Labor Employment Law Blog

By Brian Murphy and Jonathan Sokolowski

On May 29, 2013, the United States Court of Appeals for the Second Circuit issued its opinion in Cuevas v. Citizens Financial Group, Inc. and RBS Citizens, N.A., Case No. 12-2832, reversing the Eastern District of New York’s grant of Rule 23 class certification to a putative class of Assistant Branch Managers (“ABMs”) alleging that they were denied overtime. In a summary order, the Court held that the District Court failed to resolve factual disputes concerning the duties performed by putative class members, which were material to its ability to issue a ruling concerning commonality under Rule 23(a) and predominance under Rule 23(b)(3).

By Thomas Kaufman

On Friday afternoon, the Fourth Appellate District, Division 3 (Orange County) decided Faulkinbury v. Boyd & Associates (Faulkinbury II). This was a meal period, rest period, and overtime class certification decision in which the trial court had previously denied certification and the Court of Appeal had previously affirmed the denial (in Faulkinbury I).   However, the California Supreme Court issued a grant/hold review on the decision in light of its grant of review in Brinker Restaurant Corp. v. Superior Court (Brinker), and the case was remanded to the court of appeal to consider in light of the Brinker decision.

The new decision reverses the previous denial of class certification and mandates class certification of the meal period, rest period, and overtime claims. Although that is unfortunate for the security guard employer, the decision is actually written fairly narrowly and should not open the door to easy certification in the typical meal and rest period cases.  As explained below, while the court of appeal got the analysis half-right, it still appeared to gloss over the existence of individualized issues that should raise doubts about the ability to try the meal or rest period claims in the case as a class action.

By Jennifer Redmond, John Stigi, and Bram Hanono  

In McDaniel v. Wells Fargo Investments, LLC, Nos. 11-17017, 11-55859, 11-55943, 11-55958, 2013 WL 1405949 (9th Cir. Apr. 9, 2013), the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of four class action lawsuits filed by employees against brokerage firms Wells Fargo, Bank of America, and Morgan Stanley. In separate lawsuits, the employees alleged that the brokerage firms’ policies prohibiting employees from opening outside self-directed trading accounts violatesSection 450(a) of the California Labor Code, which prohibits employers from forcing its employees to patronize his or her employer. The Ninth Circuit held that the California statute is preempted by theSection 15(g) of the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. § 78o(g), which requires brokerage firms to take measures reasonably designed to prevent employees from engaging in insider trading. This case of first impression in California reassures brokerage firms that compliance with the securities laws will not violate California labor laws. 

By Thomas Kaufman

As many readers of this blog know by now, last week the Supreme Court issued yet another anti-class certification decision in Comcast Corp. v. Behrend (“Comcast”). While the full scope and meaning of the Court’s holding is subject to interpretation by the lower courts, a central holding is that a district court errs if it certifies a class for purposes of liability and damages where the plaintiff lacks collective proof capable of calculating damages to the class consistent with Plaintiff’s theory of liability.

Furthermore, Justice Scalia’s decision repeatedly invoked Wal-Mart Stores, Inc. v. Dukes (“Dukes”) and, at least as a matter of tone, appeared to admonish lower courts to be more hesitant in granting class certification than they have been under past precedent.  Indeed, Justice Scalia announced that the “predominance” analysis under Rule 23(b)(3) is even more rigorous than the strict Rule 23(a) “commonality” analysis announced in Dukes. 

As explained below, the Court’s subsequent orders issued this week that summarily reversed and remanded class certification decisions in two other cases cast serious doubt on the arguments from the plaintiff’s bar that Comcast was limited to its facts and that Comcast will have no impact on class certification jurisprudence.

By Sean Kirby and Rachel Tischler* 

On March 21, 2013, the Second Circuit issued its opinion in Parisi v. Goldman Sachs & Co., Case No. 11-5229, reversing a decision from the Southern District of New York, and holding that arbitration agreements which preclude Title VII class actions are enforceable. In reaching this decision, the Second Circuit affirmed the “liberal federal policy in favor of arbitration” and found that “there is no substantive statutory right to pursue a pattern-or-practice claim” as a class action.

By Thomas Kaufman

On March 19, 2013, the U.S. Supreme Court handed down Standard Fire Insurance v. Knowles, a short, narrow, and unanimous opinion addressing removal of class actions to federal court under the Class Action Fairness Act (“CAFA”).  The central holding of the case is that a district court should “ignore” representations by the plaintiff that the amount in controversy is under $5 million and instead consider the actual evidence concerning the number of class members and potential claims.  Although the Court did not expressly address Lowdermilk v. U. S. Bank Nat'l Ass'n, 479 F.3d 994 (9th Cir. 2007)—a 9th Circuit case that held that the defendant must establish with "legal certainty" that the amount in controversy exceeds $5 million when the plaintiff pleads that the amount in controversy is lower—the Supreme Court's reasoning effectively reverses the Lowdermilk line of cases.

By Eric Raphan, Rebecca Hirschklau and Rachel Tischler*

In February, two New York Federal District Court decisions joined other recent federal cases in enforcing arbitration agreements that preclude employees from bringing their Fair Labor Standards Act (“FLSA”) claims on a collective basis and required the employees to individually pursue their claims in arbitration. See Torres v. United Healthcare Servs., Inc., No. 12 Civ. 923 (DRH)(ARL) (E.D.N.Y. Feb. 1, 2013); Ryan v. JPMorgan Chase & Co., No. 12 CV 4844 (VB) (S.D.N.Y. Feb. 22, 2013). Both of these decisions are discussed below.

By Thomas Kaufman

On March 4, 2013 the Ninth Circuit issued a second opinion in the action, Wang v. Chinese Daily News (Wang II), in which it reversed the class certification it had previously affirmed and remanded the matter for further consideration of Rule 23(a) commonality and Rule 23(b)(3) predominance.  The Wang II decision follows a remand from the United States Supreme Court which had reversed the original Wang judgment in light of the inconsistencies between the lower courts' rulings and the certification standards the Supreme Court announced in Dukes v. Wal-Mart (“Dukes”).  As explained below, except for the last paragraph of the case, this mostly just restates holdings of other cases  But there is one highly significant holding at the end of the case concerning the application of “Trial by Formula” to wage/hour class actions that defense lawyers should be expected to cite in almost every class action they defend.

By Thomas Kaufman

On February 4, 2013 in Espenscheid v. DirectSat USA, LLC a Seventh Circuit panel unanimously affirmed a Wisconsin District Court judge's decision to decertify a large off-the-clock overtime class action. Judge Richard Posner wrote the opinion affirming the decertification and, in his inimitable style, he provides an easy-to-read dissertation on the limits of the class action device, proper standards for class certification, and the requirement for the plaintiff to propose a manageable trial plan if he wants to avoid having his class decertified. As discussed below, this case is chock full of notable points.

By Thomas Kaufman and Jason Guyser

On January 28, 2013, Hon. George King of the United States District Court for the Central District of California issued an order in Pedroza v. PetSmart, Inc. denying class certification of exempt misclassification claims brought by a former PetSmart store manager. The opinion is interesting in that it contains a detailed examination of certification requirements pursuant to Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). The analysis Judge King employed would lead to denial of certification in many exemption cases. However, Judge King separately ruled that the case could proceed as an uncertified PAGA collective action, leaving open the possibility that PAGA penalties could somehow be determined notwithstanding the Court’s finding that common issues predominated on the underlying exemption issue.

By Rebecca Hirschklau and Eric Raphan

On December 4, 2012, Southern District of New York District Judge Barbara S. Jones, granted a motion to compel arbitration on an individual basis in a class and collective action brought pursuant to, among other things, the Fair Labor Standards Act (“FLSA”) in Cohen v. UBS Financial Services, Inc., Docket No. 12 Civ. 2147 (BSJ)(JLC).

By Thomas Kaufman Follow me on Twitter

On November 7, 2012, the First District Court of Appeal published an order affirming the denial of class certification entered in favor of Sheppard Mullin’s client, Wet Seal, Inc, in a case alleging that Wet Seal forced its employees to purchase clothing as a condition of employment and denied them certain mileage reimbursements.  As explained below, the decision, Morgan v. Wet Seal, Inc., is noteworthy on multiple levels, including (1) that it rejects this plaintiff’s attempt to obtain class certification based on an alleged “unlawful policy”; (2) that it clarifies the scope of the requirement to reimburse under Labor Code Section 2802; and (3) that it provides a good framework for an employer to use to establish predominant individualized issues.

By Thomas Kaufman; (follow me on Twitter)

Deleon v. Verizon Wireless (Deleon II) is another pro-employer case that is in many ways a carbon copy of Steinhebel v. Los Angeles Times Communications, 126 Cal. App. 4th 696 (2005),  one of my favorite cases (I argued it successfully in the Court of Appeal).  The two cases address the lawfulness of agreements in which employers advance commissions to sales employees when a sale occurs, but the commission is subject to being "charged back" (recouped) if the customer cancels the sale within a certain period of time.

As explained below, Deleon II clarifies earlier precedent and effectively expands the universe of proper chargeback agreements.

By Thomas Kaufman; (follow me on Twitter)

A First Appellate District decision from May 31, 2012, Sotelo v. Medianews Group, Inc.; was published yesterday.  The opinion contains an in-depth discussion on class action concepts arising out of a case alleging misclassification of newspaper carriers as independent contractors.  The opinion cuts back on some pro-certification precedents, sets forth some anti-certification law for independent contractor cases, and contains some interesting observations about class certification in general.

By Thomas Kaufman and Travis Anderson

In Sky Sports, Inc. v. Superior Court, (2nd Dist., Div. 3, Dec. 15, 2011) Case No. B233820, the California Court of Appeal held that a defendant does not waive its right to compel arbitration of a class action by waiting to file a motion to compel arbitration until the class has been certified, where some of the class members, but not the class representative, signed arbitration agreements with defendant.

By Thomas Kaufman and Travis Anderson

On December 13, 2011, the Ninth Circuit issued its most recent decision in the Sullivan v. Oracle saga. See Sullivan, D.C. No. CV-05-00392-AHS (9th Cir. Dec. 13, 2011). The decision followed the June 30, 2011 opinion of the California Supreme Court, in which the Court answered a question that the Ninth Circuit had posed to it: whether employees of a California-based employer who worked entirely outside California could sue the employer under the California Unfair Competition Law ("UCL") for the employer's alleged failure to pay overtime to non-California employees as required under the federal Fair Labor Standards Act ("FLSA"). See Sullivan v. Oracle Corp., 51 Cal. 4th 1191 (2011). Upon remand of the case from the California Supreme Court, the Ninth Circuit held that the state court's opinion was "conclusive" and justified granting summary judgment to Oracle on the UCL claims of these non-California employees. Separately, the Ninth Circuit held that California overtime law applies to non-residents who perform work within the state, another question that it posed to the California Supreme Court to answer. This blog entry, however, focuses solely on the discussion of out-of-state employees' use of the UCL to vindicate FLSA rights.

By Maranda W. Rosenthal & Thomas R. Kaufman

On September 16, 2011, the Ninth Circuit handed down one of the first decisions to interpret and apply the game-changing decision in Wal-Mart Stores, Inc. v. Dukes, et al., 564 U.S. ___ (2011) (“Dukes”). Although Ellis v. Costco Wholesale Corp. (“Ellis”) is not as ground-breaking as the Dukes decision, it does provide some insight as to how the courts will apply the arguably employer friendly precedent established by Dukes.

On July 12, 2011, California's Second Appellate District Court of Appeal issued a decision in Brown v. Ralphs Grocery Company regarding the enforceability of arbitration agreements in the employment context that limit employees' rights to assert class and representative actions. This was the first published state court decision in California regarding employment arbitration agreements since the United States Supreme Court's groundbreaking decision in AT&T Mobility, LLC v. Concepción ("AT&T Mobility"), where the Supreme Court held that California case law invalidating class action waivers in consumer arbitration agreements is preempted by the Federal Arbitration Act ("FAA").  (For a detailed analysis of the AT&T decision, please visit Sheppard Mullin's labor and employment blog dated April 27, 2011.)

On June 20, 2011, the United States Supreme Court released its widely-anticipated decision in Wal-Mart Stores, Inc. v. Dukes, et al., 564 U.S. ___ (2011) ("Wal-Mart"). In Wal-Mart, the Supreme Court reversed the Ninth Circuit Court of Appeals and held that the proposed nationwide gender discrimination class action against the retail giant could not proceed. In a decision that will come as welcome news to large employers and other frequent targets of class action lawsuits, the Supreme Court (1) arguably increased the burden that plaintiffs must satisfy to demonstrate "common questions of law or fact" in support of class certification, making class certification more difficult, especially in "disparate impact" discrimination cases; (2) held that individual claims for monetary relief cannot be certified as a class action pursuant to Federal Rule of Civil Procedure 23(b)(2), which generally permits class certification in cases involving claims for injunctive and/or declaratory relief; and (3) held that Wal-Mart was entitled to individualized determinations of each proposed class member's eligibility for backpay, rejecting the Ninth Circuit's attempt to replace that process with a statistical formula.

On Wednesday, April 27, 2011, the United States Supreme Court decided AT&T Mobility LLC v. Concepcion. Although factually, the case involved consumer products and arbitration agreements, the decision may have a significant impact on employers and employees who enter into arbitration agreements, as well as class action practice.

In two opinions published on July 7, 2010, the Second and Fourth Districts of the California Court of Appeal refused to allow two objectors to derail two different class action settlements. In these two wage and hour class actions, the objectors challenged the proposed settlements on fairness grounds, and the courts once again affirmed the deferential review standard while rejecting the objectors arguments.

On April 21, 2010, the Ninth Circuit Court of Appeals confirmed that a putative class action removed to federal court under the Class Action Fairness Act (CAFA) does not lose federal jurisdiction just because the court denies class certification. The case, United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, et al. v. Shell Oil Company, et al., No. 10-55269, ___ F.3d ____ (9th Cir. Apr. 21, 2010), began as a putative class action in California state court. Plaintiffs alleged that defendants' oil refineries violated California's Unfair Competition Law, Business & Professions Code § 17200, and failed to provide meal periods, rest periods, timely and accurate wage statements and wages due at the time of termination. Defendants removed the case to federal court under CAFA, 28 U.S.C. § 1332(d)(2), which provides removal jurisdiction if any member of the putative class is diverse from any defendant, if the amount in controversy exceeds $5,000,000.

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In Ghazaryan v. Diva Limousine, the California Court of Appeal reversed a trial court's denial of a class certification motion in a wage and hour class action. The Court of appeal ordered the trial court to certify two subclasses.

In what is a major victory for California employers, the California Court of Appeal held yesterday in Brinker Restaurant Corp. v. Superior Court (Hohnbaum) that employers are not obligated to ensure that employees actually take meal and rest breaks, and that companies therefore cannot be held liable for alleged meal and rest break violations unless employees are "forced to forgo" these breaks.

The First Appellate District of the Court of Appeal has followed the California Supreme Court’s recent Gentry opinion finding a class action waiver unconscionable and therefore unenforceable.  In Murphy v. Check ‘N Go Of California, Inc. (which has been certified for publication), the appellate court upheld an order denying the employer’s attempt to compel arbitration of a wage and hour case.  Relying on Gentry v. Superior Court (2007) 42 Cal. 4th 443, the Murphy Court concluded that (1) the court, rather than the arbitrator, is empowered to decide the unconscionability issue and (2) the class action waiver contained in the arbitration agreement is unconscionable and therefore unenforceable.

Unfortunately, the California Supreme Court recently granted a request to depublish a Court of Appeal opinion regarding class actions that was helpful to California employers.  The effect of the opinion had been to constrain courts' ability to certify class actions in certain circumstances.  Now that the opinion has been depublished, it can no longer be cited by litigants in California cases.

On February 28, 2007, the California Court of Appeal held that employees' ability to sue employers collectively under the Unfair Competition Law ("UCL") and the Private Attorneys General Act of 2004 ("PAGA") cannot be assigned to labor unions.  The Court further held that UCL representative actions must meet the procedural requirements established for class action lawsuits.  In Amalgamated Transit Union Local 1756 v. Superior Court, L.A.S.C. B191879, two labor unions that represent mechanics and transit operators filed a lawsuit on behalf of their members alleging that the defendant-employers had committed meal and rest period violations, failed to pay wages, and violated the UCL.  The unions also requested injunctive relief and restitution under the UCL and PAGA.  The lawsuit was brought as a representative action under the UCL and PAGA, rather than as a class action lawsuit.