The laws governing wages and hours of work affect nearly everyone—and have a significant affect on class and collective actions. How employees are paid, whether as hourly non-exempt, salaried-exempt, tipped, or commissioned sales workers, and how much they are paid, are questions of deep interest to employees and employers alike. And because the laws regulating wages generally apply only to employees, as opposed to independent contractors, who is an employee is also a significant issue of concern.

All these issues were addressed in 2020 by the U.S. Department of Labor (DOL), the U.S. Circuit Courts of Appeal, and state legislatures. Federal and state laws regulating wages and hours of work continued to change and develop last year, expanding in some areas and contracting in others.

In “2020 Wage & Hour Developments: A Year in Review,” attorneys in Jackson Lewis’ Wage and Hour Practice Group look back on the significant wage and hour developments  in the laws governing the payment of wages and limitations on hours of work.

 

The U.S. Court of Appeals for the Fifth Circuit has just issued an important decision addressing “how stringently, and how soon, district courts should enforce Section 216(b)’s ‘similarly situated’ mandate” when considering motions for certification of collective actions under the Fair Labor Standards Act (FLSA). The appeals court rejected the familiar two-step, conditional certification-followed-by-decertification approach that is common across the country in collective actions. Swales v. KLLM Transport Services, LLC, No. 19-60847 (Jan. 12, 2021).

The Court made clear that district courts must review the factual record developed by the parties to determine whether plaintiffs meet the “similarly situated” standard before notice goes out to potential opt-in plaintiffs. This holding rejects the commonplace doctrine that courts should avoid considering discovery at the conditional certification stage and should rather assume that the allegations in the plaintiffs’ complaint are valid.

The suit was brought by truck drivers alleging they were misclassified as independent contractors and are “employees” under the FLSA. The Fifth Circuit has jurisdiction over Louisiana, Mississippi, and Texas.

Implications

The immediate effect of Swales is that, for FLSA cases in the Fifth Circuit, plaintiffs will not be able to issue notice to potential opt-in plaintiffs based merely on allegations. Rather, the district courts will have to assess discovery to determine whether plaintiffs are actually “similarly situated” to the collective they purport to represent.

Open Questions

The decision leaves many questions unanswered in the Fifth Circuit, including whether decertification motions remain part of FLSA collective cases. If courts are to determine whether plaintiffs satisfy the “similarly situated” standard in order for notice to be issued using a standard akin to that for traditional class actions under Federal Rule of Civil Procedure 23, with its “well-established procedural safeguards to ensure that the named plaintiffs are appropriate class representatives,” 216(b) certification may become a single-step, definitive determination.

Gatekeeping Framework

Considering the case on interlocutory review, the appeals court addressed 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 collective action. It adopted a “definitive legal standard,” setting what it called a “gatekeeping” framework: assessing whether putative opt-in plaintiffs are similarly situated “before notice is sent to potential opt-ins … not abstractly but actually.”

In hearing motions for conditional certification, district courts in the circuit have used “ad hoc tests of assorted rigor” in deciding whether employees are similarly situated, the appeals court observed. In the case at hand, it explained, the district court had applied “a Goldilocks version of Lusardi [two-step certification], something in between lenient and strict.” The Fifth Circuit panel wanted to adopt a more precise approach while expressly rejecting Lusardi, which it had “carefully avoided adopting” in the past. The problems that standard creates “occur not at decertification, but from the beginning of the case,” the panel stressed. Namely: “The leniency of the stage-one standard, while not so toothless as to render conditional certification automatic, exerts formidable settlement pressure.”

Two-stage certification “may be common practice,” the court noted. “But practice is not necessarily precedent.”

As the judges pointed out during oral argument in August, it would be of little benefit to let plaintiffs proceed collectively based on a single common fact or issue in dispute if the record as a whole indicates the employees have demonstrably different material facts or legal claims at issue. The opinion reflects that sentiment. It also heeds the U.S. Supreme Court’s binding and “unequivocal” admonition, in its 1989 decision in Hoffman-LaRoche, Inc. v. Sperling, against stirring up litigation.

If you have questions about how this decision affects collective actions in the Fifth Circuit and elsewhere, contact a Jackson Lewis attorney.

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.

 

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.

 

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.

 

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.

 

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.

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.

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.

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.