ employees had their IRS tax refunds stolen. According to the complaint, the W-2s of Sprouts’ employees were disclosed to a third party as a result of the phishing scam.

This sort of internet scam, referred to as “phishing,” occurs when someone attempts to acquire sensitive or confidential information under the guise of a legitimate request. For the average internet user, phishing scams often come in the form of a fake email from a bank or other financial institution asking you to click on a link to confirm your password on a web site that looks like a legitimate web site for the business. The fake web site often uses the actual logos and branding from a legitimate site to trick the user.

In this case, the complaint alleges an email was sent to an employee in the payroll department asking for the W-2s of all Sprouts’ workers by a Sprouts executive. The employee responded to the email sending the W-2s of approximately 21,000 Sprouts employees. Unfortunately, Sprouts later discovered that the original email requesting the information was not legitimate, and notified the authorities.

The class action complaint alleges that Sprouts was negligent in its protection of private employee information, violated California Civil Code sections 1798.80 et seq. (including California’s data breach law), and engaged in unfair business practices in violation of California Business and Professions Code section 17200. The complaint alleges that while Sprouts offered credit monitoring services for 12 months for the impacted employees, the service chosen did not protect against identity theft, and only notifies the consumer after identify theft or other fraudulent activity has occurred. The complaint also alleges that Sprouts had “lax” security procedures for its employee data, and concealed that fact from its employees.

This case highlights the necessity that employers have protocols in place to protect employee information, and the risks associated with not having such protocols in place.

Facebook Files Motion to Dismiss Birthday Text Messages Class Action

Facebook, Inc. (“Facebook”) recently filed a motion to dismiss class action claims alleging that Facebook sent unsolicited text messages to users containing birthday announcements in violation of the Telephone Consumer Protection Act (“TCPA”). The TCPA generally restricts telephone solicitations (i.e., telemarketing) and the use of automated telephone equipment, and limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages and fax machines.

Plaintiff Colin Brickman filed a putative class action on February 12, 2016, “to stop Facebook’s practice” of sending unsolicited and unauthorized text messages announcing that it is a Facebook friend’s birthday and stating “[r]eply to post a wish on his timeline or reply with 1 to post ‘Happy Birthday!’” A copy of the Complaint is available here.  Plaintiff alleges that these text messages are in violation of individuals’ statutory and privacy rights and, further, that individuals are paying to receive messages that were sent without their prior express consent (this latter argument would only be applicable to consumers that do not have an unlimited text messaging cell phone plan).  The benefit to Facebook, plaintiff alleges, is significant, as the messages encourage interaction among users on its site, and any time its users interact the company earns revenue.

In its motion to dismiss, Facebook argues that (1) plaintiff fails to plausibly allege that Facebook sent the birthday text message with an “automatic telephone dialing system,” as defined by 47 U.S.C. §227(a)(1), (2) plaintiff provided express consent to receive calls from Facebook, and (3)  the TCPA violates the First Amendment on its face as applied to the birthday text message at issue. Facebook states in its motion that plaintiff brought a putative class action under a statute that protects against mass telemarketing and spam, however plaintiff gave Facebook his cell phone number and received personalized messages regarding his friends, in contrast to the mass communications that the TCPA intends to prohibit. Further, Facebook argues that plaintiff  consented to receiving birthday messages by providing the company with this wireless number. “Unlike cases involving ‘recycled phone numbers’ or other cases involving disputes over whether a plaintiff provided his phone number, plaintiff’s admission makes this a textbook case of prior express consent,” Facebook said. Facebook also argues that, if the Court does find the TCPA applicable to the birthday text messages at issue, the Court should find the statute itself in violation of the First Amendment on the basis that it’s a content-based restriction of speech that cannot survive strict scrutiny.

In its motion Facebook also questions whether plaintiff has sufficient standing under Article III to assert a TCPA claim since plaintiff alleges that “individuals frequently pay their cell phone service providers for the receipt of . . . unwanted texts,” yet fails to allege that he pays for receipt of each of his text messages (as opposed to having an unlimited text messages cell phone plan, in which case he would not have suffered any economic harm). Facebook cites to the pending Spokeo, Inc. v. Robins case, pending before the  Supreme Court, to support  this argument. See more here.  If the Facebook complaint survives dismissal and the suit proceeds, plaintiff can seek $500 per violation, i.e. each text message, or $1,500 per violation if plaintiff can show a willful violation. A copy of Facebook’s pending motion can be found here.

LexBlog