Given the lenient standard of proof required of plaintiffs, experienced wage and hour attorneys agree that employers, in most jurisdictions, fight an uphill battle when trying to defeat conditional certification of a collective action under the Fair Labor Standards Act (“FLSA”). When an employer cannot completely defeat a motion for conditional certification, the next best option is to obtain a partial victory by convincing the court to significantly limit the size and scope of the plaintiffs’ putative class. The employer in Lay et. al. v. Gold’s Gym Int’l, Inc. et. al., 2013 U.S. Dist. LEXIS 144264 (W.D. Tex. Oct. 4, 2013) was able to do just that. The plaintiffs, who alleged on behalf of themselves and others similarly situated that they had been denied overtime compensation with respect to off-the-clock work, sought conditional certification of a nationwide class of fitness consultants and sales managers. The District Court for the Western District of Texas held that although the plaintiffs had met their burden of demonstrating that a regional class of fitness consultants and sales managers could be conditionally certified, the plaintiffs had failed to make a sufficient factual showing to permit conditional certification of a national class of those same employees. This case illustrates how employers can shrink the putative class and thus limit their potential exposure by overcoming the inference put forth by plaintiffs’ counsel that evidence of “one bad apple spoils the whole bunch.”
Gold’s Gym Opposed Conditional Certification of the Nationwide Off-the-Clock Claim Only
Former Gold’s Gym employees moved, pursuant to 29 U.S.C. § 216(b) of the FLSA, to conditionally certify a nationwide collective action of 800 fitness consultants and 120 sales managers. Plaintiffs, in two separate, then later, consolidated actions, sought damages alleging that Gold’s Gym violated the FLSA by failing to include commission and bonuses in the regular rates of pay for purposes of calculating overtime compensation (the “rate claims”) and that the gym did not compensate these employees for all overtime hours worked (the “off-the-clock claims”). Gold’s Gym did not oppose the plaintiffs’ motion to conditionally certify the collective action with respect to the rate claims. However, the defendant opposed conditional certification of the classes with respect to the off-the-clock claims.
Court Concludes There Is No Evidence Of Nationwide De Facto Policy of Encouraging Employees to Work Off-The-Clock Without Overtime Compensation
The parties did not dispute that defendants maintained an official written policy requiring non-exempt employees, including fitness consultants and sales managers, to record hours worked and to be paid for all time worked. The policy expressly prohibited off-the-clock work and the falsification of or failure to keep accurate timekeeping records. The policy also required employees to receive approval before receiving overtime. Despite the strict prohibition against off-the-clock work, the gym nevertheless maintained a written policy that employees must be paid all hours worked whether scheduled or unscheduled, even if overtime was not pre-approved by management.
Notwithstanding the undisputed written policy with respect to off-the-clock work, plaintiffs argued that defendants had a nationwide de facto policy of encouraging and allowing fitness consultants and sales managers to work overtime without compensation and further alleged that defendants had a policy of falsifying time cards. In support, the plaintiffs relied solely upon job descriptions and compensation plans applicable to fitness consultants and sales managers from across the country to infer a national policy to require off-the-clock work existed. The district court rejected this argument concluding that, although there was evidence of a regional policy, there was no evidence to suggest that defendants had a national de facto policy requiring off-the-clock work. The court stated “[t]he fact that managers within one specific region allegedly required or condoned off-the-clock work, without further evidence, is insufficient to warrant certification of the national class that the [ ] Plaintiffs request.” (emphasis added).
Court Concludes That Evidence Supports Conditional Certification Of A Regional Class Only
There was evidence that suggested a regional de facto policy requiring off-the-clock work in Gold’s Gyms locations in the South Texas region, the court held. In support of its conclusion the court explained that many of these employees submitted declarations that they were “encouraged” to work off-the-clock and that their general managers had them sign blank punch correction forms to alter the recorded number of hours worked. Several of these employees maintained that although they complained to supervisors that they were working overtime without compensation, defendant took no corrective action to ensure that they were compensated. Around ten different general managers within the South Texas region were identified and named in declarations as permitting overtime work without compensation. One piece of key evidence included a declaration of a former general manager of a San Antonio gym who stated that the regional manager of the gym’s South Texas division set monthly sales goals for the region that required high levels of productivity from fitness consultants and sales managers, while also strongly discouraging overtime work. This policy allegedly caused employees, who were allegedly fearful of being terminated if they failed to meet sales quotas, to work overtime without compensation. It was further maintained that most general managers were aware of the practice. Thus, the court concluded that the plaintiffs made a sufficient showing that a regional policy or practice of not compensating fitness consultants and sales managers for all time worked existed in Gold’s Texas Holdings’ gyms in the South Texas region.
Attempting to defeat conditional certification of the regional class, defendants argued, inter alia, that conditional certification was inappropriate because the damages of the putative class members were insufficiently similar. Defendants invoked the U.S. Supreme Court’s decision in Comcast Corp. v. Behrend for the proposition that courts must undertake a rigorous analysis of class certification motions and, in particular, the plaintiffs ability to measure damages under common classwide theory. The court found Comcast distinguishable for several reasons, most important of which was that collective actions under the FLSA are not the same as class actions under Rule 23. The court stated that while damages may not be easily determinable, the plaintiffs had sufficiently demonstrated that their alleged damages were the product of a common, de facto policy requiring off-the-clock work at the regional level. Notably, the court acknowledged that certain plaintiffs and putative class members may be exempt from FLSA overtime under the “commissioned retail salesperson” exemption under 29 U.S.C. § 207(i) but concluded that this issue would be better addressed in the latter stages of the FLSA collective action at the decertification stage.
Sometimes employers will not be able to avoid class and/or collective litigation. When this is the case, employers, looking to reduce their potential liability as much as possible, should attempt to limit the size and scope of the plaintiffs’ proposed class by emphasizing the dissimilarities among the putative class members and exposing the deficiencies in the plaintiffs’ purported proof of class commonality and cohesiveness.