Class Action Defense Blog

General Release Executed by Employees at Termination was Valid Under ERISA but Class Action Claims Fell Within Carve-Out Provision in Release, and Former Plan Participants have Standing to Prosecute Class Action Alleging Breach of Fiduciary Duty Against Plan Administrators Illinois Federal Court Holds

Plaintiffs filed a putative ERISA class action lawsuit against Tellabs alleging breach of fiduciary duty “by permitting investments in Tellabs securities when it was imprudent to do so and by disseminating misleading information to Plan participants about the prudence of investing in Tellabs securities.” Brieger v. Tellabs, 473 F.Supp.2d 878, 880 (N.D. Ill. 2007). Defense attorneys moved for summary judgment on two grounds: (1) the putative members of the class action had executed general releases which barred them from prosecuting the class action complaint, and (2) plaintiffs lacked standing to prosecute the class action because they had cashed out of the Plan. Id., at 883. The district court denied the motion.

Briefly, in December 2000, Tellabs announced a $100 million sales agreement with Sprint, and in January 2001 announced increased sales and expressed optimism about the future. For purposes of the period covered by the class action complaint, in February 2001 Tellabs common stock hit a high of $67 per share. However, the following month Tellabs lowered its revenue and earnings expectations for 2001, and in April 2001 it announced that it would not meet its lowered expectations. “By April 16, 2001, Tellabs stock had declined to $35.50 per share.” Brieger, at 881. The stock recovered to $42 per share in May 2001, but fell to $16 by June 2001 and plunged to under $1 by April 2003. Id., at 881-82. Tellabs implemented workforce reductions, and in exchange for severance benefits each employee executed a general release which provided that the employee released Tellabs – including its “officers, directors, agents, employees, employee benefit plans (and their plan fiduciaries and administrators)” – “from any and all claims of any kind relating to or arising out of Employee's employment or the termination of that employment with Tellabs, Inc. or any of its subsidiaries or affiliates.” Id., at 882.

Continue reading "Class Action Defense Case-Brieger v. Tellabs: Illinois Federal Court Denies Defense Motion For Summary Judgment In ERISA Class Action" »

Posted In: Employment Law, Court Decisions

Discriminatory Employment Practice Acts that occur Prior to EEOC Charging Period are Time-Barred even if the Discriminatory Acts had “Continuing Effects” During the EEOC Charging Period Supreme Court Holds

In a case that will have substantial impact of Title VII class action lawsuits, a divided Supreme Court held that the limitations period on a Title VII pay discrimination claim begins to run when the discriminatory act occurs. Ledbetter v. Goodyear Tire & Rubber Co., Inc., __ U.S. __, 2007 WL 1528298, *2 (May 29, 2007). Plaintiff had worked for Goodyear for almost 20 years, from 1979 to 1998, and received or was denied raises based on performance evaluations by her supervisors, id., at *3. Plaintiff filed a questionnaire with the Equal Employment Opportunity Commission (EEOC) in March 1998 alleging sex discrimination, and in July filed a formal charge with the EEOC. Id. In November 1998, after taking early retirement, plaintiff filed suit against Goodyear asserting several claims, including a Title VII pay discrimination allegation. Id. The Supreme Court summarized the district court proceedings at page *3 as follows:

The District Court granted summary judgment in favor of Goodyear on several of Ledbetter’s claims, including her Equal Pay Act claim, but allowed others, including her Title VII pay discrimination claim, to proceed to trial. In support of this latter claim, Ledbetter introduced evidence that during the course of her employment several supervisors had given her poor evaluations because of her sex, that as a result of these evaluations her pay was not increased as much as it would have been if she had been evaluated fairly, and that these past pay decisions continued to affect the amount of her pay throughout her employment. Toward the end of her time with Goodyear, she was being paid significantly less than any of her male colleagues. Goodyear maintained that the evaluations had been nondiscriminatory, but the jury found for Ledbetter and awarded her backpay and damages.

Continue reading "Class Action Defense Issues-Ledbetter v. Goodyear: Divided Supreme Court Holds Statute Of Limitations For Title VII Pay Discrimination Claims Begins To Run When Discriminatory Act Occurs" »

Posted In: Employment Law, Court Decisions

Federal Court Refuses to Exercise Supplemental Jurisdiction over State Law Wage and Hour Class Action Claims Because of Substantial Variance in State Laws and Conflict with FLSA (Fair Labor Standards Act) Opt-In Provision

Employees filed a putative class action in Connecticut federal court against Metropolitan Property alleging that the employer failed to pay overtime in violation of the federal Fair Labor Standards Act (FLSA) and Connecticut state labor laws. Neary v. Metropolitan Prop. & Cas. Ins. Co., 472 F.Supp.2d 247, 248 (D. Conn. 2007). The class action complaint included causes of action for a class action claim under FRCP Rule 23(b)(3) “for violation of state wage and hour laws ‘in each state in which each [p]laintiff worked’ (Count 4),” as well as “a class action claim under [FRCP Rule 23(b)(1)] for violation of state wage and hour laws ‘of the various states in which [p]laintiffs worked’ (Count 5).” Id. Defense attorneys moved to dismiss these class action claims on the grounds that the state law opt-out claims presented an irreconcilable conflict with the FLSA’s opt-in requirement. Id., at 249. The district court agreed.

Plaintiff’s class action complaint alleged that defendant insures vehicles nationwide and engaged in the practice of classifying field adjusters, field appraisers and outside adjusters as exempt from overtime in violation of the FLSA “and the wage and hour laws of the various states in which [p]laintiffs performed work for [d]efendant.” Neary, at 249. Plaintiff purported to bring the class action on behalf of a nationwide class alleging that certification was appropriate under Rule 23(b)(3). Id., at 249-50. The defense moved to dismiss Counts 4 and 5 of the class action complaint “pursuant to the Rules Enabling Act, 28 U.S.C. § 2072(b), on the basis that the class action procedures in Rule 23 irreconcilably conflict with Section 216(b) of the FLSA which expressly limits the scope of representative lawsuits seeking overtime pay to individuals who affirmative opt-in to the action.” Id., at 250. The district court granted the defense motion, but not for the reasons advanced.

Continue reading "Class Action Defense Cases-Neary v. Metropolitan Property: Connecticut Federal Court Grants Defense Motion In FLSA Class Action To Dismiss Class Action Claims Based On State Wage And Hour Laws" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

District Court Erred in Dismissing Employment Class Action and Compelling Arbitration Because “Take it or Leave it” Option was Procedurally Unconscionable Despite 3-Months’ Notice of Arbitration Clause and Limitations Period for Asserting Claims Against Employer was Substantively Unconscionable Ninth Circuit Holds

In February 2004, plaintiff, a paralegal at O’Melveny & Myers until July 2003, filed a class action against her former employer alleging violations of the federal Fair Labor Standards Act (FLSA) and California state laws for failing to pay overtime and failing to provide meal and rest periods. Davis v. O’Melveny & Myers, ___ F.3d ___ (9th Cir. May 14, 2007) [Slip Opn., at 5605-07]. The district court granted the defense motion to dismiss the class action and compel arbitration based on a Dispute Resolution Program that had been distributed to employees via interoffice mail and via the office intranet site. Id., at 5606. The class action alleged, in part, that the DRP was unconscionable and enforceable, id., at 5607. On appeal, the Ninth Circuit stated that whether the class action claims fell within the scope of the DRP was not in dispute; the issue, rather, was whether the arbitration provision was enforceable. Id., at 5608.

Preliminarily, the Ninth Circuit held that “the question of whether O’Melveny’s arbitration agreement is unconscionable is for a court to decide” rather than an arbitrator. Davis, at 5610 (citations omitted). It then addressed whether the arbitration clause was procedurally and substantively unconscionable, as required under California law, id., at 5611 (citations omitted). The Court of Appeals had little difficulty finding the provision procedurally unconscionable, holding that it was prepared by a “sophisticated employer - a national and international law firm, no less” and that, even though the arbitration clause was not hidden and employees were not taken by surprise, “in a very real sense the DRP was ‘take it or leave it.’” Id., at 5611-12. The only way for an employee to “opt out” of the arbitration provision was to leave the company, and California and Ninth Circuit decisional law disapproves of such provisions in employment agreements. Id., at 5612-13 (citations omitted).

Continue reading "Class Action Defense Cases-Davis v. O’Melveny & Myers: Ninth Circuit Reverses Order Dismissing Labor Law Class Action And Compelling Arbitration Holding Arbitration Clause Unconscionable" »

Posted In: Arbitration, Employment Law, Court Decisions

Commission Exemption to Overtime Pay Under Federal Fair Labor Standards Act (FLSA) need only be Established by Preponderance of the Evidence Seventh Circuit Holds

Plaintiffs filed a labor law class action against their employer for violations of the federal Fair Labor Standards Act (FLSA) alleging that they were wrongly denied overtime pay. Defense attorneys moved for summary judgment on the ground that members of the putative class action were exempt from overtime pay under FLSA; the district court agreed and entered judgment in favor of the employer and against the class action plaintiffs. Yi v. Sterling Collision Centers, Inc., 480 F.3d 505, 506 (7th Cir. 2007). The Seventh Circuit affirmed.

This case involves “whether a system of compensation common in the auto repair industry is a commission system within the meaning of the [FLSA].” Yi, at 506. While the FLSA requires overtime pay for hours worked in excess of 40 hours per week, see 29 U.S.C. § 207(a)(1), the Circuit Court noted that “there is an exemption for workers in retail stores or other service establishments (including the automobile repair service that is the defendant in this case) who (1) are paid a wage that exceeds one and a half times the minimum wage and (2) receive more than half their compensation in the form of “commissions on goods or services,” Yi, at 506 (citing § 207(i)).

Preliminarily, the Circuit Court flatly rejected the argument that the defense must establish the exemption by “clear and affirmative evidence.” Yi, at 506. While it recognized that some sister circuits have used this or similar language, id., at 506-07, the Seventh Circuit’s analysis of the statute and the case law led it to a different conclusion: the burden of proof is no greater than in other federal civil cases – preponderance of the evidence. Id., at 507. In the Court’s opinion, the narrow interpretation of exemptions referenced in decisional law is properly viewed as “a tie breaker,” id., at 508.

Continue reading "FLSA Class Action Defense Cases-Yi v. Sterling Collision: Seventh Circuit Affirms Summary Judgment In Favor Of Defense In FLSA (Fair Labor Standards Act) Class Action Case Based On Commission Exemption To Overtime Pay" »

Posted In: Employment Law, Court Decisions

In Case that will have Direct and Substantial Impact on Labor California Law Class Action Cases, California Supreme Court Rejects Defense Argument that Additional Pay Awards under Labor Code § 226.7 Constitute “Penalties” Subject to One-Year Statute of Limitations and Holds that such Awards Constitute “Wages” Subject to Three-Year Statute of Limitations

Plaintiff, a store manager at a Kenneth Cole Productions clothing store, filed an individual (not class action) lawsuit against his former employer seeking unpaid overtime and waiting penalties, and for meal and rest period and itemized pay statement violations, because he regularly worked 9-10 hours days and rarely took meal or rest breaks. Murphy v. Kenneth Cole Productions, Inc., ___ Cal.4th ___ (Cal. April 16, 2007) [Slip Opn., at 2-3]. The trial court ruled against the employer and, in part, awarded “an additional hour of pay” under California Labor Code section 226.7, and applied to three-year statute of limitations to this award. Id., at 4. Defense attorneys appealed, and the appellate court reversed in part, holding that awards under § 226.7 constituted “penalties” rather than “wages,” and were therefore subject to a one-year limitations period. Id. at 4-5.

Plaintiff initially filed a wage claim with the state’s Labor Commissioner seeking overtime and waiting time penalties; the Commissioner ruled in plaintiff’s favor, and KCP filed for a trial de novo, thereby vesting jurisdiction in the Superior Court. Murphy, at 3. Plaintiff sought additional relief in this civil action, adding claims for failure to provide meal and rest periods and for itemized pay statement violations. Id., at 3-4. The trial court allowed plaintiff to add the additional claims to his action, and ultimately entered judgment in favor of plaintiff. Id., at 4. Of critical importance, the trial court concluded that the “additional hour of pay” awardable under § 226.7 for failing to provide meal or rest periods constituted “wages” rather than “penalties” and so awarded damages for meal and rest period violations dating back to October 2000, id. This issue had been unsettled in California, with the majority of appellate court holding that these damages constituted penalties. The Supreme Court, however agreed with the trial court.

Continue reading "Class Action Defense Issues-Murphy v. Kenneth Cole: California Supreme Court Holds Three-Year Limitations Period Applies To Labor Code § 226.7 Additional Pay Awards" »

Posted In: Employment Law, Court Decisions

"On Additional Hour of Pay" under California Labor Code Section 226.7 Constitutes Wage or Premium Pay Subject to Three-Year Statute of Limitations Period, not a Penalty Subject to One-Year Limitations Period, California Supreme Court Holds

In a case that will have a substantial and immediate impact on labor law class action cases, the California Supreme Court today issued its long-awaited decision in Murphy v. Kenneth Cole Productions, Inc., which addressed two issues: "first, whether the 'one additional hour of pay' provided for in Labor Code section 226.7 constitutes a wage or premium pay subject to a three-year statute of limitations . . . or a penalty subject to a one-year statute of limitations . . .; second, whether a trial court, conducting a de novo trial, can consider additional wage claims not presented in the administrative proceeding before the state Labor Commissioner." Slip Opn., at 1 (citations omitted). The Court of Appeal had held that the payment was a penalty subject to the shorter limitations period; the Supreme Court disagreed. As the Supreme Court summarized its opinion, "We conclude that the remedy provided in Labor Code section 226.7 constitutes a wage or premium pay and is governed by a three-year statute of limitations and that the trial court properly considered the additional, but related, wage claims during the de novo trial." Id.

A complete summary of the opinion will be posted later this week.

Posted In: Employment Law, Court Decisions

California Appellate Court Affirms Summary Judgment in Favor of Defense Because no Evidence Supported Class Action Allegations that County Program Discriminated Against Women or Affected Women Disproportionately to Men

Plaintiff filed a putative class action against the County of Los Angeles alleging that it violated the federal Equal Pay Act because it paid female lawyers employed under the County’s “Auxiliary Legal Services” program (ALS) less than it paid male lawyers serving as County Counsel. Hall v. County of Los Angeles, ___ Cal.App..4th ___, 2007 WL 529963, *1 (Cal.App. February 22, 2007). Defense attorneys moved for summary judgment; the trial court granted the defense motion and the California Court of Appeal affirmed. The appellate court held that “the wage disparity between ALS and County Counsel was based on an acceptable business reason, which is a recognized ‘factor other than sex.’” Id., at *4 (citation omitted).

In 1984, in order to address a dramatic increase in juvenile court cases, the County formed ALS to supplement the legal services provided by County Counsel. The ALS attorneys were independent contractors, and by the express terms of their contracts they were employees of ALS, not the County. Hall, at *1. ALS was intended to allow the County to realize cost savings by hiring additional attorneys on “as needed” basis “without increasing the number of permanent classified County employees.” Id. “Similarly situated male and female lawyers at ALS were treated the same in terms of salary and benefits, and similarly situated male and female lawyers at County Counsel were treated the same in terms of salary and benefits.” Id., at *2. The class action complaint alleged, however, that there were more female lawyers at ALS than at County Counsel, and that female lawyers at ALS were not paid comparably with male lawyers at County Counsel. Id.

Continue reading "Class Action Defense Cases-Hall v. County of Los Angeles: Defense Properly Granted Summary Judgment In Sex Discrimination Labor Law Class Action Against County California Court Holds" »

Posted In: Employment Law, Court Decisions

Entity that Employed Significant Number of Putative Class Members was an Indispensable Party under Rule 19 of the Federal Rules of Civil Procedure and could not be Joined in Class Action Without Destroying Federal Court Diversity Jurisdiction thus Necessitating Dismissal of Class Action Complaint New York Court Holds

Plaintiff filed a putative class action against Clear Channel Communications and Clear Channel Broadcasting for violations of New York's labor laws, alleging that defendants "made and continue to make unauthorized deductions from the wages of sales representatives for the New York radio stations that Defendants own and operate." Mattera v. Clear Channel Communications, Inc., 239 F.R.D. 70, 71-72 (S.D.N.Y. 2006). Plaintiff invoked federal court jurisdiction solely on the basis of diversity, id., at 72. Defense attorneys moved to dismiss the class action complaint for failure to join an indispensable party, id.; the thrust of the defense motion was that the class action failed to name Capstar Radio Operating Company (the owner of the two radio stations where plaintiff worked) as a defendant, and that joinder of Capstar would eliminate diversity jurisdiction thereby compelling dismissal of the action, id., at 73. The district court agreed with the defense and dismissed the class action.

Plaintiff was a sales representative, selling advertising spots or on-air time for two of the 1200+ radio stations defendants own and operate. Mattera, at 72. Sales representatives were received biweekly draws against commissions earned on each sale. The commissions were to be "paid one month after the contract for a sale is executed and the advertising spot purchased is aired,." But if the customer failed to pay for the service within 120 days then there would be a "charge back," with the entire amount of the commission deducted from the employee's next paycheck. According to the allegations in the class action complaint, the customer, "typically an advertising agency or corporation with a longstanding relationship with Defendants," would pay the bill more than 120 days after service, but in such instances defendants would not reverse the charge back. Id.

Continue reading "CAFA Class Action Defense Cases-Mattera v. Clear Channel: New York Federal Court Grants Defense Motion To Dismiss Labor Law Class Action For Failure To Join Indispensable Party" »

Posted In: Class Action Fairness Act (CAFA), Employment Law, Court Decisions

District Court did not Abuse its "Broad Discretion" in Certifying Nationwide Sex Discrimination Class Action Against Wal-Mart Creating "the Largest Certified Class in History" Ninth Circuit Holds

In June 2001, plaintiffs filed a putative class action against Wal-Mart in the San Francisco federal court alleging sex discrimination in the payment of wages and in promotions. In April 2003, plaintiffs moved to certify a nationwide class action on behalf of 1.5 million former and present female employees “employed in a range of Wal-Mart positions - from part-time, entry-level, hourly employees to salaried managers.” Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. February 06, 2007) [Slip Opn., at 1340]. Defense attorneys argued that the requirements of Rule 23 had not been satisfied, stressing in particular several problems inherent in litigating a class of record size. More than a year later, in an 84-page decision handed down in June 2004, the district court rejected all but one of the defense arguments and, save for that one point, certified the class action as requested by plaintiffs. Both sides appealed, but the Ninth Circuit affirmed the district court order in all respects.

Plaintiffs’ motion sought certification of a nationwide class action on behalf of “All women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.” Dukes, at 1340. Wal-Mart stressed the “‘historic’ nature of Plaintiffs’ motion, inasmuch as it concerns a class of approximately 1.5 million women who work or worked in one or more of Wal-Mart’s 3,400 stores in 41 regions at any time since 1998.” Id. The district court recognized Wal-Mart’s concerns but concluded that “while the class size was large, the issues were not unusual.” Id. The Ninth Circuit summarized the district court’s order at page 1341 as follows:

On June 21, 2004, the district court issued an eighty-four-page order granting in part and denying in part Plaintiffs’ motion for class certification. [Citation.] With respect to Plaintiffs’ claims for equal pay, the district court granted Plaintiffs’ motion as to issues of alleged discrimination and all forms of requested relief. With respect to Plaintiffs’ promotion claim, the court’s finding was mixed. The court certified the proposed class as it related to issues of alleged discrimination (including liability for punitive damages) as well as injunctive and declaratory relief. However, the court denied Plaintiffs’ request for certification with respect to backpay because data relating to challenged promotions were not available for all class members.

On appeal, Wal-Mart focused its attack on three points: (1) that the commonality and typicality requirements of Rule 23(a) had not been satisfied, (2) that the class action complaint primarily sought monetary relief thus barring certification under Rule 23(b)(2), and (3) that the district court order prejudiced its ability to respond to individual claims. Dukes, at 1341. Plaintiffs, in turn, argued that the district court erred in limiting backpay relief. Id. The Ninth Circuit held that the district court did not abuse its discretion in certifying the nationwide class.

Continue reading "Dukes v. Wal-Mart Class Action Defense Case: Ninth Circuit Upholds Certification Of Nationwide Sex Discrimination Class Action Creating Largest Class Ever Agreeing With District Court That Class Action Was Nonetheless Manageable" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

On February 5, 2007, San Francisco's sweeping Paid Sick Leave Ordinance ("PSL") will take effect. The PSL Ordinance (Chapter 12W) was approved by 60% of San Francisco voters in the November election. San Francisco employers who do not comply with the PSL Ordinance will face stiff penalties and possible civil lawsuits with attorneys' fees recoverable.

All employers in San Francisco will be required to provide paid sick leave to all full-time, part-time and even temporary employees who work in San Francisco. Under the PSL Ordinance, employees accrue one hour of paid sick leave for every 30 hours worked (about 9 days per year for a full-time, non-exempt employee). Those employed as of February 5, 2007 will begin accruing paid sick leave as of that date. Those employed after February 5, 2007 will begin accruing paid sick leave 90 days into their employment. Employers may cap maximum accruals at 40 hours if they employ fewer than 10 employees and at 72 hours if they employ 10 or more employees. Unlike vacation benefits, paid sick leave does not need to be paid out when employees leave their employers.

Beginning February 5, 2007, employers must post the City's official notice of the PSL Ordinance in a conspicuous location in English, Spanish, Chinese and any other languages spoken by at least 5% of an employer's workforce in San Francisco. Under the PSL Ordinance, paid sick leave may be used to care for family members ("kin care"), which is more broadly defined than California's Labor Code and includes relatives such as siblings and grandparents. In addition, employees who do not have a spouse or registered domestic partner may once a year designate a person for whom the employee may use paid sick leave. Further, unlike current California law, an employee may use the entire amount of their sick leave for kin care.

Continue reading "San Francisco's Paid Sick Leave Ordinance To Take Effect On February 5, 2007" »

Posted In: Class Actions In The News, Employment Law

California Federal Court Holds that Plaintiffs Satisfied Rule 23 Requirements for Certification of Class Action Alleging Gender Discrimination in Promotion and Management Practices by Costco

Plaintiff filed a class action against their employer for violations of Title VII of the Civil Rights Act of 1964 and California's Fair Employment and Housing Act alleging "that Costco’s promotion system has a disparate impact on female employees, that Costco’s management discriminates against women in promotions, and that defendant has retaliated against persons seeking redress for discrimination." Ellis v. Costco Wholesale Corp., ___ F.Supp.2d ___, 2007 WL 127800-, *1 (N.D. Cal. January 11, 2007). Plaintiffs' lawyer moved the federal court to certify a nationwide class action on behalf of at least 700 women; defense attorneys opposed the motion and moved to strike the declarations of plaintiffs' experts in support of the motion. Id., at *4, *7. The defense also argued against class action treatment on the grounds that plaintiffs failed to exhaust administrative remedies, id., at *5, and lacked standing, id., at *6. The district court rejected defense arguments and certified a nationwide class action as requested by plaintiffs.

Plaintiffs sought certification of a nationwide class action on behalf of "current and former female employees who have been denied promotion to GM [General Manager] or AGM [Assistant General Manager] or denied Senior Staff jobs important to AGM promotion since January 3, 2002." Ellis, at *5. The district court first addressed the procedural objections raised by defense attorneys . The administrative remedies defense was premised on the argument that plaintiffs' EEOC claim was limited to discriminatory practices in promotion to general manager positions. Id.. Plaintiffs disagreed, and argued that even if it had been limited to GM claims that their other claims were "reasonably related to the allegations in the EEOC charge." Id. The district court agreed, noting that Ninth Circuit case law instructs courts "to construe the EEOC charge 'with utmost liberality.'" Id. (citation omitted). Plaintiffs' EEOC claim provided adequate notice to Costco of the claims asserted in the class action complaint. Id. With respect to Costco's standing arguments, the district court held (1) that former employees may seek injunctive relief on behalf of current employees, because "[t]o hold that employees must continue to work in jobs where they face discrimination in order to challenge discrimination would pervert Article III's injury-in-fact requirement," Ellis, at *6, and (2) that a current AGM may seek injunctive relief on behalf of women denied promotion to AGM and that it would not "delve into the merits" of the discrimination claims at the class certification stage, id.

Continue reading "Costco Class Action Defense Case-Ellis v. Costco: California Federal Court Rejects Defense Arguments And Certifies Class Action Alleging Sex Discrimination" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

California Federal Court Holds that Evidence Presented in Connection with Plaintiffs' Motion for Certification of Class Action Established that Individual Questions as to Whether Employees were Misclassified Predominate over Common Questions of Fact, Thus Rendering Litigation Unsuitable for Class Action Treatment

Plaintiffs filed a putative class action in California state court against their former employer, Domino's Pizza, for violations of California's labor laws and unfair competition laws alleging failure to pay overtime and to provide rest and meal periods to its general managers by misclassifying them as exempt employees. Plaintiffs assert they were not exempt because most of their work consisted of making pizzas and cleaning stores, and that only about 20% of their workday was spent "performing their actual general manager duties." Jimenez v. Domino's Pizza, Inc., 238 F.R.D. 241, 245-46 (C.D. Cal. 2006). The defense removed the action to federal court, id., at 246, and plaintiffs moved the court to certify the lawsuit as a class action. The district court first addressed the requirements of Rule 23(a). Id., at 247. The court found that each of Rule 23(a)'s prerequisites - numerosity, commonality, typicality, and adequacy of representation - had been satisfied. Id., at 247-49. However, the district court agreed with defense attorneys that plaintiffs had not established the elements required by Rule 23(b), and so denied the motion.

Plaintiffs asserted that the putative class action satisfied each prong of Rule 23(b), so the court addressed each in turn., Jimenez, at 249. With respect to Rule 23(b)(1), the district court agreed with defense attorneys that plaintiffs misperceived the statute's purpose. Rule 23(b)(1) authorizing class action treatment when separate lawsuits "create a risk of imposing incompatible standards of conduct on the defendant," id. In this case, while it is possible that different courts may reach different conclusions in separate lawsuits as to whether a particular general manager is exempt or non-exempt, the fact remained that Domino's "would not be incapable of fulfilling various judgments," so certification under Rule 23(b)(1). Id., at 250.

Continue reading "Jimenez v. Domino's Pizza-Class Action Defense Cases: California Federal Court Agrees With Defense That Putative Labor Law Class Action Fails To Satisfy Requirements Of Rule 23 And Denies Plaintiffs' Motion For Class Certification" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

New York Federal Court Agrees with Defense that FRCP Rule 68 Offer of Judgment Required Dismissal of Plaintiff's FLSA (Fair Labor Standards Act) Claim and Court Refuses to Exercise Supplemental Jurisdiction Over State Labor Law Class Action Claims

A former hourly employee, Ward, filed a putative class action against her former employer, Bank of New York, alleging violations of the federal Fair Labor Standards Act (FLSA) (as a collective action) and New York labor laws (as a class action) for failure to pay overtime. Ward v. Bank of New York, 455 F.Supp.2d 262, 264 (S.D.N.Y. 2006). An amended complaint named a former assistant manager, Smalls, who alleged additionally that the Bank improperly classified her and others as exempt employees. Id., at 265. The defense made an offer of judgment to Ward for $1000 under FRCP Rule 68, which she rejected. Id. Defense attorneys then moved to dismiss Ward's claims because the Rule 68 offer rendered her action moot and because no other " plaintiffs had opted in to the FLSA collective action. Id. The federal court granted the defense motion Ward's FLSA claim and dismissed her state law class action claims because it refused to exercise jurisdiction over them.

Defense attorneys argued that "Ward's FLSA claims should be dismissed on the ground that [the Bank's] Rule 68 offer of judgment moots those claims, and therefore the Court lacks subject matter jurisdiction." Ward, at 265. The district court agreed. The court held that "[w]hen a defendant offers the maximum recovery available to a plaintiff, the Second Circuit has held that the case is moot and 'there is no justification for taking the time of the court and the defendant in the pursuit of miniscule individual claims which defendant has more than satisfied.'" Id., at 267 (citations omitted). The same rule applies in FLSA collective actions: unless other plaintiffs opt in to the collective action, the plaintiff "advances only her own individual claims," which the Rule 68 offer rendered moot Id. The federal court held at page 267 that this was true "even where plaintiff rejects the offer of judgment" (citations omitted). Moreover, "Rule 68 also applies in class actions, where prior to class certification defendant offers plaintiff the maximum amount that plaintiff could recover at trial." Id., at 268 (citations omitted).

Continue reading "Ward v. Bank of New York Class Action Defense Case: Offer Of Judgment Rendered Moot Plaintiff's Fair Labor Standards Act (FLSA) Collective Action Claim New York Federal Court Holds" »

Posted In: Employment Law, Court Decisions

California Court Rejects Defense Arguments Against Collective Action for Alleged Violations of FLSA (Fair Labor Standards Act) but Agrees with Defense that Class Action is not Superior Device for Litigating State Employment Law Claims and Denies Class Action Status to Claims Based on California Labor Code, Over Which it had Supplemental Jurisdiction, as Inconsistent with "Opt-In" Requirements for FLSA Collective Action

Plaintiff, former Long Beach police officer, filed a putative class action against the City of Long Beach for alleged violations of the federal Fair Labor Standards Act (FLSA) and of California's Labor Code sections 226.7, 512 and 2802 based on the allegations that he was denied meal and rest breaks and was not properly reimbursed for business expenses while a police officer. Edwards v. City of Long Beach, ___ F.R.D. ___ (C.D. Cal. December 15, 2006) [Slip Opn., at 2-3.] The thrust of the class action complaint asserted that while police officers kept track of, and received pay for, overtime hours worked, no policy or procedure existed for officers to record or report missed meal and rest periods. Id., at 2-3. Further, while officers were required to have clean and functional uniforms and equipment, the City did not reimburse class members for the costs incurred in maintaining those items. Id., at 3. Plaintiff filed two motions in the district court: one requested certification of the lawsuit as a class action under Rule 23, id., at 7, which defense attorneys opposed on the grounds that the numerosity, commonality and typicality requirements are not met, a class action will not benefit the class, and other alternatives exist rather than class action litigation, id., at 8; the second sought certification of a collective action under 29 U.S.C. § 216(b), id., at 1, which defense attorneys opposed by focusing on the differences in job duties between the plaintiff and other class members, id., at 6. The district court refused to certify a class action under Rule 23, but granted the motion to certify a collective "opt-in" action under § 216(b), id., at 1.

In granting the motion to certify a collective action (in essence an "opt-in" class action) under § 216(b) of the FLSA, the federal court explained that "employees wishing to join the suit must 'opt-in' by filing a written consent with the court" or else they are not bound by any judgment or settlement. Edwards, at 4. In a majority of jurisdictions, certifying such a collective action requires a two-step process: "the first step is for the court to decide, 'based primarily on the pleadings and any affidavits submitted by the parties, whether the potential class should be given notice of the action,'" id., at 5 (citations omitted); the court found that the "lenient standard" required to overcome this hurdle had been met. Id., at 5-7. The second step in the process is a motion by defense attorneys to decertify the class action, id., at 7; but the district court explained that it does not address that issue until after the opt-in time period has passed, id. The court rejected defense arguments that a collective action was inappropriate because of the differences in job duties between the plaintiff and other class members, id., at 6, explaining that - even though the defense had presented a "detailed analysis" of those differences, together with a "detailed discussion" of the differences in claims that potential class members may assert - the defense arguments were "better suited for motion to decertify the § 216(b) collective action," id., at 7.

Continue reading "Edwards v. City of Long Beach Class Action Defense Case: California Federal Court Denies Defense Motion To Certify Class Action But Grants Collective Action Status Under § 216(b) of the Federal Fair Labor Standards Act (FLSA)" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

Georgia Federal District Court Holds that Offers of Judgment in FLSA (Fair Labor Standards Act) Class Action Cannot be made Prior to Expiration of Opt-In Period Because Rule 68 Requires that Offer be made on Adverse Parties and Class Members are not "Fully Identifiable" Until Opt-In Period Ends

Plaintiffs filed a putative class action on behalf of migrant farm workers against Shannon Produce Farms in July 2005 alleging violations of the Fair Labor Standards Act (FLSA), and in November 2005 they filed a motion for certification of a FLSA collective action pursuant to 29 U.S.C. § 216(b), which the district court granted. Morales-Arcadio v. Shannon Produce Farms, 237 F.R.D 700, 701 (S.D. Ga. 2006). Prior to the "opt-in" deadline for class members to join the class action, defense attorneys served an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. Id. Plaintiffs' lawyer moved to invalidate the offer of judgment. The district court summarized the competing arguments at page 701 as follows:

Plaintiffs contend that defendants' offer of judgment is improper since defendants served it during the time period provided by the Court for other similarly-situated plaintiffs to join the instant FLSA collective action. . . . Plaintiffs argue, inter alia, that the offer short-circuits the collective action process, has no legal effect since it purports to extend to workers who are not parties to the action, and moots the certified collective action and court-authorized notice. . . . Defendants have filed an opposition to the motion contending that plaintiffs' motion is premature since a motion to strike an offer of judgment is only proper at the conclusion of a case. . . . Defendants also contend that their offer of judgment is proper since it specifically contemplates and provides a recovery for additional opt-in plaintiffs who join the action by the opt-in deadline. . . . (Footnote omitted)

Continue reading "Morales-Arcadio v. Shannon Produce Class Action Defense Case: Defense Rule 68 Offer Of Judgment Served Prior To Opt-In Deadline For Class Action Under Fair Labor Standards Act (FLSA) Is Invalid Georgia Federal Court Holds" »

Posted In: Employment Law, Court Decisions

District Court did not Clearly Err in Finding UPS Violated Federal Americans with Disabilities Act (ADA) by Refusing to Hire Deaf Drivers, But Defense was Correct that Class Action Judgment Based on Violation of California's Unruh Act Must be Reversed Ninth Circuit Holds

Plaintiff filed a putative class action in California federal court against United Parcel Service alleging violations of the federal Americans with Disabilities Act (ADA), and California's Fair Employment and Housing Act (FEHA) and Unruh Civil Rights Act (Unruh Act) because it "categorically exclude[s] individuals from employment positions as 'package-car drivers' because they cannot pass a United States Department of Transportation (DOT) hearing standard that does not apply to the vehicles in question." Bates v. United Parcel Serv., Inc., 465 F.3d 1069, 1073 (9th Cir. 2006). The district court certified the lawsuit as a class action. After a bifurcated trial, the district court ruled against the defense and found that UPS violated the ADA, the FEHA and the Unruh Act. On appeal, defense attorneys argued that "(1) Bates did not establish that any class members are 'qualified'; (2) UPS satisfied its burden under the business necessity defense of the ADA; (3) the plaintiff class should be decertified; (4) the court's injunction was an abuse of discretion; and (5) UPS did not violate the FEHA or the Unruh Act." Id. The Ninth Circuit affirmed the judgment as to the ADA claim, reversed the judgment as to the Unruh Act, and refused to reach the FEHA claim finding it unnecessary in light of the fact that affirmance of the ADA claim "is sufficient grounds for affirming the injunction." Id., at 1093 n.25.

Applicants for positions as UPS package drivers must, inter alia, pass the same physical exam that the United States Department of Transportation requires of prospective drivers of commercial vehicles, which includes a "forced whisper" test of the applicants' hearing. Bates, at 1074. However, the DOT only requires a physical exam of those who will be driving vehicles with a gross weight in excess of 10,000 pounds. UPS, on the other hand, required the exam of all applicants, including the thousands of drivers operating vehicles weighing from 7100 to 9300 pounds. Id., at 1075. The class conceded that UPS may require the physical exam of who drive DOT-regulated vehicles, but argued that its blanket exclusion of deaf applicants violated state and federal laws. Id. The district court ruled in favor of the class, holding in part that UPS had failed to establish a business necessity defense to its actions. Id.

Continue reading "UPS Class Action Defense Case-Bates v. UPS: Ninth Circuit Upholds Refusal To Decertify Class Action And Affirms Class Action Judgment Against UPS Based On ADA Claim, But Agrees With Defense That Unruh Act Violation Must Be Reversed" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

FLSA Class Action Certification within Court's Discretion Even if Supported by only "Minimal Evidence" Virginia Federal Court Holds and Conditionally Certifies Class Action Subject to Defense Motion for Decertification Following Discovery

Plaintiffs filed a class action against their employers (see Note) alleging failure to pay overtime in violation of the federal Fair Labor Standards Act (FLSA). Choimbol v. Fairfield Resorts, Inc., 475 F.Supp.2d 557, 558 (E.D. Va. 2006). Plaintiffs moved the court to certify the lawsuit as a class action; defense attorneys objected on the grounds that plaintiffs were not “similarly situated” to the class and had introduced no evidence that defendant Fairfield Resorts was a “joint employer” of plaintiffs or members of the putative class. The district court rejected defense arguments and conditionally certified a class action, holding that it had authority to grant the motion for class action treatment based on “minimal evidence” subject to a subsequent motion by defense attorneys for decertification of the class action.

The facts underlying the class action complaint are rather complicated but the salient facts are these, found at pages 559 through 561 of the district court’s opinion: Fairfield Resorts operates timeshares including Kingsgate, Governor's Green and Patriot Place timeshare locations in Virginia. Fairfield contracted with Sandulyak and Nunnery to hire immigrants to provide laundry, housekeeping and grounds maintenance services at certain properties in Virginia. Sandulyak (doing business as Carolina Janitorial) provides regional immigrant labor, and is “commonly owned, staffed and operated” by national immigrant providers Ambassador Hospitality and Proline Management. Fairfield’s contract with Ambassador provided that the immigrant laborers would be employees and Carolina Janitorial and that Fairfield had no right to supervise, direct or control the laborers. In practice, however, Sandulyak failed to supervise the laborers, Carolina Janitorial did not have a manager at the properties, and Sandulyak only visited the properties once every 1-3 months. Rather, for more than a year responsibility for supervision and day-to-day control over the laborers fell to Nunnery, who had negotiated the agreement with Ambassador “in the name and on behalf of Fairfield.”

Continue reading "FLSA Class Action Defense Cases-Choimbol v. Fairfield Resorts: Virginia Federal Court Conditionally Certifies Class Action Under Fair Labor Standards Act (FLSA) Holding Only "Minimal Evidence" Required To Support Class Action Treatment" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

Pennsylvania Federal Court Agrees With Defense that Fair Labor Standard Act (FLSA) Opt-In Requirement for Overtime Class Actions is “Inherently Incompatible” with Rule 23 Opt-Out Requirement for State Law Overtime Class Action Cases Mandating Dismissal of State Claims

Former employees filed a putative class action in Pennsylvania federal court against Pocono Health System and Pocono Medical Center alleging violations of the federal Fair Labor Standard Act (FLSA), and of Pennsylvania’s Minimum Wage Act and Wage Payment and Collection Law, because defendants paid overtime on an “8 and 80” plan, requiring overtime if employees work more than 8 hours in a day or more than 80 hours over a two-week period. Otto v. Pocono Health System, 457 F.Supp.2d 522, 522-23 (M.D. Pa. 2006). Defense attorneys moved to dismiss the state law class action claims on the grounds that FRCP Rule 23 requires that class members must affirmatively “opt-out” of state law class action cases filed in federal court, but FLSA § 216(b) requires that putative class members affirmatively “opt-in” to class action cases seeking overtime pay under the FLSA. Defense attorneys urged that the state law and federal law claims advanced in plaintiffs’ class action complaint were thus “inherently incompatible” and compelled dismissal of the state law claims. Id., at 523. The district court agreed.

The federal court began by noting that several New Jersey federal courts “have held that Section 216(b) opt-in collective actions are incompatible with Rule 23 opt-out class actions.” Otto, at 523. And while those sister court decisions are not binding, the district court found the reasoning therein to be persuasive. In granting the defense motion plaintiffs’ state law class action claims, the district court explained at page 524: “It is clear that Congress labored to create an opt-in scheme when it created Section 216(b) specifically to alleviate the fear that absent individuals would not have their rights litigated without their input or knowledge. To allow an Section 216(b) opt-in action to proceed accompanied by a Rule 23 opt-out state law class action claim would essentially nullify Congress's intent in crafting Section 216(b) and eviscerate the purpose of Section 216(b)'s opt-in requirement.”

Posted In: Certification of Class Actions, Employment Law, Court Decisions

Ninth Circuit Directs District Court to Enter Judgment in Favor of Defense in Overtime Class Action Because 29 C.F.R. § 541.203 Exempts Insurance Claims Adjusters from FLSA Overtime Requirements

Insurance claims adjusters filed several overtime class action lawsuits against Farmers Insurance Exchange alleging failure to pay overtime under the federal Fair Labor Standard Act (FLSA). Defense attorneys argued that claims adjusters are exempt from FLSA’s overtime provisions. The district court created a “$3,000 in claims paid per month rule” and, under this new rule, found that some of the adjusters were exempt from overtime while others were not. On appeal, plaintiff and defense attorneys agreed that this rule “is neither workable nor supported by the evidence.” The Ninth Circuit agreed, holding that FLSA expressly exempts claims adjusters and directing that judgment be entered in favor of the defense in the class action. In re Farmers Ins. Exch., 466 F.3d 853, 855-56 (9th Cir. 2006).

In its capacity as an inter-insurance exchange, Farmers “performs all the functions of a typical insurance company,” including adjusting claims. In re Farmers Ins. Exch., at 856. In fact, approximately half of its 10,000 employees are claims adjusters categorized into five different types, which the Ninth Circuit summarized at pages 856 and 857 as:

Continue reading "Class Action Defense Cases-In re Farmers Insurance Exchange: Employer Properly Classified Insurance Claims Adjusters As Exempt From Overtime Requirements Of Federal Fair Labor Standard Act (FLSA) Ninth Circuit Holds" »

Posted In: Employment Law, Court Decisions

Trial Court Erred in Finding that Employees Voluntary Participation in a Capital Accumulation Plan Violated Illinois Wage Act Because of Two-Year Forfeiture Period

Plaintiff filed a class action against Citigroup, Travelers Group, Primerica Financial Services, Salomon Smith Barney Holdings and Salomon Smith Barney alleging that a voluntary capital accumulation plan (CAP), whereby a portion of employee compensation and wages were paid in the form of restricted stock, violated Illinois labor laws because the CAP contained a two-year forfeiture period. Kim v. Citigroup, Inc., ___ N.E.2d ___, 2006 WL 2796362 (Ill.App. September 29, 2006). Plaintiff argued that the forfeiture of a portion of the stock upon termination of employment violated the Illinois Wage Payment and Collection Act (“the Act’), which requires that employees be paid all earned wages upon termination of employment. Defense attorneys argued that the CAP program is for the benefit of employees and does not violate state law. The trial court sided with plaintiff, but the appellate court reversed.

Plaintiff was a financial consultant for Salomon Smith Barney with responsibility for managing $30-$40 million in assets. He voluntarily agreed to participate in the CAP, which he believed to be “an innovative and attractive savings vehicle.” Slip Opn., at 2. Plaintiff elected to have 10% of his compensation paid in the form of restricted stock, which allowed him to receive Citigroup stock at a 25% discount subject to a two-year vesting period. Id., at 2-3. When plaintiff left to join UBS Paine Webber, Salomon Smith Barney kept the unvested shares of his CAP stock, which represented approximately $18,000 in earned wages. Id., at 3.

Continue reading "Kim v. Citigroup-Class Action Defense Cases: Forfeiture Aspect Of Capital Accumulation Plan Did Not Violate State’s Wage Act Illinois Court Holds" »

Posted In: Employment Law, Court Decisions

Defense Attorneys Plan to Appeal Jury Verdict that Wal-Mart Failed to Provide Employees with Rest Breaks and Overtime, and that Wal-Mart Acted in Bad Faith

The jury is in on a labor law class action on behalf of 187,000 Wal-Mart and Sam’s Club employees brought in Pennsylvania state court. The lawsuit alleged that employees were not provided rest breaks and were required to work “off the clock,” depriving them of overtime pay. The jury awarded $78.5 million in damages, and that figure may be dramatically increased because the jury also found that Wal-Mart acted in bad faith, opening the door to an additional $62 million in damages, according to plaintiffs’ lawyers. The jury agreed with defense attorneys that Wal-Mart had not forced employees to work through meal breaks. Several news sources have reported on the verdict, including Steven Greenhouse of the New York Times and James Covert of the Wall Street Journal.

Continue reading "Pennsylvania Jury Finds Wal-Mart Liable In Employee Overtime/Rest Breaks Class Action Case And Awards $78 Million In Damages Plus Attorney Fees" »

Posted In: Class Actions In The News, Employment Law

Ninth Circuit Reverses District Court Judgment Enforcing Employee Waiver of ADEA Claims Because Language was not “Written in a Manner Calculated to be Understood by an Average Individual Selected by IBM for Employment Termination” and so was not “Knowing and Voluntary”

A putative class action was filed against IBM based on the allegation that an employee layoff program violated the federal Older Workers Benefit Protection Act (OWBPA) and the federal Age Discrimination in Employment Act (ADEA). Syverson v. International Business Machines Corp., 461 F.3d 1147, 1149-50 (9th Cir. 2006). Defense attorneys moved to dismiss the class action complaint based on the executed wavier of ADEA claims and covenant not to sue signed by the plaintiffs as part of the layoff program. Id., at 1150. The district court granted the defense motion to dismiss the class action, but the Ninth Circuit reversed.

In 2001, as part of a workforce reduction plan, IBM offered employees that had been selected for termination severance pay and benefits if they executed a “Microelectronics Resource Action (MERA) General Release and Covenant Not To Sue.” Syverson, at 1149. Plaintiffs filed age discrimination charges with the Equal Employment Opportunity Commission; the EEOC dismissed the charges because it found that “the MERA Agreement satisfies the OWBPA’s minimum requirements for ‘knowing and voluntary’ waiver of ADEA rights and claims and is enforceable, thus depriving the employees of their right to pursue their age discrimination claims.” Id., at 1150. The EEOC issued plaintiffs notices of right to sue, and they commenced a putative class action challenging, in part, “the MERA Agreement’s use of both a release covering ADEA claims and a covenant not to sue excepting them, the pairing of which allegedly caused confusion over whether ADEA claims were excepted from the release.” Id.

Continue reading "IBM Class Action Defense Case-Syverson v. IBM: General Release And Covenant Not To Sue Created Confusion In Employee Layoff Agreement Rendering Waiver Of ADEA Claims Unenforceable Ninth Circuit Holds" »

Posted In: Employment Law, Court Decisions

California Court Holds that Compensation Scheme Permitting Chargebacks Against Monies Advanced Against Unearned Commissions did not Violate State Labor Laws Because Such Commissions were not Wages

Four former employees filed a class action in California state court against internet service provider Verio for violations of California’s labor laws on the grounds that Verio’s compensation scheme - which provided for a base salary, plus commissions that were subject to charge backs under certain conditions - violated California Labor Code § 221 because the commissions were wages. Koehl v. Verio, Inc., ___ Cal.App.4th ___, 48 Cal.Rptr.3d 749, 751 (Cal.App. 2006). “The complaint alleged three causes of action: (1) commission chargebacks in violation of Labor Code sections 221, 223, 225 and 400-410; (2) waiting penalties pursuant to section 203; and (3) unfair competition under Business and Professions Code section 17200 et seq.” Id., at 759 (footnote omitted). Verio cross-complained against the class representatives for commissions recoverable as charge-backs under the compensation scheme, id. The trial court agreed that the commissions were not wages, awarded the employer compensatory damages (for overpayment of unearned commissions) and prejudgment interest totaling more than $250,000, and awarded the employer more than $548,000 in attorney fees. Id., at 759-60. The Court of Appeal affirmed.

Continue reading "Koehl v. Verio-Class Action Defense Cases: Class Representatives Hit With Damages And Half-Million Dollar Attorney Fee Award By California Court After Losing Labor Law Class Action Against Former Employer" »

Posted In: Employment Law, Court Decisions

The NLRB issued a broad and long-awaited decision on September 29, 2006 which affects the definition of "supervisor" under the National Labor Relations Act (the "Act"). Oakwood Healthcare, Inc., 348 NLRB NO. 37, and two other companion cases, impact all industries and could undermine the power of labor unions as millions of employees could potentially be re-classified as "supervisors." As "supervisors," these employees would be precluded from joining unions and would no longer be covered by collective bargaining agreements. Not surprisingly, labor unions are in an uproar over the Oakwood Healthcare decisions. They have called them "outrageous" and are threatening strikes against employers who re-classify employees under the new decisions.

Section 2(11) of the Act defines a supervisor as an employee who has the authority to perform any of 12 tasks in the interest of the employer while using independent judgment. In 2001, the U.S. Supreme Court provided general guidance on the definition of "supervisor" under Section 2(11) in NLRB v. Kentucky River Community Care, 532 U.S. 706 (2001). Using Kentucky River's guiding principles, the NLRB clarified the definition of "supervisor" under Section 2(11). In a well-written and thorough decision, the NLRB defines previously ambiguous terms such as "assign," "responsibly to direct," and "independent judgment" as used in Section 2(11).

Continue reading "NLRB Decision In Oakwood Healthcare, Inc., 348 NLRB No. 37, Clarifies Definition Of "Supervisor" Under Section 2(11)--Class Action Defense Issues" »

Posted In: Employment Law, Court Decisions

Tennessee Federal Court Grants Motion to Remand Because 28 U.S.C. § 1445(c) Prohibits Removal of Actions “Arising Under the Workmen’s Compensation Laws”

Following a work-related injury, a store manager retained a lawyer to negotiate a workers’ compensation settlement with her employer. She maintains that her employer retaliated and ultimately fired her. Her attorney filed a putative class action in state court against her employer alleging “reprisal and/or retaliatory discharge for asserting workers’ compensation rights.” Going v. Bass Pro Outdoor World, LLC, 437 F.Supp.2d 762, 764 (W.D. Tenn. 2006). Defense attorneys removed the class action to federal court on grounds of diversity; plaintiff’s lawyer moved to remand the lawsuit on the grounds that 28 U.S.C. § 1445(c) prohibited removal. Id. The district court rejected defense arguments and remanded the class action to state court.

The district court explained that the general rules governing removal under 28 U.S.C. § 1441 do not apply to actions “arising under the workmen’s compensation laws,” as such actions are specifically exempted from removal under § 1445(c). Goin, at 765-66. The question, then, is whether plaintiff’s lawsuit “‘arises under’ the [state’s] workers’ compensation laws, which in turn hinges upon the legal source of the cause of action at issue.” Id., at 766. The controlling authority for this inquiry is the Sixth Circuit opinion in Harper v. AutoAlliance Int’l, Inc., 392 F.3d 195 (6th Cir. 2004).

Continue reading "Class Action Defense Cases-Goin v. Bass Pro: Defense Removal Of Class Action To Federal Court Improper Because Lawsuit Arose Under Workers’ Compensation Law" »

Posted In: Employment Law, Removal & Remand

Tenth Circuit Holds that Interlocutory Review of Class Certification Orders Must be Sought within 10 days of Initial Order, not Order Denying Reconsideration, and that Plaintiffs’ Statistical Evidence Failed to Establish Prima Facie Case of Disparate Impact Because Males may have Worked more Overtime Hours for Reasons Other than Gender

Female employees filed a putative employment class action in federal district court alleging Title VII Civil Rights Act sex discrimination against Boeing on theories of both disparate impact and disparate treatment. Following substantial litigation, that included class certification of certain subclasses, the district court granted a defense motion for summary judgment as to the “hourly” wages subclass “disparate impact” overtime claim. Plaintiffs appealed this ruling - which the district court certified as a final judgment under FRCP Rule 54(b) - and several other class-certification ruling. The Tenth Circuit affirmed. Carpenter v. Boeing Co., 456 F.3d 1183 (10th Cir. 2006).

The Circuit Court began with the class certification rulings, noting that interlocutory appeal of class certification orders may be granted only if sought within 10 days of entry of the order. Carpenter, at 1189 (citing FRCP Rule 23(f)). In this appeal, plaintiffs filed a motion for class certification, which the district court granted in part and denied in part. Almost a year later, plaintiffs filed a “Renewed Motion for Class Certification”; the motion was denied. A few months later plaintiffs filed a “Second Renewed Motion for Class Certification”; this, too, was denied and plaintiffs filed their Rule 23(f) application within 10 days thereafter. Id., at 1188. Boeing argued that the application was untimely, id., at 1189; the Circuit Court agreed and dismissed the application for lack of jurisdiction, id., at 1190-92.

Continue reading "Boeing Class Action Defense Case-Carpenter v. Boeing: Federal District Court Orders In Labor Law Class Action Decertifying Subclass And Granting Defense Motion For Summary Judgment Affirmed By Tenth Circuit" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

Circuit Court Affirms District Court Order Granting Defense Motion to Dismiss ERISA Class Action Complaint Because Plaintiff Failed to Exhaust Administrative Remedies

An employee filed a putative ERISA class action on behalf of his employer’s health insurance plan against the Pharmacy Benefits Manager alleging breach of fiduciary duties for profiting from “undisclosed discounts, rebates, coupons and other forms of compensation from drug companies and pharmacies.” The district court granted the defense motion to dismiss the class action with prejudice because plaintiff failed to exhaust his administrative remedies, and the Eleventh Circuit affirmed. Bickley v. Caremark RX, Inc., 461 F.3d 1325 (11th Cir. 2006).

The Circuit Court summarized the allegations in plaintiff’s class action complaint at page 1328 as follows:

Continue reading "Class Action Defense Cases-Bickley v. Caremark: ERISA Class Action Plaintiff Properly Required To Exhaust Administrative Remedies Eleventh Circuit Holds" »

Posted In: Employment Law, Court Decisions

Massachusetts District Court Grants Joint Motion To Decertify Class And Grants Defense Motion To Dismiss New Hampshire State Law Class Action Overtime Claims

Salaried employees filed a putative class action alleging that they were misclassified as exempt and seeking overtime pay under the federal Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq., and under New Hampshire state law. Trezvant v. Fidelity Employer Servs. Corp., 434 F.Supp.2d 40 (D. Mass. 2006). During the litigation, the Massachusetts federal district court granted plaintiffs’ motion to conditionally certify an FLSA class action, and a defense motion to dismiss the state law claims contained in the class action complaint. Later still, the district court granted a joint motion to decertify the class because only a few class members opted into the lawsuit. The court then issued a single memorandum discussing these rulings. Id., at 42.

Continue reading "Trezvant v. Fidelity-Class Action Defense Cases: Massachusetts Federal Court Grants Defense Motion To Partially Dismiss Class Action That Sought Overtime Pay Under Fair Labor Standards Act (FLSA) And New Hampshire State Law" »

Posted In: Employment Law, Court Decisions

Defense Attorneys for Employer Successfully Defeat Plaintiff Lawyer’s Motion to Conditionally Certify Class on Grounds that Employees Failed to Meet Eleventh Circuit’s Two-Part Dybach Test

Employees filed a putative class action alleging overtime pay violations of the federal Fair Labor Standards Act (FLSA). Saxton v. Title Max of Alabama, Inc., 431 F.Supp.2d 1185 (N.D. Ala. 2006). Over defense objections, the employees sought conditional class certification and permission to send notice of the class action to class members. The lawsuit alleged that the employer’s assistant managers were systematically denied overtime pay in violation of the FLSA, id., at 1186, despite the fact that the employer “has a policy, which store managers are directed to enforce, that assistant managers are not to work over 40 hours in a week,” id., at 1188. The district court agreed with class action defense attorneys that plaintiffs failed to satisfy the two-part test enunciated in Dybach v. State of Fla. Dep’t of Corrections, 942 F.2d 1562 (11th Cir. 1991), and therefore denied the motion.

Continue reading "Class Action Defense Cases-Saxton v. Title Max: Certification Of Federal Fair Labor Standards Act (FLSA) Class Action Denied For Failure To Demonstrate That Class Members Desired To Opt-In And That Plaintiffs Are Similarly Situated Alabama Court Holds" »

Posted In: Certification of Class Actions, Employment Law, Court Decisions

In Case Of First Impression of Cash-Balance Pension Plans Under ERISA § 204(b)(1)(H)(i), Seventh Circuit Agrees with Defense that Time Value of Money is not Age Discrimination and Reverses Judgment in Favor of Class Action Plaintiffs

Older employees filed a class action against IBM alleging that its cash-balance defined-benefit pension plan violates the federal Employee Retirement Income Security Act (ERISA) prohibition against age discrimination. Cooper v. IBM Personal Pension Plan and IBM Corp., ___ F.3d ___ (7th Cir. August 7, 2006). Unlike a defined-contribution plan, "the personal account in a cash-balance plan is not separately funded"; rather, "IBM imputes value to the account in the form of 'credits.'" Slip Opn., at 1. The district court rejected defense arguments that the plan did not violate ERISA because its terms are age-neutral, and entered judgment in favor of the class action plaintiffs because "younger employees receive interest credits for more years." Id., at 2. The district court's decision turned on its interpretation of the phrase "benefit accrual" under ERISA § 204(b)(1)(H)(i), which is not defined in ERISA or its regulations. Id., at 4. The district court used the definition of "accrued benefit" under ERISA, which is "an amount' expressed in the form of an annual benefit commencing at normal retirement age.'" Id. In so doing, "the rule against discrimination then refers not to what IBM puts into the plan, but what the employee takes out on retirement" and thus discriminates against older employees because younger workers will receive a greater payout because they benefit from compound interest. Id. "This approach treats the time value of money as age discrimination." Id., at 4.

Continue reading "IBM Class Action Defense Case-Cooper v. IBM: Defense Prevails On Appeal From Class Action Judgment On Employees' ERISA Claims Alleging Age Discrimination In Pension Plan Due To Time Value Of Money" »

Posted In: Employment Law, Court Decisions

Federal District Court Refuses Defense Motion to Dismiss Class Action and Enforce Arbitration Agreement Holding FAA (Federal Arbitration Act) Provision Barring Class Action FLSA Claims Unconscionable Under Specific Facts of Case

Employees filed a putative class action alleging violations of the federal Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq., for failure to pay overtime. The defense filed a motion to dismiss the class action complaint and to enforce a enforce the company's "dispute resolution program" governed by the Federal Arbitration Act (FAA) which, in part, barred class actions. Skirchak v. Dynamics Research Corp., Inc., 432 F.Supp.2d 175 (D. Mass. 2006). (This class action defense has been raised in other cases discussed in separate articles.) The district court denied the defense motion, applying the well-settled rule that FAA agreements are subject to the standard defenses available in contract actions, including fraud, duress and unconscionability. Skirchak, at 178 (citing Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652 (1996)).

The court first addressed the language of FLSA itself, and acknowledged that Congress did not expressly guarantee the right to file class actions for FLSA claims. Skirchak, at 179 (citing Kuehner v. Dickinson & Co., 84 F.3d 316, 319-20 (9th Cir.1996)). But the court believed that the fact FLSA provides for collective actions, see 29 U.S.C. § 216, meant that Congress "implicitly" intended to allow such class actions, Skirchak, at 179.

Continue reading "Skirchak v. Dynamics Research-Class Action Defense Cases: Employer's Dispute Resolution Program Barring Class Action Claims For Alleged Violations Of Federal Fair Labor Standards Act (FLSA) Unconscionable Massachusetts District Court Holds" »

Posted In: Arbitration, Employment Law, Court Decisions

Federal District Court Rejects Defense to Class Action Claims Under Fair Labor Standards Act (FLSA) and State Law Claims, and Grants Summary Judgment in Favor of Class

News reporters filed in California federal court a class action against their employer that alleged numerous violations of federal and state labor laws, as well as California Business and Professions Code §§ 17200 et seq. (unfair competition). Wang v. Chinese Daily News, Inc., ___ F.Supp.2d ___, 2006 WL 1663638 (C.D. Cal. June 7, 2006). The parties filed cross-motions for summary judgment; the court denied the defense motion and granted the plaintiffs' motion. In so doing, the court inter alia rejected the defense argument that the reporters were exempt under the FLSA's "creative professional exemption," and ruled against the defense on the applicable statute of limitations governing California Labor Code § 226.7 claims (meal and rest periods). The opinion is quite detailed; this article discusses only some of the court's holdings.

The employer had a policy that allowed vacation time to accrue and to carryover into following years, provided that "accumulated vacation days cannot exceed 30 days" and that "[m]oney shall be paid for unused vacation days exceeding 30 days at $64 per day " Slip Opn., at 3. California law permits employers to adopt "no additional accrual" policies, so the question before the federal court was whether $64 per day was lawful or whether the employer was required to "buy back" the vacation time at the employees' hourly rate of pay. The court concluded that this question turned on whether the "unused vacation days" should be deemed "vested" or "accrued." Id., at 4. The court suggested that if the employer had followed its vacation policy then it would have been lawful; however, the evidence before the court established that employees routinely accrued upwards of 70 days of vacation and held that the in "actual practice," then, the employer treated the vacation time as "accrued." Id., at 5. Accordingly, the employer was required to buy back the vacation days at the employees' hourly rate of pay. Id., at 6.

Continue reading "Class Action Defense Cases-Wang v. Chinese Daily News: Class Action Reporters Owed Overtime Under Federal FLSA And Defense Vacation "Buy Back" Policy Violated State Law And Required Payment At Employees' Hourly Rate Of Pay California Court Holds" »

Posted In: Employment Law, Court Decisions

California Supreme Court Rejects Class Action Defense Argument that Employees were not Discharged by Completion of Job Assignment for Which They were Hired

A class action was filed on behalf of models that worked specific projects but were not paid immediately after the projects ended. Defense attorneys argued that the employees were not “discharged” within the meaning of California Labor Code § 201 because they were not fired or otherwise involuntarily terminated. Smith v. Superior Court, 39 Cal.4th 77, 45 Cal.Rptr.3d 394 (Cal. July 10, 2006). Plaintiff was hired as a “hair model” – an audience watched a stylist color and style her hair, she walked the runway, and she remained until defendant told her that she could leave. Plaintiff was to be paid $500, but defendant waited more than two months to pay her the money owed. Plaintiff filed a class action complaint alleging various causes of action, including violations of California Labor Code §§ 201 and 203. Slip Opn., at 2.

Section 201 of the Labor Code provides that if an employer “discharges” an employee, wages earned and unpaid at the time of discharge are due and payable immediately. Under section 203, an employer’s willful failure to pay wages to a “discharged” employee in accordance with section 203 subjects the employer to penalties. Slip Opn., at 1.

Continue reading "Class Action Defense Cases-Smith v. Superior Court: Employee Is "Discharged" Under California Labor Laws Not Only By Involuntary Termination But also By Completion Of Specific Assignment" »

Posted In: Employment Law, Court Decisions

California Court Holds that Disney did not Require Employees to Drive to Work and to Take Shuttle from Parking Lot to Work, So Disney was not Required to Compensate Them for Travel Time Spent Riding Shuttle

A Disney employee filed a putative class action against the company seeking compensation under California state law for travel time based on the theory that certain employees were assigned to a parking lot located one mile from the Disneyland theme park, and Disney provided shuttles to transport them between the parking lot and the park. Overton v. Walt Disney Co., 136 Cal.App.4thh 263 (Cal.App. 2006). The class action defense attorneys argued that the California Supreme Court opinion in Morillion v. Royal Packing Co., 22 Cal.4th 575 (Cal. 2000) – which held that if an employer requires employees to travel in a company vehicle to work then it must compensate the employees for their travel time – did not apply. The defense moved for summary judgment on the grounds that the undisputed evidence established that Disney did not require employees to drive to work (and, in fact, encouraged and offered financial incentives to employees who used alternative means of transportation), and that Disney did not require employees to use the shuttle to travel from the parking lot to the theme park (some employees, for example, would walk or ride a bike). Overton, at 267-68. The trial court granted the defense motion for summary judgment and plaintiff’s lawyer appealed.

Continue reading "Overton v. Walt Disney Company: Disney’s Class Action Defense Prevails – Disney Not Required To Compensate Employees For Time Spent Riding Shuttle From Parking Lot To Theme Park California Court Holds" »

Posted In: Employment Law, Court Decisions

Federal Court Cites Lack of Evidence Employee was Engaged in Interstate Commerce or in Production of Goods for Commerce to Establish Coverage Under Fair Labor Standards Act (FLSA) to Support Overtime Claim

Plaintiff Joseph Thorne appealed a district court order granting All Restoration Service’s defense motion for dismissal under Rule 50 as to Thorne’s overtime pay claims based on alleged violations of FLSA (Fair Labor Standards Act). Thorne v. All Restoration Serv., Inc., 448 F.3d 1264 (11th Cir. 2006). The district court had granted the defense motion on the grounds that “Thorne had not presented evidence at trial that he qualified for either enterprise coverage or individual coverage under the FLSA” because “‘[his] activities were local in nature and really did not affect interstate commerce in general,’” id., at 1265. On appeal Thorne challenged only the finding that he failed to establish individual coverage under FLSA. Individual coverage exists only if an employee “is engaged in commerce or in the production of goods for commerce,” 29 U.S.C. § 207(a)(1) (2005). The Circuit Court affirmed.

First, the Court rejected Thorne’s claim that regular use of his employer’s credit cards in the course and scope of employment means that he “engaged in interstate commerce.” First, the Circuit Court explained that the statute requires an activity that constitutes interstate commerce, not an activity that “merely affect[s]” interstate commerce. Thorne, at 1266 (citing McLeod v. Threlkeld, 319 U.S. 491, 497, 63 S.Ct. 1248 (1968)). All Thorne alleged was that he made purchases with the credit cards; he could not even establish whether the credit card bills came from out of state. Id., at 1266-67.

Continue reading "Class Action Defense and Employment Law Issues–Thorne v. All Restoration: FLSA (Fair Labor Standards Act) Overtime Claim Rejected By Eleventh Circuit" »

Posted In: Employment Law, Court Decisions

California Appellate Court Holds that Federal Fair Labor Standards Act (FLSA) May Serve as Unlawful Act for California Unfair Competition Claim, and Triable Issues of Fact Exist As to Overtime Pay Claim and Unlawful Deductions for Cancelled Subscriptions Claim

Employees who worked as telemarketers selling newspaper subscriptions filed a class action in California state court "alleging claims under the California Labor Code for overtime pay, unlawful commission deductions, and waiting penalties, and for unfair competition pursuant to [California Business & Professions Code] section 17200." Harris v. Investor's Business Daily, 138 Cal.App.4th 28, 31 (Cal.App. 2006). The claims were based on a compensation system whereby employees "were compensated on the basis of a point system which rewarded them for selling longer subscriptions, winning daily contests, and meeting weekly sales goals" but they were "subject to a 'chargeback' - a deduction from points earned on a sale if the customer cancelled the subscription within 16 weeks." Id. To ensure that it complied with state and federal laws, the compensation system provided that employees would be paid no less than the prevailing minimum wage. Id. The complaint was later amended to a add a claim that alleged violations of the federal FLSA (Fair Labor Standards Act, 29 U.S.C. § 207(a)(1)) as the predicate for a new section 17200 violation. Id., at 32. The defense demurrer to the new 17200 cause of action was sustained without leave to amend, and the defense summary adjudication motion as to the balance of the class action claims was granted. Id.

The appellate court first addressed the FLSA-based 17200 claim. The defense had argued that FLSA preempted the claim "because traditional opt-out class actions are available under the California law, while, under FLSA, class members must opt in." Harris, at 32. Relying upon several unpublished federal court decisions, id., at 34-36, the appellate court concluded that FLSA did not preempt section 17200, and that the purpose behind the federal "opt-in" requirement - "to protect employers from facing 'financial ruin' and prevent employees from receiving 'windfall payments, including liquidated damages'" - is not implicated by a section 17200 claim "limited to restitution." Id., at 33-34.

Continue reading "Harris v. Investor's Business Daily: California Class Action By Telemarketing Employees Not Preempted By Federal FLSA (Fair Labor Standards Act) California Court Holds" »

Posted In: Employment Law, Court Decisions

In Case of First Impression for Federal Courts in Fifth Circuit, Court Joins Sister Circuits in Holding that Fair Labor Standards Act (FLSA) Does not Cover Prisoners Working at Prison

On July 7, 2006, the Fifth Circuit Court of Appeals considered the appeal of a prison inmate from a federal district court judgment dismissing his action as frivolous. Loving v. Johnson, ___ F.3d ___, 2006 WL 1868320 (5th Cir. 2006). The prisoner filed suit claiming that under the federal Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (FLSA), he was entitled to receive minimum wage for working in the prison laundry. The federal appeals court noted that "until today, we have not expressly stated whether there is any FLSA employment relationship between the prison and its inmates working in and for the prison." Slip Opn., at 2. The Circuit Court adopted the reasoning of a recent opinion out of the Seventh Circuit and quickly disposed of Loving's claim, holding that "a prisoner doing work in or for the prison is not an 'employee' under the FLSA," id., at 3:

People are not imprisoned for the purpose of enabling them to earn a living. The prison pays for their keep. If it puts them to work, it is to offset some of the cost of keeping them, or to keep them out of mischief, or to ease their transition to the world outside, or to equip them with skills and habits that will make them less likely to return to crime outside. None of these goals is compatible with federal regulation of their wages and hours. The reason the FLSA contains no express exception for prisoners is probably that the idea was too outlandish to occur to anyone when the legislation was under consideration by Congress.

Slip Opn., at 3 (quoting Bennett v. Frank, 395 F.3d 409, 409-10 (7th Cir. 2005) (additional citations omitted).

NOTE: As Loving notes, prisoners have not uniformly lost these types of cases. The Fifth Circuit has held, for example, that prisoners who work outside the prison for private firms are "employees" within the meaning of FLSA (at least if they are not sentenced to hard labor), Watson v. Graves, 909 F.2d 1549, 1556 (5th Cir. 1990), but that prisoners who work inside the prison for private firms are not be covered by FLSA, Alexander v. Sara, Inc., 721 F.2d 149, 150 (5th Cir. 1983). The Fifth Circuit has also held "that a jailer was not the FLSA employer of an inmate working in a work-release program for a private employer outside the jail," Loving, at 2 (citing Reimonenq v. Foti, 72 F.3d 472, 475-76 (5th Cir. 1996).

Posted In: Class Actions In The News, Employment Law, Court Decisions

English Only Policy Supports Claims for Disparate Impact, Disparate Treatment, Intentional Discrimination and Violation of Equal Protection

After the City of Altus, Oklahoma, implemented an “English-only” policy for its employees because “other employees could not understand what was being said on the City radio” when Hispanic employees spoke in Spanish to one another, plaintiffs filed a putative class action asserting numerous discrimination-based claims. Maldonado v. City of Altus, 433 F.3d 1294 (10th Cir. 2006). The district court granted the defense motion for summary judgment with respect to all claims advanced by the class action plaintiffs. The Tenth Circuit affirmed the ruling in part, but permitted the class action to proceed on several key grounds because it found a triable issue of fact as to the allegations of “disparate impact and disparate treatment under Title VII; intentional discrimination under [42 U.S.C.] § 1981; and violation of equal protection under 42 U.S.C. § 1983.” Maldonado, at 1298. We provide but a cursory review of the opinion here; a link to the detailed opinion may be found at the end of the article.

Cutting to the chase, in analyzing the class action claims the Tenth Circuit explained that “disparate-impact claims[] ‘involve employment practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and cannot be justified by business necessity.’” Maldonado, at 1303 (quoting Int’l Bhd. Of Teamsters v. United States, 431 U.S. 324, 335-36 n.15, 97 S.Ct. 1843 (1977) (italics added)). The Court further explained that in considering whether a plaintiff’s lawyer has established a prima facie case of disparate impacts (whether in class actions or otherwise), the Court employs a sliding scale: “The less the apparent justification for mandating English, the more reasonable it is to infer hostility toward employees whose ethnic group or nationality favors another language.” Maldonado, at 1305. Maldonado held that a prima facie case existed: “Here, the very fact that the City would forbid Hispanics from using their preferred language could reasonably be construed as an expression of hostility to Hispanics. At least that could be a reasonable inference if there was no apparent legitimate purpose for the restrictions.” Id.

Continue reading "Defense of Class Action Employment Law Issues–District Court Order Granting Defense Motion for Summary Judgment In Class Action Arising Out Of “English-Only” Policy Affirmed In Part And Reversed In Part By Tenth Circuit" »

Posted In: Employment Law, Court Decisions

California Federal Court Grants Summary Judgment Under CFAA (Computer Fraud and Abuse Act) Following Seventh Circuit Opinion In Citrin

On June 9, 2006, the federal district court for the Northern District of California granting summary judgment in favor of an employer (ViChip) against its former CEO, CFO, president, secretary, and sole director (Tsu-Chang Lee), for several wrongful acts, including violating the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030. ViChip Corp. v. Lee, 2006 WL 1626706 (N.D. Cal. 2006), Case No. C 04-2914 PJH. The court rejected defense arguments that Lee’s action did not fall within the class of conduct intended to be covered by CFAA because his actions were “authorized.” Slip Opn., at 11-12.

The case arose out of a 2002 joint venture entered into by ViVoDa (through its president Lee) with two other companies; the joint venture created ViChip to “research, develop, and outsource the production of a particular type of integrated circuit.” Slip Opn., at 1. All ViChip employees, including Lee, signed employment agreements that, in pertinent part, assigned to the company anything the employee invented and promised to maintain in confidence any proprietary information. ViChip filed a patent application in June 2003. Id., at 2.

Continue reading "ViChip v. Lee: Employment Issues" »

Posted In: Employment Law, Court Decisions

“Transmission” Under CFAA (Computer Fraud and Abuse Act) Includes Deleting Files From Company Laptop Computer To Hide Improper Conduct

On March 8, 2006, the Seventh Circuit Court of Appeals considered whether an employer could pursue an action under the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, against a former employee for securely erasing files from a company laptop computer before quitting and going into competition with his former employer. International Airport Centers, L.L.C. v. Citrin, 440 F.3d 418 (7th Cir. 2006). The provision at issue states that one violates CFAA if one “knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer,” which includes company laptop computers. 18 U.S.C. § 1030(a)(5)(A)(i); Citrin, at 419. In his defense, the employee argued that his action of simply deleting computer files did not fall within the class of acts that would constitute a “transmission” within the meaning of CFAA. The district court agreed and dismissed the employer’s lawsuit. Id., at 418-19.

Continue reading "International Airport Centers v. Citrin: Employment Issues" »

Posted In: Employment Law, Court Decisions

Former California Manager Seeks Class Action Status in Lawsuit Alleging Failure to Pay Overtime and Failure to Provide Meal and Rest Breaks

In prior articles, we have discussed the prevalence of class actions against employers alleging labor law violations. These are among the "favorites" of plaintiff class action attorneys. Henry Lee of the San Francisco Chronicle reports today that a putative class action has been filed against Starbucks in federal court by a former manager who worked in two California Starbucks shops. According to the article, this class action follows the settlement of an earlier class action against Starbucks that had alleged the company had misclassified its managers as exempt from overtime. The plaintiff's lawyer claims that the prior class action led to a change in company policy so that Starbucks' managers are now paid an hourly wage. The current class action seeks damages for allegedly unpaid overtime and unpaid meal and rest periods. Mr. Lee's article, "Starbucks faces suit over OT," may be found in today's business section of the San Francisco Chronicle.

Posted In: Class Actions In The News, Employment Law

The defense of class actions can span several years, and generally class action complaints allege damages dating back many years. That combination played a part in the record settlement of a pregnancy discrimination class action lawsuit, according to Amy Joyce of the Washington Post. By way of background, Nynex Corporation was formed in 1984 to provide telephone service to the states of Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. The company acquired Bell Atlantic in 1997 and adopted its name. Three years later, in 2000, Bell Atlantic acquired GTE and changed its name to Verizon Communications. Verizon’s predecessors, Nynex and Bell Atlantic, “were accused of violating federal law by denying women pension and other benefit accruals when they spent time on pregnancy or maternity leave,” Ms. Joyce reports. Verizon recently agreed to pay almost $49 million to more than 12,000 former and current female employees to settle the landmark case.

The Washington Post reports that the settlement was consummated in 2002, but that final figures were not available until the EEOC (Equal Employment Opportunity Commission) had “completed its projects of how much would be paid in future benefits.” The article by Amy Joyce, “Record $48.9 Million Set in Maternal Bias Suit Verizon Inherited,” may be found in the June 6, 2006, Washington Post.

Posted In: Class Actions In The News, Employment Law

California Holds in Class Actions Case That Liability for Failure to Pay Prevailing Wages on Public Works Projects is Limited to Direct Employer

On April 18, 2006, a California court published its opinion in a class action case that addressed an issue of first impression in California: whether employees on public works projects may sue parties other than their direct employer for alleged violations of the prevailing wage law. Violante v. Communities Southwest Dev. & Constr. Co., 138 Cal.App.4th 972 (Cal.App. 2006). There, construction workers filed a putative class action in California state court for recovery of prevailing wages, alleging that perhaps thousands of workers "were paid less than prevailing wages as required by California Labor Code section 1770 et seq. for public works projects." The class action complaint alleged violations of Labor Code section 1774, breach of contract and unfair business practices against numerous defendants including S. J. Burkhardt, Inc., the contractor that hired Raymond David Paci, doing business as Pacific Structures; Pacific Structures had employed plaintiffs directly. The trial court sustained the demurrers of three other defendants - Chapman Heights (a contractor), Communities Southwest Development and Construction Company (a developer and general partner of Chapman Heights), and Yucaipa Valley Acres (a developer and contractor) - without leave to amend and plaintiffs appealed. 138 Cal.App.4th at 975-76.

After a careful analysis of the statutory scheme, the Court held at page 979, "Plaintiffs have a right of action against the subcontractor, their direct employer [citations]. . . . But the Labor Code nowhere requires the contractor to pay prevailing wages to a subcontractor’s employee or permits a subcontractor’s employee to sue the prime contractor when the subcontractor fails to pay prevailing wages."

Plaintiffs contend defendants violated section 1774 because plaintiffs were not paid prevailing wages by their direct employer, a subcontractor. This is an untenable interpretation. The Labor Code provides a contractor and a subcontractor must pay prevailing wages to their respective employees on a public works project, not that a contractor must pay prevailing wages to a subcontractor’s employees. 138 Cal.App.4th at 978 (italics added).

Continue reading "Violante v. Communities Southwest -- California Class Action Defense Cases" »

Posted In: Employment Law, Court Decisions

Employment Arbitration Agreement Under FAA (Federal Arbitration Act) Enforceable By Employer Illinois Supreme Court Holds

As discussed in a separate article, Circuit Courts of Appeal and state courts do not agree on the enforceability of arbitration agreements in employment contracts. This issue may be of critical importance in the defense of class actions, because a class action waiver in an employment arbitration agreement cannot possible be enforceable if the court would refuse to enforce the arbitral forum even without a class action restriction. On March 23, 2006, in an opinion that should have direct and positive impact in the defense of class action waivers in arbitration agreements in the state, the Illinois Supreme Court cast its vote on the issue, holding that under the FAA (Federal Arbitration Act, 9 U.S.C. § 1 et seq. (1994)), employment arbitration agreements are enforceable under “principles of fundamental contract law because we believe that approach is more faithful to the FAA.” Melena v. Anheuser-Busch, Inc., 847 N.E.2d 99, 107 (Ill. 2006).

In Melena, Anheuser-Busch hired plaintiff in February 1999. One year later, it mailed to employees a letter announcing a new “Dispute Resolution Program” that included a requirement for arbitration under the FAA. Employees were informed that “’by continuing or accepting an offer of employment’ with Anheuser-Busch, all employees to whom the policy was applicable ‘agree as a condition of employment to submit all covered claims to the dispute resolution program.’” 847 N.E.2d at 101. Plaintiff was injured in September 2002, and fired in March 2003. She filed suit against Anheuser-Busch in state court in May 2003. ANHEUSER-BUSCH moved to compel arbitration, but the trial court denied the motion without explanation. The appellate court affirmed, concluding that “’even if the plaintiff entered into the agreement knowingly, she did not do so voluntarily,’” and expressing doubt “about whether an agreement to arbitrate, offered as a condition of employment, ‘is ever voluntary.’” Id., at 102 (quoting appellate court opinion).

The Illinois Supreme Court reversed, holding: “In our view, the FAA’s plain language makes clear that arbitration agreements are enforceable except for state-law grounds for ordinary contract revocation.” 847 N.E.2d at 107 (italics added, citations omitted). Importantly, the Illinois Supreme Court did not make any distinction between arbitration agreements in an employment context or in a commercial setting, and did not suggest that a class action waiver provision would be interpreted under different contract principles.

Continue reading "Melena v. Anheuser-Busch -- Class Action Defense Issues" »

Posted In: Arbitration, Class Actions In The News, Employment Law, Court Decisions

Supreme Court Expands Breadth of Potential Employee Claims for Alleged Retaliation

In a prior article on class actions and class action defense, we discussed the rise of employment law class actions. One area that had not yet been widely subject to class actions consists of alleged retaliation claims. Every employment law practioner knows that Title VII of the Civil Rights Act of 1964 prohibits discrimination based on "race, color, religion, sex, or national origin," 42 U.S.C. § 2000e-2(a). To protect employees who seek to establish such employment discrimination, Congress included an "anti-retaliation" provision in Title VII that prohibits discrimination against one who has "made a charge, testified, assisted, or participated" in a Title VII matter, 42 U.S.C. § 2000e-3(a). By their nature, such claims are "class action resistant" because they are based on the case-by-case treatment of the employee and the specific conduct against which the employer alleges seeks to retaliate. That may change.

On June 22, 2006, the United States Supreme Court fundamentally altered the landscape of employment law retaliation claims. See Burlington Northern & Santa Fe Railway Co. v. White, 548 U.S. ___, ___ S.Ct. ___ (2006). Title VII retaliation claims require proof of an "adverse employment action" but courts have disagreed on what satisfies this requirement. The Supreme Court summarized the issues presented and its answers as follows:

The Courts of Appeals have come to different conclusions about the scope of the Act’s anti-retaliation provision, particularly the reach of its phrase “discriminate against.” Does that provision confine actionable retaliation to activity that affects the terms and conditions of employment? And how harmful must the adverse actions be to fall within its scope?

We conclude that the anti-retaliation provision does not confine the actions and harms it forbids to those that are related to employment or occur at the workplace. We also conclude that the provision covers those (and only those)employer actions that would have been materially adverse to a reasonable employee or job applicant. In the present context that means that the employer’s actions must be harmful to the point that they could well dissuade a reasonable worker from making or supporting a charge of discrimination. Slip Opn., at 1-2.

Continue reading "Burlington Northern v. White -- Class Action Defense Issues" »

Posted In: Class Actions In The News, Employment Law, Court Decisions

California Court Upholds Arbitration Clause With Class Action Waiver In Employment Agreement

On January 19, 2006, the California Court of Appeal for the Second District, Division 5, addressed “the enforceability of a pre-employment arbitration agreement containing a class action waiver.” Gentry v. Superior Court, 135 Cal.App.4^th 944, 37 Cal.Rptr.3d 790, 791 (Cal.App. 2006). In 1995, while employed by Circuit City, Gentry received an “Associate Issue Resolution Package” and a copy of the company’s “Dispute Resolution Rules and Procedures” setting forth various procedures for resolving employment-related disputes. The documents contained an arbitration agreement that included a class action waiver provision. The company provided each employee with 30 days to opt out of the arbitration agreement, but Gentry did not elect to do so. 37 Cal.Rptr.3d at 791-92.

In 2002, Gentry filed a putative class action against Circuit City in California state court alleging that Circuit City misclassified employees in order to avoid paying overtime. Id., at 791. Circuit City moved to compel arbitration. The trial court compelled arbitration with the class action waiver, and stayed the superior court action. The appellate court stated:

The issue in this case is a narrow one: whether the class action waiver in the Circuit City arbitration agreement is an unconscionable provision that renders the provision unenforceable. We conclude the provision is neither procedurally nor substantively unconscionable. Id., at 792.

Gentry recognized that the California Supreme Court “has found pre-employment arbitration agreements is to be adhesive where the agreement is made a condition of employment.” Id., at 793 (citations omitted). This case was different, however, because “Signing the arbitration agreement was not made a condition of Gentry’s employment; he was given 30 days to decide whether or not to opt out of the agreement, and chose not to do so.” Id. The Court also rejected Gentry’s claim that Circuit City “attempted to ‘sucker unsophisticated employees into opting out’ by touting the advantages of arbitration”; the court found that Circuit City had fairly presented both the advantages and disadvantages of arbitration. Id., at 794.

Finally, the court observed that Circuit City would not preclude litigation by means of the class action waiver: “Gentry has alleged statutory violations that could result in substantial damages and penalties should he prevail on his individual claims.” Id., at 795-96. For all of these reasons, the appellate court believed that Discover Bank v. Superior Court, 36 Cal.4^th 148 (Cal. 2005), which invalidated a class action waiver provision in a consumer contract of adhesion involving a credit card company, “does not render the class action waiver in this case unenforceable.” Id., at 791.

The opinion is well worth reading. If the case remains viable, Gentry will prove extremely useful in preventing employment law class actions. Defense attorneys and in-house counsel are well advised to keep track of the status of Gentry.

Posted In: Arbitration, Class Actions In The News, Employment Law, Court Decisions, Topics of Interest