In a number of cases, the plaintiffs' strategy in collective active litigation under the Fair Labor Standards Act may fall into a familiar pattern: file the case, do minimal discovery, move for conditional certification under the first-tier lenient standard, and then settle before decertification. While frustrating for employers, it can be, and often is, a viable strategy.
But it doesn't always work. Some cases don't settle, and keeping a class together under the less lenient, second-tier standard is much more difficult than getting it conditionally certified in the first place. Even if the class survives the employer's motion to decertify, the court may revisit the issue and decertify the case on the eve of trial as recently happened in Espenscheid v. DirectSat, LLC, Case No. 1943 (7th Cir. Feb. 4, 2013). We blogged the Espenscheid case on February 7, 2013.
Even worse than decertification, what if the court accepts the arguments that the putative class members are similarly situated, but then grants summary judgment against the entire class? That is exactly what happened earlier this month in the case of Harper v. Government Employees Insurance Co., Case No. 2:09-CV-02254-LDW-GRB (E.D.N.Y. Nov. 4, 2013).
A dozen years ago, in Bell v. Farmers Insurance Exchange, 87 Cal. App. 4th 805, cert. denied, 534 U.S. 1041 (2001), a California Court of Appeals launched a tsunami of wage and hour litigation against the insurance industry by holding that certain Farmers claims adjusters were non-exempt as a matter of law. The Bell case, which had some peculiar and largely unfavorable facts for the employer, however, soon proved to be the high water mark and a series of subsequent decisions and Department of Labor guidance reversed the tide over the next several years. We reviewed some of these cases on January 14, 2011.
In this month's Harper case, lead plaintiff was a GEICO telephone insurance claims adjuster. She filed the action in 2009 and successfully resisted a motion for summary judgment filed by the employer. After that ruling, she moved the court for conditional certification, a motion that was granted, and then conducted discovery on the 300-person opt-in class. At this stage, the case had followed the pattern.
The employer, however, then moved for summary judgment as to the class based on the additional discovery taken post-conditional certification. The court concluded that this additional discovery dispelled the prior question of fact it had found, and granted summary judgment for the employer.
As is the norm in insurance claims adjuster cases, the plaintiffs raised two sets of issues. First, they contended that the claims adjusters were simply "production workers" for the carrier and the employer therefore could not take advantage of the administrative exemption. This was the crux of the Bell case a dozen years ago, but the intervening years and the opinions of many thoughtful courts have not been kind to it. Insurance carriers provide insurance coverage, not adjusting services, and the overwhelming view is that adjusters are not production workers.
The second issue the plaintiffs raised was that they simply followed routine company guidelines and did not exercise sufficient discretion and independent judgment. They specifically pointed to the company's "Claim IQ" computer software, which they claimed made the decisions for them.
The court accepted the fact that the computer system did, in fact, make coverage and adjustment recommendations. Still, it found that those recommendations were based upon information that the claims adjuster had developed through witness interviews and other efforts and that different adjusters might reach different decisions based on the same data. It rejected the plaintiffs' general criticism of the company's use of guidelines, commenting that "[i]t would be neither in the interests of GEICO nor its policy holders to have claims adjusted according to the unguided whim of a particular claims adjuster."
The employer had also moved to decertify the class, but the court found no reason to address that motion in that it had now disposed of the plaintiffs' claims as a matter of law. As a result, the employer now has a judgment in its favor as to the entire class.
The Bottom Line: As we've commented before, conditional certification puts pressure on the employer, but is not the end of an FLSA case. In this instance, conditional certification enabled the employer to obtain summary judgment against the entire class.
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