By Gerald L. Maatman, Jr., Zachary J. McCormack, and Emilee N. Crowther
Duane Morris Takeaways: In Wade et al. v. JMJ Enterprises LLC, No. 1:21-CV-506 (M.D.N.C. Sept. 30, 2023), Judge Loretta C. Biggs of the U.S. District Court for the Middle District of North Carolina granted in part Plaintiff’s motion to certify a Rule 23 class involving North Carolina Wage and Hour Act (“NCWHA”) claims by certifying Plaintiffs’ claims for unpaid wages due for training, mandatory meetings, and improper reductions from employee time logs. In addition, Judge Biggs ruled that the Fair Labor Standards Act (“FLSA”) preempted Plaintiff’s claim for failure to pay overtime wages under the NCWHA. In turn, Judge Biggs denied Defendants’ motion to decertify the FLSA collective action claims involving failure to pay overtime wages. This decision provides a good roadmap of the interplay in “hybrid wage & hour lawsuits” relative to the standards for certification of both class actions and collective actions.
Case Background
JMJ Enterprises LLC and owner Traci Johnson Martin (collectively “JMJ”) operate three group homes in Greensboro, North Carolina. The group homes assist children with mental illnesses or emotional disturbances, as well as adults suffering from mental illnesses and developmental issues. The Named Plaintiff, Tiffany Wade (“Ms. Wade”), was employed at Fresh Start Home for Children, one of the three group homes operated by JMJ from February 2021 to April 2021, and alleged she was not fully compensated for her time attending training sessions and mandatory meetings. Specifically, Wade alleged three claims under the FLSA, including failure to pay minimum wages, failure to pay overtime wages, and retaliation. Wade also brought two state law claims against JMJ under the NCWH for failure to pay wages due and failure to pay overtime wages. In her ruling, Judge Biggs issued an order in response to Wade’s motion to certify her class claims pursuant to Rule 23(a) and Rule 23(b)(3) of the Federal Rules of Civil Procedure, and JMJ’s attempt to decertify Wade’s FLSA collective action.
The Court’s Order
State Law Claim Preempted By The FLSA
Wade alleged two state law claims against her former employer under the NCWHA. In the first claim, Ms. Wade alleged JMJ failed to pay wages due pursuant to N.C. Gen. Stat. § 95-25.6 and § 95-25.7. Section 95-25.6 is commonly known as the “payday statute” and requires an employer to pay “all wages and tips accruing to the employee on the regular payday.” See Martinez-Hernandez v. Butterball, LLC, 578 F. Supp. 2d 816, 818, 821 (E.D.N.C. 2008). In the second state law claim, Wade alleged JMJ failed to pay overtime wages pursuant to N.C. Gen. Stat. § 95-25.4.
Judge Biggs concluded that Wade’s second state law claim, the overtime claim, was preempted by the FLSA. The Court reasoned that N.C. Gen. Stat. § 95-25.14 provided an exemption to employees covered under the FLSA. Although arising from the same facts, Wade’s wages due claim did not fall under any NCWHA exemption and was deemed sufficiently separate and distinct from her FLSA claims for minimum wage and overtime wages considering that her theory of liability did not invoke provisions of the FLSA.
Rule 23 Class Certification
Considering Wade’s first state law claim, the wages due claim, the Court ruled that it was not preempted by the FLSA, Judge Biggs focused on whether Ms. Wade could meet her burden to certify a class involving similar NCWHA claims. Ms. Wade, as class representative, sought to establish a class of hourly, non-exempt employees who worked at JMJ with similar wage claims. The Court considered the four prerequisites established in Rule 23, including numerosity, commonality, typicality, and adequacy of representation. Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir. 2003).
The Court agreed with Wade that nearly 100 class members rendered joinder impracticable, therefore satisfying the numerosity requirement. Judge Biggs ruled commonality was achieved through JMJ’s improper time recording and wage policies and practices, which determined compensation for class members. Even though each member had distinguishable circumstances, the Court opined that the heart of the claims was similar, and typicality was met. Regarding adequacy of representation, the Court looked at the resume of L. Michelle Gessner at Gessner Law, PLLC, who was appointed as class counsel. JMJ argued that she could not competently represent this class by pointing to Gessner’s extensive objections during Wade’s depositions (which JMJ contended demonstrated Gessner’s lack of sufficient understanding and control of the case). Judge Biggs rejected this defense position. Relying on Gessner’s 20 plus years of experience practicing labor and employment law, specifically complex wage and hour class and collective action cases, The Court held that she was adequate counsel for purposes of representing the class.
Defendants’ Motion To Decertify The FLSA Collective Action
In order for this FLSA collective cction to proceed to trial, Judge Biggs applied a heightened standard to the “similarly situated” analysis. Wade argued that all employees making up the proposed collective action were paid based on a common policy, had similar roles at JMJ, and worked at one JMJ’s three group homes. The Court agreed that JMJ had common policies and practices with respect to training, mandatory meetings, overtime pay, and employee time logs, which applied to all employees and proved a common resolution of the FLSA claims was possible. Judge Biggs further determined there were sufficient similarities between the employees’ factual allegations and employment settings, and similar circumstances with regard to JMJ’s defenses. Judge Biggs therefore allowed the FLSA collective action to proceed.
Implications For Employers
The ruling in Wade details the burden employers must meet to decertify a FLSA collective action and also the burden for employees to certify a class action in the Fourth Circuit. This is yet another case which details the importance of employers’ obligations to abide by all record-keeping and paperwork requirements in their respective jurisdictions.