Four Ways Manufacturing Employers Can Reduce Risk of Class Action Litigation

How can manufacturing employers reduce the prospect of costly wage and hour class and collective actions?

In this legal update, James M. Stone, head of Jackson Lewis P.C.’s Manufacturing Industry Group, and Eric J. Gitig, an associate in the firm’s Los Angeles, California, office, offer guidance to minimize the risk of class litigation, particularly for unionized manufacturers with collective bargaining obligations.


Workplace Law Under a Biden Administration

As President-elect Joe Biden selects members of his Cabinet and prepares for his transition into the presidency, he and a Democratic majority in the House of Representatives may pursue a number of significant pieces of federal workplace legislation. Many of these employment law measures successfully passed the House in 2019 and 2020. And, with the possibility of a power shift in the Senate, there is the prospect that such legislation—including measures that could restrict arbitration agreements with class action waivers and a federal minimum wage increase—will make it to the President’s desk.

Moreover, as with any transition from the President of one party to the President of another party, presidential appointments to the administrative agencies such as the Equal Employment Opportunity Commission and Department of Labor will further affect employers as the agencies change their enforcement priorities and embark on new rulemaking.

In The Future of Workplace Law Under President-Elect Joe Biden, Jackson Lewis attorneys look at what the election and the incoming Biden Administration may mean for employers.


Class Action Trends Report Fall 2020

As the COVID-19 pandemic continues to alter work lives in profound ways, employers are confronted with additional liability risks. The pandemic has created a wave of litigation that is unlikely to ebb until well after the unprecedented public health crisis recedes. In this issue, Jackson Lewis attorneys discuss the risks of WARN Act litigation among the emerging trends and issues to look out for as we continue to navigate the challenges of COVID-19, move past the election and toward a new year.

Topics addressed in this issue include:

  • The pandemic resurgence and state and federal WARN laws
  • Evolving standards for certifying a FLSA collective
  • State and local issues beyond the election
  • Other class action developments

Click here to download the Fall 2020 Class Action Trends Report.


Hacked Healthcare Provider Refuses to Pay Ransom, Attackers Target Psychotherapy Patients

From Finland — by way of our Jackson Lewis Workplace Privacy, Data Management, and Security Report blog — comes the story of a healthcare provider whose refusal to pay a ransom to cyberattackers resulted in a particularly disturbing compromise of customer data: the threat of public disclosure of patient psychotherapy records.

“This incident reveals a troubling pattern of cyberattacks now extending to individuals served by the organizations compromised — patients, students, customers, members, employees, etc.,” writes Joseph Lazzarotti, founder and Leader of the Jackson Lewis Privacy, Data and Cybersecurity practice group. “Organizations devote significant resources to securing their networks and protecting the data they maintain. While that is necessary, considering the nature of the threats and current trends, it likely is not sufficient.”

Any compromise of sensitive personal information can harm employees or customers. A breach of this nature can be particularly damaging. Consider the potential impact of a cyberattack that subjects employee emails and other documents — work-related or otherwise — to scrutiny for purposes of ransom demands. Also consider the significant risk of class-wide liability for such a breach.

Read about the incident here.


COVID-19 screening programs can spur biometric privacy class actions

As organizations aim to return to some type of normalcy, and help ensure a healthy and safe workplace, many have implemented COVID-19 screening programs that check for symptoms, and an employee’s recent travel and potential contact with the virus. Moreover, many states and localities across the nation are mandating or recommending the implementation of COVID-19 screening programs in the workplace and beyond.

In many cases, organizations have leveraged various technologies, such as social distancing bands, apps, and thermal scanners, to streamline their screening programs.

Despite the benefits of COVD-19 screening programs, organizations should proceed carefully to examine not only whether the particular solution will have the desired effect, but whether it can be implemented in a compliant manner with minimal legal risk, particularly regarding the privacy and security implications.

Jason C. Gavejian, Joseph J. Lazzarotti, and Maya Atrakchi discuss the risks in their recent blog post in the Jackson Lewis Workplace Privacy, Data Management & Security Report.

Pandemic Necessitates Review of Donning and Doffing Policies

As federal and state safety and health guidelines in response to the COVID-19 pandemic call for extensive use of personal protective equipment (PPE) in the workplace, employers should give their policies on “donning and doffing” a fresh look. Pandemic-related reopening orders issued by state and local governments may include requirements that will require employers to modify their current policies.

“Claims for compensation for time associated with donning and doffing often are brought on a classwide basis,” notes Jackson Lewis attorney Justin Barnes. He takes a look at the relevant issues and the steps employers can take to mitigate the risk of claims. Read his recommendations here.

Class actions have not spiked alongside pandemic—yet

Has the COVID-19 pandemic prompted a rise in class action employment lawsuits? Not yet, according to the numbers. For now, COVID employment litigation has been comprised mostly of single-plaintiff claims. Whether the dam will hold, however, remains to be seen.

The Jackson Lewis COVID-19 Employment Lit-Watch tracks labor and employment litigation developments nationwide, as sifted from thousands of court filings daily, resulting from the COVID-19 pandemic. The tool allows users to track the trajectory, over time, of both class action and individual COVID-related filings by category, by industry, and by individual state.

A powerful tool. Users can compare federal and state filings, drill down by class actions or individual claims, view the number of complaints filed per week, or the cumulative count of all complaints to see how they have changed (or held steady) over time. Users can highlight an individual state to review a list of every complaint filed, organized by category, view more detailed information about an individual complaint, and compare the ratio of COVID incidences in a given locale to COVID litigation.

What the data shows. According to the latest Lit-Watch data (updated most recently on September 28):

  • There have been 727 employment-related complaints filed in state and federal courts alleging COVID-19 related claims.
  • Of the complaints filed, 45 have been asserted as proposed class or collective actions, just six percent of complaint filings.
  • Two-thirds of COVID-related employment claims have been filed in state courts.
  • There was a sharp spike of case filings at the end of August; however, new suits have leveled off in recent weeks.
  • By a significant margin, the healthcare industry has faced the largest number of overall complaints.
  • As for potential class actions, there is no clear leader, but suits against employers in the hospitality/restaurant and retail industries were more likely than other industries to be defending class actions.
  • Disability, leave, and accommodation claims comprise the greatest number of individual COVID-19-complaints.
  • Wage and hour claims constitute the bulk of class claims (consistent with employment class litigation generally), with workplace safety claims second.
  • It will be no surprise that the majority of cases are brought in California. However, a clear majority of class action COVID cases have been filed in Florida.

Click here to access the COVID-19 Employment Lit-Watch.

Jackson Lewis: Your COVID-19 compliance resource. Jackson Lewis will continue to track COVID-19 litigation trends as we navigate the pandemic and its impact on employers. The pandemic continues to alter the reality of how we live and work. What will never change is our commitment to provide you with the practical guidance you need to minimize legal risk while simultaneously reimagining your workplace.

Eleventh Circuit rejects incentive awards for class plaintiffs

The Eleventh Circuit Court of Appeals ruled today that “incentive” or “service” awards to lead plaintiffs in Rule 23 class actions are unlawful. It is the first circuit court of appeals to expressly invalidate such awards as a matter of law. (Johnson v. NPAS Solutions, LLC, No. 18-12344, September 17, 2020).

In a suit brought under the Telephone Consumer Protection Act (TCPA), a divided circuit panel struck down a $6,000 award to a lead plaintiff and, for this and other reasons, vacated a federal court’s order approving a proposed $1.432 million settlement. (There were 179,642 potential class members, who would have received only $7.97, but only  9,543 class members who submitted claims, bringing their haul to what could have been “a whopping $79.”)

Supreme Court precedent. The U.S. Supreme Court prohibited the award of incentive payments to plaintiffs more than a century ago, calling this particular fee for services “decidedly objectionable,” the Eleventh Circuit noted (citing Trustees v. Greenough, 105 U.S. 527 (1882), along with Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), issued on the heels of that decision. This controlling precedent precedes Rule 23 by decades, as the plaintiffs pointed out to no avail, in arguing that the decisions were nonbinding here. And these opinions seem to have gone unheeded in the 140 or so years since, the majority acknowledged, conceding that incentive awards are routine features of class settlements today.

“But, so far as we can tell, that state of affairs is a product of inertia and inattention, not adherence to law,” the court said, adding: “Although it’s true that such awards are commonplace in modern class-action litigation, that doesn’t make them lawful, and it doesn’t free us to ignore Supreme Court precedent forbidding them.”

The incentive award in this case is “part fee and part bounty,” according to the majority. Such awards amount to the kind of pay for services disfavored by the Supreme Court. What’s more, such fees are meant “to promote litigation by providing a prize to be won.”

Eleventh Circuit is an outlier. Judge Martin dissented on this point, and noted that the decision “takes our court out of the mainstream.” No other circuit court has barred incentive awards; in fact, “none has even directly addressed its authority to approve incentive awards,” she pointed out. Yet, as the majority countered, the courts appear to have abandoned the inquiry whether there is actually a legal basis for such awards, turning instead to the question whether such awards are fair.

Fee objection before fee petition? The appeals court also was troubled that, in granting preliminary approval to the slapdash settlement (over the objections of the appellant here), the district court effectively required class members to opt out or object to the attorney fee award even before class counsel filed their fee petition. The appeals court found a clear violation of Federal Rule of Civil Procedure 23(h) in setting the objection date prior to the motion for fees.

However, applying the harmless-error doctrine for the first time in the context of Rule 23(h), the court concluded that this error was harmless.

“Boilerplate” approval. In addition, the lower court violated the Federal Rules and circuit precedent more generally by failing to offer a reasoned explanation for its decision to approve the terms of a class settlement and to overrule objections. The appeals court recognized that the district court’s approach to evaluating the settlement was fairly common. Here again, though, as with the court’s approval of the incentive award, it is no answer to say, “That’s just how it’s done.”

“We don’t necessarily fault the district court—it handled the class-action settlement here in pretty much exactly the same way that hundreds of courts before it have handled similar settlements. But familiarity breeds inattention, and it falls to us to correct the errors in the case before us.”

Takeaways. As a practical matter, removing the prospect of service awards for Named Plaintiffs in class actions will impact the resolution of class actions within the Eleventh Circuit, adding further nuance to the negotiation of settlements and the drafting of settlement agreements.

This decision will also further increase judicial scrutiny of class action settlements in the Eleventh Circuit, which is a Circuit that, since its seminal decision in Lynn’s Foods, Inc. v. United States in 1982, has been active in scrutinizing the terms of employment class action settlements, particularly in the area of wage and hour settlements.

A critical question that remains unanswered is whether the majority’s rationale will be applied in the context of collective actions brought under Section 216(b) of the Fair Labor Standards Act (FLSA) or to the settlement of hybrid claims under both Rule 23 and Section 216(b).

It also remains to be seen if other federal circuits will find the Eleventh Circuit’s holding persuasive, and likewise opt to prohibit the use of incentive payments, or whether the Eleventh Circuit has further distanced itself from its sister circuits in closely scrutinizing class action settlement terms.

The Meaning of “Similarly Situated” Is Teed up for SCOTUS

The U.S. Supreme Court has been asked to fill a gaping hole in our Fair Labor Standards Act (FLSA) jurisprudence: What, precisely, is meant by “similarly situated,” as set forth in 29 U.S.C. 216(b)? The request comes in a petition for certiorari of a decision by the U.S. Court of Appeals for the Second Circuit in a wage-hour collective action against Chipotle Mexican Grill, brought by assistant managers (or “apprentices”) who contend that they were misclassified as exempt executive employees and improperly denied overtime pay. (Chipotle Mexican Grill, Inc. v. Scott (No. 20-257), petition for certiorari filed August 28, 2020).

In the absence of a meaningful definition in the statute or guidance from the Supreme Court, lower courts have been left to fashion their own tests for evaluating whether a group of employees satisfy the “similarly situated” criteria for purposes of certifying an FLSA collective action. Most federal circuits have adopted multifactor or “ad hoc” approaches, starting with the U.S. Court of Appeals for the Third Circuit. Along with the Sixth, Eighth, and Eleventh Circuits, courts in these jurisdictions take into account the ways in which putative plaintiffs are dissimilar as well as similar, along with fairness and procedural concerns, available defenses, and other considerations. The Tenth Circuit has condoned, but not required, the multifactor approach to the “similarly situated” analysis. The Seventh Circuit pulls directly from standard Rule 23 factors (predominance, most significantly). The Second Circuit, however, followed the outlier Ninth Circuit in imposing a low hurdle for FLSA certification.

The panel majority in Chipotle contends that the ad hoc approach taken by most federal circuits has “imported through the back door” Rule 23’s more demanding standard for certifying a class, for which there is no basis in the FLSA. The seven plaintiffs in this “hybrid” action sued on behalf of themselves and 516 additional employees who had opted in to an FLSA collective action; they also represented six putative classes—approximately 1,600 employees in six states—under Rule 23(b)(3). In a June 2013 ruling, the district court conditionally certified a nationwide FLSA collective. Subsequently, in a March 29, 2017, decision, the court denied Rule 23 certification, finding the plaintiffs could not satisfy predominance and superiority requirements. The court also decertified the FLSA collective action after concluding that the plaintiffs failed to show that the opt-in plaintiffs were similarly situated.

However, in an April 1, 2020, decision, a divided Second Circuit panel found that the district court erred in decertifying the FLSA collective. According to the majority, the court below had gotten the “similarly situated” analysis wrong, conflating the Section 216(b) standard with the more demanding Rule 23 criteria for class certification. By design, the Rule 216(b) hurdle is lower, Judge Chin explained, because it serves a “fundamentally different purpose[]” than Rule 23: it is “tailored specifically to vindicating federal labor rights.” In the majority’s view, unlike Rule 23 litigants, Section 216(b) plaintiffs have a “substantive ‘right’ to proceed as a collective,” and one is to be certified so long as the potential opt-in plaintiffs “share a similar issue of law or fact material to the disposition of their FLSA claims,” notwithstanding any “dissimilarities in other respects.”

Judge Sullivan, dissenting in Chipotle, argued that Section 216(b) is not so “fundamentally different” in purpose from Rule 23 as to warrant reducing the required “similarly situated” showing to a “mere formality.” His interpretation aligns with the Seventh Circuit which, in its important 2013 decision in Espenscheid v. DirectSat USA LLC, eschewed the notion that there is a meaningful rationale for adopting a distinct approach to the Section 216(b) inquiry. Notably, the panel was unanimous in finding that the district court had properly refused to certify the proposed Rule 23 classes, concluding that common questions of law did not predominate. Thus, the Second Circuit decision offers the Justices a useful framework in which to consider the interplay between Rule 23 and § 216(b), and the relative rigor applied to certification questions under the two standards.

In their petition for certiorari, the Chipotle defendants call the Second Circuit majority’s “similarly situated” standard both “incorrect and patently unworkable.” The question presented: “[w]hether a district court may consider factors other than the presence of a single material question of law or fact common to a group of employees when assessing whether the employees are ‘similarly situated’ for purposes of the collective-action provision of the Fair Labor Standards Act.”

“The confusion regarding the standard for certifying a collective action under the FLSA has festered for far too long,” the petitioners note. “This case provides the Court with an ideal opportunity to address that question for the first time, providing much needed guidance for lower courts that have been floundering in its absence.”

On the other hand, the Second Circuit’s Chipotle decision involved the decertification of a collective action that had been conditionally certified by the court; as such, the case does not tackle the more problematic issue whether a collective action should be conditionally certified in the first instance. The widely used two-stage certification framework (commonly deemed the Lusardi approach) for FLSA certification is also in dire need of Supreme Court scrutiny. With only a “modest” showing that potential opt-in plaintiffs are “similarly situated,” plaintiffs can force defendants into settling meritless claims or to engage in costly discovery and disruptive classwide litigation.

To this end, there are more promising developments for FLSA defendants in the Fifth Circuit. In a significant opinion on a matter of first impression in any circuit, a Fifth Circuit panel in In re JPMorgan Chase & Co. (No. 18-20825, February 21, 2019), ruling on interlocutory appeal, refused to allow FLSA plaintiffs to give notice of a collective action to the 35,000 current and former Chase employees in a putative 42,000-member collective. In so ruling, the appeals court rejected an approach that would conditionally certify first and wait until the step-two decertification stage to delve into the existence of the arbitration agreements.

On August 11, 2020, the Fifth Circuit, again on interlocutory review, heard oral argument in Swales v. KLLM Transport Services, a case that addresses head-on the extent to which a district court may examine the factual circumstances of whether potential opt-in plaintiffs are similarly situated before conditionally certifying a class. In Chipotle, dissenting Judge Sullivan made the important observation that “neither plaintiffs nor the court would be significantly benefited if plaintiffs were allowed to proceed collectively despite having drastically different material facts or different legal claims simply because they share a single common fact or legal issue.” During oral argument in Swales, the panel judges sua sponte made the same point.

As we await what we hope will be a grant of certiorari in Chipotle, we are cautiously optimistic that the Fifth Circuit will usher in a more workable framework for evaluating whether potential opt-in plaintiffs are similarly situated before conditional certification is granted.

EEOC: A “Pattern and Practice” is Not a Standalone Basis to Sue

The U.S. Equal Employment Opportunity Commission (EEOC) recently issued an opinion letter clarifying its authority to bring “pattern and practice” lawsuits under § 707(a) of Title VII of the Civil Rights Act of 1964. The Commission’s detailed guidance, issued September 3, 2020, announces a more restrained approach by the agency in bringing such claims.

The Commissioners voted to approve the guidance on August 27, 2020. In the letter, the EEOC states as a matter of policy that an alleged “pattern or practice of resistance” is not an independent reason for the agency to sue an employer, absent an underlying allegation of discrimination or retaliation. The EEOC has used Section 707’s “resistance” provision of late—independent of any actual violations of Sections 703 or 704—to challenge employer practices that it contends interfere with the right of employees to pursue Title VII claims.

Historical Background. Section 707 dates from the original passage of Title VII when the Justice Department and not the EEOC litigated violations of Title VII. Section 707 permitted the Attorney General to file a lawsuit against “any person or group of persons engaged in a pattern or practice of resistance” to the rights protected by Title VII. Before the EEOC was given litigation authority in 1972, the Attorney General did occasionally file 707 lawsuits without underlying charges and against individuals.

Questions Answered. The EEOC addressed two questions: (1) “[D]oes a pattern or practice claim under section 707(a) require allegations of violations of section 703 or section 704?” and (2) “[D]oes a claim under section 707 require the pre-suit requirements of section 706 be satisfied before the EEOC can file suit?” The opinion letter states: “The best reading of the relevant statutory text is that the answer to both questions is yes.”

Changing Course. This latest stance is in contrast with the EEOC’s earlier position on both questions. In the past, the Commission has filed suit challenging employer policies or practices even where no underlying violations of Sections 703 or 704 of the statute were alleged. The U.S. Court of Appeals for the Seventh Circuit, the only appeals court to have considered the issue, rejected such an expansive take on the Commission’s authority in EEOC v. CVS Pharmacy, Inc., a 2015 decision rebuffing the EEOC’s independent challenge to severance agreements that included language which, in the EEOC’s view, deterred employees from pursing EEOC charges, or participating in EEOC proceedings. “Section 707(a) does not create a broad enforcement power for the EEOC to pursue non-discriminatory employment practices that it dislikes,” the court wrote.

Falling in line with the Seventh Circuit, the EEOC now says that “the better reading of the statutory text is that it does not support such a reading of section 707.” A Section 707 claim must be “tethered” to an underlying allegation of discrimination or retaliation, it now concludes. “Rather than giving the Commission wide-ranging power to bring suit against undefined practices that it believes facilitate unlawful ‘resistance’ in some way, but may not be themselves unlawful discrimination, section 707 gives the Commission the important power of acting against acts of discrimination in violation of sections 703 or 704.”

Pre-suit Procedures Required. The opinion letter also states that the EEOC must engage in pre-suit procedures, including a formal charge, reasonable cause finding, and conciliation efforts, before it may bring a Section 707 pattern and practice claim, holding itself to the same procedures it must follow when pursuing allegations on behalf of individual claimants under Section 706.

Justice Department Authority. Although the EEOC now has the authority to sue private employers, the Justice Department has litigation authority relating to sue state and local governments for Title VII violations.  The opinion letter notes that the EEOC is not opining on the Justice Department’s authority to file suits without a charge, and notes that the Justice Department does have the authority under Section 707 to sue individuals.

Takeaway. The EEOC seldom issues formal opinion letters, and this rare guidance is welcome news for employers. It represents a significant step back from the EEOC’s expansive view of its own authority to challenge employer practices without citing a specific alleged violation of discrimination—and its authority to do so without first attempting to resolve the matter informally. As a formal guidance, employers can cite it favorably when defending company policies against any such freestanding actions by the EEOC.