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The Board’s decision likely will be reviewed by an appellate court since the NLRA allows D.R. Horton to appeal Board decisions in the District of Columbia Circuit, or in any circuit where the unfair labor practice arose or where the company does business.  The decision is almost surely to be challenged on grounds that it is at odds with the United States Supreme Court’s decision in AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011), where the Court held that a California law prohibiting class action waivers in consumer arbitration agreements was preempted by the Federal Arbitration Act, meaning that class action waivers in consumer arbitration agreements may be enforceable.  The Board’s decision also is likely to be challenged based on the fact that it was issued by only two Board members, potentially in violation of the Supreme Court’s decision in New Process Steel v. NLRB.

In D. R. Horton, Inc., 357 NLRB No. 184 (January 3, 2012), a plurality of the Board held that D.R. Horton’s class/collective action waivers in its arbitration agreements - which employees were required to sign as a condition of employment - constituted an unfair labor practice under the National Labor Relations Act. 

This case started innocuously enough, as the charging party alleged that he was misclassified as an exempt employee under the FLSA, and initiated arbitration on behalf of himself and similarly situated employees.  After D.R. Horton asserted that arbitration of collective claims was prohibited under his arbitration agreement, the charging party brought a ULP charge against the company.  With only two members participating in the decision (as the third and only other Board member recused himself), the Board held that D.R. Horton engaged in an unfair labor practice by including waivers of class or collective claims in arbitration agreements that its employees were required to sign. 

The basis for the Board’s plurality opinion is Section 7 of the NLRA, which provides employees with the right “to engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection . . . .”  29 U.S.C. § 157.  “The Board has long held, with uniform judicial approval, that the NLRA protects employees’ ability to join together to pursue workplace grievances, including through litigation,” and “that concerted legal action addressing wages, hours or working conditions is protected by Section 7.”  Thus, D.R. Horton’s mandatory arbitration agreement, which precludes employees from pursuing class or collective claims in any forum (judicial or arbitral) “clearly and expressly bars employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA,” and constitutes an unfair labor practice.

The Board’s decision expressly dealt with the Supreme Court’s ruling in Concepcion, distinguishing that case because it did not involve “the waiver of rights protected by the NLRA or even employment agreements.”  Likewise, the Board noted that Concepcion dealt with a conflict between California state law and federal law (the FAA), which implicated the Supremacy Clause, while the D.R. Horton case addressed alleged conflicts between two federal laws - the NLRA and FAA.  To the extent a conflict does exist between the two federal laws, the Board stated that the FAA would yield to the NLRA and its protections on the right to engage in concerted activity.

While the NLRB usually decides cases involving unionized workforces, this decision based on Section 7 of the NLRA would apply to union and nonunion employees, so long as the employer meets the jurisdictional requirements of the NLRA.

Even the Board’s ruling has some limitations, of which employers should be aware:

• The class waiver prohibition is limited to statutorily defined “employees” under the NLRA, meaning it does not apply to managerial employees or supervisors. 
• Employers may still insist that any arbitration proceedings be on an individual basis “[s]o long as the employer leaves open a judicial forum for class and collective claims.” 
• The Board does acknowledge that a union is still free to collectively bargain away its members’ ability to pursue class or collective claims, just as it may agree to arbitration provisions that waive other actions.  The key is that the union negotiates this, not an employer unilaterally imposing such waivers.

In 2004, plaintiffs in Sepulveda filed suit against Wal-Mart alleging that the company had misclassified its assistant managers as “exempt” under California wage and hour law.  The plaintiffs moved for class certification under Federal Rule of Civil Procedure 23(b)(2), which was denied by the district court on the grounds that Rule 23(b)(2) class treatment was inappropriate because (i) monetary relief was not incidental to injunctive relief and (ii) the duties of the proposed class members were not “susceptible to collective proof.”

In 2008, the Ninth Circuit reversed the denial of Rule 23(b)(2) class certification.  Wal-Mart moved for a re-hearing, which was stayed pending the Supreme Court’s decision in Wal-Mart Stores, Inc.  v. Dukes, et al., which was handed down last June.

Following Dukes, the Ninth Circuit reversed its earlier decision in Sepulveda and affirmed the district court’s denial of class certification.  In doing so, the Sepulveda court recognized that Dukes created two major hurdles for certifications of Rule 23(b)(2) classes.  First, in Dukes, the Supreme Court adopted the “not incidental” test, which forbids Rule 23(b)(2) certification where “monetary relief is not incidental to the injunctive or declaratory relief.”  Second, the Dukes Court held that Rule 23(b)(2) “does not authorize class certification when each class member would be entitled to an individualized award of monetary damages.”

The Sepulveda court thus found that class treatment was inappropriate for two central reasons.  First, fewer than half of the putative class members were currently employed by Wal-Mart and, thus, a majority of the class members could not benefit from injunctive relief.  Second, the damages calculation required a highly individualized proof of each plaintiff’s duties and hours.  Taking this together, the Ninth Circuit held that it was not an abuse of discretion for the district court to find that “the monetary relief sought was not incidental to the injunctive relief sought.” 

In sum, the Sepulveda decision highlights the post-Dukes difficulty that plaintiffs will have certifying class actions pursuant to Rule 23(b)(2), especially with regard to employment cases which often have class members seeking individualized monetary damages.

In Wang, a hybrid FLSA collective action and state-law wage and hour class action case involving employees at a single facility, the district court had granted certification of the class action under both Rule 23(b)(2) and 23(b)(3), and the case then proceeded to trial. The Ninth Circuit, after affirming the certification under Rule 23(b)(2), found it unnecessary to consider the certification under 23(b)(3).  Now, on remand, the Ninth Circuit may consider both the Rule 23(b)(2) and 23(b)(3) certifications.  Indeed, if the Ninth Circuit overrules the Rule 23(b)(2) certification, it will be required to address the 23(b)(3) certification.  Although Wal-Mart v. Dukes did not analyze certification under Rule 23(b)(3), it did analyze Rule 23(a)(2), which is a prerequisite to any certification under Rules 23(b)(2) or 23(b)(3).

At a minimum, the Court’s remand is a signal that its decision in Wal-Mart v. Dukes is not limited to multi-facility Title VII cases or “intent” cases, but also applies to wage and hour cases. It also makes clear that Dukes applies to post-trial reviews. The true impact of Wal-Mart v. Dukes on wage and hour class actions remains to be seen, but it is clear that parties must now wrestle with Dukes in contexts going beyond the facts of the Wal-Mart case.

Along with the two named individuals, the EEOC sought to represent a class of unidentified individuals who allegedly were disabled under the ADA and purportedly had been subjected to UPS’s medical leave policy, which the EEOC claimed violated the ADA by failing to provide leaves of absence longer than 12 months.  The court had already dismissed the EEOC’s original complaint in September 2010, noting that the class allegations in the complaint were “so threadbare, conclusory and formulaic that it does not even allow the court to reasonably infer” that the proposed class members had any basis for the claim.  The EEOC filed an amended complaint that same month, again alleging generally that each unidentified class member was disabled and could perform the essential functions of his or her job with or without reasonable accommodation, but for the application of UPS’s allegedly “inflexible” medical leave policy.  UPS promptly filed another motion to dismiss, arguing that the amended complaint still failed to plead sufficient facts to support its allegations.

The court agreed, finding that the EEOC’s amended complaint used the same “conclusory, formulaic language” with respect to purported class members that was rejected by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).  The court noted that the amended complaint failed to allege “specific facts regarding what the unidentified class members’ disabilities are, the conditions of their termination or leave, or what accommodations would have been suitable for them to return to work.”  Citing EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 777 (7th Cir. 2007), the court explained that the complaint “must provide some specific description of [the protected conduct] beyond the mere fact that it is protected,” and that the allegations must “specifically indicate that the plaintiff is qualified to perform the essential functions of the job with or without reasonable accommodation.”  Although the EEOC argued that its allegations satisfied Twombly because the amended complaint put UPS  on notice of its claims against the company, it supported its argument with cases alleging violations of Title VII of the 1964 Civil Rights Act rather than ADA cases.  The court noted that pleading standards for  alleged Title VII violations (such as sex or race discrimination) were different from those involving alleged ADA violations, which must provide adequate detail of an employee’s qualifications to perform the essential functions of his or her job.

The EEOC also argued that identifying all class members before filing a claim might cause employers to stonewall investigations.  The court rejected this argument, pointing out the “considerable gulf between stating a plausible claim with sufficient detail to provide fair notice and identifying every single potential class member.”  The court also emphasized the EEOC’s obligation to investigate and conciliate claims before suing.  Specifically with respect to the EEOC’s “stonewalling” argument, the court pointed out that the agency also has subpoena power, which “provides a strong antidote to the EEOC’s professed concerns about concealment of relevant information.” Considering the EEOC’s powers and duties, the court noted that the “EEOC both can and should do better in presenting its class allegations so that they set forth in more detail the factual basis for their ADA claims.”

As to the EEOC’s additional argument that it did not have to identify each class member individually because it is exempt from following the requirements for class certification of FRCP Rule 23, the court found that the “EEOC  is not exempt from the standard pleading requirements” of Rule 8 of the Federal Rules of Civil Procedure and the EEOC failed to cite any authority to suggest otherwise.

The court’s decision permits the EEOC to pursue the detailed claims it asserted on behalf of the two named individuals, and gives the EEOC “one final opportunity” to file within 21 days a motion for leave to file a second amended complaint “if it believes that it can cure the pleading defects.”

This decision has significance not just for employers who are under attack by the EEOC for maintaining leave policies under which employees are subject to termination after a set period of time, but also for employers who are facing pattern or practice claims.  The good news is that some trial courts are becoming reluctant to allow the EEOC to pursue nationwide class actions without at least complying with basic pleading requirements applicable to every ADA plaintiff.  On the other hand, employers facing pattern-and-practice investigations should not be surprised if the agency soon gets more aggressive in exercising its broad investigatory and subpoena powers to avoid similar results in the future.

In Pitts v. Terrible Herbst, Inc., Gareth Pitts sued his employer for overtime and minimum wages, asserting a collective action under the Fair Labor Standards Act, a class action under Nevada state wage and hour laws, and a class action for breach of contract.  Before Pitts could move for class certification, the defendant-employer made an offer of judgment pursuant to Fed. R. Civ. P. 68 “to allow judgment to be taken against it in the total amount of $900.00 plus costs and reasonable attorney’s fees.”  Pitts’ claimed damages in the case were only $88.00, but he nonetheless rejected the offer. 

In response, the employer filed a motion to dismiss the case on the grounds that Pitts’ rejection of the offer of judgment mooted the entire case.  The district court disagreed and held that a Rule 68 offer of judgment does not moot a putative class action so long as the class representative can still file a timely motion for class certification.  The district court went on to find that Pitts had failed to timely move for class certification and thus granted the motion to dismiss on other grounds.

On appeal, the Ninth Circuit affirmed the district court’s ruling regarding the effect of a Rule 68 offer of judgment on a yet-to-be-certified class action, holding that “[a] rule allowing a class action to become moot simply because the defendant has sought to buy off the individual private claims of the named plaintiffs before the named plaintiffs have a chance to file for class certification would thus contravene Rule 23’s core concern:  the aggregation of similar, small, but otherwise doomed claims.”  The Court acknowledged that the wage and hour claims at issue in the case were not “inherently transitory” like most claims previously found to be resistant to the mootness doctrine.  Nonetheless, the Court reasoned that “[t]he end result is the same:  a claim transitory by its very nature and one transitory by virtue of the defendant’s litigation strategy share the reality that both claims would evade review.” 

Underlying the Ninth Circuit’s decision was its belief that a “plaintiff who brings a class action presents two separate issues for judicial resolution.  One is the claim on the merits; the other is the claim that he is entitled to represent a class.”  According to the Court, though the offer of judgment may moot the named plaintiff’s claim on the merits, it does nothing to moot the named plaintiff’s right to have a class certified if the requirements of the rules are met.

Though not the focus of this posting, it should be noted that the Ninth Circuit ultimately reversed the district court’s ruling that the named plaintiff had missed the time for filing a motion for certification and thus reinstated the class action.

Could this be true?  After all, Concepcion wasn’t an FLSA or even an employment case.  Two consumers had attempted to bring a class action against a company for fraud and false advertising stemming from the purchase of phone services.  The Supreme Court had snuffed out the consumers’ class claims because they had signed arbitration agreements binding them to bringing actions only in their “individual capacity.”

Now, thanks to a pair of strippers and an operation called Cousin Vinnie’s Back Room, a result has arrived from the first test case since Concepcion of an employer using the class waiver in an arbitration agreement to defend against an FLSA collective action.  The news is good for employers.  In D’Antuono v. Service Road Corp., the federal district court in Connecticut halted a proposed FLSA collective action two months ago because the strippers had signed arbitration agreements containing class waivers.

It wasn’t a knockout blow for employers.  First, the court did not rely on the Concepcion reasoning, per se, to cut short the FLSA collective action.  Concepcion instead served as an influential alternative to the primary reasons.  (The primary reasons were that (a) Connecticut does not have a law rendering class waivers “unconscionable,” and (b) nothing about the class waiver prevented the strippers from vindicating their FLSA rights.)  Second, the court in June 2011 permitted an immediate appeal to the United States Court of Appeals for the Second Circuit (covering Connecticut, New York, and Vermont), so that court will have the final say for the strippers.

But the district court’s opinion is heartening.  The judge, Mark R. Kravtiz, is one of the nation’s most highly regarded, and his 56-page opinion is intellectually robust.  His language strongly suggests that deference to arbitration agreements -- as set forth in the Federal Arbitration Act and discussed in Concepcion -- preempts any argument that that class waivers should be unenforceable.  Among other nuggets, Judge Kravitz wrote:

[T]his Court reads the AT&T Mobility [v. Concepcion] decision as casting significant doubt on virtually any “device or formula” which might be a vehicle for “judicial hostility toward arbitration.”

Tough fights lay ahead as courts throughout the country will grapple with whether Concepcion means employers can exempt themselves from FLSA collective actions (and state wage-hour actions) through an arbitration agreement.  With the help of exotic dancers seeking more than the greenbacks in their garters, the first court to weigh in has come close to saying “yes.”

The plaintiffs sought to certify the class of current and former employees under Rule 23(b)(2) of the Federal Rules of Civil Procedure, which prescribes the rules for class actions seeking injunctive relief rather than money damages.  But, the Supreme Court, in an opinion delivered by Justice Antonin Scalia, held that the certification of the plaintiff class was inconsistent with both Rules 23(a) and 23(b)(2).

Under Rule 23(a)(2), the plaintiffs needed to show that there were “questions of law or fact common to” all of the plaintiff class members.  According to the Court, commonality requires the plaintiffs to demonstrate that the class members have suffered the same injury, which does not mean merely that they have all suffered a violation of the same provision of law.  Rather, “[t]heir claims must depend upon a common contention -- for example, the assertion of discriminatory bias on the part of the same supervisor.”  Slip op. at 9.   

The common contention, moreover, must be “affirmatively demonstrate[d]” because “Rule 23 does not set forth a mere pleading standard.”  Id. at 10.  One way to demonstrate a common contention is by presenting “significant proof that an employer operated under a general policy of discrimination … if the discrimination manifested itself in hiring and promotion practices in the same general fashion, such as through entirely subjective decisionmaking processes.”  Id. at 12-13 (citations and quotations omitted).  However, the Court found that “significant proof” is “entirely absent here.”  Id. at 13.  Although the Court recognized that Wal-Mart had a common “policy” of allowing discretion by local supervisors over employment matters, which can be the basis of Title VII liability under a disparate-impact theory, the mere existence of the policy does not lead to the conclusion that every employee in a company using a system of discretion has such a claim in common.  Rather, the Court found that “[t]o the contrary, left to their own devices most managers in any corporation -- and surely most managers in a corporation [like Wal-Mart] that forbids sex discrimination -- would select sex-neutral, performance-based criteria for hiring and promotion that produced no actionable disparity at all.”  Id. at 15. 

The Court, in a 5-4 decision, thus concluded that, because the plaintiffs failed to identify a common mode of exercising discretion that pervades the entire company, they failed to establish the existence of a common question, and reversed the class certification order.  Justice Ginsburg, joined by Justices Breyer, Sotomayor, and Kagan, dissented from the Rule 23(a) ruling, arguing that the majority blended Rule 23(a)(2)’s commonality requirement with Rule 23(b)(3)’s inquiry into whether common questions “predominate” over individual ones.  Justice Ginsburg added that “[t]he evidence reviewed by the District Court adequately demonstrated that resolving [plaintiffs’ claims of gender discrimination] would necessitate examination of particular policies and practices alleged to affect, adversely and globally, women employed at Wal-Mart’s stores.  Rule 23(a)(2), setting a necessary but not sufficient criterion for class-action certification, demands nothing further.”  Dissenting op. at 8.

The Court also held that the plaintiffs’ claims for backpay were improperly certified under Rule 23(b)(2) because the monetary relief sought was not incidental to injunctive or declaratory relief.  Under Rule 23(b)(2), a class may be certified when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.”  Rather than involving monetary damages that flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief, the Court found that this case would require additional hearings to resolve the disparate merits and scope of each individual’s relief; and that contrary to the Ninth Circuit’s view, Wal-Mart is entitled to individualized determinations of each employee’s eligibility for backpay.  “[A] class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.”  Id. at 27.  The Court thus concluded, in a 9-0 decision, that, “at a minimum, claims for individualized relief (like the backpay at issue here) do not satisfy the Rule.”  Id. at 20.

The case began when AT&T customers Vincent and Liza Concepcion purchased wireless phone service, which advertised the provision of free phones. The Concepcions were not charged for the phones, but they were charged approximately $30 in sales tax. In March 2006, the Concepcions filed a complaint against AT&T in the United States District Court for the Southern District of California. The complaint was later consolidated with a putative class action alleging that AT&T had engaged in false advertising and fraud by charging sales tax for the “free” phones.

The Concepcions’ contract with AT&T contained a standard arbitration provision, which required the Conceptions to pursue their claims against AT&T through arbitration in an individual capacity rather than through a lawsuit as a member of a putative class.  Accordingly, AT&T moved for arbitration in accordance with the contract, but the district court denied AT&T’s motion, relying on Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005), a California Supreme Court decision that held class action waivers in certain consumer contracts were unenforceable as a matter of public policy. This California law was overturned by the Concepcion  ruling.

Writing for the Court, Justice Antonin Scalia said that permitting states to nullify arbitration agreements based on policy judgments frustrates the purpose of the FAA, which was enacted in 1925 “in response to widespread judicial hostility to arbitration agreements.” According to the Court, the FAA was designed to promote arbitration, under the belief that affording parties discretion to design their own arbitration processes − including limiting the availability of class arbitration − advances efficiency and streamlines the resolution of disputes.

While AT&T v. Concepcion was decided in the context of a consumer contract and not an employment agreement, employers should be aware that the ramifications of this case could extend to the employment sphere. Employers should examine their arbitration agreements to ensure that a class action waiver is included, as these types of provisions are more likely to be enforced in light of the Court’s decision.

Eugenia Bright, a cashier at the discount retail chain 99 Cents Only Stores, initiated a class action against her employer in Bright v. 99 Cents Only Stores, 189 Cal. App. 4th 1472 (Cal. Ct. App. 2010), review denied (Feb. 16, 2011). She argued that by failing to provide “suitable seating” to its cashiers, her employer violated provisions of Section 14 of the Industrial Welfare Commission (IWC) Wage Order 7-2001, a seldom used and relatively untested provision that requires employers to provide seating for their employees under certain circumstances. She also sought civil penalties under California’s Private Attorneys General Act of 2004, § 2698 et seq. (“PAGA“).  PAGA permits employees to sue their employers and collect statutory penalties on behalf of all current employees, as well as all former employees who worked for the company within PAGA’s one-year statute of limitations. PAGA penalties consist of $100 for each aggrieved employee for the first violation and $200 per pay period for each aggrieved employee for subsequent violations.  Plaintiff also sought attorneys’ fees, available to plaintiffs who prevail in PAGA actions.

The trial court dismissed the plaintiff’s PAGA claim on the grounds that IWC Wage Order 7-2001 restricts civil penalties to cases in which the employee was underpaid. The California Court of Appeal for the Second Appellate District, however, reversed and reinstated the claim. The appellate court held that because the California Labor Code incorporated the labor conditions set by the IWC, a violation of the suitable seating requirement is a violation of the California Labor Code. Thus, the court concluded that employees can recover monetary damages under PAGA when employers do not comply with IWC Wage Order requirements, including, without limitation, the suitable seating requirement. 

Moreover, the 99 Cents Only Stores decision makes clear that penalties under PAGA are available even when the employers’ violations do not result in lost wages. While actions filed thus far concern compliance with seating requirements provided for in the state’s wage orders, arguably the analysis may apply to any minor violation of California’s wage orders including a violation of an employer’s obligation to provide lockers and changing rooms, display clocks in major work areas, and maintain bathrooms at certain temperatures. 

Since this decision, a wave of class action suits have been filed against retail employers with operations in California for alleged “suitable seating” violations. While they have not yet been targeted by the Plaintiffs’ bar, other California employers such as restaurants and manufacturers may become future targets for these types of claims and should take steps to ensure compliance with these and other provisions found in California wage orders.

Plaintiff Villacres was a class member in a prior class action, in which the plaintiffs asserted various wage and hour claims against ABM, but did not include a claim for civil penalties under California’s Private Attorneys General Act (“PAGA”).  That said, a part of the settlement proceeds were allocated to cover civil and statutory penalties.  The court approved the settlement, and the case was dismissed.  Villacres neither opted-out of nor objected to the settlement.  Two days after the court’s dismissal, Plaintiff Villacres filed a new lawsuit against ABM, seeking PAGA penalties arising from claims settled in the prior action.  The trial court granted summary judgment to ABM finding that Villacres’s claims were barred by res judicata, and the appellate court affirmed this decision.  

The take-away from this decision is that employers should be able to protect themselves from successive lawsuits asserting claims that are covered by a prior class action settlement agreement.  Accordingly, employers should pay close attention to the scope and content of the general or specific releases in their class action settlement agreements.
 

In its now-vacated July 2010 decision, Cappuccitti v. DirecTV, Inc., 611 F.3d 1252 (11th Cir. 2010) (“Cappuccitti I”), the Eleventh Circuit had held that, in addition to satisfying CAFA’s aggregate $5,000,000 amount in controversy requirement, at least one class plaintiff must satisfy the general diversity statute’s $75,000 amount in controversy requirement.  Otherwise, reasoned the Court, federal courts would transform into “small claims courts, where plaintiffs could bring five-dollar claims by alleging gargantuan class sizes to meet the $5,000,000 aggregate amount requirement.” 

The Cappuccitti plaintiffs sought to recover early termination fees from DirecTV that amounted to no more than $480 each and, thus, not a single plaintiff was able to satisfy the $75,000 amount in controversy requirement.  For that reason, the Eleven Circuit ordered that the case be dismissed for lack of subject matter jurisdiction.  The Eleventh Circuit’s decision would have forced many class actions to state court considering that a large number of class actions do not have a single plaintiff that can meet the $75,000 in damages requirement.  The decision drew heavy criticism from academia, legal commentators, and even courts.  One California federal district court referred to Cappuccitti as “misguided in both [its] reasoning and result.”  In re DirecTV Early Cancellation Litigation, 2010 WL 3633079, at *10 (C.D. Cal. 2010).    

The Eleventh circuit has now vacated its original decision and issued a replacement decision on October 15, 2010, Cappuccitti v. DirecTV, Inc., --- F.3d ----, 2010 WL 4027719 (11th Cir. 2010) (“Cappuccitti II”).  Reversing course, Cappuccitti II unambiguously held that “[t]here is no requirement in a class action brought originally or on removal under CAFA that any individual plaintiff's claim exceed $75,000.”  Accordingly, the Court held that plaintiffs had met CAFA’s jurisdictional requirements.

The lawsuit was filed in 2007 under the Fair Labor Standards Act on behalf of approximately 3,000 current and former employees.  The Court conditionally certified the class, and approximately 330 employees opted in to the class.  After the close of discovery, Farmers Pride sought decertification of the class, arguing that the variations in compensation practices and pre- and post-shift activities during the limitations period, in addition to the inconsistencies in class member testimony on those issues, made collective action treatment unworkable and unfair to Farmers Pride.  Specifically, under the compensation system applicable to most class members, the amount of additional time that Farmers Pride paid employees for donning- and doffing-related activities varied widely by employees’ shift and department and over time.   

Notwithstanding the substantial briefing offered by the parties, the Court decided to take a closer look at the evidence and held a two-day evidentiary hearing where each side was given a full day to present witnesses and exhibits focused on the decertification issue.  The Court’s opinion granting Farmers Pride’s decertification motion relied on both the evidentiary hearing testimony and the other evidence submitted by the parties during the briefing process.

In ordering decertification, the Court found that there was no uniform, class-wide method for Plaintiffs to prove that Farmers Pride’s compensation system was uniformly inadequate:

“The evidence submitted indicated that there may be some hourly production workers who have legitimate claims of undercompensation for time spent donning and doffing, and some who may not; the evidence does not demonstrate, however, that the question of undercompensation can be answered in [a] manner common to all plaintiffs.”

The Court thus found that the absence of common proof made proceeding collectively unfair because, if tried on a collective basis, a verdict for the plaintiffs would make the company liable to the entire class even though it may have fully paid many members of the class.  

The Court also gave serious weight to the fact that the class members offered discovery responses and deposition testimony that were “plagued with inconsistencies,” which in turn showed “the importance of cross-examination of each plaintiff” as opposed to allowing the Plaintiffs to prove their claim through supposedly “representative” testimony.

In decertifying the class, the Court noted that, in light of the remedial purposes of the FLSA, it would give Plaintiffs two weeks to propose an alternative class consisting of a “more precisely defined and smaller group,” but only “if plaintiffs can establish that the record warrants a collective action as to that group.”  However, the Court was clear that any such proposal must take into account the Court’s findings on the evidence before it and must credit the evidence and testimony presented by defendant, which the Court considered credible and reliable.   

Hunton & Williams attorneys Michael Mueller and Ryan Glasgow, along with Jill Welch from Barley Snyder, represent Farmers Pride in the federal action, as well as a companion case pending in Pennsylvania state court.