Favorable Decisions Denying Class Certification in Wage and Hour Cases
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.