Wage & Hour Defense Blog : Wage & Hour Lawyer & Attorney : Epstein Becker Green Law Firm : DOL Enforcement, FLSA Coverage

By: Douglas Weiner

A faculty comprised of Defense counsel and Plaintiffs’ counsel presented strategic insights to those who gathered at the American Conference Institute’s 9th National Forum on Wage Hour Claims and Class Actions. I had the pleasure of moderating a judicial panel comprised of six federal jurists who offered practitioners key insights from their experience in presiding over cases alleging violation of the Fair Labor Standards Act. In addition to the substantive issues of class and collective action litigation, I took the opportunity to ask the judges what tips they had for wage-hour litigators to make effective presentations in their courtrooms. After a lively discussion, led by the Honorable Roger B. Cosby, the consensus of the members of the judicial panel was that practitioners would benefit from the following points:

1. Know the Judge: Judges are not all the same, so find out as much as you can about the District Judge and Magistrate Judge assigned to your case. 
    
2. Know Opposing Counsel: Attorneys are not all the same either. 
    
3. First Impressions Count: The Initial Conference is often your first opportunity to make an impression on the judge. You want to be viewed as “competent” and “reasonable”. 
    
4. There is More Than One Way to Litigate a Wage Hour case: Litigation does not yield to universal, cookie-cutter strategies. If you are successful in simplifying a complex case for the Judge, you assume the role of Trusted Guide.
    
5. Be the Trusted Guide: Many cases are a jumble of disputed facts, conflicting theories and theories of claims. Judges often look for the one thread that will unravel the whole tangled mess. You want to be the person the Court will look to and trusts to show them how to emerge from the legal morass. Your role in this capacity depends a great deal on how the Court sees you from the outset.
    
6. Settlement Conference Submission: If the judge does not ask for pre-settlement conference submissions, ask for leave to submit a short one, and find out whether the court requires them to be exchanged. You want the settlement judge going into the conference with the notion that the outcome you espouse is the fairer one. 

The judicial panel was comprised of Hon. Donetta W. Ambrose, U.S. District Court, W.D. Pa; Hon. Warren W. Eginton, U.S. District Court, D. Conn.; Hon. Raymond L. Erickson, U.S. District Court, D. Minn., Hon. Roger B. Cosbey, U.S. District Court, N.D. Ind.; Hon. Suzanne H. Segal, U.S. District Court, C.D. Cal.; and Hon. Stephen J. Murphy, III, Eastern District of Mich.

Douglas Weiner is a Senior Trial Counsel in the Labor and Employment practice in the EpsteinBeckerGreen New York office. He has 30 years of federal wage-hour litigation experience with the U.S. Department of Labor. As Senior Trial Attorney for the New York Regional Solicitor's Office, Mr. Weiner was the lead prosecutor on many of the Department’s most significant wage-hour and whistleblower cases, including those pursuant to Sarbanes-Oxley and the Fair Labor Standards Act. Mr. Weiner now represents employers in government audits and defends employers in wage-hour class and collective actions.

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A conflict is brewing in the federal courts over whether a defendant's offer to settle a collective action FLSA case for full relief can moot the case and effectively deprive the court of jurisdiction.  Plaintiff's lawyers view this tactic as a trick aimed at "picking off" class members to avoid a larger suit, while defendants argue that the courts should not be used to stir up litigation once a party's claim has been fully satisfied.  Put simply, why continue a lawsuit once the plaintiff has won everything he or she could collect?

In a recent decision out of North Carolina, a federal judge has waded into this mix by dismissing an overtime case filed against United Mortgage.  The defense counsel sent the attached letter to the plaintiffs' counsel offering to not only fully compensate the named plaintiffs, but to pay any claims submitted with an accompanying affidavit explaining the details of any alleged unpaid work.  The plaintiffs declined the offer and the judge dismissed the case.

The plaintiffs have appealed to the Fourth Circuit, which will no doubt lead to an important appellate decision affecting all FLSA collective actions.  The last time a circuit court weighed in on this issue, the Fifth Circuit held that offers of judgment did not deprive a court of jurisdiction except in very limited circumstances, and greatly limited the use of the technique in obtaining dismissal.  Hopefully, common sense will carry the day and those who would reject a win in favor of running up attorneys fees won't be rewarded.

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by Douglas Weiner

EpsteinBeckerGreen was well represented at the National Advanced Forum on Wage & Hour Claims and Class Actions held in New York City on May 19 and 20. EBG attorney Douglas Weiner addressed the Conference regarding his experience as a former Senior Trial Attorney for the U.S. Department of Labor, identifying emerging trends of Fair Labor Standards Act litigation, and the most expensive mistakes employers make – and how to avoid them. The second day Mr. Weiner moderated a panel of Judges experienced in presiding over wage & hour class actions who gave their insights into effective trial management techniques and settlement strategies. 

Plaintiffs’ counsel, defense counsel, former Department of Labor officials, and seasoned Judges exchanged views on:

• The latest on exemption claims, independent contractor and employee misclassifications, donning and doffing, compensable work, off-the-clock activities and other current areas of wage and hour litigation.
• Plaintiffs’ new targets, including remote access, tip pooling, and where the plaintiff’s bar is particularly active and looking at new opportunities.
• With a new sheriff in town, and the economic stimulus package requiring the payment of Davis-Bacon prevailing wage rates for covered projects, the Department of Labor’s stepped up enforcement of Government contract work.
• Motions for conditional certification, and motions for decertification with a view of recent rulings in current cases.
• Making the call whether to settle early, late or not at all: Evaluating potential exposure, risks of litigation and managing a settlement structure where appropriate.
• Plaintiffs’ counsel expressed their view that wage hour class actions were accelerating “vertically” and “horizontally”. Using California as the epicenter of such litigation, their intent is to drill into industries and business groups that have not yet been targeted, thus expanding class action lawsuits vertically. Horizontally, they expect to give employers throughout the nation the same scrutiny that has resulted in the many large judgments that are reported on a nearly daily basis. 

Defense counsel emphasized the advice EpsteinBeckerGreen gives our clients. Conduct a wage hour self-audit, and ensure compliance with applicable law, to gain the upper hand.

A similar National Forum on Wage & Hour Claims and Class Actions is scheduled to take place in San Francisco in October. We hope to see you there.

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by Michael Kun

How quickly can $87 million go up in smoke?

Pretty darned quickly, especially if you are referring to the $87 million that was awarded to plaintiffs and their attorneys in a tip-pooling class action against Starbucks in San Diego.

In Chau v. Starbucks (CA4/1 D053491 6/2/09), Jou Chau, a former Starbucks barista, brought a class action against Starbucks challenging the Company's policy that permits certain service employees, known as shift supervisors, to share in tips that customers place in a collective tip box.
If you've ever been to a Starbucks, you know exactly where that tip box is. (And if you haven't been to a Starbucks, then you must be new to the country. Welcome.)

Chau alleged the Company's policy violates California's Unfair Competition Law, Bus. & Prof. Code, § 17200, based on a violation of Labor Code section 351. After certifying a class of current and former baristas and conducting a bench trial, the trial court found Chau had proved his claim, and awarded the class $87 million in restitution, plus interest and attorney's fees.

And now it's gone.

Up in smoke that smells vaguely like soy latte.

A California Court of Appeal has overturned the decision, ordering the trial court to enter judgment in Starbuck's favor.

The Court of Appeal concluded that applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes. The Court explained that the trial court's ruling was improperly based on a line of decisions that concerns an employer's authority to require that a tip given to an individual service employee must be shared with other employees. As the Court explained, the policy challenged in Chau presented the flip side of this mandatory tip-pooling practice as it concerned an employer's authority to require equitable allocation of tips placed in a collective tip box for those employees providing service to the customer.

This one can be chalked up as a major victory not just for Starbucks, but for the entire hospitality industry, which has been hit with an epidemic of wage-hour class actions in California. To those who represent employers in these matters, congratulations must go out now only to Starbucks' attorneys, but to Starbucks itself, for holding firm rather than paying an enormous settlement, as plaintiffs surely sought both before and after their trial court victory.

Now we can sit back and wait to see if the California Supreme Court wishes to hear the case, as plaintiff's counsel will certainly request.

While it's always a fool's game to bet on what the California Supreme Court might do, the early read on this case is that it is not a matter that the Supreme Court will have interest in.
 

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Making FLSA collective actions go away quickly just got harder in Texas.  In a recent decision in December 2008, the Fifth Circuit Court of Appeals (with jurisdiction over Texas) significantly limited the availability of a valuable defensive tactic regularly asserted by defendants in FLSA collective actions – the offer of judgment under Federal Rule of Procedure 68. Prior to the Court’s ruling, defendants were often able to reduce their liability under the FLSA by preemptively offering a settlement to class representatives, satisfying theirclaims in full. By doing so, the representative’s claims were deemed moot; and, the representative was unable to proceed in his or her capacity for the class of employees. This principle has been accepted by a wide spectrum of federal courts.

 However, in Sandoz v. Cingular Wireless, 553 F.3d 913 (5th Cir. 2008) the Fifth Circuit determined this approach was available in only limited circumstances. The Court recognized the practice created an “incentive for employers to use Rule 68 as a sword, ‘picking off’ representative plaintiffs and avoiding ever having to face a collective action.” Further, it was acknowledged that the tactic had the potential to “frustrate” the objectives of the FLSA, while sustaining duplicative individual lawsuits under the Act. According to its ruling in Sandoz, a claim would be deemed “moot” only if the representative failed to file a timely motion to certify the class of employees; or, the motion to certify is denied.

While the ultimate consequence of Sandoz has yet been realized by employers, it is certain the offer of judgment tactic in FLSA collective actions has been dealt a serious blow in the Fifth Circuit. 

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Despite the lenient standards for conditionally certifying an FLSA collective action, a federal court in Miami recently ruled that a collective action against a local auto dealership was inappropriate.

First, some background on FLSA collective actions. The Fair Labor Standards Act provides that an action for overtime compensation “may be maintained . . . by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.”  29 U.S.C. § 216(b). The Eleventh Circuit Court of Appeals, which covers Alabama, Florida, and Georgia, has instructed district courts to follow a two-tiered procedure to determine whether plaintiffs are “similarly situated” for purposes of class certification under § 216(b).  At the initial stage, or “notice stage,” the district court’s decision is based only on the pleadings and any affidavits which have been submitted. The second stage of the two-tiered procedure typically occurs at the end of discovery when the matter is ready for trial and defendant has filed a motion for decertification of the class.

In deciding whether to authorize notice at the “notice stage,” the Court should strike a balance between allowing the named plaintiffs to contact potential class members to inform them of their rights, and the prohibition against solicitation of clients and the desire to avoid frivolous claims. One district court explained the rationale for this requirement as follows:

In seeking court-authorized notice, plaintiffs are in effect asking this court to assist in their efforts to locate potential plaintiffs and thereby expand the scope of the litigation. As a matter of sound case management, a court should, before offering such assistance, make a preliminary inquiry as to whether a manageable class exists. Moreover the sending of notice and consent forms to potential plaintiffs implicates concerns in addition to orderly case management. The courts, as well as practicing attorneys, have a responsibility to avoid the “stirring up” of litigation through unwarranted solicitation.

Severetson v. Phillips Beverage Co., 137 F.R.D. 264, 266 (D. Minn. 1991).

The Eleventh Circuit has held that a district court has the authority to enter an order requiring notice to individuals who are “similarly-situated,” but “before determining to exercise such power…the district court should satisfy itself that there are other employees…who desire to ‘opt in’ and who are ‘similarly situated.’” Dybach v. State of Florida Dep’t of Corrections, 942 F.2d 1562, 1567-68 (11th Cir. 1991). A plaintiff must offer “detailed allegations supported by affidavits which successfully engage defendants’ affidavits to the contrary.” Id.  Generalized, unsupported allegations are insufficient to discharge the plaintiff’s burden. Rather, a plaintiff has the burden of demonstrating a reasonable basis for crediting her assertion that aggrieved individuals exist in the proposed class. Rodgers, 2006 U.S. Dist. LEXIS 23272, at *7-8 (citing Haynes v. Singer Co., Inc., 696 F.2d 884, 887 (11th Cir. 1983)). 

Thus, plaintiff or her counsel’s mere belief in the existence of other employees who desire to opt in, and “unsupported expectations that additional plaintiffs will subsequently come forward, are insufficient to justify” certification of a collective action and notice to a potential class. Id.  Moreover, “[c]ertification of a collective action and notice to a potential class is not appropriate to determine whether there are others who desire to join the lawsuit.” Id. (citing Dybach, 942 F.2d at 1567-68). Rather, a plaintiff must show that others desire to opt in before the court can authorize notice. Id. 

When there is a lack of evidence to support a finding that other employees are interested in opting in to the litigation, a court should deny the Plaintiffs’ motion for conditional certification. 

That was exactly the result reached in a recent decision by United States District Court Judge Ursula Ungaro in Galban v. Bill Seidle's Nissan, Inc., Case No. 1:09-cv-20310-uu (S.D. Fla.)  The plaintiffs, former salesmen, alleged in their complaint that they were denied the federal minimum wage based on the dealership's "commission-only" pay plan.  They moved for conditional certification of a class, but failed to demonstrate that any other similarly situated salespeople had an interest in joining the litigation.  Absent such evidence, Judge Ungaro did not hesitate in denying the plaintiffs' motion.

The Galban decision illustrates an important principle of FLSA litigation.  A so-called "collective action" is not a collective action until the court says it is.  And although the standards for certifying a collective action at the initial, "notice" stage are lenient, there are certain minimum requirements that a plaintiff must meet.  It is defense counsel's role to hold plaintiffs to those standards and demonstrate, if possible, that a collective action is inappropriate.  

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