Gerald L. Maatman, Jr. – Page 2 – Class Action Defense

March 27, 2024 by Gerald L. Maatman, Jr.

California Court Of Appeal Deems Attorneys’ Fees And Costs Awards To Prevailing Plaintiffs Mandatory On Overtime And Minimum Wage Claims

By Eden E. Anderson and Gerald L. Maatman, Jr.

Duane Morris Takeaways: On March 25, 2024, the California Court of Appeal for the Second District held in Gramajo v. Joe’s Pizza on Sunset, Inc., Case Nos. B322992/B323024 (Cal. App. Mar. 25, 2024), that awards of attorneys’ fees and costs to prevailing plaintiffs in actions for unpaid minimum or overtime wages are mandatory. Consequently, a trial court lacks discretion to deny fees and costs recovery, even when a plaintiff engages in bad faith litigation tactics and recovers a negligible amount. On a bright note, mandatory fee and cost awards must still be reasonable, and a trial court retains discretion to reduce the amount sought if it is unreasonable.

Case Background

Elinton Gramajo worked as a pizza delivery driver. He sued his employer for failing to pay him minimum and overtime wages, failing to provide meal and rest breaks, failing to reimburse business expenses, and other related claims. He sought a total recovery of $26,159.23. Coincidentally, that amount was just above the $25,000 jurisdictional threshold for an unlimited civil proceeding. After four years of litigation, the case proceeded to trial. A jury found in Gramajo’s favor, but only on his claims for unpaid minimum and overtime wages. The jury awarded him just $7,659.63.

Gramajo then sought to recover a whopping $296,920 in attorneys’ fees, and $26,932.84 in costs. The trial court denied any recovery. It found that Gramajo acted in bad faith by artificially inflating his damages claim to justify filing the case as an unlimited civil proceeding. As evidence of bad faith, the trial court highlighted that, although Gramajo sought $10,822.16 in unreimbursed expenses, he submitted no evidence at trial to support that claim. He also alleged an equitable claim for injunctive relief, but then never pursued that claim. Additionally, the trial court found that the case had been “severely over litigated” with Gramajo noticing 14 depositions and serving 15 sets of written discovery requests, while ultimately using just 12 exhibits at trial. Id. at 4.

The trial court’s denial of Gramajo’s motion for fees and costs was premised upon § 1033(a) of the California Code of Civil Procedure, which vests discretion in a trial court to deny attorneys’ fees and costs recovery when a plaintiff recovers less than the $25,000 jurisdictional minimum for an unlimited civil case. Gramajo appealed.

The Court of Appeal’s Decision

On appeal, the California Court of Appeal for the Second District reversed.

It held that § 1194(a) of the California Labor Code applied, and not § 1033(a) of the Code of Civil Procedure. Section 1194(a) of the Labor Code provides than a plaintiff who prevails in an action for unpaid minimum or overtime wages “is entitled to recover in a civil action . . . reasonable attorneys’ fees, and costs of suit.” The Court of Appeal reasoned that § 1194(a) mandates a fee award to a prevailing plaintiff who alleges unpaid minimum and/or overtime wages, and that it was more specific than § 1033(a) of the Code of Civil Procedure, and more recently enacted.

On a bright note, the Court of Appeal cautioned that its reversal “should not be read as license for attorneys litigating minimum and overtime wages cases to over-file their cases or request unreasonable and excessive cost awards free of consequence” and that § 1194(a) mandates only the recovery of a “reasonable fee and cost award.” Id. at 15. While remanding that issue to the trial court, the Court of Appeal highlighted an example of a fee award it deemed reasonable. It noted that, in Harrington v. Payroll Entertainment Services, Inc., 160 Cal.App.4th 590 (2008), the plaintiff recovered just $10,500 in unpaid overtime wages and was awarded attorneys’ fees of just $500.

Implications Of The Decision

While it is an unfortunate outcome that attorneys’ fees and costs awards in overtime and minimum wage cases are mandatory to a prevailing plaintiff, and not entirely discretionary, the silver lining in Gramajo is that a trial court at least retains discretion to award only what is reasonable.

March 18, 2024 by Gerald L. Maatman, Jr.

Texas Federal Court Strikes Down NLRB’s 2023 Joint Employer Rule

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Emilee N. Crowther

Duane Morris Takeaways: In Chamber of Commerce of the U.S.A. et al. v. NLRB et al., No. 6:23-CV-00553, 2024 WL 1045231 (E.D. Tex. Mar. 8, 2024), Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas granted the Plaintiffs motion for summary judgment and denied the Defendants cross-motion for summary judgment. Under the NLRB’s 2023 joint employer rule, even companies who exercise just “indirect control” over the employees of another entity could be considered a joint employer under federal labor laws. The Court held that the NLRB’s 2023 joint employer rule did not provide a meaningful two-part test to determine joint employer status, and that the NLRB’s reason for rescinding the 2020 Rule was arbitrary and capricious. Accordingly, the Court vacated the 2023 Rule and reinstated the 2020 Rule.

This ruling is a huge win for businesses, as it reinstates the 2020 Rule’s heightened “substantial direct and immediate control” standard for determining joint-employer status.

Case Background

In 2020, the NLRB issued a joint-employer final rule, providing that an entity “is a joint employer of a separate employer’s employees only if the two employers share or codetermine the employees’ essential terms and conditions of employment” (the “2020 Rule”). Id. at 12 (quoting 29 C.F.R. § 103.40(a) (2020)). Under the 2020 Rule, a company is a joint employer when it exercises “substantial direct and immediate control” over one or more of the following “essential terms or conditions of employment” – “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.” Id. at 12-13 (quoting 29 C.F.R. § 103.40(a), (c)(1) (2020)).

In 2023, the NLRB rescinded the 2020 Rule and enacted a new joint-employer final rule (the “2023 Rule”). Id. at 14. The 2023 Rule defined a joint employer as an entity that exercised “reserved control” or “indirect control” over one of seven terms and conditions of employment, including: “(1) work rules and directions governing the manner, means, and methods of the performance, and (2) working conditions related to the safety and health of employees.” Id. (29 C.F.R. § 103.40(d)-(e)).

In 2023, Plaintiffs sued the Defendants, challenging the 2023 Rule on two grounds: (i) that it is inconsistent with the common law; and (ii) that it is arbitrary and capricious. Id. at 14-15.

In response, the Defendants cross-moved for summary judgment on the Plaintiffs claims, alleging that the 2023 Rule was based on, and is governed by, common law principles, that it is not arbitrary and capricious, and that the Board acted lawfully in rescinding the 2020 Rule. Id. at 20.

The Court’s Decision

The Court granted the Plaintiffs motion for summary judgment, and denied Defendants cross-motion for summary judgment, thereby “vacating the 2023 Rule, both insofar as [the 2023 Rule] rescind[ed] the [2020 Rule] and insofar as it promulgate[d] a new version of [the 2020 Rule].” Id. at 30.

First, the Court focused on the main dispute between the parties, i.e., whether the 2023 Rule had a meaningful two-step test to determine an entity’s joint employer status, or the 2023 Rule only had one step for all practical purposes. Id. at 20-21. The Defendants argued that the 2023 Rule’s joint-employer injury had the following steps: (i) “an entity must qualify as a common-law employer of the disputed employees”; and (ii) “only if the entity is a common-law employer, then it must also have control over one or more essential terms and conditions of employment.” Id. The Court disagreed, finding that “an entity satisfying step one, along with some other entity doing so, will always satisfy step two,” since “an employer of a worker under the common law of agency must have the power to control ‘the material details of how the work is to be performed,” and the Defendants proposed step two included “work rules and directions governing the manner, means and methods of the performance of duties.” Id. at 22-23 (internal citations omitted).

The Court then analyzed whether the Board lawfully rescinded the 2020 Rule. It opined that “to survive arbitrary-and-capricious review, agency action must be ‘reasonable and reasonably explained.” Id. at 28-29. The Court held that the Board did not provide a “reasonable or reasonably explained” purpose for rescinding the 2020 Rule, and therefore, its recension was arbitrary and capricious. Id. at 29. Since “vacatur of an agency action is the default rule” in the Fifth Circuit when such rule “is found to be discordant with the law or arbitrary and capricious”, the Court vacated the 2023 Rule. Id. at 30.

Implications For Employers

The Court’s vacatur of the 2023 Rule in Chamber of Commerce of USA et al. v. NLRB et al. is an important victory for employers. The 2023 Rule would have made “virtually every entity that contracts for labor . . . a joint employer.” Id. at 25. Moreover, the 2020 Rule, in addition to imposing the heightened “substantial direct and immediate control standard,” provides integral guidance for what actions are considered joint, and what actions are not. The Court’s decision to reinstate the 2020 Rule, therefore, is also a significant win for employers.

March 16, 2024 by Gerald L. Maatman, Jr.

Sixth Circuit Is First to Weigh In On Pizza Driver Mileage Reimbursement Battle And Rejects DOL Interpretation

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown

Duane Morris Takeaways: On March 12, 2024, in Parker v. Battle Creek Pizza, Inc. No. 22-2119 (6th Cir. Mar. 12, 2024), a three-judge panel of the Sixth Circuit addressed the issue of what standard applies for calculating reimbursements of vehicle expenses owed under the FLSA to delivery drivers who use their own vehicles for their jobs. The consolidated appeal arose from dueling opinions of U.S. District Courts in Michigan and Ohio on the same issue.

The Sixth Circuit concluded that neither the IRS standard mileage rate (the approach of the court in Michigan), nor an employer’s “reasonable approximation” of vehicle costs (the approach of the court in Ohio), satisfies an employer’s minimum wage obligations under the FLSA. The Sixth Circuit vacated the district court opinions and sent the cases back to their respective courts for further proceedings on remand. The Sixth Circuit’s decision is essential reading for all businesses with delivery drivers, particularly those defending minimum wage claims involving drivers’ expenses, a hot-button litigation issue percolating in courts across the country.

Case Background

To set the stage, the FLSA requires payment of the minimum wage (currently $7.25 an hour) to employees “free and clear.” In the U.S. Department of Labor regulations interpreting the statute, 29 C.F.R. § 531.35 states that employers cannot shift business expenses to their employees if doing so causes the employees’ wages to drop below the minimum wage. In another section of the FLSA regulations, the DOL addresses how to calculate an employee’s “regular rate of pay” for overtime calculations when the employer reimburses an employee’s business expenses. In that regulation at 29 C.F.R. § 778.217(c), the DOL says employers may “reasonably approximate” the amount of the expenses to be reimbursed. The DOL regulations say nothing, however, about how to calculate such an approximation, and whether the analysis applies to wages owed other than overtime wages.

The district court in Parker v. Battle Creek Pizza, Inc., 20-CV-00277 (W.D. Mich. Apr. 28, 2022), held that use of the IRS mileage rate satisfied the FLSA. The court deferred to the DOL’s Field Operations Handbook, the internal manual that guides investigators for the Wage and Hour Division. In the Field Operations Handbook. The DOL takes the enforcement position at § 30c15(a) that employers may, in lieu of reimbursing an employee’s actual expenses, use the IRS standard business mileage rate to determine the amount of reimbursement owed to employees for FLSA purposes. By contrast, the district court in Bradford v. Team Pizza, Inc., 20-CV-00060 (S.D. Ohio Oct. 19, 2021), rejected the IRS mileage rate in favor of an employer’s “reasonable approximation” of the drivers’ expenses.

The IRS standard business mileage rate, currently $.67 a mile, is intended to represent gasoline, depreciation, maintenance, repair and other fees pertaining to vehicle upkeep. Employers’ “reasonable approximation” of an employee’s costs in using their personal vehicles to perform work typically is lower than the IRS rate.

The Sixth Circuit’s Ruling

The Sixth Circuit highlighted the basic requirement of the FLSA to pay employees at least the minimum wage for hours worked. As the Sixth Circuit stated, when an employee’s hourly wage is the minimum $7.25 an hour, any underpayment of the employee for costs they expended to benefit the employer necessarily causes them to receive less than the minimum wage.

Although it acknowledged the difficulty of calculating vehicle expenses on an employee-by-employee basis, the Sixth Circuit reasoned that any “approximation” of an employee’s personal vehicle costs — whether it be the employer’s own calculation or the IRS’s standard business mileage rate — is contrary to the FLSA where it results in an employee receiving less than the minimum wage.

The Sixth Circuit declined to defer to the DOL’s interpretation in the FLSA regulations or the agency’s Field Operations Handbook. It emphasized that the FLSA regulation supporting the “reasonable approximation” method — 29 C.F.R. § 778.217(c) — addressed overtime calculations, not minimum wage. The Sixth Circuit also found use of the IRS standard business mileage rate to be fatally flawed. As it explained, the IRS’s rate, though more generous in application than the “reasonable approximation” method, disfavors high-mileage drivers like delivery drivers and fails to account for regional and other differences inherent in maintaining a vehicle. Id. at 6.

The Sixth Circuit did not announce a new standard to replace the two approaches it rejected. However, it offered a three-part framework for the district courts to consider on remand. Similar to the burden-shifting framework in Title VII disparate treatment cases, the Sixth Circuit suggested that an FLSA plaintiff might present prima facie proof that a reimbursement was inadequate. The employer would then bear the burden to show that the amount it reimbursed bore a reasonable relationship to the employee’s actual costs. The plaintiff would have an opportunity to attack the employer’s reasoning while bearing the ultimate burden to prove failure to receive minimum wages.

Implications For Employers

Although the Sixth Circuit’s ruling in Parker is binding only on federal courts in Ohio, Michigan, Tennessee and Kentucky, the opinion may prompt courts around the country to reconsider reliance on the DOL’s “reasonable approximation” standard and the IRS’s standard business mileage rate when evaluating minimum wage claims of delivery drivers. Considering that FLSA claims asserting underpayment for vehicle expenses already is a favorite topic of the plaintiffs’ class action bar, we expect the opinion to unleash a flood of new lawsuits in this area. All businesses with delivery drivers ought to keep a close watch on how the Michigan and Ohio district courts apply the Sixth Circuit’s ruling on remand.

A silver lining in the decision may well be the notion that as calculating the appropriateness of reimbursement is required on a driver-by-driver basis, such claims seem difficult to ever certify.

The opinion in Parker is also significant in light of the Supreme Court’s forthcoming ruling on the viability of the Chevron doctrine, the framework in which courts generally defer to agencies’ interpretation of federal statutes. In rejecting the DOL’s interpretation of the FLSA, the reasoning in Parker may be a harbinger of future rulings under the FLSA and a panoply of other statutory schemes if the Supreme Court abandons Chevron deference.

March 14, 2024 by Gerald L. Maatman, Jr.

The Duane Morris Private Attorneys General Act Review – 2024

By Gerald L. Maatman, Jr., Jennifer A. Riley, Brandon Spurlock, and Shireen Wetmore

Duane Morris Takeaways: One law making California so different – and so challenging – for employers is the Private Attorneys General Act (“PAGA”), which authorizes employees to assert claims for alleged labor violations. Such a worker acts as “a private attorney general” to pursue civil penalties against an employer as if they were an arm of the State of its agencies. PAGA claims are not class actions per se – instead, they are known as “representative actions – but they pose analogous risks and exposures like class actions brought under the California Labor Code. Plaintiffs bring thousands of PAGA cases every year, and, because PAGA plaintiffs can bring suit on behalf themselves and other employees, the stakes are often significant, with companies exposed to risks similar to those arising from class action litigation. The PAGA, however, has its own specific rules of the road, which differ from the rules elucidated in familiar Rule 23 jurisprudence. The explosion of PAGA litigation has resulted in a complex body of case law that is often difficult to navigate, particularly in terms of the application of arbitration agreements and representative action waivers. Given the wide adoption of such arbitration agreements, companies are struggling to grasp how recent decisions regarding the PAGA and arbitration impact their businesses.

To that end, the class action team at Duane Morris is pleased to present this year’s edition of the Private Attorneys General Act Review – 2024. We hope it will demystify some of the complexities of PAGA litigation and keep corporate counsel updated on the ever-evolving nuances of these issues. We hope this book – manifesting the collective experience and expertise of our class action defense group – will assist our clients by identifying developing trends in the case law and offering practical approaches in dealing with PAGA litigation.

Click here to download a copy Duane Morris Private Attorneys General Act Review – 2024 eBook.

Stay tuned for more PAGA class action analysis coming soon on our weekly podcast, the Class Action Weekly Wire.

March 12, 2024 by Gerald L. Maatman, Jr.

The EEOC’s 2023 Annual Performance Report Touts A Record $665 Million In Worker Recoveries

By Gerald L. Maatman, Jr., Alex W. Karasik, and Christian J. Palacios

Duane Morris Takeaways: On March 11, 2024, the EEOC published its Fiscal Year 2023 Annual Performance Report (FY 2023 APR), highlighting the Commission’s accomplishments for the previous year, including a record-breaking recovery of $665 million in monetary relief for over 22,000 workers, a near 30% increase for workers over Fiscal Year 2022.

Employers should take note of the Commission’s annual report, as it provides invaluable insight into the EEOC’s regulatory priorities, and highlights the significant degree of financial risk that companies face for failing to comply with federal anti-discrimination laws. It is a must read for corporate counsel, HR professional, and business leaders.

FY 2023 Statistical Highlights

The EEOC’s recovery of $665 million in monetary relief over the past fiscal year represents an increase of 29.5% compared to Fiscal Year 2022. Specifically, the Commission secured approximately $440.5 million for 15,143 workers in the private sector and state and local governments and another $204 million for 5,943 federal employees and applicants.

Furthermore, the Commission reported having one of the most litigious years in recent memory, with 142 new lawsuits filed, marking a 50% increase from Fiscal Year 2022. Among these new lawsuits, 86 were filed on behalf of individuals, 32 were non-systemic suits involving multiple victims, and 25 were systemic suits addressing discriminatory policies or affecting multiple victims. These numbers show an agency flexing its litigation muscles.

The EEOC’s drastic increase in filings was accompanied by a corresponding increase in complaint activity, with 81,055 new discrimination charges received, 233,704 inquiries handled in field offices, and over 522,000 calls from the public, thereby demonstrating the efficacy of the Commission’s outreach and public education efforts.

Other performance highlights from the report included obtaining more than $22.6 million for 968 individuals in litigation, while resolving 98 lawsuits and achieving favorable results in 91% of all federal district court resolutions. The Commission further reduced its private and federal sector inventories by record levels.

Strategic Developments / Systemic Litigation

The Commission also reported significant progress in its “priority areas” for 2023, which included combatting systemic discrimination, preventing workplace harassment, advancing racial justice, remedying retaliation, advancing pay equity, promoting diversity, equity, inclusion and accessibility (“DEIA”) in the workplace, and, significantly, embracing the use of technology, including artificial intelligence, machine learning, and other automated systems in employment decisions.

In 2023, the EEOC resolved over 370 systemic investigations on the merits, resulting in over $29 million in monetary benefits for victims of discrimination. The Commission also reported that its litigation program achieved a 100% success rate in its systemic case resolutions, obtaining over $11 million for 806 systemic discrimination victims, as well as substantial equitable relief. Further, the Commission made outreach and education programs a priority in 2023, and specifically sought to reach vulnerable workers and underserved communities, including immigrant and farmworker communities, hosting over 680 events for these groups and partnering with over 1,120 organizations, reaching over 107,000 attendees.

Other Notable Developments

Beyond touting its monetary successes, and litigation accomplishments, the FY 2023 APR also highlights the newly enacted Pregnant Workers Fairness Act (“PWFA”), which provides workers with limitations related to pregnancy, childbirth, or related medical conditions the ability to obtain reasonable accommodations, absent undue hardship to the employer.

The Commission began accepting PWFA charges on June 27, 2023 (the law’s effective date) and has conducted broad public outreach relating to employers’ compliance obligations under the new law.

Takeaways For Employers

The EEOC’s Report is akin to a litigation scorecard. By all accounts, 2023 was a record-breaking year for the EEOC. As demonstrated in the report, the Commission has pursued an increasingly aggressive and ambitious litigation strategy to achieve its regulatory goals, and had a great deal of success in obtaining financially significant monetary awards. Employers should take note of these trends and be proactive in implementing risk-mitigation strategies and EEOC-compliant policies.

We anticipate that the EEOC will continue to aggressively pursue its strategic priority areas in 2024, which could shape out to be another precedent-setting year. We will continue to track EEOC litigation activity, and look forward to providing our blog readers with up-to-date analysis on the latest developments.

March 7, 2024 by Gerald L. Maatman, Jr.

Announcing The Launch Of The Duane Morris Discrimination Class Action Review – 2024!

By Gerald L. Maatman, Jr. and Jennifer A. Riley

Duane Morris Takeaways: Legal compliance to prevent discrimination is a corporate imperative. Companies and business executives operate in the court of public opinion and workplace inequality continues to grab headlines and remains forefront in the public eye. In this environment, employers can expect discrimination class actions to reach even greater heights in 2024. To that end, the class action team at Duane Morris is pleased to present the inaugural edition of the Duane Morris Discrimination Class Action Review – 2024. This publication analyzes the key discrimination-related rulings and developments in 2023 and the significant legal decisions and trends impacting discrimination class action litigation for 2024. We hope that companies and employers will benefit from this resource in their compliance with these evolving laws and standards.

Class action litigation in the discrimination space remains an area of key focus of skilled class action litigators in the plaintiffs’ bar. Class actions challenging employment policies and practices has a robust history since passage of the Civil Rights Act of 1964. For decades, federal courts routinely granted class certification in nationwide employment discrimination class actions, which often spiked settlements that entailed huge pay-outs and across-the-board changes to HR systems. In turn, significant changes in the workplaces of Corporate America resulted from class action precedents, massive settlements, and injunctive relief orders. This changed in large part over a decade ago when the U.S. Supreme Court decided Wal-Mart Inc. v. Dukes, et al., 564 U.S. 338 (2011). That decision reversed a class certification order in a pay and promotions lawsuit involving 1.5 million class members who asserted claims of sex discrimination in pay and promotions. In handing down this ruling, the Supreme Court tightened the legal requirements for securing class certifications. It simultaneously forced the plaintiffs’ bar to adjust their strategies on how to prosecute class actions, while also fueling new defense strategies for opposing class certification motions. Suddenly gone were the days when nationwide class actions challenging hiring, compensation, and promotion policies of large corporations inevitably ended with across the board certification orders and big settlement checks.

But the pendulum appears to be swinging back, as courts are becoming increasingly inclined to find for plaintiffs in class certification rulings, and thereby raising the potential for large monetary remedies. This is especially true in the discrimination context, as society continues to grapple with widespread inequality in the wake of large scale social justice campaigns like Black Lives Matter and the #MeToo movement. Businesses are being confronted with increasingly employee-friendly legislative changes and a more aggressive plaintiffs’ bar.

Click here to download a copy of the Duane Morris Discrimination Class Action Review – 2024 eBook. Look forward to an episode on the Review coming soon on the Class Action Weekly Wire!

March 6, 2024 by Gerald L. Maatman, Jr.

Ohio Federal Court Decertifies FLSA Collective Action In Latest Application Of Sixth Circuit’s “Strong Likelihood” Standard

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Kathryn Brown

Duane Morris Takeaways: On February 29, 2024, in Miller II v. SBK Delivery, LLC, No. 2:21-CV-04744 (S.D. Ohio Feb. 29, 2024), Judge Michael H. Watson of the U.S. District Court for the Southern District of Ohio applied the Sixth Circuit’s standard in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003 (6th Cir. 2023,) to decertify a collective action of delivery drivers seeking unpaid overtime under the FLSA. As one of the first decertification rulings applying the Clark standard, the Court’s opinion is required reading for businesses litigating FLSA claims before courts in the Sixth Circuit.

Case Background

On September 22, 2021, the plaintiff in Miller II filed a Complaint against the defendant, SBK Delivery, LLC. The defendant contracted with multiple package carriers to provide delivery drivers. The package carriers paid the defendant for each package the drivers delivered. The defendant then paid each driver a percentage of the payment it received from the package carrier. The plaintiff asserted claims of unpaid overtime under the FLSA and Ohio law as well as a breach of contract claim. The plaintiff filed the FLSA claims on behalf of a proposed collective action of drivers who entered into independent contractor agreements with the defendant to provide services as delivery drivers.

On February 9, 2022, the Court approved the parties’ joint stipulation to conditionally certify and issue notice to a collective action consisting of current and former delivery drivers who performed work for the defendant between September 22, 2018 and the present who worked over 40 hours per workweek and were classified as independent contractors.

Nineteen (19) individuals filed consents to join the lawsuit as prospective opt-in plaintiffs.

On March 22, 2023, the defendant filed a motion to decertify the collective action. Prior to the close of briefing on the decertification motion, on May 19, 2023, the Sixth Circuit issued its pivotal decision in Clark.

In Clark, the Sixth Circuit articulated a “strong likelihood” standard for facilitating notice to potential opt-in plaintiffs pursuant to 29 U.S.C. § 216(b) of the FLSA. Under the new standard, only after demonstrating a “strong likelihood” that similarly situated other employees exist may opt-in plaintiffs become parties to the named plaintiff’s lawsuit.

Following the Sixth Circuit’s ruling, the parties filed supplemental briefing to address the similarly-situated status of the collective under Clark.

The Court’s Ruling

Because the parties had stipulated to conditional certification prior to the Sixth Circuit’s ruling in Clark, the Court had not had an earlier opportunity to rule on the plaintiff’s similarly-situated status relative to those in the collective action prior to the issuance of notice to potential opt-in plaintiffs.

Applying the Clark standard to the plaintiff’s claims for the first time, the Court held that the plaintiff failed to show a strong likelihood that he was in fact “similarly situated” to the putative opt-in plaintiffs.

The Court reasoned that it was not enough for the plaintiff to show that he was subject to the same alleged FLSA-violating policy of misclassification as an independent contractor of the defendant. The plaintiff also needed to establish that the question of the amount and extent of alleged unpaid overtime could be determined on a collective-wide basis.

The Court found the plaintiff dissimilar from the opt-ins in multiple key respects, including with respect to the route assignment a driver chose, since each route assignment had different start times, end times and duration. Based on individual differences in whether a driver worked overtime hours, the Court reasoned that evidence of the named plaintiff’s hours worked would not be representative of the claims of the opt-in plaintiffs. Accordingly, the Court concluded that it would need to analyze individually each opt-in plaintiff’s overtime claims to determine liability, which would be completely contrary to the purpose of the collective action mechanism.

As a result of the Court’s application of Clark, it held that the plaintiff’s FLSA claims must proceed on an individual basis only. For these reasons, the Court dismissed each of the opt-in plaintiff’s claims without prejudice.

Implications For Employers

The Court’s ruling in Miller II demonstrates that the Clark standard is a game changer for FLSA litigants in district courts within the Sixth Circuit.

To satisfy the “strong likelihood” iteration of the similarly-situated standard for FLSA certification, plaintiffs must show more than the existence of a common policy or practice that allegedly violates the FLSA. The ruling highlights the opportunity the Clark standard affords to defendants to whittle down the scope of an FLSA lawsuit significantly by marshaling facts of dissimilarity between the named plaintiff and others. To maximize the ability to prevail on a certification ruling under the Clark standard, companies ought to devote significant resources to managing FLSA compliance risks on the front end, before any litigation arises.

March 5, 2024 by Gerald L. Maatman, Jr.

Federal Court In Kansas Blows Up ADEA Collective Action Against Learjet, Inc. And Bombardier, Inc., Granting Defendants’ Motion To Decertify

By Gerald L. Maatman, Jr. and Gregory Tsonis

Duane Morris Takeaways: In a decisive ruling on February 29, 2024, Judge Eric F. Melgren of the U.S. District Court for the District of Kansas granted the motion by defendants Bombardier, Inc. (“Bombadier”) and its subsidiary Learjet, Inc., (“Learjet”) in Wood, et al. v. Learjet Inc. et al., Case No. 18-CV-02681 (D. Kan. Feb. 29, 2024), to decertify a collective action brought under the Age Discrimination in Employment Act (“ADEA”). This landmark decision underscores the increased scrutiny applied during the decertification stage of collective actions, especially concerning allegations under the ADEA, and how defendants can successfully achieve decertification by attacking proffered evidence and establishing the individualized inquiries which preclude proceeding as a collective action.

Case Background

The lawsuit originated from claims by two named plaintiffs, both over the age of 40 and former employees at the Bombardier Flight Test Center (“BFTC”) in Wichita, Kansas, operated by Learjet. The named plaintiffs alleged a pattern or practice of age discrimination in violation of the ADEA, i.e., specifically that defendants targeted non-union employees over the age of 40 for termination. Following the lawsuit’s initiation, and applying the “similarly situated” collective action standard incorporated by the ADEA from the Fair Labor Standards Act, plaintiffs sought conditional certification of a collective action under the traditionally “lenient” standard applied by the courts within the Tenth Circuit and others in evaluating certification of collective actions. Specifically, the plaintiffs sought and obtained conditional certification for a collective action consisting of non-union personnel employed since April 2, 2016 at the BFTC whose employment was terminated when they were over 40 years of age. After the dissemination of notice, additional plaintiffs opted in, with four remaining by the time the defendants moved for decertification.

Procedurally, the defendants moved to decertify the collective action after the conclusion of fact discovery.

The two named plaintiffs and four opt-ins all worked in the BFTC, were over the age of 40 at the time their employment ended, and were terminated for various reasons. One named plaintiff was terminated as a result of performance issues and a safety violation. The other named plaintiff was placed on a performance improvement plan for time management issues that resulted in his termination. While Learjet terminated one opt-in plaintiff for insubordination in connection with his failure to repay a tax payment reimbursement to the company, the three other opt-in plaintiffs were laid off as part of corporate reorganizations, with performance playing a role in some, but not all, layoff-related terminations.

The Court’s Decision

Applying the Tenth Circuit’s two-step approach for collective action certification, the Court moved from the “lenient standard” at the conditional certification stage to the “stricter” standard post-discovery to assess whether the plaintiffs were “similarly situated.” Id. at 9. The analysis to determine whether the members of the collective action were “similarly situated” to the named plaintiffs involved examining disparities in employment circumstances and available individual defenses, as well as procedural fairness and efficiency considerations.

The Court found the evidence of a discriminatory policy, predicated on an alleged statement about the company’s age composition, insufficient to establish a pattern or practice of discrimination. To establish an unlawful policy, plaintiffs relied on a single statement made by a director at a meeting in which he “drew an inverted triangle to represent a large number of older workers (at the top) and a small number of younger workers (at the bottom)” and allegedly stated that “the age balance was upside down” and that they “needed to reduce the age of the Company.” Id. at 3. The Court, however, determined that “no evidence” of a discriminatory policy existed other than the alleged statement. Notably, the Court highlighted the lack of documentation, meetings, or direct involvement by management in any discriminatory policy’s alleged development or implementation. Id. at 13. Furthermore, terminations affecting the named plaintiffs and opt-ins spanned three years and involved various decision-makers, and evidence demonstrated that the average age of BFTC employees and percentage of workers over the age of forty increased between 2015 and 2019. Id. at 8, 13.

The Court also considered the individual circumstances of the named plaintiffs’ and opt-ins’ terminations, noting significant differences in the reasons for termination and the involvement of different managers in these decisions. The Court credited defendants’ argument that individualized defenses required decertification, as some opt-in plaintiffs executed releases barring their ADEA claims, the named plaintiffs’ claims were limited by the scope of their charges of discrimination, and one opt-in failed to disclose claims against defendants in bankruptcy proceedings. Id. at 16. Though noting that the individualized evidence was “not onerous,” the Court opined that the diversity in employment circumstances and the presence of individualized defenses underscored the plaintiffs’ disparate situations, which counseled against the maintenance of a collective action. Id. at 16. Finally, the Court also found that the “lack of common representative evidence” and the “highly individualized” circumstances of each plaintiff threatened to confuse a jury by requiring separate mini trials, which was wholly inefficient. Id. at 17. Accordingly, the Court granted defendants’ motion to decertify.

Implications for Employers

This decision sends a strong message about the potential hurdles faced by plaintiffs in sustaining collective actions after fact discovery, particularly in pattern-or-practice ADEA cases. For employers, the ruling highlights the importance of meticulous record-keeping, clear performance management, and consistent application of termination policies to defend against collective action claims effectively.

Moreover, this decision showcases the strategic value of aggressively challenging collective action certification on the basis of individualized claims and defenses, thereby preventing the broad-brush grouping of distinct employment cases. Employers should also note the critical role of early, proactive legal strategies in managing and mitigating the risks associated with collective action litigation.

February 29, 2024 by Gerald L. Maatman, Jr.

It’s Here! The Duane Morris Privacy Class Action Review – 2024

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex W. Karasik

Duane Morris Takeaways: The last year saw a virtual explosion in privacy class action litigation. As a result, compliance with privacy laws in the myriad of ways that companies interact with employees, customers, and third parties is a corporate imperative. To that end, the class action team at Duane Morris is pleased to present the Privacy Class Action Review – 2024. This publication analyzes the key privacy-related rulings and developments in 2023 and the significant legal decisions and trends impacting privacy class action litigation for 2024. We hope that companies and employers will benefit from this resource in their compliance with these evolving laws and standards.

Click here to download a copy of the Privacy Class Action Review – 2023 eBook. Look forward to an episode on the Review coming soon on the Class Action Weekly Wire!

February 21, 2024 by Gerald L. Maatman, Jr.

Seventh Circuit Affirms Minors Are Not Parties Bound To Arbitrate Claims In GIPA Class Action

By Gerald L. Maatman, Jr., Derek S. Franklin, and George J. Schaller

Duane Morris Takeaways: In Coatney, et al. v. Ancestry.com DNA, LLC, No. 22-2813, 2024 U.S. App. LEXIS 3584 (7th Cir. Feb. 15, 2024), the Seventh Circuit affirmed the district court’s denial of Ancestry’s motion to compel arbitration on the grounds that minors were not parties to arbitration agreements entered by their guardians and the Defendant. Circuit Judge Michael B. Brennan wrote the opinion of the Seventh Circuit panel.

For companies facing class actions under the Illinois Genetic Information Privacy Act (“GIPA”) involving alleged disclosure of confidential genetic information, this ruling is instructive on dispute resolution provisions and how drafting those provisions can dictate who is bound to arbitrate claims.

Case Background

Defendant, Ancestry.com DNA, LLC (“Ancestry”) is a genealogy and consumer genomics company that allows users to create accounts to purchase DNA test kits, which Ancestry collects consumer saliva samples. Id. at 2. Ancestry takes these samples, analyzes the genetic information, and then returns genealogical and health information to the purchaser through its website. Id. In 2020, Blackstone, Inc. acquired Ancestry.

Only adults may purchase or activate a DNA test kit, and purchasers must agree to Ancestry’s terms and conditions before purchasing and activating a test kit. Id. However, minors thirteen to eighteen years old may still use Ancestry’s DNA service as long as a parent or legal guardian purchases and activates the test kit, and sends in the minor’s saliva sample using an account managed by the child’s parent or guardian. Id.

Between 2016 and 2019, guardians purchased and activated test kits on behalf of the Plaintiffs, who were all minors at the time. Id. at 2-3. Each guardian agreed to consent terms (“Terms”) concerning the use of each minor’s DNA test kit. Id. at 3. The terms contained a dispute resolution provision binding the parties to arbitration and waiving any class actions. Id. However, the Terms did not require Plaintiffs to read them. Plaintiffs alleged that they did not, and that they also did not create the Ancestry accounts. Id. at 4.

Plaintiffs, on behalf of themselves and a putative class of similar members, filed suit against Ancestry in Illinois federal court alleging violations of the Illinois GIPA. Id. Plaintiffs alleged that, as part of Blackstone’s 2020 acquisition of Ancestry, Ancestry disclosed genetic test results and personal identifying information to Blackstone without obtaining written authorization. Id.

Ancestry responded by moving to compel arbitration under the Terms dispute resolution provisions. Id. at 5. The district court denied Ancestry’s motion. First, the district court found that Plaintiffs did not assent to Ancestry’s Terms through their guardians’ accounts or their guardians’ execution of consent forms on Plaintiffs’ behalf. Id. Second, the district court determined equitable principles such as the theory of direct benefits estoppel did not bind Plaintiffs, as there were no allegations that Plaintiffs accessed their guardians’ Ancestry accounts or their DNA test results. Id.

As a result, Ancestry filed an interlocutory appeal with the Seventh Circuit for review of the district court’s decision. Id.

The Seventh Circuit’s Decision

The Seventh Circuit affirmed the district court’s decision. On appeal, Ancestry urged the Seventh Circuit to reverse the district court’s denial of its motion to compel on three grounds, including: (1) Plaintiffs’ guardians assented to the Terms on their behalf; (2) Plaintiffs were “closely related” parties to their guardians (or even third-party beneficiaries), foreseeably bound by the Terms; or (3) as direct beneficiaries of the Terms, Plaintiffs were estopped from avoiding them. Id. at 6.

At the outset, the Seventh Circuit reasoned that it is a “bedrock principle” that “an arbitration agreement generally cannot bind a non-signatory.” Id. at 6-7. The Seventh Circuit also explained that “whether an arbitration agreement is enforceable against a non-party is a question governed by ‘traditional principles of state law.’” Id. at 7.

First, on Ancestry’s argument that Plaintiffs’ guardians assented to the Terms on Plaintiffs’ behalf, the Seventh Circuit determined that the Terms’ plain and ordinary meaning was unambiguous and found that the only parties to the agreement are the signatory and Ancestry. Id. Further, the Seventh Circuit noted that Terms stated they “are personal” to the signatory, who “may not … assign or transfer any … rights and obligations,” established by them. Id. The Seventh Circuit also found that the Terms contained no language that the guardians “agreed to them ‘on behalf of their children.” Id. at 9.

Second, the Seventh Circuit rejected Ancestry’s argument that Plaintiffs may be contractually bound to the Terms “either as closely related parties or third-party beneficiaries.” Id. at 11. The Seventh Circuit opined that “[t]he company mounts these arguments from shaky legal ground, as Illinois ‘recognize[s] a strong presumption against conferring contractual benefits on non-contracting third parties.’” Id. With respect to Ancestry’s argument that Plaintiffs were bound by the Terms as “closely related” parties to their guardians who signed them, the Seventh Circuit determined that a special relationship in fact and in law between the Plaintiffs and their guardians as that relationship “does not join their identities, as can be the case with parent and subsidiary corporations.” Id. at 12-14. The Seventh Circuit similarly concluded that the Terms did not cover Plaintiffs as third-party beneficiaries since the express provisions of Ancestry’s Terms excluded third-party beneficiaries. Id. at 12. While the Seventh Circuit found that the Terms that contemplated consent to Ancestry’s processing and analysis of a child’s DNA, no aspect of that consent established that the Terms were for “plaintiffs direct benefit.” Id. at 16. In addition, the Terms’ arbitration provision did “not contain language capturing the plaintiffs.” Id. at 17. Instead, the provisions’ language indicated that the “signatories intended to bind themselves, but not others to arbitration.” Id.

Finally, the Seventh Circuit rejected Ancestry’s argument that “[a]s direct beneficiaries of their guardians’ agreement to the Terms, Plaintiffs are estopped from avoid its arbitration provision.” Id. at 18. Noting the absence of legal authority supporting Ancestry’s argument, the Seventh Circuit concluded “that Illinois would not embrace direct benefits estoppel to bind plaintiffs here.” Id. at 19. The Seventh Circuit also based its conclusion on the absence of any record allegation that “plaintiffs have accessed or used the analyses completed by Ancestry as contemplated by the Terms” coupled with Illinois’ law “disfavoring the binding of non-signatories to arbitration.” Id. at 25.

Implications For Companies

Companies that are confronted with GIPA class action litigation involving dispute resolution provisions should note the Seventh Circuit’s emphasis in Coatney on the lack of allegations that Plaintiffs read the contractual terms at issue, along with the absence of contractual language capturing or identifying Plaintiffs.

Further, from a practical standpoint, companies should carefully evaluate the language expressed in terms and conditions agreements, including those drafted in dispute resolution provisions, as courts are not inclined to assume non-signatories are bound to agreements when not expressly included.