Court Finds Individualized Issues Predominate and Grants Company’s Motion to Decertify Branch Administrators’ Class

The United States District Court for the Southern District of Indiana recently decided a case highlighting the importance of clear employer policies when it comes to wage payment issues. In Smith v. Professional Transportation Inc. et al., 13-cv-00221 (N.D. Ind. January 26, 2018), the named plaintiff alleged that the defendant failed to pay Branch Administrators overtime compensation and/or failed to classify Branch Administrators as exempt and pay them as prescribed by the FLSA (the Court noted the allegations were unclear).  The parties stipulated to the conditional certification of a class that was defined as “[a]ll individuals who were employed or are currently employed by [defendant] as a Branch Administrator at any time between November 10, 2011, and January 9, 2015.”  The defendant then moved to decertify the conditional class, and the District Court granted the motion.

In decertifying the class, the Court found that the named plaintiff did not demonstrate that she was similarly situated to all opt-in Branch Administrators who were subject to a common policy in violation of the FLSA.

In reaching this conclusion, the Court noted that it was unclear whether the named plaintiff was alleging that the Branch Administrators were misclassified as non-exempt and not paid $455.00 per week (the FLSA minimum weekly salary to qualify for exempt status), or that they were properly classified as non-exempt but not paid overtime. The Court declined to certify the collective action on the former ground, observing that the named plaintiff had not cited to any authority standing for the proposition that an employer must classify employees as exempt if they perform some amount of managerial work.

As for the named plaintiff’s allegations that the defendant required the Branch Administrators to work more than their authorized hours without pay, the Court held that individualized issues predominated over common ones. The Court noted that, even though the named plaintiff and one of the opt-in plaintiffs each claimed that they worked more than their agreements with the defendant authorized, those statements alone did not constitute a “policy” on the part of the defendant.  On the contrary, the evidence showed that defendant’s policy was to pay all excess time for which payment was sought, even if it was not pre-approved.  The Court also concluded that individualized issues predominated over any common policy or practice because determining the truth of whether or not there was any off-the-clock work would turn on the credibility of the witnesses.  In addition, the agreements with each Branch Administrator varied from employee to employee.  Finally, the named plaintiff’s suggestion on how opt-in damages could be proven at trial itself supported denial of the class, as plaintiff suggested that each opt-in should submit a declaration identifying the total number of hours worked in an average week.  The Court concluded that such a method established liability for each opt-in without requiring the plaintiff to prove that liability.

Smith underscores the importance of employers having up-to-date and lawful written wage payment policies, and lends support for future arguments relating to the predominance of individualized issues in a collective.

Sexual Harassment Class Investigations on the Rise with EEOC

Since September, stories of sexual harassment have dominated the headlines. In what USA Today dubbed the “Weinstein Effect,” workplaces of all types and size have been seeing employees step forward to take part in the #MeToo movement by shining light on abuses of power by companies’ leadership. The increased focus on sexual harassment has created a surge in discrimination lawsuits and government investigations, with almost no industry being immune.

The Equal Employment Opportunity Commission responded quickly to the recent increase in charges of sexual harassment in the workplace, which is unlawful under Title VII of the Civil Rights Act. In October, the Agency launched a new training and outreach program for employers centered around respect in the workplace. Since then, EEOC has announced a string of successes in class-based sexual harassment investigations, including:

  • $340,000 settlement in January 2018 with restaurant chain Indi’s Fast Food Restaurant, Inc. concerning claims to 15 former female employees, some of whom were teenagers at the time of the alleged harassment.
  • $75,000 settlement in November 2017 with Trans Ocean Seafoods, Inc. on behalf of three female employees who complained of persistent, sexually explicit comments by a male colleague.
  • $100,000 settlement in October 2017 with Clougherty Packing, LLC on behalf of a class of female employees alleging sexual harassment by supervisors and other employees.

This trend appears likely to continue as EEOC ramps up its efforts to crack down on sexual harassment. In an effort to reach more victims who may be afraid to step forward or too busy to go to an EEOC office during business hours, EEOC recently opened a new online portal for employees to file charges of harassment and other discrimination online from the convenience and privacy of their homes. This will make it easier than ever for employees to get EEOC involved if they feel their employer is not doing enough to prevent abusive behavior in the workplace.

So what can employers do to prepare for their #MeToo moment? Employers need to evaluate their policies, training programs and complaint response procedures to ensure they are doing all they can to prevent or mitigate the potential for sexual harassment in the workplace.

Jackson Lewis Resources Available to Help:

“Ticket-gate”- Revisiting the Intersection of Professional Football and Class Actions

First, Deflategate. Now, “Ticket-gate?”  Stirring in the United States District Court, Northern District of Ohio, a putative class action takes aim at an unsafe football field, a cancelled preseason game, and over a million dollars in alleged consumer class damages.  The case is Herrick v. National Football League, et al. (N.D. Ohio, Case No. 5:17-cv-00472-CAB).

The Allegations

The 2016 Pro Football Hall of Fame preseason game between the Green Bay Packers and Indianapolis Colts was scheduled to take place on August 7, 2016. But due to compromised painting of logos and other markings on the turf, the field was deemed unsafe and unplayable.  That call, and the related call to scrap the game entirely, was made, according to filings in the case, at 5:00 p.m. on the day of the game.  Fans attending the game, however, were allegedly intentionally kept in the dark and were not informed of the game’s cancellation until three hours later.  In the meantime, fans purportedly were ushered into the stadium and encouraged to buy food, drinks, and merchandise.  Plaintiff, on behalf of himself and “thousands” of putative class members, now seeks to recover not only the cost of the tickets, but also related out-of-pocket incidentals, such as travel and lodging expenses.

Class Certification

On January 15, 2018, Plaintiff moved for class certification. As framed in the motion, the question of liability on the sole claim for breach of contract might not be the main hurdle; rather, the central issue will be whether the class can proceed as a damages class under Federal Rule of Civil Procedure 23(b)(3).  Under the U.S. Supreme Court’s decision in Comcast Corp. v. Behrend, 569 U.S. 27 (2013), to proceed as a damages class under Rule 23(b)(3), while a plaintiff’s class damages model may be an approximation, it still must be firmly tethered to the theory of injury. Id. at 35.

So how does Plaintiff’s damages model purport to do so? According to Plaintiff’s expert, Dr. Justine Hastings, it’s all in available records.  Ticket damages?  According to Dr. Hastings, Defendant’s revenue data and secondary market statistics can approximate ticket costs.  Traveling expenses?  According to Dr. Hastings, ticket holders’ zip codes can predict the likely mode of travel and associated travel costs for individuals.  And lodging expenses?  According to Dr. Hastings, ticket holders’ zip codes and the average hotel rate in the area ($289/night) can be used to quantify lodging expenses.

Will this suffice to secure certification of a damages class under Rule 23(b)(3)? Stay tuned.  Opposition papers are due February 16, and oral argument is set for March 26.  In the meantime, here’s to hoping for a class action-free Super Bowl LII.

Jackson Lewis Class Action Trends Report Winter 2018 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 (Winter 2018)

A PAGA Case Cannot Stand Without Standing: Court of Appeal Affirms Trial Court’s Dismissal of PAGA Action After the Plaintiff Settles His Individual Labor Code Claims In Arbitration

In Kim v. Reins International California, Inc. (B278642, Cal. Ct. App., December 29, 2017), the State of California Court of Appeal for the Second Appellate District addressed for the first time the question of whether an employee-plaintiff, who had settled and dismissed his individual claims under the Labor Code against his employer, was able to maintain a representative action under the Labor Code Private Attorneys General Act (the “PAGA”) on behalf of other “aggrieved employees”. The Court held that because of the settlement and dismissal of his individual claims, the employee-plaintiff was no longer an “aggrieved employee” and therefore did not have standing to represent other “aggrieved employees” under the law.

Under the PAGA, an “aggrieved employee” may bring a representative action on behalf of him or herself and other “aggrieved employees” for any violation of the California Labor Code. Cal. Labor Code §§ 2698, et seq. Since the law was first enacted in 2004, many employers around the state have been on the receiving end of PAGA actions, in which employees can seek substantial civil penalties that were previously only recoverable by the State of California. PAGA cases have become increasingly favored by plaintiffs’ attorneys for a number of reasons, including the fact that PAGA-claims cannot be compelled into arbitration.

This case involves many common elements familiar to experienced class and representative action litigants in California: Kim, a former employee of Reins International, brought a wage and hour class action alleging various violations of the Labor Code as well as a claim for civil penalties under PAGA for the same underlying violations. Kim had also signed an arbitration agreement when he began working for the company. Reins International responded to the lawsuit with a common countermeasure: it moved to compel arbitration of Kim’s individual claims, dismiss the class claims, and stay the PAGA cause of action until the arbitration was complete. The trial court granted the motion to compel arbitration, reserved the issue of class arbitrability for the arbitrator, and stayed the cause of action under PAGA.

While the case proceeded in arbitration, the parties reached a settlement of Kim’s individual claims. Pursuant to the settlement, Kim dismissed his individual claims with prejudice and the class claims without prejudice, leaving only the PAGA cause of action. As a result, the trial court lifted the stay and the parties proceeded to litigate the PAGA claim back in Superior Court.

Following the lifting of the stay, Reins International filed a motion for summary adjudication of the PAGA cause of action in its favor on the grounds that following the settlement and dismissal of all of his individual claims against his employer, Kim was no longer an “aggrieved employee” and therefore could not maintain the PAGA cause of action. The trial court agreed and dismissed the PAGA cause of action.

The Court of Appeal upheld the trial court’s decision, holding that “where an employee has brought both individuals claims and a PAGA claim in a single lawsuit, and then settles and dismisses the individual employment causes of action with prejudice, the employee is no longer an ‘aggrieved employee’ as that term is defined in the PAGA, and therefore that particular plaintiff no longer maintains standing under PAGA.”

The Court was not swayed by Kim’s arguments that the PAGA claim should have been unaffected by his individual settlement in that it did not release the rights and potential claims of other individual employees nor the State of California, in whose stead Kim was seeking civil penalties. In fact, the Court noted that it agreed with Kim’s arguments that his individual settlement did not impair the ability of the State of California nor another employee from pursuing the same claims individually or in a representative capacity under PAGA; nonetheless, his ability to do so ended the moment he settled and dismissed all his individual claims against Reins International.

The Court stated that its holding is confined to the specific circumstances in the case – involving the voluntary settlement and dismissal of individual claims in arbitration – and declined to opine on what effect an adverse determination in arbitration would have on PAGA standing generally. Nonetheless, the Court’s in-depth application of the standing doctrine to PAGA actions – where previously the California Supreme Court has only made surface-level references – has potentially far reaching implications in cases where employees are seeking PAGA penalties for alleged Labor Code violations that they cannot establish they have suffered individually, in cases where the employee litigates and loses in arbitration, and in cases where they have resolved their individual disputes in private settlements. These issues and others will undoubtedly be tackled by the Courts of Appeal and the California Supreme Court as they continue to interpret and mold the PAGA.

Illinois Court of Appeals Holds BIPA Plaintiffs Must Allege Some Actual Harm

In a ruling that may have significant impact on the recent wave of biometric privacy suits, an Illinois state appeals court held that plaintiffs must claim actual harm to be considered an “aggrieved person” covered by Illinois’ Biometric Information Privacy Act (BIPA), in a dispute arising from the alleged unlawful collection of fingerprints from a Six Flags season pass holder. Rosenbach v. Six Flags Entertainment Corp., 2017 IL App (2d) 170317 (Ill. App. Ct. Dec. 21, 2017).

Click here for an article on our Workplace Privacy, Data Management & Security Report blog which discusses the impact of this case and provides additional resources to help navigate biometric information protection laws.

U.S. Supreme Court to Rule on Application of American Pipe Tolling Decision on Class Actions

Earlier this month, the U.S. Supreme Court granted certiorari to China Agritech, Inc., a fertilizer manufacturer, from the Ninth Circuit’s decision in Resh v. China Agritech, Inc., 857 F.3d 994 (9th Cir. 2017).  In reviewing Resh, the Court will consider whether its American Pipe and Construction Co. v. Utah, 414 U.S. 538 (1974) ruling tolls statutes of limitation to allow previously absent class members to bring a subsequent class action outside of the applicable limitations period.  In other words, whether its American Pipe ruling applies only to subsequent individual claims or if it extends more broadly to successive class actions.

Background

In American Pipe, the Supreme Court held that the filing of a class action suit tolls the running of the statute of limitations for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status.  However, there is currently a circuit split regarding the interpretation of American Pipe as it relates to tolling for subsequent putative class actions.  As stated in its Petition, China Agritech argues that the First, Second, Third, Fifth, Eighth and Eleventh Circuits have found the American Pipe decision to allow for tolling for individual actions only—and not serial class actions.  Three other courts of appeal—including the Ninth Circuit in the decision at issue—have rejected this notion and instead interpret American Pipe to mean that the limitations period is tolled not only as to individual claims but also as to future class action claims.

Ninth Circuit Opinion

Plaintiffs in Resh brought a putative class action alleging violations of the Securities Exchange Act of 1934.  Plaintiffs were also previously unnamed plaintiffs in two earlier putative class actions against some of the same defendants, and class action certification was denied in both cases. In December 2014, a California district court dismissed Resh’s proposed class action and concluded that the statute of limitations was tolled for the individual claims of the named plaintiffs in Resh but was not tolled for plaintiffs’ would-be class action.  In May 2015, a Ninth Circuit panel reversed that decision, holding that permitting future class action named plaintiffs to avail themselves of the American Pipe tolling would “advance the policy objectives that led the Supreme Court to permit tolling in the first place.”  The Ninth Circuit also stated that this rule promotes “economy of litigation by reducing incentives for filing duplicative, protective class actions because ‘[a] putative class member who fears that class certification may be denied would have every incentive to file a separate action prior to the expiration of his own period of limitations.’”

Before the Supreme Court, China Agritech argues that the Ninth Circuit erred in extending American Pipe to class actions, the decision cannot be reconciled with the principles animating American Pipe tolling, and affirming this decision would lead to significant adverse policy consequences.

Our Class Actions and Complex Litigation practice group is carefully monitoring this case, as it could have a significant impact on class action litigation going forward. If you would like to discuss this case in more detail, please reach out to Stephanie Adler-Paindiris or the Jackson Lewis attorney with whom you regularly work.

ALERT- Plaintiff’s Bar Currently Targeting Online Hiring Practices: What Your Company Needs to Know

 The latest target of the plaintiff’s overly-aggressive tactics—a company’s use of recruitment ads in hiring employees.  All industries and all forms of advertising are potentially coming under attack, including social media platforms and websites dedicated to employee recruiting.  Specifically, the plaintiff’s bar has repeatedly targeted certain advertisements on social media sites that encourage individuals to apply for jobs at their company, using information obtained from user profiles.

What is the claim?

The legal argument being asserted is that the advertisements are alleged class violations of federal, state, and local laws that prohibit age discrimination in employment advertising, recruitment, sourcing, and hiring, including the federal Age Discrimination in Employment Act (ADEA).  The theory is as follows: certain social media sites have a feature that allows a user to see the reason they were identified to receive a particular advertisement.  The language under the targeted advertisement might state, for example, that the company intends for the ad to reach a certain demographic, i.e. people ages 28 to 45 who live or were recently in the United States.  The plaintiff’s bar is seizing upon this type of advertisement and language to allege that the plaintiff is in receipt of direct evidence that the company “regularly targets younger prospective job applicants on [social media sites]” and, therefore, that the Company is likely engaged in other forms of hiring discrimination.  Based on these ads and these allegations, the plaintiff’s bar is threatening legal action—including filing class and associational charges of discrimination with federal, state, and/or local agencies.

How can we help?

Our Class Actions and Complex Litigation team has been tracking this issue very closely.  Our goal in bringing these lawsuits to your attention is to provide information and advance notice around a potentially serious issue.  To respond to these threats, Jackson Lewis has put together an internal team to provide an immediate response and to efficiently handle the defense of this issue.  If you have any questions, or if you would like to discuss your Company’s recruiting and hiring practices in more detail, please reach out to Stephanie Adler-Paindiris, Paul Patten, and Eric Magnus.

 

 

Spokeo Strikes Again – Biometric Data Privacy Class Action Fails On Its Face (Scan)

On November 21, 2017, the U.S. Court of Appeals for the Second Circuit held that a plaintiff bringing a putative class action under the Illinois Biometric Information Privacy Act (“BIPA”) could not establish an injury-in-fact and therefore lacked Article III standing, further adding to the legacy of the U.S. Supreme Court’s holding in Spokeo v. Robins and providing companies with additional firepower to fight against claims of bare procedural statutory violations of privacy statutes where individuals suffer no actual harm or risk of real harm.  (Santana v. Take-Two Interactive Software, Inc.)

Take-Two, the developer of the video game series NBA 2K, has included a feature in several of its recent releases that allows players to scan their face into the video game to create a personalized avatar basketball player for use in the game.

Prior to scanning their face and creating an avatar, players are required to agree that “Your face scan will be visible to you and others you play with and may be recorded or screen captured during gameplay.” The lawsuit alleged that this disclaimer did not provide sufficient notice under the BIPA.

BIPA requires that individuals are given written notice that biometric identifying data is being collected and are informed of the organization’s purpose and length of time for which the data will be collected, stored, and used. BIPA also requires that the organization make publicly available a written policy identifying the length of time that the organization will retain biometric identifying data and its rules regarding the destruction of such data.

The plaintiff alleged that Take-Two failed to inform him of the purpose and duration for which his data would be stored, failed to make a publicly available written policy regarding its retention/destruction schedule, and, as a result, collected and disseminated his biometric identifying data without his informed consent.

The Circuit Court affirmed the District Court’s dismissal for lack of Article III standing, holding that the alleged procedural violations failed to raise a material risk of harm that plaintiff’s biometric data would be misused, disclosed, or accessed by third parties. The Court held that, under Spokeo, plaintiff failed to show a “risk of real harm sufficient to confer injury-in-fact.”  The Court also found plaintiff’s argument that he was deterred from using biometrics in the future insufficient to establish a risk of future harm.

The Court also took note that plaintiff was well-aware that Take-Two was collecting his biometric data. As a result, this decision may have limited application in cases where the individual may be unaware that his or her biometric data is being collected and stored.  Nonetheless, this decision further prevents individuals from asserting procedural statutory violations that are completely divorced from actual harm or risk of real harm.

For more information regarding the use of biometrics identifiers and the law related to same, please contact the Jackson Lewis attorney with whom you regularly work.

Restaurant Supply Driver’s Federal FLSA Claims Shown the Exit Ramp on MSJ Ruling

Finding not a “scintilla” of evidence to support claims of minimum wage violations, a New York federal district court in Yu Sen Chen et al v. MG Wholesale Distribution Inc. et al, 16-cv-04439 (E.D.N.Y.) dismissed a proposed collective action (and refused to exercise supplemental jurisdiction of the corresponding state law claims).  In doing so, the district court relied on simple arithmetic and the plaintiff’s own admissions. 

Basis of Complaint

After spending more than a decade working as a truck loader and driver’s helper for a restaurant supply distribution company in Queens, New York, the named plaintiff filed a putative collective action alleging minimum wage and overtime violations under federal and state law.  In doing so, he claimed he worked 12 hours per day, six days per week, for a set salary of approximately $600/week. 

Allegations Taken with a Grain of Salt

Last year, the named plaintiff voluntarily dismissed the overtime claims.  Discovery ensued on the remaining claims.  During the course of discovery, the plaintiff alleged he worked approximately 72 hours per week (although he claimed that at times he may have worked upwards of 77 hours).  He testified his salary was approximately $600/week.  While the named plaintiff claimed the times sheets utilized in the litigation were falsified (and he thus worked much more), the Court applied plaintiff’s testimony regarding hours worked. 

Applying basic arithmetic, and accepting as fact that the named plaintiff worked 72 hours per week (or even 77 hours per week), he earned more than the $7.25 federal minimum wage, the Court ruled. As a result, no federal minimum wage claim existed, making the prospective collective action ripe for dismissal.  The Court also refused to exercise supplemental jurisdiction over the state law claims (minimum wage and spread of hours claims).    

Takeaway

While the information discovered regarding hours worked may have suggested potential issues under state law, simple math proved there was no minimum wage claim under the FLSA.  This finding was enough to divest the court of subject matter jurisdiction, and the Court punted on the state law claims.  This lesson should not be lost on any employer (regardless of the industry).  Employers facing a collective action should not overlook the possibility of attacking the pleadings of the federal claims.  If a court dismisses those claims, the employer may live to fight the state law claims another day (assuming the plaintiff even re-files them).   So pay attention to simple math; it may prove to be your salvation. 

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