United States: California Employers Down, But Not Out, Concerning Class Certification Issues

Shortly after the California Supreme Court issued its 2012 decision in Brinker Restaurant Corp. v. Superior Court, employers saw an immediate uptick in appellate court decisions supporting the denial of class certification to plaintiffs in wage and hour lawsuits.

Today, the opposite seems to be true: appellate courts are reversing decisions denying class certification and directing trial courts to certify wage and hour class actions.  In some of the more recent cases, the courts justify class certification based on the existence of one common question and reserve for another (unspecified) day the multitude of admittedly individualized questions that are summarily characterized as irrelevant questions about "damages."

In Martinez v. Joe's Crab Shack, the California Court of Appeal for the Second District reversed a trial court's denial of class certification as to the restaurant's managers who claimed they had been misclassified as exempt employees.  The plaintiffs alleged they spent more than 50 percent of their time performing nonexempt tasks (cooking and bussing tables), and thus were entitled to overtime premiums.  The employees moved for class certification, but the trial court denied the motion because individual trials would be necessary to resolve the amount of time each employee spent performing exempt duties.  In doing so, the trial court applied the logic of other appellate decisions denying class certification in misclassification cases, such as Dailey v. Sears, Roebuck & Co., Mora v. Big Lots Stores, Inc., and Arenas v. El Torito Restaurants, Inc.

This time, however, the Court of Appeal reversed the trial court's decision denying class certification.  While acknowledging that the time spent on particular tasks is relevant to the employer's ultimate liability, the Court held that restaurant's policy of classifying managers as exempt from overtime and the managers' allegations that their tasks did not differ from nonexempt tasks was common enough to justify class certification.  The Court said that the trial court should have focused on "the employer's realistic expectations [of the job] and its classification of the tasks [that] managers may have been expected to perform rather than whether the employee can identify in retrospect, the amount of time he or she was engaged in an exempt or nonexempt task."  The appellate court therefore instructed the trial court to refocus its analysis on the policies and practices of the employer, "even those in which the facts appear to present difficult issues of proof."

In Jones v. Farmers Ins. Exch., insurance claims representatives and senior claims adjusters alleged that their employer should have compensated them for preparatory work they were purportedly required to perform before their scheduled shifts and for the time it took them to drive to their first appointments each day.  The trial court denied class certification on the ground that that individualized trials would be required to resolve whether employees actually performed these pre-shift tasks.

In reversing this decision, the Court of Appeal for the Second District found that common issues predominated because the existence of a uniform policy requiring pre-shift tasks was, in and of itself, a common question amenable to class treatment.  It further reserved any individualized issues—such as actual time spent on these tasks—as applicable only to the amount of "damages," which, in its view, did not preclude class certification.  On remand, the Court instructed the trial court to focus on whether plaintiffs' theory of recovery is amenable to class treatment, as opposed to whether any individual might actually be able to recover at trial.

Finally, in Williams v. Superior Court (Allstate Ins. Co.), the California Court of Appeal for the Second District reversed the lower court's decertification of a class of automotive field adjusters who claimed they were not paid for certain pre- and post-shift activities, such as logging onto their computers, setting voicemail messages, and checking for schedule and travel changes.  The trial court initially certified the class, finding that Allstate's alleged requirement that the employees perform these pre- and post-shift tasks was a common question justifying class certification.  Shortly after the class was certified, however, the United States Supreme Court handed down its decision in Wal-Mart Stores, Inc. v. Dukes.  Based on that decision, Allstate moved to decertify the class, arguing that individualized issues predominated as to whether any employee spent more than a de minimis amount of time on pre- or post-shift tasks.  Specifically, Allstate argued that since Dukes rejected a "trial by formula" approach to class actions, a series of mini-trials would be necessary to establish any individual employee's right to compensation for time spent on the allegedly required pre- or post-shift tasks.

Although the trial court agreed with Allstate and decertified the class, the Court of Appeal reversed the decertification order with directions to certify.  The Court found that "[t]rial by formula is [merely] a method of calculating damages," which "have little, if any, relevance at the certification stage."  Accordingly, it held that "whether Allstate had a practice of not paying adjusters for off-the-clock time was common enough to justify class certification, regardless of whether Allstate's de minimis defense could, arguably, eviscerate any one employee's right to recover any wages at all."

These decisions do clearly leave employers exposed to a greater risk of a class being certified, which typically works in favor of plaintiffs' leveraging multi-million dollar settlements.  All is not lost, however.  Since the appellate courts still have yet to address precisely how these (admittedly difficult to prove) cases should be tried, class wide liability may not be a foregone conclusion.

For example, should the trial court determine that Joe's Crab Shack required its managers to perform certain nonexempt tasks (thereby resolving the arguably common question), plaintiffs presumably will still have to prove – as a matter of liability – that every single class member did not perform exempt tasks more than 50 percent of the time.  Since the court must address this question eventually, employers may have an opportunity to deflate the class prior to trial – even after losing the initial class certification battle.

Should evidence arise that many class members did not perform nonexempt tasks, for instance, an employer may move to decertify the class or may ask the court to require each and every class member attend trial to prove up his or her individual entitlement to "damages."  Another option may be to move in limine to preclude statistical or "representative" evidence of time spent on nonexempt tasks where, after certification, there is evidence of a wide variance amongst class members regarding how much time each spent on these tasks.  Given the opportunities to deflate a certified class later on in the litigation and the potential for thousands of mini-trials, employers may be down after these recent decisions, but they are certainly not out.  Certified or not, some class actions are not suitable for trial.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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