Illinois BIPA Defendants May Soon Be Getting Relief

Many businesses currently are defending a wave of class action lawsuits filed under the Illinois’ Biometric Information Privacy Act, popularly known as “BIPA” ).  The floodgates to litigation were opened earlier this year when the Illinois Supreme Court ruled that individuals need not allege actual injury or adverse effect, beyond a violation of his/her rights under BIPA, in order to qualify as an “aggrieved” person and be entitled to seek liquidated damages, attorneys’ fees and costs, and injunctive relief under the Act.  Potential damages are substantial as the BIPA provides for statutory damages of $1,000 per negligent violation or $5,000 per intentional or reckless violation of the Act. The majority of BIPA suits have been brought as class actions seeking statutory damages on behalf of each individual affected, exposing businesses to potentially crushing damages.

Please click here to access our Workplace Privacy, Data Management & Security Report blog discussing this important issue.

U.S. Supreme Court Allows Zappos Data Breach Litigation to Proceed

Yesterday, the U.S. Supreme Court rejected a petition for a writ of certiorari by Zappos requesting the Court to review a Ninth Circuit Court decision which allowed customers affected by a data breach to proceed with a lawsuit on grounds of vulnerability to fraud and identity theft. The ruling stems from a 2012 breach that affected over 24 million Zappos customers, which including hackers accessing customer’s names, account numbers, passwords, email addresses, billing and shipping addresses, phone numbers, and the last four digits of the credit cards.

Please click here to access our Workplace Privacy, Data Management & Security Report blog discussing this important issue.

U.S. Supreme Court Holds Federal Rule of Civil Procedure 23(f) Is Not Subject to Equitable Tolling

In a decision important to class action practice, the U.S. Supreme Court has held that Federal Rule of Civil Procedure 23(f), which establishes a 14-day deadline to seek permission to appeal an order granting or denying class certification, is not subject to equitable tolling. Nutraceutical Corp. v. Lambert, No. 17-1094 (Feb. 26, 2019).

Please click here to access our article discussing this recent decision.

Jackson Lewis Class Action Trends Report Winter 2019

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. We hope you enjoy!

Class Action Trends Report Winter 2019

Fifth Circuit Rules District Court Erred in Ordering Notice of Collective Action to Employees who Signed Arbitration Agreements

In a significant case of first impression, the U.S. Court of Appeals for the Fifth Circuit just held it to be in error for a district court to order notice be sent to employees as part of a certification who, by a preponderance of the evidence, entered into a valid arbitration agreement.  If the employer fails to establish the existence of a valid arbitration agreement as to a particular employee, that employee would receive the same notice as others.  In re: JPMorgan Chase & Company, No. 18-20825.  This decision is of great importance to employers with mandatory arbitration programs and those located in Texas, Louisiana, or Mississippi.

Background & Procedural History

In December 2017, Plaintiff Shannon Rivenbark, a call-center employee, sued Chase alleging that it had violated the FLSA by failing to compensate her and other employees at Chase’s call centers for working “off-the-clock.” Subsequently, plaintiffs moved to conditionally certify a collective action consisting of approximately 42,000 current and former call-center employees.  Plaintiffs asked the district court to send notice to all putative collective members.  In response, Chase argued that approximately 35,000 (or 85%) of the putative collective members had waived their right to proceed collectively by signing binding arbitration agreements.  Specifically, “Chase averred that including those Arbitration Employees in the collective action and giving them notice of it ‘would be inconsistent’ with the agreements and the Federal Arbitration Act (‘FAA’).”

On December 10, 2018, despite Chase’s objections, the court conditionally certified the collective action, which included the 35,000 Arbitration Employees.  In doing so, the court reasoned that even assuming Chase’s position was correct, “the Court cannot determine that there is no possibility that putative class members will be able to join the suit until [d]efendant files a motion to compel arbitration against specific individuals.”  Chase had not moved to compel arbitration. The court conditionally certified the collective and directed that notice “be sent to all putative class members via First Class Mail and e-mail,” as well as ordered Chase to produce contact information for all 42,000 putative collective members.

In response, Chase moved for the district court to certify its order for interlocutory appeal under 28 U.S.C. § 1292(b) and to enter an emergency stay to allow for orderly appellate review, both of which were denied by the district court.  On December 20, 2018, Chase filed a petition for a writ of mandamus, asking the appeals court to direct the district court to exclude from notice of the collective action “any employees who signed arbitration agreements waiving their rights to participate in [the] collective action.”

Fifth Circuit Decision

The Court of Appeals for the Fifth Circuit began their analysis by stating “[a] writ of mandamus is ‘a drastic and extraordinary remedy reserved for really extraordinary cases,’” and addressed the three conditions that needed to be met in order to issue a writ of mandamus.  First, the petitioner must have “no other adequate means to attain the relief he desires.”  Here, the Court determined that Chase met the first condition, as it determined that the error presented is “truly irremediable on ordinary appeal.”  Chase would have no remedy after a final judgment, as the notice issue would be moot once the contact information was provided and the notice was sent out to putative collective members.  Second, the court “must be satisfied that the writ is appropriate under the circumstances.”  Here, the Court found that mandamus relief would be “especially appropriate” given the subject matter of the issue at stake (i.e. whether notice of a collective action may be sent to Arbitration Employees). The Court further recognized that this is an increasingly recurring issue, as well as one that no court of appeals has weighed in on.  Lastly, in order to issue a writ of mandamus, the petitioner must demonstrate a “clear and indisputable right to the writ.”

In analyzing this last requirement and of particular note, the Fifth Circuit discussed and provided new important guidance regarding the discretion afforded to district courts as stated in Hoffmann-La Roche Inc. v. Sperling, U.S. 165, 169 (1989).  The Court noted that while courts have discretion to send notice of pending FLSA actions to potential opt-in plaintiffs, “[Hoffmann-La Roche] did not explain whether Arbitration Employees waiving their right to proceed collectively count as ‘potential plaintiffs.’”  This has resulted in conflicting outcomes from district courts, particularly when courts follow the two-stage Lusardi method to certify a collective action.  See Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987). Many district courts, the Fifth Circuit recognized, wait until the second stage, when discovery is complete, to determine the applicability of arbitration agreements.

Ultimately, the Fifth Circuit held that district courts may not send notice to an employee with a valid arbitration agreement unless the record shows that nothing in the agreement would prohibit that employee from participating in the collective action.  The Fifth Circuit further reasoned that Hoffmann-La Roche confines district courts’ notice-sending authority to notifying potential plaintiffs, but it nowhere suggests that employees have a right to receive notice of potential FLSA claims. Therefore, the district court’s December 10 order was incompatible with Hoffmann-La Roche and with the Fifth Circuit’s holding in its opinion regarding notice.

The Fifth Circuit also stated that district courts “do not ‘have unbridled discretion’ to send notice to potential opt-in plaintiffs” and that the purpose of giving discretion to facilitate notice is because of the need for “efficient resolution in one proceeding of common issues.”  Additionally, the Court stated that notifying Arbitration Employees would reach into disputes beyond the “one proceeding,” and alerting individuals who cannot ultimately participate in the collective “merely stirs up litigation,” which is proscribed in Hoffmann-La Roche.

Finally, the Fifth Circuit noted that determining whether there is a valid arbitration agreement is a “question of state contract law and is for the court.”  Where a preponderance of the evidence shows that the employee has entered into a valid arbitration agreement, “it is error for a district court to order notice to be sent to that employee as part of any sort of certification.”  The Court ultimately determined that while the district court in this instance did err in ordering notice to Arbitration Employees, the court did not “clearly and indisputably” err, as is required for a writ of mandamus, and thus the Fifth Circuit denied the petition.

Takeaway

This decision is not only significant to employers with mandatory arbitration programs.  This holding has the potential to reduce the ability of the plaintiffs’ bar to use the FLSA notice process and subsequent information obtained as leverage in class litigation.  While this was the first court of appeals to address this specific issue, we will be carefully monitoring this development to see if other circuits follow suit.  Please contact Jackson Lewis with any questions about this case.

Insurance Agents Properly Classified as Independent Contractors, Circuit Court Rules

The Sixth Circuit ruled that agents were properly classified as independent contractors in an Employee Retirement Income Security Act (ERISA) class action brought on behalf of thousands of current and former insurance agents in Jammal v. American Family Insurance Co., No. 17-4125 (6th Cir. Jan. 29, 2019).

The Court reviewed the lower court’s analysis of the factors for determining employee or independent contractor status set forth in Nationwide Mut. Ins. Co. v. Darden as conclusions of law rather than fact.

On an interlocutory appeal, the Sixth Circuit, looking solely at whether or not the plaintiffs were employees or independent contractors, reversed the District Court’s finding that the approximately 7,200 agents were employees and were owed health and retirement benefits. The District Court found that American Family acted consistently with the industry by classifying its agents as independent contractors, rather than employees, and took many steps to structure the relationship as such. Agents signed a written agreement stating they were independent contractors and filed their taxes consistent with this, deducting business expenses as self-employed business owners. American Family paid by commission and did not provide vacation, holiday, sick, or other paid time off. The agents worked out of their own offices, set their own hours, and hired and paid their own staff. However, as noted by the lower court, the plaintiffs were referred to as employees in company training manuals and received extensive company training.

The Sixth Circuit pointed out that in applying Darden, a court takes into account factors such as control exercised, skill, tools required, duration of the relationship, location of the work, discretion over hours, method of payment, establishment as a business, tax treatment, as well as whether or not there is an express agreement between the parties. The Sixth Circuit in its review held that each Darden factor is in itself a “legal standard” that the District Court applies to the facts, disagreeing with its sister circuits that had treated these as factual matters subject to review for clear error only. As a result, the Sixth Circuit found it could review the District Court’s conclusions about the individual factors de novo.

The Court further noted that, depending on the legal context, more or less weight of a Darden factor might be warranted in the analysis. In this case, the Court found that the District Court incorrectly applied the legal standards to determine the skill required of an agent and the hiring and paying of assistants. The Court also noted that control and supervision are less important in an ERISA context and that the lower court should have given greater weight to the parties’ express agreement. When these factors were properly applied to the facts, the Court held that the entire mix of Darden factors favored independent contractor status, thus warranting reversal of the District Court’s finding of employee status.

Sixth Circuit Rules that Moonlighting Police Officers are Employees, not Independent Contractors

The Sixth Circuit Court of Appeals recently concluded that all officers of a private security and traffic control company were “employees,” rather than independent contractors under the Fair Labor Standards Act (“FLSA”). The case is Acosta v. Off Duty Police Services, Inc., Nos. 17-5995 and 17-6071 (6th Cir. Feb. 12, 2019).

Off Duty Police Services (“ODPS”), in Louisville, Kentucky, offers private security and traffic control services. A majority of ODPS’ workers are sworn officers, who also work full time for a law enforcement entity. ODPS also employs unsworn workers, who generally do not have a background in law enforcement. The jobs performed by both groups of workers are essentially the same, although sworn officers receive a higher hourly wage. Since ODPS classified both sworn and unsworn workers as independent contractors, it never paid overtime wages.

The Department of Labor sued ODPS under the FLSA, alleging that all of the workers were entitled to overtime wages. The district court held that ODPS’ unsworn workers were employees under the FLSA, but the sworn officers were independent contractors because they “simply were not economically dependent on ODPS and instead used ODPS to supplement their incomes.”

On appeal, the Sixth Circuit began its ruling by stating “[t]he way we work in America is changing. The relationships between companies and their workers are more fluid and varied than in decades past. Our task in this appeal is to apply traditional legal protections to one such relationship.”

The Court relied on the “economic realities” test in affirming in part and reversing in part the district court’s decision. The “economic realities” test consists of six non-determinative factors aimed at answering the ultimate question of “the worker’s economic dependence or independence from the alleged employer.”  In balancing the factors, the Sixth Circuit determined that five of the six factors supported a finding that all of ODPS’ workers were employees under the FLSA.

Please contact a Jackson Lewis attorney with any questions related to employee classifications or any other wage and hour issues.

 

 

Ninth Circuit Re-affirms Fair Credit Reporting Act’s Strict Disclosure Standards

A disclosure form that included other, state-mandated disclosure information violated the Fair Credit Reporting Act’s (FCRA) standalone document requirement, the Ninth Circuit held. Gilberg v. Cal. Check Cashing Stores, LLC, No. 17-16263 (9th Cir. Jan. 29, 2019). In doing so, the Ninth Circuit relied on Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017), where the Court held the plain language of the FCRA requires that the disclosure be “in a document that consists solely of the disclosure,” and that a disclosure form which included a liability waiver in the same document violated the “standalone document requirement.”

The FCRA requires that employers provide job applicants with a “clear and conspicuous disclosure” that the employer may obtain a consumer report on the applicant.

The Court rejected the defendant’s argument that the extraneous information in its form consisted “of other, state-mandated disclosure information, which furthers rather than undermines FCRA’s purpose.” The Ninth Circuit emphasized the FCRA clearly states that the disclosure must be in a document that consists solely of the disclosure and that no exceptions to this requirement should be implied into the statute. The Court also noted that the presence of the state-mandated disclosures did not further the FCRA’s purpose as they were “as likely to confuse as . . . to inform.”

The Ninth Circuit then held that the form also was not “clear and conspicuous.” The Court quoted one section of the form which it held was unclear because a reasonable person would not understand the language:

The scope of this notice and authorization is all-encompassing; however, allowing CheckSmart Financial, LLC to obtain from any outside organization all manner of consumer reports and investigative consumer reports now and, if you are hired, throughout the course of your employment to the extent permitted by law.

The Court further held the disclosure was unclear because it combined both the FCRA and state-mandated disclosures, which could confuse a reasonable person.

Although the Court held that the disclosure was sufficiently “conspicuous” and noted with approval its use of capitalized, bolded, and underlined headers, it stressed that the form must be both clear and conspicuous and, therefore, did not comply with the FCRA’s “clear and conspicuous” requirement.

Given the Ninth Circuit’s strict interpretation of the FCRA’s “standalone document requirement” and emphasis on clarity, employers within that circuit should ensure that their disclosure forms: (1) do not contain any extraneous materials; and (2) are written in plain English and without any “legalese.”

Please contact Jackson Lewis for assistance in complying with the FCRA.

Standing in Data Breach Litigation: Will the U.S. Supreme Court Weigh In?

The U.S. Supreme Court may finally weigh in on the hottest issue in data breach litigation, whether a demonstration of actual harm is required to have standing to sue. Standing to sue in a data breach class action suit, largely turns on whether plaintiffs establish that they have suffered an “injury-in-fact” resulting from the data breach. Plaintiffs in data breach class actions are often not able to demonstrate that they have suffered financial or other actual damages resulting from a breach of their personal information. Instead, plaintiffs will allege that a heightened “risk of future harm” such as identity theft or fraudulent charges is enough to establish an “injury-in-fact”.

Please click here to access our Workplace Privacy, Data Management & Security Report blog discussing this important issue.

Second Circuit Sheers Cosmetology Student’s Claims in Intern-or-Employee Case

Concluding that a student at a for-profit cosmetology academy was the “primary beneficiary” of the hours he spent training at the academy’s salon, the Second Circuit Court of Appeals has upheld the district’s court’s determination that the student was an intern, and not an not employee entitled to minimum wage or overtime under the FLSA or the New York Labor Law. Velarde v. GW GJ, Inc., 2019 U.S. App. LEXIS 3536 (2d Cir. Feb. 5, 2019). The Second Circuit has jurisdiction over New York, Connecticut and Vermont.

Please click here to access our Wage & Hour Law Update blog discussing this recent decision.

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