New Court of Appeal Decision Potentially Helpful To Employers Opposing Class Certification Of Wage And Hour Claims

By Christopher S. Andre and Scott K. Dauscher

Today, in Faulkinbury v. Boyd & Associates, Inc., the California Court of Appeal issued a decision that might prove helpful to employers opposing motions for class certification of wage and hour claims.  The court reiterated that it is the plaintiff(s)' burden to show his or her claims are susceptible to common proof (i.e. proof of alleged liability common to all of the purported class members) and that a defendant employer "'may defeat class certification by showing that an affirmative defense would raise issues specific to each potential class member and that the issues presented by that defense predominate over common issues.'" 

In general, non-exempt employees must be provided at least one unpaid, duty-free meal period of at least 30 minutes each workday.  An additional unpaid, duty-free meal period may be required if an employee works more than 10 hours in a workday.  The Industrial Welfare Commission wage orders permit an employer to instead provide a paid on-duty meal period "when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job meal period is agreed to."

The plaintiffs in the case were employed as security guards who worked at numerous different locations.  They alleged, among other things, that the employer improperly required them to agree to paid on-duty meal periods, contending that the nature of their work did not prevent them from being relieved of all duty (i.e., that they should have been provided unpaid, duty-free meal periods instead of paid, on-duty meal periods).  The plaintiffs alleged also that they were not authorized and permitted to take all required rest periods and that the employer improperly calculated their overtime rates of pay. 

The trial court denied class certification, finding that common issues of law and fact did not predominate over individualized issues. 

The Court of Appeal affirmed the trial court's decision as to plaintiffs' meal period claims and as to plaintiffs' rest period claims, holding that the trial court correctly applied the law as to those claims and holding that the trial court's rulings as to those claims were supported by substantial evidence. 

The Court of Appeal was persuaded that the evidence in the record sufficiently showed that common issues of law and fact would not predominate over individual issues because there was no common proof showing whether or not the requirements for a valid on-duty meal period were or were not satisfied as to any particular security guard employee.  As to the plaintiffs' rest period claim, the Court of Appeal was persuaded that the declarations the employer submitted by employees stating they were authorized and permitted to take all required rest periods was substantial evidence supporting the trial court's conclusion that common issues of law and fact did not predominate over individualized issues because those declarations showed a lack of common proof as to whether the security guard employees were or were not authorized and and permitted to take all required meal periods. 

However, the Court of Appeal reversed the trial court's denial of class certification of plaintiff's claim that the employer incorrectly calculated the applicable overtime rates of pay because its calculations did not include annual bonus payments and other forms of alleged compensation provided to the security guard employees.  The Court of Appeal held that claim was susceptible to common proof because the claim could be determined based on the employer's payroll records.  In other words, the employer either correctly calculated the rate of overtime pay or it did not.  This part of the decision is still potentially helpful to employers because the Court of Appeal emphasized that the claim should have been certified because it was susceptible to common proof, and we believe many common wage and hour claims are in fact not susceptible to common proof.  

Court of Appeal Decision Reiterates That Class Certification Is Appropriate Only When The Claims Asserted Are Susceptible To Common Proof

By Christopher S. Andre and Scott K. Dauscher

Claims asserting violations of California's wage and hour laws are frequently if not predominantly brought as class actions.  One of the most hotly litigated issues in such cases is the issue of whether the case should or should not be certified as a class, which nearly always turns on whether common issues of law and fact predominate over individual issues.  Two recent Court of Appeal decisions emphasizing that plaintiffs seeking class certification carry the burden of showing that liability can be established based on common proof (i.e., proof applicable to all of the class members) may be helpful to employers opposing class certification.  

As we previously reported here, in Arenas v. El Torito Restaurants, et al., the Court of Appeal affirmedThe court stated: "Based on the record presented, the plaintiffs have not demonstrated that resolution of the common issues of act and law will be accomplished by common proof that can be extrapolated to all class members. Instead, the plaintiffs have demonstrated that the case is replete with individual factual issues." the trial court's denial of class certification based on the trial court's finding that plaintiffs failed to meet their burden of showing that common issues of law and fact predominate over individual issues. 

On May 26, 2010, in Bomersheim v. Los Angeles Gay and Lesbian Center, the Court of Appeal reversed the trial court's denial of class certification based on the Court of Appeal's holding the claims were susceptible of susceptible to common proof.  The Court of Appeal held that based on the unique facts of that case the issue of whether the defendant's alleged negligent medical treatment of patients who presented with a confirmed syphilis infection or reported sexual contact with persons known or suspected to be infected with syphilis proximately caused injury or other damages was susceptible to common proof.  The Court reasoned that whether the Centers patients underwent retesting and retreatment as a result of having been allegedly mistreated or for other reasons was susceptible to common proof because the Center's own records would tend to show the reason why a particular patient underwent retesting and retreatment. 

We think various wage and hour claims frequently are not susceptible to common proof.  For example, we think an individual employee's reasons for not taking a rest period or a meal period will seldom be reflected by an employer's records or by other evidence applicable to all of the class members and for that reason would not be susceptible to common proof.  

California Supreme Court Denies Review Of Court Of Appeal Decision That Might Make Class Certification Easier In Wage And Hour Cases

By Christopher S. Andre and Scott K. Dauscher

As we previously reported here, in Jaimez v. DAIOHS USA, Inc., a decision we think is wrongly decided in many ways, the California Court of Appeal might have made it significantly easier for plaintiffs to obtain class certification in wage and hour cases.

Alex Jaimez was employed by DAIOHS USA, Inc., as a Sales Route Representative, and filed suit alleging he was misclassified as an exempt employee during part of his employment, that he was not paid for all hours worked, that the did not receive all required meal and rest periods, and that his wage statements were not accurate.

The trial court denied Jaimez' motion for class certification, finding, among other things, that common issues of law and fact did not predominate and that Jaimez was not an adequate class representative.

In a wide-ranging opinion, the Court of Appeal reversed the trial court's decision to deny class certification. According to this Court of Appeal, the trial court erred when it found based on the evidence submitted in support of and in opposition to the motion for class certification that individual issues would predominate over common questions of law and fact. According to this Court of Appeal, in determining whether common issues of law and fact predominate, the inquiry is whether the plaintiff's "theory of recovery" is likely to prove amenable to class treatment.

The court's opinion might be read by some to mean that a trial court cannot consider the merits of evidence offered to rebut a plaintiff's "theory of recovery" (i.e., the plaintiff's allegations of wrongdoing) when ruling on a motion for class certification.

The court's opinion contains also statements that might be read by some to mean that meal periods cannot be waived, that employers must ensure that employees take their meal periods, and that an employee who alleges he or she received inaccurate wage statements meets the requirement of showing actual injury if the statements are inaccurate and if he or she was confused about whether he or she was compensated for all hours worked.

In one bright spot for employers, the court affirmed the trial court's finding that plaintiff Jaimez was not an adequate class representative because, among other things, Jaimez lied on his employment application about his felony conviction and admitted in deposition his view that it is acceptable to lie in order to obtain or maintain employment

The Court of Appeal initially did not certify the opinion for publication. However, in response to requests by a number of plaintiffs' attorneys and associations of plaintiffs' attorneys, the Court of Appeal certified the opinion for publication on February 8, 2010.

As we previously reported here, on March 8, 2010, we filed with the California Supreme Court a request that the Court of Appeal's decision be depublished, and on March 15, 2010, DAIOHS USA, filed with the California Supreme Court a petition for review of the Court of Appeal's decision.

Today, the California Supreme Court denied both DAIOHS USA's petition for review of the Court of Appeal's decision and our separate request that the Court of Appeal's decision be depublished. Had either the petition for review or the depublication request been granted, the Court of Appeal's decision would no longer have been citeable as precedent.

With this latest action by the California Supreme Court, the unfortunate trend of California appellate court decisions generally favoring employees over employers continues.

Click here to download and to read a copy of the Court of Appeal's decision.

Divided 9th Circuit Court of Appeals Approves Largest Class Action in History

By Christopher S. Andre and Scott K. Dauscher

On April 26, 2010, in Dukes v. Wal-Mart Stores, Inc., a divided Ninth Circuit Court of Appeals decided 6-5 en banc to affirm the decision of the trial court to grant class certification in a discrimination lawsuit alleging Wal-Mart Stores discriminates against its women employees. The nationwide class is reputed by the Los Angeles Daily Journal to number upward of 1.6 million women employees, which would make the class the largest class in United States history.

In 2001, the Impact Fund, a Berkley, California based organization many plaintiff's attorneys donate money to, filed on behalf of Betty Dukes and other current or former employees of Wal-Mart a lawsuit alleging Wal-Mart discriminates against its women employees regarding promotions and pay practices in violation of Title VII of the Civil Rights Act of 1964.

The trial court later certified a class consisting of "all women employed by Wal-Mart at any time after December 26, 1998."

On Appeal, the Ninth Circuit Court of Appeals affirmed the trial court's grant of class certification but remanded to the trial court for further consideration the issue of whether to certify for class treatment the plaintiffs' claims for punitive damages and the issue of whether to certify an additional class or classes consisting of women who were no longer employed by Wal-Mart when the lawsuit was filed.

One of the key issues in any motion for class certification is whether common issues of law and fact predominate over individualized issues of law or fact. Based on our initial review of the decision, we think the following succinct dissent by Chief Judge Alex Kozinski is apt:

Maybe there'd be no difference between 500 employees and 500,000 employees if they all had similar jobs, worked at the same half-billion square foot store and were supervised by teh same managers. But the half-million members of the majority's approved class held a multitude of jobs, at different levels of Wal-Mart's hierarchy, for variable lengths of time, in 3,400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed depending on each class member's job, location and period of employment. Some thrived while others did poorly. They have little in common but their sex and this lawsuit.

We are continuing to analyze the lengthy 139 page opinion and will update this blog once we have completed our analysis.

In the meantime, given the stakes involved and the issues involved, we think it is a virtual certainty that Wal-Mart Stores will petition the United States Supreme Court for review of the 9th Circuit's decision. Although review by the Supreme Court is discretionary, we think the Supreme Court would very likely be interested in this case given the importance of the issues not only to Wal-Mart Stores and its employees but to numerous other large employers and their employees. Further, the 9th Circuit Court of Appeals is not only the largest of the Circuit Courts of Appeal; it also the most frequently reversed Circuit Court of Appeals.

Click here to download and to read the opinion.

Court of Appeal Affirms Denial Of Class Certification Of Claims By Allegedly Misclassified Restaurant Managers

By Christopher S. Andre

Today, the California Court of Appeal certified for publication its decision in Arenas v. El Torito Restaurants, et al., holding that the trial court did not abuse its discretion when it denied class certification of the plaintiff restaurant managers' claims that they and other managers were improperly classified as exempt employees.

The plaintiffs were employed as salaried managers at El Torito, El Torito Grill and GuadalaHarry's restaurants. They alleged that they were improperly classified as exempt employees because their duties did not meet the exemption requirements of Industrial Welfare Commission Wage Order 5-2001 and that they defendants were therefore liable to them and to the alleged class for unpaid overtime, for missed meal periods, for missed rest periods, and for related claims.

The trial court denied the plaintiffs motion for class certification on the ground that the plaintiffs failed to meet their burden of showing that common issues of law and fact predominated over individual issues of law and fact such that litigating the claims on a class basis would be superior to litigating the claims on an individual basis. The trial court found that the evidence presented in support of and in opposition to the motion for class certification showed that the issue of whether the managers' duties met the exemption requirements was not susceptible to common proof. The trial court ruled that findings as to one or a few managers could not be applied to other managers because how managers spent their time varied from store to store. The court stated: "Based on the record presented, the plaintiffs have not demonstrated that resolution of the common issues of act and law will be accomplished by common proof that can be extrapolated to all class members. Instead, the plaintiffs have demonstrated that the case is replete with individual factual issues."

On appeal, the court held that the trial court applied the correct legal standards when it determined that the plaintiffs' claims were not susceptible to common proof and that the trial court's decision was supported by substantial evidence. Further, the court rejected plaintiffs' contention that defendants "cannot on one hand assert they have determined, based on job activities, that all managers are exempt but on the other hand argue a court must examine each individual's tasks to determine whether that person is exempt." In other words, the court held that just because an employer has classified a category of employees as exempt does not necessarily mean that the issue of whether the employees were correctly classified as exempt can properly be adjudicated on a class basis.

The court's decision is welcome news for California employers because it provides trial courts direction about what plaintiffs must show to demonstrate their claims can be decided based on common proof.

Click here to download and to read a copy of the court's decision.