Step Right Up: Tentative Ruling Shows Amusement Park Beats Back Bulk of Class Bid

In a mixed ruling, a California state court judge in Villegas v. Six Flags Entertainment Corp., Case No. BC505344, issued a decision last week denying certification of eight subclasses of amusement park workers, but indicating she would consider certification of several others pending further briefing. 

Basis of Complaint

In 2013, a group of four plaintiffs filed suit in Los Angeles Superior Court seeking to represent a class of current and former Six Flags Magic Mountain and Hurricane Harbor employees who worked at the parks. The complaint accused Six Flags of a series of state labor law violations, including the failure to pay employees overtime wages, provide mandatory meal and rest breaks or proper seating.  The named plaintiffs held positions such as ride mechanics, ride operators, and game attendants.

Certification Bid

Last year, the plaintiffs moved for class certification.  Magic Mountain opposed the motion, arguing there was a complete lack of evidence of common issues requiring certification.  In doing so, it argued, in part, that during the relevant time period, it employed more than 25,000 employees in 255 positions within 25 separate departments (and thus, common proof was missing). 

During oral argument last week, the judge issued a tentative decision denying certification of the bulk of the subclasses, drawing protests from plaintiffs’ counsel.  A particular point of contention concerned a “shaved time” subclass (a class consisting of workers whose wages were not fully paid) and a “walking time” subclass (a class consisting of workers who were not compensated for time spent walking to break areas).  Based upon the preliminary ruling, the judge rejected these arguments citing the individualized nature of the issues, but took the matter under submission. 

Not So Fast:  Certification of Additional Classes Will Be Considered

Perhaps thinking that everyone deserves a chance to walk away a winner, the judge ordered additional briefing on three subclasses: a rounding subclass (where employees’ hours were manually reduced) and two regular rate subclasses (where employees’ overtime rates were based on their hourly rates, and not on their “regular rate of pay”).  In doing so, the judge did not indicate which way she was leaning. 

Takeaway

While drawing comparisons between an amusement park and any other employer may be difficult, one key takeaway is clear:  arguing the practical application of an employer’s business practices to the proposed subclass should lay at the forefront of any certification opposition.  Indeed, showing a lack of commonality across a proposed subclass through representative examples can make or break an opposition to certification.  So keep your eye on the brass ring.

 

Class Action Filed Against NCAA and 20 Universities Alleging Student-Athletes with Scholarships Are Employees

In the latest effort to argue that student athletes qualify as employees under the Fair Labor Standards Act (“FLSA”), a class action lawsuit was filed last week in a federal court in Pennsylvania against the National Collegiate Athletic Association (“NCAA”) and 20 universities.

Last year, the U.S. Court of Appeals for the Seventh Circuit affirmed U.S. District Judge William T. Lawrence’s dismissal of a student-athlete litigation against the NCAA and over 120 NCAA Division I member schools alleging that student-athletes are employees who are entitled to a minimum wage under the FLSA.  Berger v. NCAA, No. 16-1558 (7th Cir. Dec. 5, 2016).   Jackson Lewis had the privilege of representing 30 of the Universities named in that lawsuit.  You can read more about the Berger case here.

Now, Plaintiff Lawrence “Poppy” Livers has filed a lawsuit on behalf of himself and others alleged to be similarly situated, claiming that college student athletes who receive scholarships are employees who are entitled to compensation.  Plaintiff argues the “crux” of the Complaint is that recipients of athletic scholarships, which require them to participate in NCAA athletics under daily supervision of full-time coaching and training staff, are employees of NCAA member schools as much as, “and arguably more than, fellow students employed in work study programs, e.g., student ticket takers, seating attendants and food concession workers at NCAA contests.”

Further, Plaintiff argues that this Complaint differs from Berger in that the putative collective in this case “only includes Scholarship Athletes, and does not address the status of ‘walk-ons,’ i.e., student athletes who are not obligated to, and controlled by, NCAA member schools pursuant to Athletic Financial Aid Agreements.”  The Plaintiffs in Berger attended the University of Pennsylvania which does not enter into Athletic Financial Aid Agreements.  A copy of the Complaint in Livers can be accessed here.

We will continue to carefully monitor developments in this case and draft updates as appropriate.  For more information regarding this case or the Berger case, please contact the Jackson Lewis attorney with whom you regularly work.

Supreme Court Hears Argument on Validity of Class Action Waivers in Employment Arbitration Agreements

Yesterday the U.S. Supreme Court held a one-hour oral argument in three consolidated cases concerning the enforceability of arbitration agreements requiring employees to waive their right to bring or participate in a class or collective actions. Click here for a summary of yesterday’s argument.

“12 Inches” is Much Ado About Nothing – Seventh Circuit Serves Subway and Practicality a Win in Footlong Class Action

“A class action that ‘seeks only worthless benefits for the class’ and ‘yields [only] fees for class counsel’ is ‘no better than a racket’ and ‘should be dismissed out of hand.’” In re Subway Footlong Sandwich Mktg. & Sales Practices Litig., 2017 U.S. App. LEXIS 16260, at *3 (7th Cir. Aug. 25, 2017) (quoting In re Walgreen Co. Stockholder Litig., 832 F.3d 718, 724 (7th Cir. 2016)).  With those words, the Seventh Circuit put an end to a putative class action spawned by a Subway sandwich, a measuring tape, and a Facebook post that went viral.

BACKGROUND

In 2013, an Australian teenager discovered that his “footlong” Subway sandwich measured only 11 inches, not 12.  The teenager posted a picture of his sandwich and a tape measure on Facebook, and the post went viral.  It also spawned a putative class action.

However, early discovery confirmed that the natural baking process for Subway’s bread created minor variations in the sizes of the “footlong” sandwiches, even if the same amount of dough was used.  Thus, in the absence of any damages, the plaintiff’s attorneys shifted focus and sought certification for injunctive relief under Federal Rule of Civil Procedure 23(b)(2).  Ultimately, the case settled, with Subway agreeing to take steps that might help further ensure that its “footlong” sandwiches would bake-out to the full 12 inches.  In return, class counsel received $520,000 in attorney’s fees and each class representative received $500.  But Theodore Frank, a well-known class action objector, believed the settlement was worthless, and appealed the settlement to the Seventh Circuit.

THE DECISION

The Seventh Circuit agreed with Mr. Frank and held that the putative class action should not have been certified and the settlement should not have been approved because the putative class action and settlement offered “zero benefits for the class.” Id. at *14.  Before the settlement, Subway customers could be fairly (but not entirely) certain that their “footlong” sandwiches would be 12 inches long: Subway used uniform quantities of dough that were meant to bake to 12 inches.  After the settlement, nothing really changed.     Assuming implementation of the proposed injunctive relief, Subway customers still could only be fairly (but not entirely) certain that their “footlong” sandwiches would be 12 inches long.  As both parties acknowledged, “because of the inherent variability in food production and the bread baking process, [Subway] will never be able to guarantee that each loaf of bread will always be exactly 12 inches or greater in length after baking.” Id. at *13.  Finding this all “utterly worthless,” the Seventh Circuit concluded that the settlement only served to enrich class counsel and, to a lesser extent, the class representatives, and the settlement should not have been approved and the class action decertified.  Id.

CONCLUSION

The impact of this decision may be curtailed by the fact that this case involved an injunctive class action under Rule 23(b)(2).  Still, it is a win for practicality and commonsense, and it may give pause to the next overly zealous attorney who tries to make a quick fortune off a Facebook post gone viral.

Employer’s Use of Non-Compliant Disclosure Form Did Not Result in Concrete Injury Under Fair Credit Reporting Act

A job applicant alleging a violation of one of the procedural requirements of the Fair Credit Reporting Act (FCRA) lacked standing to sue under Article III of the United States Constitution because he failed to allege facts showing he suffered a concrete injury in fact, apart from the alleged statutory violation itself, the U.S. Court of Appeals for the Seventh Circuit has ruled unanimously, applying the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016). Groshek v. Time Warner Cable, Inc., No. 16-3355; Groshek v. Great Lakes Higher Education Corp., No. 16-3711 (7th Cir. Aug. 1, 2017).

Background

The FCRA requires that before an employer may obtain a consumer background report on an employee or job applicant, the employer must give the person a “clear and conspicuous” written disclosure that a background report may be obtained. The disclosure must be “in a document that consists solely of the disclosure.” This is known as the “stand-alone disclosure” requirement. In addition, the person must give written consent authorizing the employer to obtain the background report.

In May 2016, the Supreme Court decided Spokeo, which involved a different provision of the FCRA. The Supreme Court held that to have standing to sue under Article III, a plaintiff must have suffered a “concrete” injury apart from the underlying statutory violation itself. (For details of Spokeo, see our article, Supreme Court: ‘Actual Injury’ Needed to Establish Standing to Sue for Violations of Fair Credit Reporting Act.) Spokeo has been applied to actions, typically class actions, brought under many different statutes, including the FCRA. Courts applying Spokeo in FCRA stand-alone disclosure cases, such as Groshek, are divided on the standing question. Decisions dismissing cases for lack of standing presently outnumber approximately two-to-one decisions that find standing.

Facts

Groshek involved appeals from two district court decisions holding the plaintiff lacked standing under Spokeo. In each case, Cory Groshek had received and signed a disclosure and authorization form before the employer obtained a background report on him. Groshek brought class actions alleging that the disclosure and authorization forms he received and signed did not comply with the FCRA’s stand-alone disclosure requirement because they contained extraneous information, including a release of liability. Groshek did not allege, nor could he have, that the inclusion of extraneous language confused him or that he would have done anything differently had the form complied with the FCRA by not including the extraneous language. Groshek and the alleged class sought to recover statutory damages (not actual damages), which can range from $100 to $1,000 per person for willful violations of the FCRA.

Relying on Spokeo, the defendant-employers moved to dismiss the cases for lack of standing. The district courts granted the motions and dismissed each of the cases. Groshek appealed those decisions to the Seventh Circuit, which consolidated the appeals.

Seventh Circuit’s Opinion

The issue before the Seventh Circuit was whether the statutory violation alleged by Groshek (the Court assumed, but did not decide, the legal sufficiency of Groshek’s claim) constituted a “concrete” injury within the meaning of Spokeo. Groshek contended that he suffered two types of concrete injuries: an informational injury and a violation of his right of privacy. Writing for a unanimous panel of the court, Judge William J. Bauer rejected both of Groshek’s arguments and affirmed the district court decisions.

The Court began its analysis by considering the purpose of the FCRA’s disclosure and authorization requirements. It stated that the stand-alone disclosure requirement “is clearly designed to decrease the risk of a job applicant unknowingly providing consent to the dissemination of his or her private information,” and that the authorization requirement further protects consumer privacy by giving the person the right to withhold consent. The Court then reasoned that the statutory violation alleged by Groshek was not tied to the concrete harm that the FCRA sought to protect against, because (a) the disclosure that he received did inform him that a background report may be obtained, and (b) there was no allegation that the extraneous language confused him or “caused him not to understand the consent he was giving.”

In rejecting his claim of an informational injury, the Court distinguished the two Supreme Court cases relied upon by Groshek, Federal Election Commission v. Akins, 524 U.S. 11 (1998), and Public Citizen v. Department of Justice, 491 U.S. 440 (1989). In those cases, the plaintiffs sought to compel the government to disclose information that the government was statutorily required to disclose. In contrast, Groshek was not seeking to compel the employers to provide him with any information, and he therefore suffered no informational injury. The Court also held that Groshek did not suffer a concrete privacy injury, because he had knowingly signed the disclosure and authorization form allowing the employer to obtain a background report.

The Court concluded by distinguishing the decision in Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017), an FCRA stand-alone disclosure case in which the Ninth Circuit held that the plaintiff had standing under Spokeo. The disclosure form in Syed contained a liability waiver similar to those in the disclosure forms at issue in Groshek. However, the Syed court characterized the allegations in that case, and reasonable inferences therefrom, as alleging that the plaintiff was “confused” by the inclusion of the liability waiver and, further, that the plaintiff “would not have signed it” in the absence of the liability waiver. The Seventh Circuit found Syed to be “inapposite,” because, “[u]nlike the plaintiff in Syed, Groshek presents no factual allegations plausibly suggesting that he was confused by the disclosure form … or that he would not have signed it had the disclosure complied” with the FCRA.

Implications

The Seventh Circuit is the second Court of Appeals to decide the question of whether a plaintiff alleging a violation of the FCRA’s stand-alone disclosure requirement has standing. The Ninth Circuit in Syed reached the opposite result. The Groshek opinion likely will be more influential than Syed among district courts, however. First, the standing analysis in Groshek is more thorough than was the Ninth Circuit’s analysis in Syed, which was only two paragraphs long. Also, the Ninth Circuit’s rationale is much narrower, because it is based on the Ninth Circuit’s reading of the plaintiff’s complaint as alleging he was confused by the inclusion of the liability release language and would not have consented to the background check had that language not been there. In our experience, few, if any, plaintiffs would be able to credibly (and truthfully) make such an allegation. And if the existence of an injury in fact turned on whether the named plaintiff was confused by the inclusion of extraneous language in the disclosure, that could turn the standing inquiry into an individual determination, thereby making class certification inappropriate under the predominance requirement of Rule 23 of the Federal Rules of Civil Procedure.

Illinois Class Actions Spark New Attention For Biometric Data Applications

Capturing the time employees’ work can be a difficult business. In addition to the complexity involved with accurately tracking arrival times, lunch breaks, overtime, etc. across a range of federal and state laws (check out our Wage and Hour colleagues who keep up on all of these issues), many employers worry about “buddy punching” or other situations where time entered into their time management system is entered by a person other than the employee to whom the time relates. To address that worry, some companies have implemented biometric tools to validate time entries. A simple scan of an individual’s fingerprint, for example, can validate that individual is the employee whose time is being entered. But that simple scan can come with some significant compliance obligations, as well as exposure to litigation as discussed in a recent Chicago Tribune article.

The use of biometrics identifiers still seems somewhat futuristic and high-tech, but the technology has been around for a while, and there are already a number of state laws addressing the collection, use and safeguarding of biometric information. We’ve discussed some of those here, including the Illinois Biometric Information Privacy Act which is the subject of the litigation referenced above. Notably, the Illinois law permits individuals to sue for violations of the law and, if successful, can recover liquidated damages of $1,000 or actual damages, whichever is greater, along with attorneys’ fees and expert witness fees. The liquidated damages amount increases to $5,000 if the violation is intentional or reckless.

For businesses that want to deploy this technology, whether to time management, physical security, validating transactions or other purposes, there are a number of things to be considered. Here are just a few:

  • Is the company really capturing biometric information as defined under the applicable law? New York Labor Law Section 201-a generally prohibits the fingerprinting of employees by private employers. However, a biometric time management system may not actually be capturing a “fingerprint.” According to an opinion letter issued by the State’s Department of Labor on April 22, 2010, a device that measures the geometry of the hand is permissible as long as it does not scan the surface details of the hand and fingers in a manner similar or comparable to a fingerprint. So it is important to understand the technology and, specifically, the exact type of information being captured.
  • How long should biometric information be retained? A good rule of thumb – avoid keeping personal information for longer than is needed. The Illinois statute referenced above codifies this rule. Under that law, biometric identifiers and biometric information must be permanently destroyed when the initial purpose for collecting or obtaining such identifiers or information has been satisfied or within 3 years of the individual’s last interaction with the entity collecting it, whichever occurs first.
  • How should biometric information be accessed, stored and safeguarded? Before collecting biometric data, companies may need to provide notice and obtain written consent from the individual. This is the case in Illinois. As with other personal data, if it is accessible to or stored by a third party services provider, the company should obtain written assurances from its vendors concerning such things as minimum safeguards and record retention.
  • Are you ready to handle a breach of biometric data? Currently, 48 states have passed laws requiring notification of a breach of “personal information.” Under these laws, the definitions of personal information vary, and the definitions are not limited to Social Security numbers. A number of them include biometric information, such as Connecticut, Illinois, Iowa and Nebraska. Accordingly, companies should include biometric data as part of their written incident response plans.

The use of biometrics is no longer something only seen in science fiction movies or police dramas on television. It is entering mainstream, including the workplace and the marketplace. Businesses need to be prepared.

Certification of Alleged Misclassified Bakery Distributors Denied due to Predominance of Individualized Issues

Class certification would have been granted in Soares v. Flowers Foods, Inc., 3:15-cv-04918 (N.D. Cal., June 28, 2017), but for the allegedly misclassified independent contractors’ decision to deliver, or not deliver, the goods themselves.

In Soares, the named plaintiffs sought to represent a class of truck drivers who were paid to distribute baked goods manufactured by Flowers Foods.  Plaintiffs filed suit in October 2015, alleging that Flowers Foods misclassified them as independent contractors and failed to reimburse them for business expenses, failed to provide meal or paid rest periods, and made improper deductions from their compensation, among other things. The distributors all signed a Distributor Agreement that purported to establish an independent contractor relationship and set forth details about how the baked goods must be distributed.  The distributors claimed that they were actually employees, not independent contractors, and asserted violations of California wage and hour laws.

Magistrate Judge Corley ruled that the four requirements to certify a class pursuant to Fed. R. Civ. P. (“FRCP”) 23(a) were met: (1) typicality, (2) commonality, (3) numerosity, and (4) adequate representation.

However, Judge Corley denied class certification pursuant to FRCP 23(b)(3) because in the substantive independent contractor/employee misclassification analysis, the individual issues clearly predominated over the common issues. In California, the common law test to distinguish between employees and independent contractors focuses on the purported employer’s “right to control the manner and means of accomplishing the result desired,” S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal.3d 341, 350 (1989).  Thus, Judge Corley found the “right to control” was subject to common proof under the Distributor Agreement.

However, S.G. Borello also set forth nine secondary factors to determine an employment relationship.  One of the nine factors was so “riddled with individualized inquiries,” that it predominated over the common issues, namely, “whether the individual performing services is engaged in a distinct occupation or business from the alleged employer.”  Judge Corley evaluated the class members’ business operations, such as whether they contracted with other companies besides the alleged employer, or hired sub-drivers to do the work, to determine whether the distributors were engaged in distinct work from each other or the alleged employer.  The Court found a wide variety of business arrangements among the distributors, in whether they also provided delivery services for other companies, or hired sub-drivers to perform their routes.  For example, Judge Corley stated there would need to be “mini-trials” into the distributors’ recollections of how often they personally serviced their routes, and when and how often, if at all, they provided distribution services for other companies. These factual questions of whether the distributors were engaged in the same, or distinct business from the alleged employer, were ultimately too individualized for common resolution, thus defeating class certification.

New York Appeals Court Rejects Enforceability of Class Action Waivers – But Is This Ruling Short-Lived?

In an issue of first impression in the state of New York, last week the New York Supreme Court, Appellate Division (the state’s intermediate appellate court) weighed in on the enforceability of arbitration provisions that preclude employees from pursuing claims on a class, collective or representative basis. The appeals court concluded that such provisions are in violation of the National Labor Relations Act and therefore are unenforceable. Gold v. New York Life Insurance Co., 2017 N. Y. App. LEXIS 5627 (N.Y. App. Div. July 18, 2017).  In so holding, the court of appeals sided with the federal U.S. Courts of Appeal for the Sixth, Seventh and Ninth Circuits. NLRB v. Alternative Entertainment, Inc., 858 F.3d 393 (6th Cir. 2017); Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016).

However, as the appeals court noted, an equal number of federal U.S. Courts of Appeal have held that such class/collective action waiver provisions do not violate the NLRA and instead are consistent with the purposes of the Federal Arbitration Act (FAA). Cellular Sales of Missouri, LLC v. NLRB, 824 F.3d 772 (8th Cir. 2016); D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013); Murphy Oil Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015); Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2nd Cir. 2013).

Will this state appellate ruling have any long-lasting practical effect? That depends, for as the appeals court noted, “[i]n all likelihood, the United States Supreme Court will resolve this circuit split in due course.”  In fact, the Supreme Court has agreed to take up the matter, granting certioriari in a consolidated manner in Murphy Oil, Lewis and Morris.  The potential outcome of the appeal became even more interesting when, just over a month ago, the Office of the Solicitor General, on behalf of the Trump administration, reversed its Obama-era position and filed an amicus brief supporting the enforceability of class/collective action waiver provisions.  Notably, just last week the Supreme Court set oral argument for October 2, 2017, the first day of the Court’s upcoming session.  Thus, no later than the spring of 2018, we expect this issue to be resolved.

Murphy Oil Case Scheduled for Oral Argument

In January, the United States Supreme Court granted certiorari in National Labor Relations Board v. Murphy Oil USA, Case No. 16-307, Epic Systems Corp. v. Lewis, Case No. 16-285 and Ernst & Young LLP v. Morris, Case No. 16-300, consolidating them for argument.  The U.S. Supreme Court is expected to resolve the circuit split over whether an arbitration agreement that requires an employee to waive his or her right to bring or participate in a class action violates the National Labor Relations Act.  The Court’s decision will have major implications on class and collective actions going forward.  Jackson Lewis represents Murphy Oil in the case.

We recently posted that the Department of Justice (DOJ) filed an amicus curiae brief in support of the employers, taking a position opposed to the NLRB.

The consolidated cases were just scheduled for oral argument before the Supreme Court on October 2, 2017.  Although DOJ already filed its brief, the NLRB has not.  We will continue to monitor for the Board’s filing.

Jackson Lewis Class Action Trends Report Summer 2017 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_Whitepaper_Summer 2017

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