Wage and Hour eLunch A Year in Review

Presented by: Joan B. Tucker Fife

Emilie C. Woodhead

July 14, 2016

Today’s eLunch Presenters

Joan Fife

Partner San Francisco

jfife@winston.com

Emilie Woodhead

Of Counsel Los Angeles

ewoodhead@winston.com

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Topics

• Federal • Department of Labor New Overtime Regulations

• Supreme Court Decisions

• Certification Cases

• Arbitration Agreements And Class Action Waivers • Settlements • California

• New Theories

• PAGA Cure Provision

• Meal Breaks

• Miscellaneous

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Department of Labor New Overtime Regulations

Department of Labor’s Adopted Regulations

• Take effect on December 1, 2016 • Salary standard raised to $913/week, $47,476 annually

• Formerly $445/week, $23,660 annually (last updated in 2004)

• Total annual compensation requirement for highly compensated employees set at annual equivalent of 90th percentile of full-time salaried workers nationally $134,004

• Salary threshold automatically updates every three years at 40th percentile benchmark

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Department of Labor’s Adopted Regulations

• White House believes up to 5 million workers will be affected by new law

• Articles speculate employees converted from salaried to hourly could end up receiving less pay

• Some disappointed level not raised to $50,000 as was originally proposed in 2015

• Non-profits, higher education institutions, and tech start-ups have all publically complained new regulations will have negative impacts

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Supreme Court Decisions

Tyson Foods v. Bouaphakeo 136 S.Ct. 1036 (Mar. 22, 2016)

• Hourly workers at Iowa pork processing plant filed FLSA collective action to collect overtime for time spent donning/doffing and walking to/from work stations

• Plaintiffs won $2,892,378 jury verdict (liquidated damages raised figure to $5,785,757) in Northern District of Iowa

• Tyson appealed, arguing statistical analysis used to reach damages amount was improper

• 8th Circuit affirmed trial court’s decision • U.S. Supreme Court held that statistical evidence could be used for

class certification

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Wal-Mart Stores v. Braun (U.S. Apr. 2016)

• Class of 200,000 Wal-Mart workers who alleged they were denied rest breaks won $188 million jury verdict in 2006 in Pennsylvania state court

• On appeal to Pennsylvania Supreme Court, Wal-Mart argued state court conducted trial by “formula,” which is barred by Dukes

• U.S. Supreme Court denied certiorari in April 2016 • Court may have choosen not to grant cert because of its Tyson

decision

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Certification Cases

Baugh v. CVS Health (E.D. Penn. July 2015)

• Pharmacist brought putative FLSA class action alleging failure to pay OT to pharmacists who “floated” between workplaces

• Plaintiff asked for an extension of the FLSA 2 year statute of limitations to three years because of CVS’s willful conduct

• Court found no evidence of willfulness on CVS’s part, and declined to extend SOL for FLSA claims

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Stiller v. Costco (9th Cir.)

• Appeal currently pending before 9th Circuit • Southern District of California previously decertified class • Original claims stem from allegations that the plaintiffs were not paid

overtime during closing procedures • Plaintiffs argue Southern District erred by not considering all factors of

claims and also gave improper dispositive weight to the size of the proposed class

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Howard v. CVS (9th Cir. Jan. 2016)

• 9th Circuit affirmed 2014 decision denying class status to the plaintiffs • Plaintiffs claimed they were forced to work off-the-clock and were not

properly compensated • 9th Circuit held the plaintiffs failed to produce enough data to back up

claims • Evidence showed wide-ranging differences in time worked by the

plaintiffs

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Moore v. Coty (C.D. Cal. Dec. 2015)

• Plaintiff designed bottle labels for the defendant’s perfume products • Plaintiff alleged violations of FLSA, Cal. Labor Code, and UCL for

failure to pay overtime and meal and rest breaks • Court denied class certification under Rule 23 • Plaintiff failed to show her claims were common to those of the

proposed class, and the plaintiff was an inadequate class representative because she misleadingly double-billed her time

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Arbitration Agreements and Class Action Waivers

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Silver-Greenberg, “Beware the Fine Print,” New York Times, Oct. 31, 2015

• In class actions pushed into arbitration between 2010 and 2014, judges ruled in favor of companies in four out of five cases

• Use of arbitration clauses has become standard across many industries

• Growing concern exists regarding lack of oversight and potential pro-business bias in arbitration

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Lewis v. Epic (7th Cir. May 2016)

• Misclassification suit brought by technical writers • Defendant used arbitration agreement containing class waivers • 7th Circuit held agreements illegal, joining NLRB’s position • Decision disagrees with other circuits • Petition for certiorari to Supreme Court expected

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Cellular Sales of Missouri LLC v. NLRB (8th Cir. June 2016)

• NLRB found Cellular Sales violated NLRA by requiring workers to sign arbitration agreements, precluding class action claims

• 8th Circuit did not enforce NLRB order because it interfered with right to protected activity

• Panel agreed with NLRB’s finding that Cellular Sales violated NLRA by attempting to limit employees’ ability to file charges with the Board

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Robinson v. J & K Admin. (5th Cir. Mar. 2016)

• Texas federal court compelled arbitration to determine if workers could bring class claims for unpaid overtime in arbitration proceeding

• 5th Circuit held a broadly worded arbitration agreement allows arbitrators to decide if class and collective actions are permissible under agreement

• Supreme Court declined review

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Baltazar v. Forever 21 (Cal. S.C. Mar. 2016)

• Plaintiff alleged she faced sexual harassment and harassment based on race and challenged arbitration agreement for including an injunctive relief clause

• California Supreme Court ruled clause was not unconscionable • Court also rejected the plaintiff’s contentions that not attaching model

arbitration rules was unconscionable

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Ling v. P.F. Chang’s China Bistro (Cal. App. 4th Mar. 2016)

• Arbitrator awarded around $240,000 in costs and attorney’s fees to P.F. Chang’s following arbitration where plaintiff partially successful

• Court found arbitrator had exceeded his power because award was contrary to public policy

• Court of Appeal affirmed trial court’s ruling because attorney fees were improper under section 1194 of Cal. Lab. Code

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Harris v. Tap Worldwide (Cal. App. June 2016)

• Plaintiff signed acknowledgment of receipt of arbitration agreement, but did not sign agreement itself

• Plaintiff alleged defendant violated FEHA and wrongfully terminated him

• Defendant moved to compel arbitration • Court of Appeal overturned Superior Court, and compelled arbitration,

even though plaintiff never signed agreement

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Settlements

In Re: Foot Locker Litigation (E.D. Pa. July 2015)

• Five suits consolidated into single MDL involving around 9,500

employees • Litigation began in 2007, class certified in 2011, and in July 2015

cases settled for $7.15 million • Average approximately $750 per employee

• Employees made wide ranging claims from not being compensated for opening and closing to having their time shaved

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Litt v. Western Stone & Metal (N.D. Cal. July

2015)

• $650,000 settlement between jewel retailer and store workers alleging FLSA OT violations • 280 California workers and 1100 workers from other states

• Approximately $1,194 on average for California

• Approximately $287 on average for employees in other states

• Settlement reached before class certified • Western Stone paid various bonuses and incentive pay to nonexempt

employees, but allegedly failed to include value of compensation in regular rate of pay

• Plaintiffs alleged they were not paid required level of OT pay

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Mosqueda v. UniFirst (C.D. Cal Aug. 2015)

• $2.6 Million settlement involving 733 class members

• Approximately $3,500 on average per employee

• Settlement reached before class certified

• Plaintiffs alleged policies involving rounding down time worked, failing to provide appropriate breaks, and failing to pay wages due at termination

• Plaintiffs held diverse positions ranging from truck loader to health physics technician

• Plaintiffs took issue with receiving payment on debit cards, subject to transaction fees

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Sanchez v. Frito-Lay (E.D. Cal. May 2016)

• Plaintiff filed suit on behalf of nonexempt California employees

allegedly subject to policies that denied them OT, compensation for unused vacation, and breaks

• $600,000 settlement denied on the grounds that plaintiff’s counsel, “severely compromised any potential recovery before arriving at the negotiating table”

• Court concerned with unnecessary and unjustified discounting of the plaintiff’s claims

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Taylor v. FedEx Freight (E.D. Cal. May 2016)

• 1,600 California drivers brought state labor law claims alleging

FedEx’s mileage-based payment scheme did not account for non-driving activities

• $3.75 million settlement reached • Approximately $2,343 on average per employee

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Connell v. CVS Pharmacy (Cal. July 2015)

• 1,600 pharmacists brought three separate class actions alleging CVS forced employees to work seven days in a row without overtime

• $7.4 million settlement approved • Class members received on average $2,846

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Bickley v. Schneider National (N.D. Cal. Sept. 2015)

• A certified group of 6,000 truck drivers alleged employer violated state wage and hour laws and failed to provide meal and rest breaks

• Parties reached a $28 million settlement agreement after case had been earlier certified in 2012 • Class members received on average $3,500

• Allegations related to defendant failing to allocate compensation for certain work activities such as paying for all miles driven, not providing meal and rest breaks, and failing to pay accrued vacation

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In Re High Tech Employees (N.D. Cal. Sept. 2016)

• Employees alleged Apple, Google, and other tech firms conspired to depress salaries by 10-15% between 2005-2009

• Class of approximately 64,000 employees certified October 2013 • District Court originally refused to approve $325 million settlement

because it was too low • District Court approved $415 million settlement

• Approximately $5,860 on average per employee

• Plaintiffs’ counsel requested $81 million but awarded $40 million

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Cotter v. Lyft (N.D. Cal. June 2016)

• Court originally rejected $12.25 million settlement because it failed to

properly calculate damages for drivers • Revised deal for $27 million incorporated data from Lyft about proper

mileage reimbursements for drivers • Revised deal preliminarily approved

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O’Connor v. Uber (N.D. Cal. July 2016)

• Agreement to settle two misclassification class actions for up to $100

million • Court refused to initially grant preliminary approval, and instead

requested supplemental briefing to clarify inter alia, how parties conducted calculations

• Supplemental briefing not yet submitted

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California

New Theories??

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PAGA Cure Provision

• Governor Brown signed AB 1506 October 2, 2015 to address increasing PAGA litigation

• Bill took effect immediately • Allows employer 33 days from postmark of notice to cure certain

violations • Only applies to wage statement claims regarding beginning and end

date or name and address violations • Cure is achieved by providing affected employees compliant wage

statements from three years prior to notice and making required changes to future wage statements

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PAGA Cure Provision

• Some hoped cure period would be longer and allow more violations to be curable

• No ability to cure violations involving gross wages earned, total hours worked, piece rate and piece rate units earned, all deductions, net wages earned, and all applicable hourly rates and the number of hours worked at each rate

• Employer can only use cure provision once in 12 month period

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Meal Breaks

• Safeway v. Superior Court of Los Angeles Cty (Sup. Ct. Ca. July 2015), review denied (Oct. 21, 2015) • Employees asserted putative class claims for violations of the Labor Code

involving non-payment for missed meal breaks

• Court permitted uniform record of non-payment to warrant class certification, finding it implausible that thousands of employees never missed a meal break

• Defendants unsuccessfully argued that the plaintiffs did not allege there was a policy of denying meal breaks

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Meal Breaks

• Taco Bell Wage and Hour Actions (E.D. Cal. Mar. 2016) • 134,000 workers alleged several claims including a policy of paying 30

minutes of wages when an employee skipped a meal break

• Fresno jury agreed with employees’ state law claims regarding underpay for missed meal breaks, awarding class $496,000

• Jury denied several other state law claims including failure to provide meal breaks from 2003-2013

• Case on appeal to the 9th Circuit

• Plaintiffs requested $7.3 million in attorney fees

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Miscellaneous

Tip Offsets

• Steele v. Leasing Enterprises (5th Cir. June 2016) • Employees brought FLSA suit because restaurant chain took 3.25% of tips

received via credit card

• District Court and 5th Circuit both found this offset exceeded restaurant’s direct costs to convert tips to cash and ruled for employees

• Court held liquidated damages were not available because restaurant had good faith belief in compliance with FLSA

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Is Document Review “the Practice of Law”?

• A question in recent cases involving contract attorneys performing document reviews and subsequently making claims for OT under FLSA

• Law firms have countered that these attorneys are engaged in practice of law and therefore exempt

• Henig v. Quinn Emanuel (S.D.N.Y. Dec. 2015) • Contract attorneys not eligible for overtime when they solely do document

review because coding documents required professional judgment

• Lola v. Skadden (2d Cir. July 2015) • Document review is not per se practice of law under the FLSA

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Thank You

Joan Fife

Partner San Francisco

jfife@winston.com

Emilie Woodhead

Of Counsel Los Angeles

ewoodhead@winston.com

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