This week, California's Governor signed into law legislation (1) increasing the state minimum wage, (2) providing overtime compensation for many household employees, and (3) expanding the scope of California's paid family leave insurance program. With respect to minimum wage (which is currently $8/hour in California), AB 10 increases the minimum wage to $9/hour effective July 1, 2014, and further increases it to $10/hour effective January 1, 2016. Currently, the only state with a higher minimum wage than California's upcoming $9/hour is Washington, where the minimum wage is $9.19/hour.
The Governor also signed into law AB 241, which adds section 1450 to the California Labor Code and is known as the Domestic Worker Bill of Rights. Under this new law, individuals who work in many household occupations are now required to be paid overtime compensation at a rate of one and one-half times their regular rate for all hours worked in excess of 9 hours per day or 45 hours per week. The law excludes "casual babysitters" whose work is intermittent or irregular as well as babysitters who are under age 18, and further excludes individuals who work in residential care facilities. The law would apply to nannies, housekeepers, and individuals who provide care for the elderly and/or disabled within a private household. This new law takes effect January 1, 2014.
Finally, the Governor signed into law SB 770, which expands the scope of California's family temporary disability insurance program. Under the current program, employees who take time off to care for a seriously ill child, spouse, parent or domestic partner, or for baby bonding, are entitled to partial wage replacement benefits through this state insurance program administered by the EDD. Under the new law, these benefits are expanded to also be provided to employees who take time off to care for a seriously ill grandparent, grandchild, sibling or parent-in-law. This new law takes effect July 1, 2014. To be clear, this new law is not a leave statute and does not require California employers to provide leaves of absence to employees for any of these circumstances, much less to provide employees pay for such leaves. An employer's leave obligations are governed by the employer's policies and the employer's coverage under other applicable laws such as the FMLA and CFRA.
We will continue to keep you updated on any additional legislative developments.
Employers may recall recent publicity in California over the extent to which an employer may recover its attorneys’ fees after prevailing in a wage and hour action. This is because Labor Code section 218.5 on its face provides that the prevailing party in any action brought for nonpayment of wages “shall be awarded” its reasonable costs and attorneys’ fees. Thus, Labor Code section 218.5’s fee-shifting provision on its face applies equally to a prevailing employee and employer. Based on this language, in Kirby v. Immoos, a trial court awarded attorneys’ fees to an employer who prevailed in a wage case alleging, among other things, meal and rest break violations. A California court of appeal thereafter affirmed the employer’s fee award. However, the California Supreme Court ultimately reversed this outcome and held that Labor Code section 218.5 does not apply to meal and rest break claims, reasoning that these claims are not claims alleging “non-payment of wages.” The Court’s ruling left open the possibility that a prevailing employer could recover attorneys’ fees in certain other types of wage-related actions.
To avoid this result, the California Legislature introduced a bill, SB 462, to amend Labor Code section 218.5 to provide that a prevailing employer may only recover attorneys’ fees if a trial court finds that the employee brought the wage action in bad faith. The legislature recently passed this bill and yesterday California’s Governor signed it into law. With this amendment, it will be even more difficult and rare for a prevailing employer to recover attorneys’ fees in wage and hour actions in California.
Today the Ninth Circuit issued its decision in Urbino v. Orkin Services of California, Inc., addressing how to properly analyze whether the amount in controversy element is satisfied for purposes of diversity jurisdiction in a PAGA action. As most California employers know, PAGA is a California statute that allows an employee to recover penalties (purportedly on behalf of the state) against an employer for various violations of the California Labor Code. Worse, the employee who is the named plaintiff can seek to recover penalties on behalf of all aggrieved employees. Most claims are filed in state court, but employers retain the option to remove the action to federal court if the requirements for diversity jurisdiction are met. One of those requirements is that the amount in controversy must exceed $75,000. In determining whether the amount in controversy meets this jurisdictional threshold, the question becomes whether courts should look only at the amount of the named plaintiff's claim, or whether courts should look at the aggregate amount of the claim as to all "represented" employees. California district courts have disagreed over the answer to this question. Today, the Ninth Circuit resolved the question, holding that only the claim of the named plaintiff (and not the aggregate claims of all aggrieved employees sought to be represented) may be considered in determining whether the amount in controversy requirement is satisfied. The result of this decision will be that far fewer PAGA claims will be capable of removal to federal court based on diversity jurisdiction. The full opinion of the court is here.
Two recent class action lawsuits illustrate an emerging trend in wage and hour class action litigation, namely, claims for failure to pay overtime wages based on the improper calculation of the employees’ overtime rates.
The first lawsuit, filed against clothing retailer Forever 21 by a former 13-year employee, alleges that employees were not paid all of their overtime wages due to Forever 21’s failure to take into account non-discretionary bonuses and incentive pay when calculating the employees’ overtime rates. Juana Diaz, the plaintiff in this lawsuit, seeks to represent all of Forever 21’s hourly warehouse employees in the State of California. This lawsuit was filed May 24, 2013 in the Los Angeles County Superior Court.
In the second lawsuit, plaintiff William Sullivan seeks to represent non-exempt employees of Lyon Management Group, a property management company, in a similar claim. Sullivan alleges that Lyon failed to include the employees’ commissions and bonuses when calculating their overtime rates. This lawsuit was filed May 8, 2013 in the Orange County Superior Court.
Although the outcome of these cases remains to be seen, two recent decisions finding such claims suitable for class certification confirm the viability of class certification of claims based on the improper calculation of overtime rates. In a May 10, 2013 decision in the case of Faulkinbury v. Boyd & Associates, Inc., a California appellate court ruled that the question of whether annual bonuses must be included in calculating the overtime rates of the proposed class was appropriate for class certification. On May 28, 2013, the federal Court of Appeals for the Ninth Circuit overturned a lower court decision denying class certification in Levya v. Medline Industries, Inc. The plaintiffs in that action sought to represent over 500 employees on a number of claims, including a claim that nondiscretionary bonuses had been improperly excluded from overtime rates. The federal court ordered the proposed class certified.
The calculation of an employee’s overtime rate varies from case to case. Federal and California laws state that an employee’s overtime rate is based on that employee’s “regular rate of pay,” which includes all of the compensation the employee normally receives for the work performed for the employer. In many cases, it is not enough to look only at the employee’s hourly rate. The employer must also include any other compensation normally paid to the employee for their work including salary, piecework earnings, non-discretionary bonuses, and commissions in the regular rate of pay. Conversely, discretionary bonuses, payments in the nature of gifts on special occasions, and contributions by an employer to certain welfare plans generally are not included in the calculation of the “regular rate of pay.” Whether a particular type of compensation should be included in the regular rate of pay is a very fact-specific determination. The cases above make clear that employers of all sizes should review their practices to ensure that the regular rate is being properly calculated. As cases have illustrated, this is an issue that lends to class certification, which greatly increases the risk and exposure of a potential claim.
Two steps forward, one step back. That seems to be the pace of wage and hour class certification decisions for California employers these days. In recent months, both the Ninth Circuit and some California Courts of Appeal have issued employer-friendly decisions holding that class certification is not proper on the facts of the wage and hour claims before them (see, e.g. Wang v. Chinese Daily News (9th Circuit) and Dailey v. Sears Roebuck (California court of appeal). However, over the past week, two new decisions have been issued reminding California employers that class certification is far from dead in the wage and hour context.
Yesterday, the Ninth Circuit issued its decision in Leyva v. Medlin Industries, Inc., reversing a district court’s denial of class certification and ordering that class certification be granted. The plaintiff in the case sought to represent a class of 538 hourly employees of Medline, alleging that the employer engaged in improper time rounding practices that resulted in employees performing work “off the clock” and without pay, and that the employer also failed to include bonus compensation in calculating the overtime rate. The district court denied class certification, holding that individual damage issues predominated over any issues common to the class and that litigating the case on a class basis would be unmanageable. The Ninth Circuit, without much factual discussion, held that the district court abused its discretion in denying class certification. More specifically, the Ninth Circuit held that the district court erred in relying almost exclusively on individual damage issues as the basis for denial of class certification. The Ninth Circuit held that the need for individual damage determinations does not defeat class certification and does not render a class proceeding unmanageable. In so holding, the Ninth Circuit made clear that it does not believe the United States Supreme Court’s recent decision in Comcast v. Behrend, suggests otherwise. According to the Ninth Circuit, Comcast v. Behrend simply held that the proponent of class certification must demonstrate a model of proving damages attributable to the theory of liability. In Comcast, the proposed model did not isolate damages flowing from one theory of liability versus others. The Ninth Circuit contrasted the case before it and held that if liability was proven for rounding violations and/or improper overtime rate calculations, the damages sought would all flow from the same theory of liability. Furthermore, the employer had apparently demonstrated that classwide damages could be fairly easily calculated from the employer’s payroll database (the employer had filed a notice of removal early in the case, which included the employer’s own damages calculations). The Ninth Circuit emphasized that individual damage issues, almost categorically, are not enough to defeat class certification in any wage and hour case.
The Ninth Circuit mentioned but provided no real discussion of facts or evidence in the case proffered by the employer to demonstrate that individual issues predominate. For example, the employer apparently argued and/or submitted evidence that different employees had different types of bonuses—some being discretionary and some non-discretionary, which might impact whether such compensation even needed to be included in the overtime rate calculation. Additionally, it is unclear how it could be determined on a classwide basis whether any particular class member actually performed work that was uncompensated (regardless of any rounding practice) without individually questioning each class member. In any event, the Ninth Circuit’s view on individual damages issues was certainly made clear. The full decision is here.
In another unfavorable class certification ruling, a California Court of Appeal issued its decision last week in Bluford v. Safeway Stores, also reversing a trial court’s denial of class certification, this time in a meal break case. On the meal break claim, the employer’s policy apparently did not specifically mention the employee’s entitlement to a second meal break if the employee worked in excess of 10 hours per day. There was evidence, however, that some employees indeed knew they could take second meal breaks and did take such breaks. The trial court denied class certification, finding that individual issues predominated because a determination of liability would require questioning of the individual employees as to whether they were permitted to take such breaks and if they did not take them, why that was. The court of appeal disagreed, holding that class certification could properly be based on the employer’s lack of a proper policy clearly authorizing and permitting second meal breaks for shifts in excess of 10 hours. In other words, the lack of a fully compliant policy supported class certification, regardless of evidence that at least some employees knew by unwritten policy that they were in fact entitled to such breaks.
There was also a rest break claim at issue in the Bluford case, but it was premised on unique facts different that rest break claims in typical cases (i.e. employees were not permitted to take rest breaks). Specifically, the rest break claim challenged whether Safeway provided paid rest breaks to its employees. Safeway paid these employees based on a piece rate formula utilizing mileage rates applied according to number of miles driven, the time when the trips were made and the locations where the trips began and ended. Pay was also based on fixed rates for certain tasks and hourly rates for other tasks and delays. According to the court, neither the mileage rate compensation formula nor the fixed rate formula compensated employees for rest period time. Safeway argued that the mileage and activity rates were designed to include compensation for rest periods. The court rejected this theory, holding that averaging pay is not allowed under California law as a means for complying with minimum wage obligations.
Notably, the driver employees at issue in the Safeway case were covered by a collective bargaining agreement that had meal and rest break provisions. The court rejected the argument that the claims were preempted by the Labor Management Relations Act. The Bluford case is available here.
These two cases serve as an unfortunate reminder that wage and hour class actions remain alive and well in California, and will continue to so remain. It is imperative that employers ensure that they have compliant wage and hour policies for California employees, as this remains one of the best tools for defeating class certification. In the meantime, it remains to be seen how other courts (besides the Ninth Circuit) will interpret Comcast v. Behrend and its impact on class certification in wage and hour cases, where damages issues are often highly individualized.
In order to be properly classified as an exempt employee in California, the employee must spend the majority of his or her weekly work time performing exempt tasks. Thus, California's test for exemption has a very quantitative focus, a focus that is materially different than the "primary duty" test under the federal FLSA. One question that commonly arises in lawsuits challenging exempt status of managers in California is whether time spent by those managers concurrently performing exempt and non-exempt tasks qualifies as exempt work for purposes of the quantitative analysis. Take, for example, a retail manager who assists customers during a rush but continues oversight of the store and coaching and direction of subordinate employees at the same time. Is such concurrent work exempt, non-exempt or both? Yesterday, a California court held that the work cannot be both exempt and non-exempt nor partial time credit given to the exempt and non-exempt sides of the ledger. Instead, the court held that the trier of fact must determine the "primary purpose" of the work and consider whether that primary purpose falls on the exempt or non-exempt side of the ledger. The case is Heyen v. Safeway, Inc. and the decision is here.
In the Heyen case, the court's analysis led to an adverse decision for the employer. The plaintiff, a grocery store manager, claimed she spent the majority of her time on non-exempt work (cashiering, etc.) instead of management duties. Following trial, the court found liability and awarded the plaintiff overtime compensation. The employer said that the trial court erred in failing to consider time spent by the plaintiff concurrently managing while performing non-exempt tasks. The appellate court found no erro and held that based on the evidence, the trier of fact properly concluded that the work was for a primarily non-exempt purpose and thus, the employer did not get time credit for the employee's concurrent management duties.
This case serves as a reminder to California employers about the need to carefully review exempt classifications to ensure that exempt employees truly spend the majority of their work time on exempt tasks.
There has been a lot of litigation in California concerning the exempt status of various categories of employees, with plaintiffs’ attorneys filing class action after class action seeking to recover four plus years of overtime compensation stemming from employers allegedly misclassifying employees as exempt from overtime compensation. Typically, these claims are premised on an argument that the employees’ job duties (as opposed to the amount or manner of compensation paid to the employees) do not meet the test for exemption. A decision hand down today by a California Court of Appeal serves as a reminder that failure to pay exempt employees on a salary basis also destroys exempt status, even if the employees’ job duties satisfy the test for exemption.
In Negri v. Koning & Assoc., the plaintiff was an insurance adjuster who was paid $29 per hour for his work. He did not have any guaranteed and predetermined minimum salary that he would be paid regardless of hours worked. In actual practice, the plaintiff always worked at least 40 hours per week and was paid $29 per hour for each of those hours worked (and more if he worked more than 40 hours). Thus, the employee’s total compensation each week was far more than double the minimum wage (the minimum threshold amount of compensation to qualify for exempt status generally in California). Nonetheless, the employee sued his employer, claiming he was improperly classified as exempt and was owed overtime compensation. [He alleged he typically worked over 60 hours per week.] The employer argued the employee was properly classified as exempt based on his job duties and compensation. The trial court ruled in favor of the employer, citing federal authorities generally determining that insurance adjusters are exempt administrative employees. The employee appealed.
The appellate court reversed, but wisely did not want to touch the issue of whether the employee’s job duties met the test for the administrative exemption in California. [California courts have been all over the map on interpretation and application of the administrative exemption as to claims adjusters and as to many other categories of employees.] Instead, the court analyzed whether the employee’s compensation met the salary basis test necessary for exempt status. The court explained that payment on a salary basis requires that an employee be paid a guaranteed predetermined amount (of at least twice the minimum wage) that is not subject to reduction based on quantity or quality of work. The court held that the employer’s method of paying this employee did not meet this salary basis test because the employee was simply paid hourly without any guaranteed minimum salary. Thus, hypothetically, if the employee worked only a few hours in a week, his total compensation would be less than double the minimum wage because there was no guaranteed minimum salary in place. The employer argued that this hypothetical scenario never happened and that the employee always worked and was paid for at least 40 hours and so there was no “actual reduction” based on quantity worked. As such, the employer argued that the salary basis test was still satisfied as to this employee. The court disagreed and held that there must be a guaranteed minimum salary in place in order for an employee to be deemed paid on a salary basis and qualify for exempt status. The court clarified that it is permissible for an employer to pay an employee compensation over and above the guaranteed minimum without destroying exempt status, but there must at least be a guaranteed minimum in place in the first instance. The full decision is available here.
This case serves as a cautious reminder for employers who pay exempt employees using hourly forms of compensation. While this is generally permissible, there must be an agreement in place that the employee will receive a guaranteed minimum salary of at least double the minimum wage (California employees) for full-time employment. Otherwise, exempt status can be successfully challenged, with back overtime owed (typically at an alarming overtime rate given the higher rate of compensation paid to employees classified as exempt).
California employers should all be aware that California law requires employers to pay out all accrued, but unused, vacation pay immediately upon termination of employment. In other words, use it or lose it policies and/or policies that provide for forfeiture of vacation on termination of employment are illegal in California. Employers who fail to timely pay vacation wages on termination of employment are liable not only for the actual amount of unpaid vacation wages, but also for "waiting time penalties" of a full day's regular wages for each day the payment is late, up to 30 days. There is, however, an exception to the rule prohibiting a forfeiture of vacation wages for unionized employees if the collective bargaining agreement "otherwise provides" (meaning it provides for something other than full payment of all vested vacation upon termination of employment). Today, a California court interpreted this exception narrowly to hold that a collective bargaining agreement ("CBA") must "clearly and unmistakeably" specify that vested vacation does not need to be paid in order for a waiver to be found. In other words, an implied waiver or a waiver inferred from the totality of the circumstances (such as the past mutual practice of the union and the employer) is not good enough. The case is Choate v. Celite Corp. and the decision is here.
In the Choate case, the employer granted its employees between one and five weeks of vacation annually. At the beginning of each year, the employer calculated the yearly vacation allotment based on an employee's length of service and the number of hours the employee worked the year before. Under the CBA, employees terminated from employment were entitled to "receive whatever vacation allotment is due them upon separation." Both the union and the employer understood this provision to mean that employees were entitled to be paid for the vacation time already allotted to them for the year of their termination, but not for any vacation time they had accrued toward the next year's allotment by virtue of having performed a certain number of hours of work. The employer paid out vacation in accordance with this understanding. Notwithstanding the apparent agreement of the union and the employer as to the interpretation of the CBA's vacation provision, a group of terminated employees sued for unpaid vacation wages and waiting time penalties.
The court held that the employer owed the pro rata vacation wages earned during the termination year because the CBA did not "clearly and unmistakeably" waive employees' right to receive those vacation wages. The court held that it was not sufficient that the union had for years agreed with the employer's interpretation of the vacation provision. Although the court held that the vacation wages were owed, the court held that the employer did not owe waiting time penalties because the employer's failure to pay was not "willful." The court held that the employer reasonably believed that the wages were not owed based not only on the union's agreement but also on conflicting case law, some of which suggested that an implied waiver standard was proper.
As a side note for litigators, the employer in this case also argued that the employees' vacation claim was preempted by the Labor Management Relations Act. The court rejected this argument and held that the claim was not preempted because the claim did not really require "interpretation" or "analysis" of the CBA.
Employers with unionized employees who do not pay out all accrued, unused vacation on termination of employment should ensure that the applicable CBA clearly and unmistakeably waives this entitlement.
Earlier this week, a California court issued a published decision holding that an employer who employs piece rate employees must compensate those employees at the piece rate for all piece rate work and at a rate of at least the minimum wage for each hour of non-piece rate work. It is not sufficient that an employer simply look backward at the pay period to determine if the total piece rate compensation divided by total hours worked (piece rate time and non-piece rate time) equals at least the minimum wage and then make up the difference only where the total falls below the minimum wage. The case is Gonzalez v. Downtown LA Motors and the decision is here.
The decision rests on uncertain footing, relying on a prior California Court of Appeal decision in Armenta v. Osmose, 135 Cal.App.4th 314 (2005). In turn, the Armenta decision relied on a 2002 DLSE opinion letter, in which the DLSE opined that piece workers must be paid at least minimum wage for all non-piece rate hours worked and that the employer may not satisfy this obligation by simply looking back at the end of the pay period at the total piece rate compensation earned and ensuring that it is equal to at least minimum wage for all hours (piece rate and non-piece) worked. In that opinion letter, however, the DLSE acknowledged that California minimum wage law is susceptible to a divergent interpretation that the backward-looking/averaging approach is permissible. Some California federal courts have also held that the backward-looking/averaging approach is proper. To add to the confusion, the DLSE itself flip-flopped on its own interpretation of what is required in this situation. In an earlier DLSE Interpretive Bulletin, the DLSE endorsed the backward-looking/averaging method. See DLSE Interpretive Bulletin No. 84-3 (Feb. 1, 1984). However, without explanation, the DLSE reversed its position several years later, explaining in its Operations and Procedures Manual that piece rate workers, in addition to their piece rate compensation, separately must be paid at least minimum wage for all non-piece rate hours worked.
Of course, the employer in the Gonzalez case did not get any break from interpreting the law the same way the DLSE has at times interpreted it. Instead, the employer was found liable to a class of piece rate employees for minimum wage violations and was ordered to pay the class for all unpaid minimum wages, as well as penalties for “willful” violation of the law. Apparently, it’s only okay for the DLSE to get it wrong when trying to interpret the exact requirements of California wage and hour law.
Unless and until there is a positive change in legal authority on this issue in California, employers who pay workers on a piece rate basis may want to take a cautious approach and pay these workers not only their piece rate for piece rate work, but also minimum wage for non-piece rate work hours.
In good news for California employers, over the last two weeks, two more favorable decisions have been issued denying class certification in California wage and hour actions. Yesterday, in Dailey v. Sears, Roebuck and Co., a California court held that class certification was properly denied in a case alleging certain Sears auto center managers and assistant managers were improperly classified as exempt and denied overtime compensation as well as proper meal and rest breaks. The court held that substantial evidence supported the trial court’s finding that individual issues predominated over issues common to the class on each claim. The plaintiff had argued that his theory for class treatment was that Sears uniformly classified the positions as exempt, and had uniform policies and procedures (including strict labor budgets) that effectively required the employees to spend the majority of their time on non-exempt work and to work at least 50 hours per week. Plaintiff submitted a declaration stating that he spent the majority of his work time on non-exempt work, and submitted declarations of just 4 co-workers stating the same thing. In contrast, Sears submitted declarations of 21 putative class members, each explaining that they regularly spent the majority of their work time on exempt, managerial tasks.
The plaintiff argued that his evidence was sufficient to demonstrate that misclassification was widespread and that class certification should have been granted. Plaintiff argued that individual issues effectively could be managed at trial through the use of representative sampling to determine both liability and damages, whereby a random sample of class members would testify to their work experience and from that testimony liability and damages determinations would be made and extrapolated to the rest of the class. The court rejected Plaintiff’s arguments. The court held that the existence of uniform classification policies and other uniform policies and procedures applicable to the class was not enough to support class treatment. Rather, the proper focus is on the impact of those allegedly uniform policies on the class and how much time class members spent on exempt versus non-exempt tasks. In this regard, the court determined that substantial evidence supported the trial court’s finding that Sears’ evidence showed that work experiences (and time spent on exempt versus non-exempt work) materially varied from employee to employee depending on a number of factors and that there were no uniform policies “commonly” dictating that the putative class members spend the majority of their time on non-exempt work. As such, individual issues would predominate over any common issues, making class treatment inappropriate.
The same conclusion was reached with respect to Plaintiff’s meal and rest break claims. The court held that there was no evidence of a uniform policy or practice depriving class members of meal or rest breaks, making class treatment inappropriate.
Regarding Plaintiff’s proposed sampling plan for managing individual issues, the court expressed its doubt as to whether the use of representative sampling is proper to determine liability (as opposed to damages), based on the United States Supreme Court’s ruling in Wal-Mart v. Dukes. The court held that even if it is permissible to use sampling to determine liability in some cases, it was not appropriate in this particular case given the predominance of individual issues and lack of common experience among class members.
In another recently issued decision, Wang v. Chinese Daily News, the Ninth Circuit overturned a judgment following jury and bench trial in favor of a certified class of newspaper employees alleging various wage and hour claims. The case has quite a procedural history. First, a California district court granted class certification in favor of the newspaper employees. Second, the district court granted summary judgment in favor of the class, finding that they did not qualify for exempt status as a matter of law. Following that order, the district court held a trial on damages that resulted in the class being awarded over $2.5 million in damages. Chinese Daily News appealed the judgment to the Ninth Circuit, and the Ninth Circuit affirmed. The Supreme Court granted review and later reversed the Ninth Circuit’s decision in light of Wal-Mart v. Dukes.
On remand, the Ninth Circuit reversed the district court’s grant of class certification. In light of Wal-Mart v. Dukes, the court held that class certification could not be maintained under Federal Rule of Civil Procedure 23(b)(2) because the class sought individualized monetary relief, which was not merely “incidental” to their request for injunctive relief. The Plaintiffs actually conceded that class certification was improper under 23(b)(2). However, this still left open the question as to whether class certification properly could be maintained under Rule 23(b)(3), which applies when a court determines that common issues predominate over any issues requiring individualized adjudication. In this regard, the court remanded the issue to the district court to reconsider in light of Wal-Mart v. Dukes and the Ninth Circuit’s decision. In providing guidance and direction to the district court to consider on remand, the Ninth Circuit emphasized that “commonality” does not exist simply because the claims raise “common questions” about the employer’s compliance with wage and hour laws. “What matters to class certification is not the raising of common questions—even in droves—but rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.” The court held that commonality could not be established simply because the employer had a uniform classification policy. The court further emphasized that “dissimilarities within the proposed class may impede the generation of common answers.” As a result, the court emphasized that on remand “Plaintiffs must show significant proof that [CDN] operated under a general policy of [violating California labor laws]” in order for class certification to be warranted.
The Wang decision, like the Sears decision, also contains some positive guidance on the impropriety of using sampling at trial in the event a class is again certified on remand. The court explained its view that the United States Supreme Court has disapproved of “trial by formula” whereby sampling is used to determine damages, which are then extrapolated to the rest of the class without further individualized proceedings. The court emphasized that “employers are entitled to individualized determinations of each employee’s eligibility for monetary relief” and that “employers are also entitled to litigate any individual affirmative defenses they may have to class members’ claims.”
This guidance from both a California court and the Ninth Circuit on the impropriety of sampling to determine liability and/or damages is good stuff for California employers defending wage and hour class actions. Employers should of course be aware that further guidance on this important issue is expected from the California Supreme Court in Duran v. U.S. Bank, which is currently under review.