United States: Wage And Hour Class Actions In The Healthcare Industry

I. THE SCOPE OF THE PROBLEM

Healthcare employers have not been immune to the dramatic increase in wage and hour class and collective actions that have plagued employers in the last few years. What started in 2008 as a localized outbreak by a single law firm filing class and collective actions against hospital systems in Rochester, New York challenging automatic 30-minute pay deductions for meal periods has now become an epidemic. The cases spread quickly because the same firm filed nearly identical lawsuits against large healthcare systems in Syracuse, Utica, and Buffalo, New York; Pittsburgh and Philadelphia, Pennsylvania; and Boston, Massachusetts.

In 2010, the same firm filed 22 wage and hour class and collective actions in federal and state courts against prominent New York City area hospital systems. The range of employers named in those cases was extensive and included some of New York's most notable healthcare institutions. In addition to the hospital systems named in the caption of the complaints, the lawsuits also named hundreds of other healthcare facilities that the plaintiffs alleged are subsidiary, joint or affiliated organizations throughout the entire New York metropolitan area, including community hospitals, rehabilitation centers, clinics, laboratories, research institutions, veterans' hospitals, psychiatric hospitals, drug and alcohol rehabilitation facilities, adult day care facilities, fertility centers, and other specialized institutions for diagnosis, care and treatment of conditions such as AIDs, Alzheimer's Disease, epilepsy, cardiac and vascular disease, pediatric diseases, cancer and blood disorders, and many other types of illness or disease. Some of the cases also named the president and/or CEO of the healthcare institution as individual defendants. The putative class sizes were also broad, potentially reaching 100,000 employees in some cases.

Since then, many more law firms have filed wage and hour class and collective actions against healthcare employers in state and federal courts across the country, including Alabama, Georgia, Florida, Texas, Illinois, California, Tennessee, Michigan, Indiana, the District of Columbia, and elsewhere.

The aggressive tactics of plaintiffs' lawyers have played a significant role in this trend.1 Plaintiffs' class action counsel no longer wait for potential wage and hour plaintiffs to walk through the door or call. Instead, they are turning to sophisticated means to identify and gather "opt-in" plaintiffs. For example, a prominent New York plaintiffs' class action firm has sent letters to hospital employees across the country stating:

Our investigation has revealed that many hourly employees in the health care industry are not paid for all the hours that they work, especially during meal periods. You may be owed unpaid wages for situations including when you worked during your meal break. We are currently investigating.

Enclosed with the letter is a "fact sheet" that posed the question: "Is there any urgency to complete the consent form?" The response: "Yes... any delay in returning the Consent Form can cost you back wages."

The internet has also helped plaintiffs' attorneys to more efficiently and expeditiously amass information regarding an employer's practices, and reach employees across the country, in some cases using names and addresses gathered from unions and other publicly available sources such as state nurses registries. Plaintiffs' attorneys also have set up websites to provide information to employees about current class and collective actions against healthcare employers. One plaintiffs' firm has a website entitled www.hospitalovertime.com , which states "if you worked as an hourly employee for a Health Care facility or Hospital our investigations suggest you may not have been paid for all the time you were permitted to work" and urges such employees to "take action" and contact the firm.

Healthcare employers have recently had some significant successes in healthcare wage and hour class and collective actions, obtaining dismissals,2 defeating plaintiffs' motions for conditional certification in an FLSA collective action,3 and obtaining decertification.4

Nevertheless, because of the sheer size of these cases, the disruption they cause, the large potential damages, the possibility of adverse publicity, and the cost of litigation, many healthcare employers feel compelled to pay significant amounts to settle these lawsuits. The settlements, which are often reported on the internet, serve to foment additional litigation. Moreover, the pleadings filed by plaintiffs' counsel, and typically available online, provide a template for plaintiffs' counsel nationwide. The following are some examples of some recently publicized settlements — some involving well known and highly respected healthcare employers, and each involving significant fees to plaintiffs' counsel:

  • An $8.5 million settlement of a class and collective action against a large Boston hospital system by employees claiming the hospital violated the FLSA and Massachusetts law by failing to pay employees for time worked before and after their scheduled shifts, during meal periods automatically deducted from their pay, and for time spent attending required meetings.
  • A $7.75 million settlement of an FLSA collective action against a large hospital in Philadelphia asserting claims for failure to pay employees for time worked during meal periods automatically deducted from their pay.
  • $5.4 million settlement of a class action against a large healthcare plan by support specialists, product specialists, and business application coordinators who worked in an IT capacity and claimed they were misclassified as exempt. The plaintiffs alleged they were denied overtime under the California Labor Code and the FLSA for hours worked in excess of 40 and that they were not paid for travel time and meal breaks.
  • A $15 million settlement of a class action against a large hospital by current and former nurses, social workers and aides who claimed they were denied overtime and rest and meal periods in violation of the California Labor Code.
  • A $2 million settlement of a class action by 3,000 home healthcare workers who claimed they were not paid for time spent (or expenses) when traveling between patient visits and — as a result — were denied overtime. The employer also agreed to prospectively pay for travel time and to include that time in the calculation of overtime pay.
  • A $9 million settlement by a large hospital and healthcare system to a class of nurses and other employees who claimed they worked during uncompensated rest breaks that were automatically deducted from their time cards and paychecks.
  • Following an investigation by the California Division of Labor Standards Enforcement, a California hospital paid $2.7 million to settle claims that they had not been paid for second meal breaks during shifts as required by California state wage law.
  • A U.S. Department of Labor (DOL) settlement for more than $ 1.7 million to 4,000 health care workers involving a Missouri medical corporation comprised of seven healthcare centers and hospitals and allegations that employees were subject to an automatic deduction for meal periods whether the employees were fully relieved of their duties or not.

The explosion of wage and hour class actions that has affected employers in all sectors of the economy is now increasingly focused on healthcare industry employers, in part because it remains one segment of the economy that continues to grow. The recent class action lawsuits (and settlements) have predominately involved three distinct areas of wage and hour law: (1) "off-the-clock claims"; (2) employee misclassification; and (3) failure to properly calculate overtime using the "regular rate of pay". This Littler Report examines the legal theories and practical implications of lawsuits brought under these three general theories and suggests practical solutions to defend against and perhaps avoid such claims.

II. CLASS AND COLLECTIVE ACTIONS: THE PROCEDURAL BACKDROP

A. Class versus Collective Action — Overview

Plaintiffs' counsel routinely use class or collective action devices in wage-related litigation. The named plaintiffs in class or collective actions, in addition to prosecuting their own claims, purport to represent the interests of numerous other current and former employees with allegedly substantially similar claims. Federal class actions in which plaintiffs assert violations of state wage laws must be brought under Rule 23 of the Federal Rules of Civil Procedure whereas class-action-type lawsuits for violations of the FLSA must be brought as collective actions under Section 216 of the FLSA. There are significant differences between these two types of cases that may impact the course and outcome of the litigation and defense strategy.

B. Opt-In versus Opt-Out

One of the main distinctions between FLSA "collective actions" and Rule 23 "class actions" is that putative class members in Rule 23 class actions need to "opt-out" or affirmatively decline to participate in order to avoid being part of the class. In FLSA collective actions, individuals who fall within the class definition must "opt-in" if they want to be a plaintiff in the lawsuit. Section 216(b) of the FLSA, the collective action provision, provides that no employee "shall be a party plaintiff to [an FLSA collective] action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought." Thus, while the existence of a Rule 23 class action "does not depend in theory on the participation of other class members," an FLSA case cannot become a collective action unless other plaintiffs affirmatively "opt-in" by giving written and filed consent.5

The opt-in requirement of FLSA collective actions is an obvious advantage to employers since fewer current and former employees are likely to participate if they must affirmatively join the action rather than, simply by inaction, remain part of the class in a Rule 23 case. Although there is no hard and fast data, the opt-in rate in FLSA collective actions not backed by a union is generally estimated to be between 15 and 30 percent, in contrast to Rule 23 class actions in which participation is far greater.6 Of course, the rate of opt-in plaintiffs "goes up if labor organizations or other groups become involved and rally the potential plaintiffs."7 The economy may also play a role in opt-in rates because current or former employees who have lost their job are more likely to opt-in to an FLSA collective action. More class members can justify greater recovery and more attorneys' fees. It is more difficult to justify a significant fee award in opt-in cases with fewer plaintiffs, especially if plaintiffs' counsel's fee appears disproportional to the backpay collected by the opt-in plaintiffs.

C. Statutes of Limitation

Another major distinction between Rule 23 class actions and FLSA collective actions is the impact of applicable statute of limitations. Under the FLSA, a plaintiff suing for unpaid wages and overtime can recover for the two-year period preceding the date he files a claim, or three years if the employer acted willfully.8 The filing of the collective action complaint does not toll (or halt the operation of) the statute of limitations for anyone other than the named plaintiffs (assuming they filed a consent form).9 Rather, the statute of limitations is tolled separately for each individual when he or she files a written consent form, affirmatively opting-in to the case. Thus, if a case has 1,000 opt-in party plaintiffs, it also may have 1,000 different applicable limitations periods. In contrast, in a Rule 23 class action, the filing of the complaint tolls the statute of limitations for all individuals ultimately found to be part of the class until the court decides whether to certify the case as a class action.10 For this reason, plaintiff's counsel routinely move to certify an "opt-in" class, for purposes of giving notice to potential class members, at the earliest stages of a case.

D. Standards for Certification and Notice

Plaintiffs seeking to bring a class action under Rule 23 must meet all of the four requirements of Rules 23(a): numerosity, commonality, typicality and adequacy of representation. In addition to satisfying these requirements, to be certified as a class action the case must meet one of three categories listed in Rule 23(b).11

Instead of having to meet the Rule 23 requirements discussed above, plaintiffs seeking to bring a collective action under the FLSA must prove that they are "similarly situated" to other potential class members. Most courts have adopted a "two-stage" procedure for certifying FLSA collective actions. Courts following this procedure first make a preliminary determination whether the employees are sufficiently similarly situated for purposes of providing notice to putative class members so that they may "opt-in." At this stage, called the conditional certification stage, courts have generally required plaintiffs to make some factual showing that they and the other putative collective action members "were victims of a common policy or plan that violated the law" and that there is nexus between their situation and that of the other putative class members.12

In many jurisdictions, particularly in the Southern and Eastern Districts of New York, courts have readily granted conditional certification based on a minimal showing.13 Even under this fairly lenient standard, however, courts have denied conditional certification in cases that would require an individualized, fact-intensive inquiry because of such things as differences in the putative class members' job responsibilities, departments, and day-to-day duties.14 In addition, at least one court has required that, the plaintiff show "commonality between the basis for his claims and that of the potential claims of the proposed class, "beyond the mere facts of job duties and pay provisions."15

If conditional certification is granted, notice is sent to all putative class members and discovery proceeds. At the close of discovery (or an earlier time if defendant chooses), the defendant may move to "decertify" the conditionally certified class. At this second stage of the two-step process, the court applies a more "stringent standard" of proof in determining the appropriateness of certification.16 The main factors a court considers at this stage are: (1) disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to the defendant that appear to be individual to each plaintiff; and (3) fairness and procedural considerations.17

The peril for employers in FLSA collective actions is that even if the underlying claim is without merit, if the case is conditionally certified, the court will authorize the plaintiff to send a notice to all putative class members oftentimes early in the litigation. As discussed further below, the notice will contain a description of the claims in the case, and the potential class members to whom it is sent may include all nonexempt employees, particularly in cases where all employees are subject to the same payroll policy (e.g., automatic 30-minute deduction for meal periods)18 Although employers may be successful in decertifying a collective action, this motion practice occurs late in the proceedings after the employer has expended considerable time and money on discovery, motions and hearings — and after the employer's workplace has been disrupted and employees distracted.19 However, employers with demonstrable variations in the pay practices applicable to putative class members that are germane to the litigation should strongly consider litigating through the decertification stage as the likelihood of successfully decertifying a case is significantly greater than successfully defeating a motion for conditional certification.

E. Contents of the Notice

Once a court certifies a class under Rule 23(b)(3), it must provide notice of class certification to putative class members. Although there are no mandatory notice requirements in Rule 23(b)(1) and (b)(2) class actions, the court may order notice "if the absence of such notice would violate Constitutional due process requirements."20 At a minimum, the notice must state concisely, clearly, and in plain, easy to understand language: (1) the nature of the action; (2) the definition of the class certified; (3) the class claims, issues, or defenses; (4) that a class member may enter an appearance through counsel; (5) that the court will exclude from the class any member who wishes to opt-out, stating when and how members may do so; and (6) the binding effect of a class judgment on class members.21 If any certified Rule 23 class action is being settled or voluntarily dismissed, notice also must be sent to absent class members who will be bound by the proposed settlement or dismissal.22

Notice of conditional certification in FLSA collective actions, which must be approved by the court, generally includes the following: (1) a description of the action; (2) a statement that the employer denies the allegations; (3) a description of the individuals eligible to receive the notice; (4) information about the procedure for opting in to the litigation; (5) the effect of joining or failing to join the litigation; (6) the statute of limitations for the types of claims asserted; (7) a statement that the employer cannot retaliate against employees for exercising their rights under the FLSA; and (8) the identity of the plaintiff's counsel.23

Of course, an employer always will be concerned about any language in the notice that suggests that it has violated the law and that employees have been underpaid because of the potential that such implications may have on employees, causing them to search for additional claims that may be asserted. Not surprisingly then, the language in the notice describing the claims in the case is often hotly disputed by the parties and must be resolved by the court. Because of these concerns, the granting of conditional certification may drive employers to seek settlement of the litigation at an early stage.

F. Availability of an Interlocutory Appeal

If a federal district court grants or denies a request to certify a class under Rule 23, federal appellate courts may permit an appeal if a petition for permission to appeal is filed within 10 days after the order granting or denying class certification is entered.24 An appeal does not automatically stay proceedings in the district court unless the district court or the federal appellate court orders a stay of all proceedings.25 In contrast to Rule 23, under the FLSA employers have no direct avenue to appeal certification decisions.26 Although employers may petition for interlocutory review under U.S. Code title 28 section 1292(b), such motions are rarely granted.27

G. Hybrid Class and Collective Actions

To obtain the advantages of both class and collective actions — potential early notice, an opt-out class, a longer statute of limitations — plaintiff class action lawyers often bring "hybrid" class/collective actions asserting claims under both the FLSA and state wage laws. Ruggles v. Wellpoint, Inc.,28 is an example of such a hybrid case against a healthcare provider. To avoid this "double whammy," employers in hybrid class/collective actions often seek to dismiss the state wage law claims, as Wellpoint did, albeit unsuccessfully.29 Some employers have, however, been successful in arguing that the opt-out procedures in class actions under Rule 23 are inherently incompatible with the opt-in procedures of collective actions under the FLSA, and therefore, the Rule 23 state law claims should be stricken or dismissed.30 The trend in most jurisdictions is to allow "hybrid" class/collective actions to proceed.

Footnotes

1 Collective actions provide a powerful tool for unions seeking to organize healthcare employers as well. The ability to directly contact a large class of nonexempt employees which it likely would not have otherwise, and to publicly assert claims of unlawful compensation practices, provides positive press for an organizing effort. The Service Employees International Union (SEIU) has provided financial and legal support in a number of class actions against healthcare employers. See, e.g., http://www.timesunion.com/local/article/Albany-Med-nurses-settle-1027093.php.

2 E.g., Wolman v. Catholic Health Sys. of Long Island, Inc., 2012 U.S. Dist. LEXIS 21654 (E.D.N.Y. Feb. 16, 2012) (dismissing a class and collective action against 25 hospitals and healthcare facilities that the plaintiffs claimed were part of a single "integrated healthcare system."); Sampson v. MediSys Health Network, Inc., 2011 U.S. Dist. LEXIS 12697 (E.D.N.Y. Feb. 8, 2011) (Magistrate Judge recommended dismissal with prejudice of an FLSA collective action); Nakahata v. New York-Presbyterian Healthcare Sys., 2011 U.S. Dist. LEXIS 8585 (S.D.N.Y. Jan. 28, 2011) (Ddismissing four wage and hour class/collective actions against New York City hospitals); Cavallaro v. UMass Mem. Health Care, Inc., 2011 U.S. Dist. LEXIS 61003 (D. Mass. June 8, 2011) (granting judgment on the pleadings to UMass Memorial Health Care, Inc. defendant in a class and collective action alleging claims for unpaid meal periods, among other things. The court had also previously dismissed all of the numerous state law claims against the hospital, its subsidiaries and affliliatesaffiliates).

3 E.g., Blaney v. Charlotte-Mecklenburg Hospital Authority, 2011 U.S. Dist. LEXIS 105302 (W.D.N.C. Sept. 16, 2011).

4 E.g., Kuznyetsov v. West Penn Allegheny Health Sys., 2011 U.S. Dist. LEXIS 146056 (W.D. Pa. Dec. 20, 2011); White v. Baptist Mem. Health Care Corp., 2011 U.S. Dist. LEXIS 52928 (W.D. Tenn. May 17, 2011).

5 Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1248-49 (11th Cir. 2003).

6 Ellis v. Edward D. Jones & Co., L.P., 527 F. Supp. 2d 439, 444 (W.D. Pa. 2007).

7 Attorneys Discuss Strategies for Bringing, Defending FLSA Collective Action Lawsuits, Daily Lab. Rep. (BNA), Aug. 13, 2002.

8 29 U.S.C. § 255(a). Under the continuing violation theory, employees also can recover for violations that occur after the filing of the lawsuit.

9 See Hoffman v. Sbarro, 982 F. Supp. 249, 260 (S.D.N.Y. 1997).

10 Am. Pipe & Const. Co. v. Utah, 414 U.S. 538, 552-53 (1974).

11 Class actions may be brought under Rule 23(b)(1), (2), or (3). Rule 23(b)(1) is used where the funds available may be insufficient to satisfy all claims, and is rarely used in employment class actions. Certification under Rule 23(b)(2) is appropriate only when the claims are for equitable relief, such as injunctions to require employers to change policies. Backpay, which is considered equitable relief also is available under 23(b)(2). Rule 23(b)(3) actions allow for both injunctive relief and compensatory and punitive damages.

12 Blaney, 2011 U.S. Dist. LEXIS 105302, at *19 (plaintiffs must provide sufficient evidence that they were "victims of a common policy or plan that violated the law."); Amendola v. Bristol-Myers Squibb Co., 558 F. Supp. 2d 459, 467 (S.D.N.Y. 2008).

13 In the Eastern District of New York, for example, conditional certification has been granted in approximately 97% of the putative FLSA collective actions filed.

14 See, e.g., Davis v. Lenox Hill Hosp., 2004 U.S. Dist. LEXIS 17283 (S.D.N.Y. Sept. 1, 2004) (holding that RNs in a special elite corps program for RNs who were interested were not similarly situated to other RNs, LPNs, and nurses aides who were not in the program); Holt v. Rite Aid Corp., 333 F. Supp. 2d 1265, 1274-75 (M.D. Ala. 2004) (denying conditional certification in the first stage after considering evidence that there were substantial differences between individual employees' daily tasks and responsibilities).

15 White v. Osmose, Inc., 204 F. Supp. 2d 1309, 1314 (N.D. Ala. 2002).

16 Zivali v. AT&T Mobility, LLC, 784 F. Supp. 2d 456, 460 (S.D.N.Y. 2011); Reyes v. Tex. EZPawn, L.P., 2007 U.S. Dist. LEXIS 1461 (S.D. Tex. Jan. 8, 2007).

17 Id.

18 See, e.g., Camesi v. Univ. of Pittsburgh Med. Ctr., 2009 U.S. Dist. LEXIS 40571 (W.D. Pa. May 14, 2009).

19 In fact, Camesi was decertified, but that only occurred more than two and a half years after notice was sent to all potential class members. Camesi v. Univ. of Pittsburgh Med. Ctr., 2011 U.S. Dist. LEXIS 146067 (W.D. Pa. Dec. 20, 2011).

20 Alba Conte & Herbert B. Newberg, Newberg On Class Actions § 8.2 at 163 (4th ed. 2002).

21 Fed. R. Civ. P. 23(c)(2)(B).

22 Fed. R. Civ. P. 23(e)(1)(B)

23 Whalen v. United States, 85 Fed. Cl. 380 (Fed. Cl. 2009); Ruggles v. WellPoint, Inc., 591 F. Supp. 2d 150 (N.D.N.Y.); Lynch v. United States Auto. Ass'n, 491 F. Supp. 2d 357 (S.D.N.Y. 2007); De Asencio v. Tyson Foods, Inc., 130 F. Supp. 2d 660 (E.D. Pa. 2001).

24 Fed. R. Civ. P. 23(f).

25 Id.

26 Comer v. Wal-Mart Stores, Inc., 454 F.3d 544, 549 (6th Cir. 2006); Baldridge v. SBC Commc'ns, Inc., 404 F.3d 930, 933 (5th Cir. 2005).

27 See, e.g. Pereira v. Foot Locker, Inc., 2010 U.S. Dist. LEXIS 5845 (E.D. Pa. Jan. 25, 2010).

28 253 F.R.D. 61 (N.D. N.Y. 2008).

29 Id. at 65-66, 68.

30 See, e.g., Woodard v. Fedex Freight East, Inc., 250 F.R.D. 178 (M.D. Pa. 2008) (dismissing state law class allegations and requiring individual state law claims to be asserted by opt-ins on a pendent basis because the objectives of the FLSA's collective action procedure would be defeated "if plaintiffs can obtain federal jurisdiction with an FLSA claim and then sidestep [FLSA] § 216(b)'s opt-in requirement by asserting an opt-out class claim under a parallel state law that lacks an opt-in requirement.").

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