Wage-and-hour class actions: The sky is falling (or is it?)

After Brinker and Duran, what lies ahead?

Bryan Schwartz
2012 September

In the dark days of 2011 — and as recently as six months ago — it seemed like all might be lost. The industry of wage-and-hour class litigation had exploded after workers and their lawyers caught wind of early-21st century cases like Bell v. Farmers Ins. Exchange (over $90 million for misclassified claims adjusters), Savaglio v. Wal-Mart ($172 million for missed meal breaks), and SavOn Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 333 (class action is favored mechanism for resolving wage disputes). Now, it seemed on the brink of collapse.

With the end of wage/hour class suits, many of us would need to diversify into other areas of litigation. I saw employment class-action litigators expand into consumer law, begin taking more individual workers’ cases, and try their hands practicing in bankruptcy.

Much worse, workers who count on us in the plaintiffs’ bar to vindicate their rights to fair and lawful wages would be out in the cold, because few of us can afford to offer contingency representation on wage cases worth a few hundred or few thousand dollars, with full fee-shifting on smaller cases uncertain after Chavez v. City of Los Angeles (2010) 47 Cal.4th 970; hourly workers cheated of their pay certainly cannot pay us for services out-of-pocket; and, as California officially recognized with the passage of the Private Attorney General Act of 2004 (PAGA), government agencies are too overburdened to enforce wage and hour laws comprehensively without our help.

During this bleak period, decisions in both the United States Supreme Court and in the California Courts of Appeal seemed to point to one conclusion: judges were getting tired of hearing wage/hour class actions (notwithstanding the extraordinary relief obtained for workers during the last decade of robust private enforcement of wage laws).

In the U.S. Supreme Court, the one-two punch of Stolt-Nielsen v. AnimalFeeds (2010) 130 S.Ct. 1758, and ATT Mobility v. Concepcion (2011) 131 S.Ct. 1740, seemingly reconstituted a 1925 statute, the Federal Arbitration Act (FAA), to empower corporations to sweep away concerted actions by workers asserting wage claims, simply by requiring employees (or applicants) to sign agreements to arbitrate, long before the signers know they will be deprived of lawful wages. Of course, Wal-Mart v. Dukes (2011) 131 S.Ct. 2541, considering the merits of claims at the class certification stage and harping on managers’ discretion as anathema to class litigation, sent a chill down most of our spines.

As of early 2012, in the California Courts of Appeal, the eternally-pending-review Brinker Restaurant Corp. v. Superior Court (2008) 80 Cal.Rptr.3d 781, created the possibility that meal-and-rest period claims would be, almost as a matter of law, inherently too individualized (turning on whether workers voluntarily forego breaks) to permit class-wide adjudication. And anyhow, according to Kirby v. Immoos Fire Protection Svcs (2010) 113 Cal.Rptr.3d 370, employers could recover their attorneys’ fees against our clients if we lost any meal/rest period claim – or even lost a class-certification motion on a meal/rest claim. No reasonable plaintiffs’ lawyer could advise a humble, low-wage client to take such a risk.

Then last winter, sounding what seemed to be the final death knell, the Court of Appeal in Duran v. US Bank (2012) 137 Cal.Rptr.3d 391, sought to eradicate virtually any form of class-wide proof in a wage/hour case, essentially stretching the holding of Wal-Mart v. Dukes to mean that relying on statistical or representative proof in a class action impermissibly denies employers of their due-process right to defend each employee’s wage claims separately.

There’s always tomorrow

I remember well April 12, 2012, because it was the day the sun broke through again on wage/hour class litigation: The long-awaited day the California Supreme Court ruled in Brinker (2012) 53 Cal.4th at 1004. Sure, the Court did not hand us strict liability for premiums where workers work during meal or rest breaks. Ironically, the employer-side spin doctors used this one holding, that employers cannot be liable for premiums by simply failing to police workers to ensure every break is taken, to paint Brinker as a great victory for their team. But those of us in the trenches of wage/ hour class litigation – on both sides – immediately knew differently: That the chief result of Brinker would be to again empower employee advocates in claims where employers, with policies and common practices, refuse to relinquish all control over meal-and-rest periods owed to workers.

And the sun grew brighter still. In rapid succession: Kirby was decided for employees – holding that employers cannot be entitled to fee-shifting merely based on workers’ unsuccessful litigation of meal/rest period claims; then, the California Supreme Court granted the workers’ petition for review in Duran.

In the meantime, during this evolving springtime for wage/hour-class plaintiffs, we began to see that courts were allaying our worst fear – i.e., that Concepcion, Stolt-Nielsen, and Wal-Mart v. Dukes would successfully preclude class litigation of employees’ claims. By April 2012, both the U.S. and California Supreme Courts had denied review of Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, which held post-Concepcion that class waivers in arbitration agreements remain inapplicable to PAGA claims and which did not extend Concepcion to undermine Gentry v. Superior Court (2007) 42 Cal.4th 443 (arbitration class waivers unconscionable in employment context). The Court of Appeal’s April 2012 decision in Samaniego v. Empire Today, LLC (2012) 205 Cal.App.4th 1138, review denied (July 11, 2012), described a virtual laundry list of ways in which arbitration agreements might still be found unconscionable under California law, even after Concepcion, applying Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83. Likewise, Federal Circuit and District Courts repeatedly upheld class certification or reversed certification denial orders, or denied motions to stay court actions and compel individual arbitration of claims, defeating companies’ hope that Concepcion, Stolt-Nielsen and/or Wal-Mart v. Dukes would doom employees’ concerted activity.

On top of these developments, the National Labor Relations Board’s (NLRB’s) progressive D.R. Horton, Inc., 357 N.L.R.B. No. 184 (2012 WL 36274), decision from January 2012 reinvigorates a couple other old statutes – the National Labor Relations Act (NLRA) of 1935, long ignored by all but the pure union lawyers, and the Norris-LaGuardia Act of 1932, 29 U.S.C. §§ 102, et seq., articulating a public policy to protect unorganized workers’ right of association. The NLRB reminded workers’ rights advocates that the protections for employees engaged in concerted activities under Section 7 of the NLRA and association covered by the Norris-LaGuardia Act are valuable outside the union context.

California’s Legislature also enacted new workers’ rights bills, with the “Wage Theft Prevention Act of 2011” (AB 469) (effective January 1, 2012), adding Labor Code section 2810.5, requiring that employers provide non-exempt workers with notice at the time of hire containing extensive information affecting their wages and working conditions, with a host of new civil and criminal penalties for wage violations or any failure to pay a Labor Commissioner judgment (Lab.Code, §§ 200.5, 1197.1, and 1197.2). Moreover, effective January 1, 2013, employees’ commission agreements must be transparent, written contracts.

Now, in the fall of 2012, the once-bleak outlook for wage/hour class-action litigators seems not only more hopeful, but presents a host of new opportunities for plaintiffs’ attorneys.  Next month,  I will discuss in detail five particularly hot battlegrounds in the refreshed struggle for workers’ wages: 1) arbitration class waiver issues post-Concepcion and Stolt-Nielsen; 2) how Wal-Mart v. Dukes is affecting class certification; 3) new challenges and opportunities in misclassification cases where employers claim administrative, professional, and outside sales exemptions; 4) what is the next likely “shoe to drop” from the U.S. Supreme Court’s march to stomp out wage/hour class litigation; and, 5) the implications of Brinker and our battle yet to be won in Duran, to continue allowing courts to be flexible in determining fair and efficient means to hear class-wide proof, through statistical and representative evidence, as has long been permitted under Sav-On.

[Editor’s Note - If you are interested in continuing this article now, the entire piece including the part to be printed next month is available immediately online at www.plaintiffmagazine.com.]

Bryan Schwartz Bryan Schwartz

A smart and tenacious litigator, Bryan Schwartz has represented clients’ interests before a wide range of adjudicative bodies: from the United States District Court, to United States Courts of Appeals; from California Superior Courts to the California Supreme Court; from the Equal Employment Opportunity Commission, to the Merit Systems Protection Board; from the United States Department of Labor, to labor arbitration before the American Arbitration Association and other organizations. Mr. Schwartz has helped many grateful clients get their careers back on track after employer wrongdoing derailed them, obtaining tens of millions in recovery for employees across the country.

Mr. Schwartz’s efforts on behalf of whistleblowers and discrimination victims have been publicized worldwide, from The Washington Post to the Wall Street Journal, from National Public Radio to MSNBC, from Voice of America to India’s Hindustani Times. Mr. Schwartz has developed a niche in Federal employees’ unique claims, and has led multi-plaintiff class and collective actions involving overtime and other wage violations under state and federal laws across the country.

Before founding his own firm in 2009, Mr. Schwartz led the San Francisco, California, office of Nichols Kaster, LLP. Previously, Mr. Schwartz practiced with the Washington, DC-based firm of Passman & Kaplan, PC, and clerked for the Hon. Franklin Van Antwerpen, currently a senior member of the Third Circuit Court of Appeals.

Mr. Schwartz is the Chair of the State Bar of California’s Labor and Employment Law Section, which has over 7500 members. He is immediate past President of FAIR, a non- profit foundation dedicated to increasing diversity in the plaintiffs’ employment Bar and to workers’ rights education, and a member of the Executive Board of the California Employment Lawyers Association (CELA) and the Board of Directors of the Legal Aid at Work (formerly Legal Aid Society – Employment Law Center).

Mr. Schwartz has chaired the Annual Meeting of the Labor and Employment Law Section, and the State Bar’s Advanced Wage and Hour Conference. He helped to initiate CELA’s statewide Employee Justice Fellowship, to aid law students of all backgrounds in entering the practice of representing workers, and CELA’s annual Diversity Summit, by which hundreds of labor and employment lawyers gather to discuss how to create leadership opportunities for diverse attorneys in the field and overcome bias in the profession. Mr. Schwartz appeared as amicus curiae before the California Supreme Court on behalf of CELA in several critical cases, including Brinker Restaurant Corp. v. Superior Court, Kirby v. Immoos Fire Protection, and Duran v. US Bank.

Mr. Schwartz is one of California’s most prolific speakers and authors on employment law subjects. He has presented often to the State Bar, the National Employment Lawyers Association, CELA, and elsewhere, from NPR’s “Your Legal Rights” radio show, to the ABA’s Commission on Disability Rights, to the San Francisco Trial Lawyers Association, to JAMS (the arbitration and mediation provider). His articles have been published in the California Labor and Employment Law Review, Plaintiff Magazine, and other media. The firm’s blog is a resource to jurists, attorneys, and workers nationwide.

As a young man, Mr. Schwartz was elected the International Programming Vice President of the B’nai B’rith Youth Organization and President of Cornell University’s student government. After graduating from Cornell and before law school at the University of California at Berkeley, Mr. Schwartz was a Federal Investigator (bilingual-Spanish) at the U.S. Equal Employment Opportunity Commission, a campaign manager, and a school teacher in Costa Rica. Also a professional photo journalist, Mr. Schwartz has traveled to nearly 50 countries on fi e continents, is the author of Scattered Among the Nations and is President of the non-profit organization, Scattered Among the Nations. Mr. Schwartz is past President of Temple Beth Abraham in Oakland, California.

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