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The Supreme Court kicked off its October 2017 Term yesterday with a spirited oral argument in the three cases involving the enforceability of arbitration agreements in employment contracts.

As we have explained, these cases—Epic Systems v. Lewis, Ernst & Young LLP v. Morris, and NLRB v. Murphy Oil USA—present the question whether an arbitration agreement in an employment contract that requires bilateral arbitration, and prohibits class procedures, is invalidated by Section 7 of the National Labor Relations Act (NLRA), which gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” According to the National Labor Relations Board, Section 7 protects employees’ right to seek relief on a class-wide basis, and therefore renders unenforceable arbitration agreements that bar class procedures—even though the Supreme Court has twice held that the Federal Arbitration Act (FAA) protects the enforceability of such agreements, in AT&T Mobility LLC v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013).

The four Justices who dissented in either Concepcion or Italian Colors (or both) aggressively defended the NLRB’s determination. When the dust settled, however, it was not at all clear that they will be able to attract a fifth Justice to their position.

Continue Reading Supreme Court Considers Class Waivers in Employment Arbitration Agreements

The Supreme Court on Tuesday heard oral argument in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, a case that has been closely watched for its potential to narrow the circumstances in which a class action may be certified under Federal Rule of Civil Procedure 23 and a collective action for unpaid wages certified under the Fair Labor Standards Act (FLSA). We previously described this case in prior blog posts. One of us attended the argument, and the other closely reviewed the transcript (pdf). Our combined reaction: The anticipated decision in this case may focus on an FLSA issue and, if so, then it seems unlikely to mark a sea change in the rules governing Rule 23 class actions. Continue Reading Supreme Court Hears Argument in Tyson Foods v. Bouaphakeo—and a Blockbuster Class Certification Ruling Seems Less Likely

court-gavelToday, the Supreme Court granted review in what may be a major decision on the standards for class certification, Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146.

Continue Reading Supreme Court to Revisit Class-Certification Standards in Tyson Foods, Inc. v. Bouaphakeo

330px-Supreme_Court_Front_DuskThe Supreme Court will decide before the end of this Term whether to hear any or all of four important cases that raise recurring questions of class action law that have sharply divided the lower courts. These cases address questions that we have blogged about before (e.g., here and here): whether a class full of uninjured members may be certified, and whether plaintiffs may rely on experts and statistics to gloss over individualized differences among class members in order to prove their class claims and damages. These questions strike at the heart of what it means to be a “class,” because class actions generally must be litigated using common evidence to show that each class member has been harmed.

Continue Reading Supreme Court To Decide Whether To Hear Four High-Stakes Cases Asking When A Suit May Be Litigated As A Class Action

A plaintiff hopes to represent a class to pursue two sets of wage-and-hour claims but runs into headwinds in the district court.  First, one set of claims disappears because his legal theory doesn’t withstand a motion to dismiss.  Then class certification is denied on what was left.  After that, the defendant— invoking Rule 68 of the Federal Rules of Civil Procedure—offers to settle “any liability claimed in this action.”  Under Rule 68, if the case goes to judgment and the plaintiff wins less than the offer, he would be liable for the defendant’s costs for any proceedings after the offer was made.

What is to be done?  The plaintiff in Sultan v. Medtronic, Inc. thought that he could simply accept the offer of judgment and associated payment and then proceed as if he hadn’t done so.  Forging ahead with an appeal of the partial dismissal and the denial of class certification, the plaintiff principally relied on a Ninth Circuit decision that permitted a settling plaintiff to appeal because the accepted offer lacked broad language addressing all claims—and in fact, during negotiations in that case, the parties had deleted an explicit reference to class claims.

Sometimes a settlement really is a settlement, however, and the Ninth Circuit held that this was one of those times.  Rejecting the plaintiff’s arguments that the Rule 68 judgment did not moot the class claims because they were not specifically identified in its terms, the court held (in an unpublished opinion) that a settlement of “any liability claimed in this action” was enough to end the entire case.  Along with my colleagues John Zaimes and Ruth Zadikany, I was counsel for Medtronic on this appeal.

Suppose that you’re a trial court considering a motion for class certification.  And suppose that the parties present you with two competing statutory interpretations.  One legal standard permits the case to be adjudicated with common evidence.  And the other standard would require  individualized inquiries.  What should you do?  Should you decide what the law is and then see whether the putative class claims can be tried in a single trial?

The surprising answer of the California Court of Appeal is in Hall v. Rite Aid Corp. (pdf) is “No.”  Hall appears to conclude that commonality and predominance need not be established under the correct substantive legal standards.  Rather, if the plaintiffs propose a legal standard dispensing with individualized inquiries, the very question whether that standard applies is a common issue supporting class certification.

Hall is another decision in a growing series of “suitable seating” cases addressing a California Industrial Welfare Commission Wage Order that requires employers to provide employees with “suitable seats when the nature of the work reasonably permits the use of seats.” The plaintiffs in Hall—cashier-clerks who divided their time between check-out counters, stockrooms, and sales floors—construed the Order to require seats to be provided to every employee for every task where providing seats would be reasonable. In particular, the plaintiffs contended that Rite Aid had a duty to provide a seat to any employee who worked at a check-out counter for any period of time, even if for much of that time the employee would not be able to perform the job while sitting.  Rite Aid, in contrast, contended that the duty to provide a seat depended on the employee’s duties as a whole, so that the Order would not require providing a seat to an employee working at a check-out counter if the employee worked mostly at tasks where seating was inappropriate, or if check-out duties would not allow the employee to sit most of the time.  Thus, under plaintiffs’ legal theory, any failure to have a seat at a check-out counter was a violation requiring no further inquiry, while under Rite Aid’s theory such a failure would violate an employee’s rights only under certain, largely individualized circumstances.

Agreeing with Rite Aid’s view of the substantive law, the trial court decertified a class.  The San Diego-based Court of Appeal reversed.  In its view, the disputed legal elements of the plaintiffs’ claim were themselves common legal issues supporting class certification.  According to that court, deciding exactly what the law required the plaintiff had to prove in common was an impermissible predetermination of the action’s merits, and thus fell afoul of the California Supreme Court’s decision in Brinker Restaurant Corp. v. Superior Court.

True, Brinker had disapproved a “free-floating inquiry into the validity of the complaint’s allegations” at the class certification stage.  Yet the California Supreme Court also recognized that when “legal issues germane to the certification inquiry bear as well on aspects of the merits, a court may properly evaluate them”; indeed, [t]o the extent the propriety of certification depends on disputed threshold factual or legal questions, a court may, and indeed must, resolve them.”

It seems to me that, when one interpretation of a Wage Order would require resolution of myriad individualized issues, and the other interpretation would permit the same issues to be resolved in common, the “propriety of certification” under Brinker would depend on the correct legal standard.  Not so, according to the Hall court, which viewed the very dispute over the legal standard as a common issue supporting class certification.

The Hall opinion would seem to allow a plaintiff to obtain class certification simply by advancing a theory of liability that omits inherently individualized elements such as causation and injury, on the ground that the validity of the plainly erroneous legal theory could be determined on a class-wide basis.  And the Hall approach raises significant unanswered questions.  The opinion suggests that defendants—especially employers whose policies are challenged—should want threshold legal questions to be decided after class certification so that the entire class is bound by the result.  But if class counsel is wrong about the legal theory, and in fact the legality of the employer’s policy depends on individual circumstances, does the entire class lose because the class plaintiff’s overbroad theory fails, even though some or even many class members would have valid claims under the proper, more individualized standard?  That might create adequacy and due process problems, elevating the interests of the class-action lawyers over those of their clients.  But if determination of the legal issue on a class basis instead simply results in decertification of the class, allowing new actions under the correct theory, then it makes no sense to defer the decision as to what, exactly, plaintiffs must prove through common evidence.

The issue surfaced indirectly in the California Supreme Court’s recent unanimous decision in Duran v. US Bank NA (pdf), which we recently discussed.  Duran rejected the use of questionable statistical sampling that swept away individualized issues and defenses in a wage-and-hour class action.  The Court’s evaluation of the class-certification and trial-management issues hinged on a view of the governing law under which an employee’s exempt status under the overtime laws hinged on whether the employee actually spent more than half-time carrying out duties that were exempt (there, sales outside the employer’s facility).  Justice Liu’s concurring opinion suggested a possible legal test—different from the Court’s view—that would turn on the employer’s reasonable expectations about the balance of exempt or nonexempt activity within a particular job classification, not on the employees’ actual work practices. If that test correctly stated the obligation, Justice Liu suggested, the application of the exemption could be determined as a common issue without the need for statistical sampling. Hall raises the troubling possibility that a litigant could seek to avoid individualized issues by restating the governing legal test along the lines of Justice Liu’s concurrence in Duran, and then claim that the choice between Justice Liu’s formulation and the formulation adopted in the Court’s opinion itself was a common issue of law.   In my view, such an approach would be inconsistent with Duran and Brinker.

 

In Duran v. U.S. Bank N.A. (pdf), the California Supreme Court recently addressed an important question in the context of state-court class actions: Can plaintiffs invoke statistical sampling in an attempt to prove class-wide liability and overcome the presence of individual questions that ordinarily would defeat class certification?

The court’s answer to that question is a mixed bag for business. The court firmly rejected the haphazard approach to sampling used by the trial court in the lawsuit against U.S. Bank. But the court left open the troubling possibility that sampling might be used in support of class certification in the future. Continue Reading California Supreme Court Rejects Exceptionally Poor Sampling Method, But Leaves Open Many Questions About Sampling And Class Certification

The Supreme Court makes its biggest headlines when it wades into the biggest issues of the day. But the Supreme Court also maintains a substantial docket of seemingly small—but ultimately important—technical questions.

In recent years, the Court has been particularly interested in defining precisely when an hourly employee is on and off the clock. For example, earlier this term, the Court held in Sandifer v. United States Steel Corp. that employers need not compensate certain workers for time spent donning and doffing safety gear. The Court will answer a related question next term. Yesterday, the Court granted certiorari to decide whether end-of-shift security screenings to prevent theft are compensable time under the Fair Labor Standards Act, as amended by the Portal-to-Portal Act.

Although such screenings may take only a matter of minutes, when aggregated over the course of a two-year limitations period for numerous employees, the damages exposure can be substantial. That explains why a series of nationwide back-pay class actions have been filed in the wake of the Ninth Circuit’s decision that time spent in security screenings must be compensated.

The Supreme Court will now review that decision in Integrity Staffing Solutions, Inc. v. Busk, No. 13-433. The legal issue is whether security screenings are “integral and indispensable” to employees’ “principal activities” or merely “preliminary” or “postliminary” to those activities. Under the Ninth Circuit’s view, security screenings are compensable because the task is necessary to the employees’ work and done for the benefit of the employer. But the Second Circuit has described security procedures as “modern paradigms of the preliminary and postliminary activities described in the Portal-to-Portal Act.”

Integrity Staffing is likely to be among the first cases heard when the Court reconvenes after its summer recess. Until then, expect the wave of related class actions to continue.

In recent years, one of the hottest types of collective actions against employers under the Fair Labor Standards Act (“FLSA”) is what is commonly called a “donning and doffing claim”—a lawsuit for unpaid wages for time employees spent changing clothes for work, such as putting on uniforms, safety gear, and the like. In a recent decision, Sandifer v. United States Steel Corp. (pdf), No. 12-417, the Supreme Court unanimously clarified the rules for these collective actions.

One of the major fights in donning and doffing suits is over the meaning of a key provision of the FLSA that exempts employers from having to compensate employees for off-the-clock “time spent in changing clothes … at the beginning or end of each workday” (29 U.S.C. § 203(o)) if a collective bargaining agreement so provides. Many agreements do exactly that.

Nonetheless, parties have litigated for years over what activities are exempt under Section 203(o). The plaintiffs’ bar typically takes a very narrow view of what constitutes “changing clothes” under the statute. The Court’s decision today takes a far more practical view of the statute. Sandifer makes clear that time spent donning or doffing protective gear that is (1) designed and used to cover the body and (2) commonly regarded as an article of dress—including hard hats, protective jackets, and protective coverings for the arms and legs—is exempt if the employees’ collective bargaining agreement so provides. In addition, minimal time spent putting on or removing other protective gear (such as safety glasses and earplugs) during this time is likewise exempt. Sandifer is therefore likely to reduce the number of circumstances that would allow plaintiffs to succeed in bringing donning-and-doffing lawsuits under the FLSA.

We provide more details about the decision in Sandifer after the jump.
Continue Reading Do Employers Have To Pay Unionized Workers For Time Spent Donning and Doffing Safety Gear? Supreme Court Says No.

Some observers of California wage-and-hour class actions contended that the Brinker v. Superior Court—a key decision we have discussed in the past—had sounded the death knell for class certification in those cases. of California wage and hour class actions. Not so fast, according to the California Courts of Appeal, which have, in four published opinions, reversed four separate trial court orders that had denied certification in wage and hour class action cases:

This recent wave of decisions favoring certification confirms that the California appellate courts have a strong desire to keep these lawsuits afloat. We recently authored an article (PDF) published in the Los Angeles Daily Journal that discusses three of these decisions and addresses their implications for employers and practitioners alike.