wage and hour update - winston & strawn · 7/16/2014 · wage and hour claims • federal --...

© 2014 Winston & Strawn LLP

Presented by: Joan B. Tucker Fife

Emilie C. Woodhead

July 16, 2014

Wage and Hour Update

Brought to you by Winston & Strawn’s Labor and Employment Practice Group


Today’s eLunch Presenters

Joan Fife Partner

San Francisco

[email protected]

Emilie Woodhead Of Counsel Los Angeles

[email protected]


What We Will Cover:

• Quick Highlights of Wage and Hour Claims and Issues

• Annual Update on Certification of Class and Collective Actions

• Latest on Arbitration Agreements and Class Action Waivers

• California Update • PAGA

• Seating

• The Big Picture


Quick Highlights of Wage and Hour Claims and Issues


Wage and Hour Claims

• Federal -- Fair Labor Standards Act (FLSA) • Minimum wage, hours worked, overtime, classification issues

• Enforced by the Department of Labor

• State Wage and Hour Laws • Vary considerably from state to state

• Can impose more employer obligations than federal law

• Watch out – California, New York, Colorado and where Plaintiffs’ counsel are

• Still common claims • Off the clock – Pre- and Post-shift work; bag checks; meal break auto-deduct

• Misclassification – Exempt v. Non; Independent contractor v. employee • HR Manager at branch; Oil field employees; working managers; computer professionals

• Meal and rest


Meal and Rest Break Cases

• Does not require lunch or coffee breaks • “Bona Fide” meal periods (30+ minutes) ≠

worktime (29 C.F.R. § 785.19) • Rest periods of short duration (5-20

minutes) must be counted as hours worked (29 C.F.R. § 785.18)

FLSA

• Generally, if ee works > 5 hours, :30 meal break must be “provided”

• :10 rest break “authorized” for every 4 hours of work, or major portion thereof

• 1 hour pay/day for violation of any meal and additional 1 hour pay/day for any rest

California


Meal and Rest Break Cases: Arguments by Plaintiffs • No clear written policy requiring compliant meal and rest breaks

• No payment of any penalty

• No training on policies

• No documentation regarding when meal breaks are taken • Automatically deducting a 30-minute meal period

• No mechanism to report and pay for meals not taken

• Employees recording same break time each day (e.g., 12:30 p.m. – 1:00 p.m.)

• No discipline for supervisors who do not provide meal and rest breaks

• No leeway for returning late for meal break


Other Wage and Hour Issues in Litigation

• Not including bonuses or other incentive compensation in calculating regular rate of pay for overtime purposes (for non-exempt employees)

• Rounding time

• CA: Not paying all wages owed on the day of termination (or as required for resignations)

• CA: Improper wage statements

• CA: “Use it or lose it” vacation policies


Annual Update on Certification of Class and Collective Actions


Federal Cases – Certification Granted

• Driver v. AppleIllinois, LLC (7th Cir. 2014): • That district court changed class definition after initial order granting class

certification did not open the door for interlocutory appeal

• Order denying motion for decert not subject to a petition to appeal under Rule 23(f)

• Jancich v. Stonegate Mortg. Corp. (D. Kan. 2014): • Commissioned loan officers claimed they were instructed only to record 40 hours per

week

• Court rejected argument that different pay plans, varying job duties, and different supervisors created dissimilar factual and employment settings

• Court held administrative exemption could be determined across the board because all Ps performed similar duties and D classified all loan officers exempt

• Ruffin v. Avis Budget Car Rental (D.N.J. 2014): • Refused to decertify class of shift managers claiming misclassification because

evidence reflected similar job duties, and determining exemption would not make the class unmanageable


Federal Cases – Certification Denied

• Paulino v. Dollar General Corp. (N.D. W.Va. 2014): • Denied certification of state law claims for failure to pay wages within 72 hours of

termination

• Class was impermissible “fail safe” class

• P also failed to satisfy Rule 23 commonality, typicality, and predominance

• Hinterberger v. Catholic Health System (W.D.N.Y. 2014): • Granted motion to decertify FLSA conditional certification, granted D’s motion for

summary judgment of certain state law claims, and denied motion for Rule 23 class certification of state law claims

• Addressed standard for actual or constructive knowledge under FLSA: Survey data was not conclusive evidence of employer’s knowledge nor were records indicating certain employees worked through lunch


Federal Cases – Certification Denied

• DeSilva v. North Shore-Long Island Jewish Health System, Inc. (E.D.N.Y. 2014) • Decertified FLSA collective action with over 1,000 opt-ins

• Denied certification of Rule 23 class action

• “Ps are required to demonstrate that [defendant]’s lawful policies are or were consistently and systematically violated in such a way that would be possible to generalize across the 1,196 opt-in Ps in this case”

• Ps worked in a wide variety of positions, departments, and locations. D’s offered plausible, individualized defenses

• “[T]he presentation of purportedly representative evidence would hinder, rather than advance, considerations of procedure and fairness”

• Automatic meal deduction is not enough for certification

• Noted “questionable tactics” and “sloppy cut-and-paste approach” by Ps


California Cases – Certification Granted

• Since Brinker, what have California done in certification decisions?

• Benton v. Telecom Network Specialists (Cal. App. 2013): • Evidence that some techs worked under conditions permitting breaks was not basis

for denying certification

• Evidence that staffing companies that employed techs had diverse meal and rest policies was not basis for denying certification

• Court could not deny certification of overtime claims on the ground that individualized inquiry was required to determine whether techs actually incurred overtime

• Jones v. Farmers Ins. Exch. (Cal. App. 2013): • Ps contended that D denied them comp for “computer synch time” performed at

home before their scheduled shifts

• Appellate court held the existence of such a policy is a factual question common to all class members. Trial court applied improper criteria by focusing on individual issues concerning right to recover damages

• Evidence supported named P was not a suitable class representative, but Ps can amend


California Cases – Certification Granted

• Martinez v. Joe’s Crab Shack Holdings (Cal. App. 2013) • Trial court denied class certification for managerial employees of chain restaurant,

and rejected statistical evidence proffered by Ps. Court of Appeal reversed and directed the trial court to reconsider by refocusing analysis on policies and practices

• Class relief would be appropriate even if there were individual managers who spent more than 50% of their time on managerial work if policies resulted in managerial employees being undercompensated for performing exempt work

• Supreme Court granted petition for review pending Duran

• Williams v. Superior Court (Allstate Ins. Co.) (Cal. App. 2013): • Vacated order decertifying class of auto field adjusters claiming that they worked off

the clock and directed recertification

• While some adjusters might never have worked off the clock, existence of individuality as to damages does not defeat class certification


California Cases – Certification Denied

• Dailey v. Sears, Roebuck & Co. (Cal. App. 2013) • Affirmed denial of class certification.

• There was substantial evidence that theory for certification – that D acted in a uniform manner toward proposed class of managers and assistant managers, resulting in widespread misclassification – was not amenable to class-wide proof

• Johnson v. California Pizza Kitchen (Cal. App. 2013) • Trial court properly denied certification of 4 subclasses regarding 4 claims – off the

clock, meal periods, rest periods and wage statements

• Timekeeping and meal period policies were facially compliant, and evidence varied as to the circumstances of each employee

• P’s claims of understaffing as causing rest break violations not subject to common proof


Duran v. U.S. Bank – Statistical Evidence and Certification • California Supreme Court struck down $15MM judgment for Ps

• Ordered decertification of current and former business banking officers, who alleged they were misclassified as exempt

• Rejected trial court’s reliance on 21-person sample of a roughly 260-person class (insufficiently large, biased, and too large a margin of error)

• Directed trial courts to pay closer attention to manageability at class certification stage


CA Federal Cases – Certification Granted

• Leyva v. Medline Industries, Inc. (9th Cir. 2013) • Presence of individualized damages cannot, by itself, defeat Rule 23 certification

• Distinguishes Comcast

• Abdullah v. U.S. Sec. Assocs. (9th Cir. 2013) • Affirming class certification of meal break class of security guards who signed on-

duty meal period agreements

• Wang v. Chinese Daily News (C.D. Cal. 2014) • Supreme Court vacated and remanded certification in light of Dukes

• 9th Circuit reversed certification

• C.D. nevertheless certified same class


CA Federal Cases – Certification Denied

• Coleman v. Jenny Craig (S.D. Cal. 2013 and 2014) • Denied motion for class certification and motion for reconsideration

• Rejected argument Benton was intervening change in controlling law

• Friend v. Hertz (9th Cir. 2014) • District court did not abuse its discretion in denying class certification where

evidence did not “bridge the gap between policy and practice”

• Dilts v. Penske Logistics (S.D. Cal. 2014) • Court decertified class after partial bench trial on claims of illegal wage deductions

and unreimbursed business expenses, inter alia

• Other: • Cummings v. Starbucks (C.D. Cal. 2014)

• Rai v. CVS Caremark (C.D. Cal. 2013)


Arbitration Agreements and Class Action Waivers


Supreme Court Background

• AT&T Mobility v. Concepcion (S.Ct. 2011) • The Federal Arbitration Act (FAA) was enacted to ensure the enforcement of

arbitration agreements according to their terms so as to facilitate streamlined proceedings

• California’s “Discover Bank Rule” – which voided class action waivers as unconscionable – preempted by FAA

• American Exp. Co. v. Italian Colors Rest. (S.Ct. 2013) • Reinforced that FAA reflects overarching principle that arbitration agreements are

matter of contract and courts must enforce them according to their terms

• Rejected judge-made exception allowing a court to invalidate arbitration agreements that prevent effective vindication of statutory right


Iskanian v. CLS Transp. Los Angeles • California Supreme Court held that Gentry trumped by FAA in light of

Concepcion (i.e., a state’s refusal to enforce class action waiver on grounds of public policy or unconscionability is preempted by FAA)

• Specifically rejected NLRB’s ruling in D.R. Horton

• Exception for PAGA claims – discussed further below


Arbitration: Not Necessarily Enforceable

• Chavarria v. Ralphs Grocery (9th Cir. 2013) • FAA did not preempt California’s procedural unconscionability rules for contracts or

invalidation of the policy as substantively unconscionable

• Compare Peng v. First Republic Bank (Cal. App. 2013) • Applied unconscionability principles and found that agreement was enforceable even

where it did not attach arbitration rules and had unilateral modification provision

• Billingsly v. Citi Trends (11th Cir. 2014) • Employer gathered declarations and arbitration agreements after court set the

schedules and procedures for conditional certification. Described as “highly coercive” and “interrogation-like”

• The Eleventh Circuit affirmed decision to deny enforceability of arbitration agreements on grounds that district court had discretion to correct effects of improper pre-certification communications with class members


Avoiding Labor Commissioner Hearings

• Division of Labor Standards Enforcement (DLSE) or the Labor Commissioner’s Office adjudicates wage claims in a Berman hearing

• Extremely employee-friendly

• Sonic-Calabasas A v. Moreno (Cal. 2013)

• On remand from United States Supreme Court, the California Supreme Court held the FAA preempts state-law rule requiring a Berman hearing before arbitration

• While fact that arbitration supplants an administrative hearing cannot be basis for finding arbitration agreement unconscionable, this does not end unconscionability inquiry


Who Interprets Arbitration Agreements?

• Lee v. JPMorgan Chase (C.D. Cal. 2013) • Where arbitration has no express waiver of class actions, who decides whether Ps

may arbitrate on a class basis –arbitrator or court?

• Question of whether agreements authorize class arbitration concerns procedural mechanisms, and is to be answered by arbitrator

• “Delegation Clauses” are enforceable and not unconscionable • Malone v. California Bank & Trust (Cal. App. 2014)

• Tiri v. Lucky Chances (Cal. App. 2014)


California Update


PAGA

• Under California Private Attorney General Act (PAGA), employee can bring claims on behalf of others potentially without meeting class certification standards

• Almost any Labor Code (or Wage Order) violation can form basis of PAGA claim

• Unclear what, if any, pleading standards apply

• PAGA is attractive to P’s lawyers • Attorneys’ fees available

• Penalties “stack” quickly – $100 per pay period per employee for initial violation, $200 per pay period for subsequent violations


Types of PAGA Claims

• Suitable seating claims

• PAGA claims mirroring any wage and hour class action claim under the Labor Code

• Claims that employers owe PAGA penalties for missed meal and rest breaks even where employer paid the one-hour premium • No court has yet to address this issue

• Claims for PAGA penalties for alleged improperly itemized wage statements • C.D. of California granted motion to dismiss claim for PAGA penalties premised on

claim of improperly itemized wage statements under Labor Code sec. 226, finding that Labor Code sec. 226.3 already provided for a civil penalty


PAGA Procedure

• Arbitrability • Iskanian v. CLS Transp. Los Angeles (Cal. 2014): PAGA representative action claims

cannot be avoided through arbitration agreement with class action waiver

• Fardig v. Hobby Lobby Stores (C.D. Cal. 2014): Court rejected argument that PAGA claims are not arbitrable and that waiver of representative PAGA claims renders arbitration agreements unenforceable. Concepcion preempts California rule rendering PAGA waivers unenforceable

• Does it make sense for employers to insist on class waivers in future, knowing that PAGA representative actions arguably can’t be prohibited under Iskanian?


PAGA Procedure

• Class Treatment • Taylor v. West Marine Products (N.D. Cal. 2014): “It is true that several of my

colleagues have said that PAGA claims need not be brought as class claims. . . . But Article III imposes a mandatory standing requirement.” Court allowed amendment for PAGA claims, but only for individual plaintiffs’ claims and for claims ultimately certified under Rule 23

• Manageability • Ortiz v. CVS Caremark Corp. (N.D. Cal. 2014): Granted motion to strike PAGA

claims as unmanageable because a multitude of individualized assessments would be necessary


Removing PAGA Actions to Federal Court?

• Urbino v. Orkin Srvcs. of California (9th Cir. 2013) • Civil penalties under PAGA could not be aggregated for purposes of meeting amount

in controversy requirement for diversity jurisdiction

• A single P holds his right individually, not as part of a group

• Insofar as the P brings the case on behalf of others, the real party in interest is the state – which is not a “citizen” for diversity purposes

• Baumann v. Chase Inv. Srvcs. Corp. (9th Cir. 2014) • PAGA representative actions are not sufficiently similar to Rule 23 class actions to

establish federal jurisdiction under the Class Action Fairness Act


Suitable Seating Claims

• Hall v. Rite Aid Corp. (Cal App. 2014):

• Trial court's assessment, on the merits of a former employee's putative class action against her employer, that the employer did not violate wage order requiring employers to provide seats to employees when permitted by the nature of the work, was not a proper basis to decertify the class, since it was irrelevant to whether the theory of recovery advanced by the former employee was likely to prove amenable to class treatment

• Henderson v. JP Morgan Chase Bank:

• Pending before the 9th Circuit, which has certified questions for the California Supreme Court to provide guidance on how to interpret key phrases of the suitable seating requirement

• Kilby v. CVS Pharmacy Inc.: Same


Suitable Seating Claims

• Ninth Circuit Certified Three Questions for the California Supreme Court: • Whether the nature of an employee’s work should be considered holistically, or be

assessed for each task performed throughout the day?

• Whether courts should take into account the employer’s business judgment as to whether the employee should stand, the physical layout of the workplace, or physical characteristics of the employee?

• Whether an employee needs to show what constitutes a suitable seat in order to bring a claim, if the employer has not already provided one?


Take Aways – What Next?

• PAGA to get the employer to settle?

• Any claim for any time worked

• Misclassification – as long as high dollars at issue

• New industries

• Wage statements, Meal Breaks, Vacation Pay, Auto-Deducts

7/16/2014


Questions?


Thank You.

Joan Fife Partner

San Francisco

[email protected]

Emilie Woodhead Of Counsel Los Angeles

[email protected]

wage and hour update - winston & strawn · 7/16/2014 · wage and hour claims • federal --...

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