Recent developments demonstrate that an employer’s uniform policy of classifying employees as exempt from wage-and-hour laws is insufficient to establish the requirements of class certification.
Recent decisions by both state and federal courts in California provide important guidance to employers that classify broad categories of their employees as exempt from coverage under state and federal wage-and-hour laws. These decisions make clear that an employer’s uniform policy of classifying employees is insufficient to satisfy the requirements of class certification.
Plaintiffs seeking to maintain a class or collective action based on an employer’s alleged misclassification of employees must present evidence common to all class members establishing either a deliberate policy of misclassification by the employer or that classification based on job descriptions alone in fact resulted in widespread misclassification. In either case, plaintiffs must demonstrate that misclassification of the class members was the rule rather than the exception, such that individual differences among employees in this regard are not so significant as to render class treatment improper.
In Arenas v. El Torito Restaurants, Inc., 183 Cal. App. 4th 723 (2010), the California Court of Appeal affirmed a lower court’s denial of certification of a class of restaurant managers who were allegedly misclassified as exempt from California’s overtime wage laws. In doing so, the court rejected the plaintiffs’ contention that the employer’s act of determining the managers’ exempt status based on an assessment of their common job duties prevented the company from claiming that the managers’ jobs were too dissimilar for class treatment. Instead, the court clarified that “the only legally relevant issue” was whether each individual class member’s job functions could enable him/her to be classified as exempt. This was not an issue that was susceptible to common proof because of the differences in job functions between managers at different restaurant locations.
Similarly, in Faulkinbury v. Boyd & Associates, Inc., 2010 WL 2525710 (Jun. 24, 2010) the Court of Appeal affirmed the denial of certification of a class of security guards who alleged that they were denied off-duty meal breaks. Such meal breaks for employees are required under California law, unless the nature of the work prevents the employee from being relieved of all duty. The employer in Faulkinbury implemented a policy requiring all of its security guard employees to take on-duty meal breaks – in effect uniformly classifying them as exempt from the off-duty meal break requirement. However, the fact that each of the security guards worked under very different circumstances made it necessary to consider on an employee-by-employee basis whether the nature of his/her work prevented the employee from being relieved of duty during meals.
At the federal level, the United States District Court for the Southern District of California recently decertified a class in a case in which the court had previously granted certification based primarily on the employer’s classification policy. In Weigele v. FedEx Ground Package System, Inc., 2010 WL 1337031 (Apr. 5, 2010), the court reversed its prior decision in light of the 2009 Ninth Circuit ruling, In re Wells Fargo Home Mortgage Overtime Pay Litigation, 571 F.3d 953 (9th Cir. 2009), which held that when determining the propriety of class treatment, a trial court may not rely on an employer’s uniform classification policy to the “near exclusion of other relevant factors.” See also Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935 (9th Cir. 2009).
The Weigele court interpreted the Ninth Circuit precedent as establishing the “substantially decreased importance” of an employer’s common classification scheme. As such, the plaintiffs, a class of Dock Service managers employed by FedEx, could not present evidence sufficient to show that issues common to the class would predominate over individual issues. The evidence presented did not enable the court to determine that the actual work tasks performed by plaintiffs in the purported class were sufficiently similar. In this regard, the court focused on the absence of any policies stating how Dock Service managers should perform their jobs and balance their responsibilities, or explicitly instructing managers to carry out non-exempt tasks.
While the outcomes of these cases provide protection to employers, they also demonstrate that class actions remain popular among the plaintiffs’ bar, and the risk of class action liability is still very real. Nevertheless, these recent developments make clear that should an employer face class action litigation alleging misclassification of a broad group of employees, the plaintiffs’ burden in establishing uniformity of work sufficient to support class treatment will be quite high.