Category: General

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

Duane Morris Takeaways: On September 26, 2023, in Texas v. Biden, No. 6:22-CV-00004 (S.D. Tex. Sept. 26, 2023), Judge Drew B. Tipton of the U.S. District Court for the Southern District of Texas granted in part and denied in part the States’ Motion for Summary Judgment and enjoined the federal government from enforcing Executive Order 14,026 and the Final Rule against the States of Texas, Louisiana, and Mississippi and their agencies. Judge Tipton found that the President acted exceeded his authority by issuing Executive Order 14,026 and unilaterally requiring federal contractors to increase their employees’ minimum wage from $10.10 to $15 per hour. Other district courts have considered the President’s authority in issuing Executive Order 14,026, but Judge Tipton is the first federal judge to find that the President exceeded his authority. This ruling hits only the surface of what is yet to come. The parties in other cases have already filed appeals in the Ninth and Tenth Circuits challenging district court opinions that have issued contrary rulings, and the government in this case is bound to appeal this decision to the Fifth Circuit.

Procedural Background

The Federal Property and Administrative Services Act (“Procurement Act” or the “Act”) applies to federal and contractor employees. Congress implemented the Act to centralize the process by which various good and services are purchased by agencies on behalf of the government.

On April 21, 2021, President Biden, relying solely on the Act, issued Executive Order 14,026 (“EO 14,026”) to require federal contractors and subcontractors to pay certain employees $15 per hour. EO 14,026 was scheduled to begin on January 30, 2023, with annual increases thereafter. Specifically, in issuing EO 14,026, President Biden invoked his authority to “promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers.” Id. at 5. After engaging in notice-and-comment rulemaking, the U.S. Department of Labor published its Final Rule, Increasing the Minimum Wage for Federal Contractors, on November 24, 2021, implementing EO 14,026 (the Final Rule and EO 14,026 are the “Wage Mandate”). Id.

Three months later, three states – Texas, Louisiana, and Mississippi (the “States”) – sued President Biden, the U.S. Department of Labor (“DOL”), and certain DOL executives (collectively the “federal government”) challenging the validity of the Wage Mandate. Id. at 2-3.

The parties cross-filed cross-motions to dismiss and motions for summary judgment. The federal government argued generally that two of the Act’s provisions, read together, provide the President with a broad grant of authority to implement policies “that the President considers necessary to foster an economical and efficient system for procuring and supplying goods and services for using property,” including the Wage Mandate. Id. at 13. The States argued that the Act is far more narrow and that it is primarily meant as a means to “centralize and introduce flexibility into government contracting to remedy duplicative contracts and inefficiencies,” which does not include setting the minimum wage for federal contractors. Id.

The District Court’s Decision

The District Court granted in part and denied in part the States’ cross-motion for summary judgment. It found that the States proved that that the President acted “ultra vires,” or beyond his authority in issuing EO 14,026. Judge Tipton enjoined the federal government from enforcing EO 14,026 and the Final Rule against Texas, Louisiana, and Mississippi and their agencies.

The District Court agreed with the States and held that Sections 101 and 102 of the Act “read together, unambiguously limit the President’s power to the supervisory role of buying and selling goods.” Id. The District Court found that the Act’s historical context further supported its holding that the President’s authority “does not include a unilateral policy-making power to increase the minimum wage of employees of federal contractors.” Id. at 15.

Judge Tipton further found that the purpose of the Act purpose conflicts with the Wage Mandate. He explained that the Act’s purpose is to provide “a relatively hands-off framework that enables agencies to determine for themselves the quantity and quality of items to procure on behalf of the federal government. It does not confer authority for the President to decree broad employment rules.” Id. at 20. As an example, the District Court compared the Act to two other permissible federal wage statutes – the Davis Bacon Act and the Walsh-Healey Public Contracts Act. Id. at 20-21. Judge Tipton opined that unlike those two permissible federal wage-statutes, in which Congress expressly gave the Secretary of Labor limited power to tailor the minimum wage of certain classes of federal contractors, the Procurement Act did not permit the President unlimited wage-setting authority. Id. at 21. The District Court concluded that the “Procurement Act’s text, history, purpose and structure limit the President to a supervisory role in policy implementation rather than a unilateral, broad policy-making power to set a minimum wage.” Id. at 22.

The federal government will likely appeal the decision, and the Fifth Circuit will join the Ninth and Tenth Circuits in deciding whether the President exceeded his authority in issuing EO 14,026.

Implications for Employers

The District Court’s decision is a huge win for employers in Texas, Louisiana, and Mississippi as the federal government is prohibited from enforcing EO 14,026. Companies should stay tuned for the imminent showdown in the Fifth, Ninth, and Tenth Circuit’s on the President’s Authority over increasing the minimum wage for federal contractors and subcontractors.

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

Duane Morris Takeaways:  In Killmer, Lane & Newman, LLP v. BKP, Inc., No. 21-SC-930, (Col. Sept. 11, 2023), the Colorado Supreme Court ruled that an attorney’s allegedly defamatory statements about a company’s wage-and-hour practices during a press conference to announce filing a class action against that same company were protected by the litigation privilege.  The Supreme Court’s unanimous en banc opinion held that the Colorado Court of Appeals erred in concluding that there was an exception to the applicability of the litigation privilege where the size and contours of the proposed class were easily ascertainable from the employer’s records and undermined the need to identify and alert potential class members through the press.  In reversing the appellate panel’s ruling, the Colorado Supreme Court determined that the attorney’s statements were shielded from defamation claims by the litigation privilege since the statements merely repeated wage-and-hour allegations made in the complaint and advanced the goals of the lawsuit.  The decision in BKP serves as a reminder to companies of the potential pitfalls of bringing defamation claims against attorneys who disseminate information to the public about a party that they are suing in a class action.

Case Background

In 2018, two law firms, Killmer, Lane & Newman, LLP and Towards Justice (collectively, along with attorney Mari Newman of Killmer, Lane & Newman, “the Attorneys”), filed a federal class action lawsuit claiming that Ella Bliss Beauty Bar (“Ella Bliss”), an operator of beauty salons in the Denver metropolitan area, failed to properly pay its nail technicians for required custodial work under federal and Colorado state law.  Id. at 5.

On the same day the federal lawsuit was filed, one the Attorneys, Mari Newman, held a press conference in which she stated that Ella Bliss nail technicians had to clean the businesses “for no pay whatsoever,” that the salons “only pay [employees] for the hours they feel like paying,” and that Ella Bliss “is simply too cheap to pay its workers the money they deserve.”  Id. at 43.  The Attorneys collectively also issued a press release that day asserting that “Ella Bliss Beauty Bar forced its service technicians to perform janitorial work without pay, refused to pay overtime, withheld tips, and shorted commissions.”  Id. at 44.

Exactly one year later, Ella Bliss’ parent company, BKP, Inc. (“BKP”) filed a defamation lawsuit against the Attorneys in Colorado state court pertaining to five allegedly defamatory statements that the Attorneys made during their 2018 press remarks, including the ones quoted above.  Id. at 13.  The district court dismissed the defamation suit and found that the Attorneys’ statements were protected by the litigation privilege, which shields from defamation claims statements by an attorney that have “some reference to the subject matter of . . . proposed or pending litigation.”  Id. at 22.

When the Plaintiffs appealed the dismissal to a three-judge panel of the Colorado Court of Appeals, the appellate panel partially reversed the district court’s decision and found that some of the statements at issue were not shielded by the litigation privilege.  Id. at 49.  While the Attorneys argued that the goals of the media statements were to promote their class action and publicize it to potential additional class members, the appellate panel rejected that notion since the Attorneys were set to receive employment records and payroll documents in discovery that could have easily identified the class members without needing to resort to harmful press statements.  Id. at 14.

Following the appellate decision, the Colorado Supreme Court granted the petitioner’s writ for certiorari and analyzed on the question of “whether the common law litigation privilege for party-generated publicity in pending class action litigation excludes situations in which the identities of class members are ascertainable through discovery.”  Id. at 1.

The Colorado Supreme Court’s Decision

On further appeal, the Colorado Supreme Court reversed the appellate panel’s ruling and determined that the litigation privilege applied to the allegedly defamatory attorney statements at issue.  Id. at 49.  The Supreme Court reasoned that the statements “merely repeated, summarized, or paraphrased allegations in the class action complaint” and, therefore, “served to notify the public, absent class members, and witnesses about, and therefore furthered the objective of, the litigation.”  Id. at 42.

The Supreme Court also held that the appellate panel erred by basing its litigation privilege analysis on whether the identities of class members were easily ascertainable through discovery.  Id. at 2.  According to the Supreme Court, two reasons led to that conclusion: “(1) ascertainability is generally a requirement in class action litigation, and imposing such a condition would unduly limit the privilege in this kind of case;” and (2) “the eventual identification of class members by way of documents obtained during discovery is not a substitute for reaching absent class members and witnesses in the beginning stages of litigation.”  Id.

Implications For Employers

The Colorado Supreme Court’s decision in BKP, Inc. is notable in that it may serve to embolden the inclination of some class action plaintiffs’ attorneys to use strategic communication techniques to air their clients’ claims in the ‘court of public opinion’ in an attempt to gain leverage, as well as using mass communication tools to grow the reach of their lawsuit to more potential class members. While employers understandably may want to fight back against weaponized misinformation by asserting defamation claims, employers should exercise caution and pick their battles when it comes to such claims, given the high potential for variance in judicial outcomes in states where the case law on this issue remains unsettled and the jurisdictional variables also at play.  Ultimately, corporate counsel should carefully consider the potential risks of pursuing a defamation claim against an attorney based on statements that a court may find shielded by privilege regardless of their truthfulness.

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

Duane Morris Takeaways: In Wilson v. Timec, No. 2:23-CV-00172, 2023 WL 5753617 (E.D. Cal. Sept. 6, 2023), Judge William B. Shubb of the U.S. District Court for the Eastern District of California granted Defendants’ Motion for Partial Judgment on the Pleadings in a race discrimination class action. The Court held that Plaintiffs Marvonte Wilson and Domonique Daniels (“Plaintiffs”) failed plausibly to allege in their complaint that Defendants’ hair drug testing employment practice had a disparate impact or disparate treatment on individuals with melanin-rich hair under Title VII of the Civil Rights Act of 1964 (“Title VII”) or under the California Fair Employment and Housing Act (“FEHA”).   This case serves as an important reminder to companies that utilize employment-related drug testing to stay vigilant as to the potential impact of their chosen drug testing protocols on certain populations and communities.

Case Background

Plaintiffs, who both have melanin-rich hair, filed a complaint alleging that Defendants failed to provide them work assignments or opportunities on the basis of allegedly false positive hair drug tests.  Id. at 1.  Plaintiffs asserted that hair drug testing is less effective on melanin-rich hair, and persons of color who have melanin-rich hair are consequently at a higher risk of false positive test results than individuals with lighter-colored hair.  Id. at 2.  Plaintiffs filed a class action and sued on behalf of themselves and other similarly-situated workers alleging that the drug testing had a disparate impact on individuals with melanin-rich hair under Title VII and under the FEHA and that Defendants subjected them to disparate treatment.  Id. at 1.  In response, Defendant DISA (later joined by all other Defendants) filed a Motion for Judgment on the Pleadings (“Defendants’ Motion”).  Id.

The Court’s Decision

The Court initially noted that Title VII prohibits employers from “discriminat[ing] against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race . . . or national origin.”  Id. at 2 (quoting 42 U.S.C. § 2000e-2(a)(1)).  Similarly, the FEHA prohibits employers from discriminating against an individual “‘in compensation or in terms, conditions, or privileges of employment’ on, inter alia, race, color, or national origin.”  Id. (quoting Cal. Gov’t Code § 12940(a)).  Due to the similar language between Title VII and FEHA, the Court opined that that “Title VII framework is applied to claims brought under the FEHA.”  Id. (quoting Pinder v. Emp. Dev. Dep’t., 227 F. Supp. 3d 1123, 1136 (E.D. Cal. 2017)).

The Court reasoned that a disparate impact claim is proper when plaintiffs “plausibly allege that an employment disparity exists with respect to the protected group.”  Id. (citing Liu v. Uber Techs. Inc., 551 F. Supp. 3d 988, 990 (N.D. Cal. 2021)).  The Court dismissed Plaintiffs’ Title VII and FEHA disparate impact claims because it found that their complaint lacked substantive allegations sufficient to “establish a connection between race and the challenged” hair drug testing.  Id. at 3.  Namely, the Court held that, even though Plaintiffs raised allegations in their response to Defendants’ Motion “concerning the difference in the melanin content of dark hair in people of different races, the disparity in drug test outcomes between black and white employees, the difference in how drugs interact with the hair of black and white individuals, and the increased risk of false positive test results due to hair products used by black individuals,” “[n]one of th[o]se allegations appear[ed] in the [Plaintiffs’] complaint.”  Id. at 2.

The Court also opined that a claim of disparate treatment is proper “where an employer has treated a particular person less favorably than others because of a protected trait.”  Id. at 3.  That said, the Court dismissed Plaintiffs’ Title VII and FEHA disparate treatment claims because Plaintiffs failed plausibly to allege that, in adopting their facially neutral drug-testing policies, Defendants “had discriminatory intent.”  Id.

For these reasons, the Court concluded that Defendants’ Motion should be granted.  Id. at 3.  It provided Plaintiffs 20 days, or until September 26, 2023, to file an amended complaint.  Id.

Implications for Employers

The Court’s ruling is an important win for companies facing disparate impact class actions in that it illustrates the high bar plaintiffs must meet to clear the pleading phase.  In particular, the Court’s decision shows that plaintiffs must allege facts showing an actual connection between the challenged practice and the protected category at issue.  That said, companies that utilize employment-related drug testing should be proactive and stay apprised of research surrounding their chosen drug tests and their potentially disparate impact on various communities.  Additionally, companies should evaluate their drug testing policies and practices to ensure they remain free of discriminatory intent and potential bias as to any particular community.

 

By Gerald L. Maatman, Jr., Natalie Bare, and Emilee N. Crowther

Duane Morris Takeaways: In Bone v. XTO Energy, Inc., No. 21-CV-1460, 2023 WL 5431139 (D. Del. Aug. 23, 2023), the Judge Joel H. Slomsky of the U.S. District Court for the District of Delaware granted RUSCO Operating, LLC and Ally Consulting, LLC’s (collectively, “RUSCO”) Motion to Intervene in a case filed by workers that used its app to connect with a company seeking their safety consulting services. The Court allowed RUSCO to intervene as a matter of right based on RUSCO’s interest in its classification of workers that use its app as independent contractors and its interest in enforcing RUSCO’s arbitration agreement.  This case serves as a reminder to companies that provide staffing services of the benefits of monitoring litigation filed against partner companies (and the potential pitfalls of not doing so).

Case Background

Plaintiffs Cory Bone and Luis Carillo were safety consultants engaged by Defendant XTO Energy, Inc. (XTO) as independent contractors through an online app operated by RUSCO Operating, LLC and Ally Consulting.  Id. at 1.  They sued on behalf of themselves and other similarly- situated workers engaged through the app, alleging misclassification and subsequent failure to pay overtime in violation of the Fair Labor Standards Act (“FLSA”).  Id.  RUSCO asserted that they paid Plaintiffs directly for the work they provided to XTO, and by using the app, Plaintiffs and putative collective action members had agreed to arbitrate any employment-related disputes.  Id. at 2.  RUSCO filed a Motion to Intervene to enforce the arbitration agreement.  Id.

The Court’s Decision

The Court concluded that RUSCO could intervene as a matter of right.  Id.

Under Rule 24, a non-party may intervene (1) as a matter of right, if the disposition of the case would impair its interest; or (2) as a matter of permission, if common questions of law and fact exist between the non-party’s claims or defenses and those at issue in the case.  The Court explained that a party must timely demonstrate the following to intervene as a matter of right: “(1) a sufficient interest in the litigation; (2) a threat that the interest will be impaired or affected, as a practical matter, by the disposition of the action; and (3) that its interest is not adequately represented by the existing parties and the litigation.”  Id. (quoting Commonwealth v. President of the United States of America, 888 F.3d 52, 57 (3d Cir. 2018).

The first prong required RUSCO to demonstrate a “significantly protectable” interest, i.e., one that is specific to the intervener, capable of definition, “and will be directly affected in a substantially concrete fashion by the relief sought.”  Id. at 4 (quoting Kleissler v. U.S. Forest Serv., 157 F.3d 964, 972 (3d Cir. 1998)).

The Court held that RUSCO met this prong because it classified any workers using its app as independent contractors and Plaintiffs’ claims against XTO turned “on whether Plaintiffs [were] employees or independent contractors.”  Id.  In addition, the Court opined that RUSCO had a significant protectable interest in the litigation due to its interest in enforcing the arbitration agreement Plaintiffs had executed in order to use the app.  Id. (discussing RUSCO’s successful intervention in Field v. Anadarko Petro. Corp., 35 F.4th 1013, 1016 (5th Cir. 2022) based on its “interest in enforcing [its] arbitration agreements, particularly given the interrelatedness of the parties’ contractual relationships and the plaintiff’s claims, is ‘a stake in the matter that goes beyond a generalized preference that the case come out a certain way’”).

The second prong required RUSCO to establish “a tangible threat to [its] legal interest.” Id. at 5.  The Court held that RUSCO met this prong because the Court’s determinations regarding independent contractor misclassification and arbitration agreement enforcement “could negatively impact RUSCO’s legal interests.”  Id.

Finally, the third prong required RUSCO to establish that its interest “diverge[d] sufficiently from the interests of [XTO], such that [XTO might not be able to] devote proper attention to the [RUSCO’s] interests.”  Id.  (citing Commonwealth, 888 F.3d at 59).  on this issue, the Court concluded that XTO could not adequately represent RUSCO’s interest in the litigation because Plaintiffs brought claims based on improper payment, and RUSCO — not XTO — had paid the workers asserting those claims.  Id.  Moreover, at the time of RUSCO’s intervention, XTO had not yet sought to compel Plaintiffs to arbitration so it had not devoted proper attention to RUSCO’s interests in that regard.  Id.

Implications for Employers

Companies providing staffing services should review litigation filed against the entities to which they provide staff to evaluate whether the disposition of claims or issues in the litigation will implicate their interest. Staffing companies that refer workers to other companies should ensure the contract contains adequate notice provisions concerning litigation pertaining to the employment relationship. Companies that do not discover litigation that may affect their interests may have to live with results of unfavorable outcomes.

By Gerald L. Maatman, Jr. and Emilee N. Crowther

Duane Morris Takeaways: In Moore v. MW Servicing, LLC, No. 20-CV-217 (E.D. La. Aug. 2, 2023), Judge Greg Guidry of the U.S. District Court for the Eastern District of Louisiana granted Defendants Motion to Decertify Plaintiffs’ Collective Action, holding that, pursuant to Swales v. KLLM Transportation Services, L.L.C., 985 F.3d 430 (5th Cir. 2021), Plaintiffs had not met their burden of establishing they were “similarly situated” to the opt-ins during the decertification stage.  The decision in Moore evidences the new Fifth Circuit regime in certifying/decertifying  collective actions post-Swales, in that it properly places the “similarly situated” burden in Plaintiff’s court at all relevant times. The ruling should be required reading for all businesses defending wage & hour litigation in the states comprising the Fifth Circuit.

Case Background

Defendants MW Servicing, LLC, WBH Servicing, LLC, Bruno, Inc., and Joshua Bruno (“Defendants”) own and operate various properties in Louisiana.  Plaintiffs Brittany Moore, Dmitry Feller, Jada Eugene, Christopher Willridge, and five opt-in Plaintiffs (“Plaintiffs”) worked for Defendants as property managers, leasing agents, leasing consultants, accounting managers, executive assistants, janitorial/maintenance workers, and babysitters.

Plaintiffs filed their a collective action (the “Complaint”) against Defendants on January 20, 2020, asserting Defendants failed to pay minimum wage under the Federal Labor Standards Act (“FLSA”), and failed to pay, or untimely paid, Plaintiffs their final checks under the Louisiana Wage Payment Act (“LWPA”).

The Lusardi v. Xerox Corporation Standard

At the time Plaintiffs filed their Complaint, the standard practice in federal courts to certify a collective action and send notice to potential opt-in plaintiffs followed the two-step process outlined in Lusardi v. Xerox Corporation, 116 F.R.D. 351 (D.N.J. 1987).

The first Lusardi step, also known as the “notice stage,” required courts to determine whether the named plaintiffs and potential opt-in plaintiffs were “similarly situated” solely on the basis of the pleadings and affidavits submitted by the parties.  Id. at 360-61.  Once the named plaintiffs met this lenient threshold, courts often granted conditional certification and notice was sent to the potential opt-ins.  Id.

The second Lusardi step, also known as the “decertification stage,” permitted defendants to move to decertify the conditional certification, but shifted the burden of establishing that plaintiffs are not “similarly situated” to defendants.  Id.

In Moore, Plaintiffs filed their motion for conditional certification on May 5, 2020.  Almost a year later, on March 15, 2021, the Court granted Plaintiffs’ Motion for Conditional Certification.

The Fifth Circuit’s Departure From Lusardi “Notice Stage” In Swales

In Swales v. KLLM Transport Services, L.L.C., 985 F.3d 430, 441 (5th Cir. 2021), the Fifth Circuit rejected Lusardi’s “notice stage” approach. The Fifth Circuit held that the text of the FLSA did not require a certification phase, and courts should instead determine at the outset of the case “what facts and legal considerations are material to determining whether Plaintiff and the proposed class are similarly situated.” (emphasis added).

Importantly, in rejecting Lusardi’s “notice stage” approach, the Fifth Circuit held that the burden of establishing that the plaintiffs and opt-ins are “similarly situated” rests with plaintiffs at all relevant times.  Id. at 443, n. 65 (“a plaintiff should not be able to simply dump information on the district court and expect the court to sift through it and make a determination as to similarity”).

On January 5, 2022, Defendants in Moore filed a motion to decertify the collective action. They asserted that Plaintiffs were not “similarly situated,” and the collective action should be decertified.

The Court’s Decision

On August 2, 2023, Judge Guidry granted Defendants motion to decertify on the grounds that Plaintiffs had not met their burden to establish they were “similarly situated” to the opt-ins. Moore, No. 20-217, at 7.

In reaching its decision, the Court acknowledged that while Swales rejected the traditional Lusardi “notice stage,” the Fifth Circuit clarified that the factors considered by courts in Lusardi’s “decertification stage” could “help inform or guide” courts “similarly situated analysis.”  Id. at 3 (citing Loy v. Rehab Synergies, L.L.C., 71 F 4th 329, 336-37 (5th Cir. 2023)).  Thus, even though Lusardi’s “notice stage” had been employed in this case, the Court elected to impose Swales for the decertification stage and required Plaintiffs to establish that they had met the “similarly situated” requirement of the FLSA.  Id.

The court considered three factors, including: “(1) the disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to defendant which appear to be individual to each plaintiff; [and] (3) fairness and procedural considerations.”  Id. at 3 (quoting Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1103 (10th Cir. 2001)).

As to the first factor, the Court noted substantial differences existed between the plaintiffs and opt-ins’ method of payment (salary versus hourly), employer (all worked for different entities), job titles, and the asserted wrongful acts of Defendants.  Id. at 5-6.  As to the second factor, the Court found that too many individualized claims remained in the matter (such as joint employment, good faith and willfulness, common policies, and salary status), which would necessarily require individualized defenses.  Id. at 6.  As to the final factor, while the Court acknowledged that the plaintiffs and opt-ins did have some overlapping common issues, “other methods of managing [the] litigation to the benefit of judicial efficiency” existed.  Id.

Ultimately, the Court found that a single trial of all plaintiffs’ claims would “result in confusion both for the jury and management of the trial itself,” and granted Defendants’ motion to decertify the collective action.  Id. at 7.

Implications for Employers

In the Fifth Circuit pre-Swales, plaintiffs’ counsel could readily establish that plaintiffs and opt-ins were “similarly situated” during the notice stage by presenting minimal evidence.  After plaintiffs’ counsel met this low threshold and conditional certification was granted, employers were left with two options: (1) expend significant resources to conduct extensive discovery in pursuit of establishing that plaintiffs and opt-ins were not “similarly situated”; or (2) settle.  Thus, until Swales, Plaintiffs’ counsel were able to utilize employers’ looming financial burden to unfairly obtain settlements on the basis of threadbare evidence.

Post-Swales, however, district courts in the Fifth Circuit are required to “rigorously scrutinize the realm of ‘similarly situated’ workers, [at] the outset of the case, not after a lenient, step-one ‘conditional certification.’”  Swales, 985 F.3d at 434.  By placing the FLSA’s “similarly situated” burden on Plaintiffs, this ensures that collective action complaints can no longer be used as fishing expeditions, and reduces the likelihood that frivolous lawsuits are filed.

Since Swales, the Sixth Circuit in Clark v. A&L Homecare and Training Center, LLC, 68 F.4th 1003, 1009 (6th Cir. 2023), similarly rejected Lusardi’s two-step certification approach, but elected not to adopt Swales “rigorous scrutiny” standard.    Instead, the Sixth Circuit held that notice must only be sent to potential plaintiffs if they show “a ‘strong likelihood’ that those employees are similarly situated to the plaintiffs themselves.” Id. at 1011.

While at present only the Fifth and Sixth Circuits have departed from the longstanding Lusardi standard, other circuits may follow suit, and depending on how many circuits “jump ship” from Lusardi, the issue may soon be ripe for judicial review with the U.S. Supreme Court.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Tyler Zmick with their discussion of recent developments in WARN class action litigation spurred by the COVID-19 pandemic and its impact on the global workforce.

Episode Transcript

Jennifer Riley: Thank you for being here again, for the next episode of our Friday weekly podcast, the Class Action Weekly Wire. I’m Jen Riley, partner at Duane Morris, and joining me today is Tyler Zmick. Thank you for being on the podcast, Tyler.

Tyler Zmick: Thank you, Jen. Great to be here, thanks for having me.

Jen: So today we wanted to discuss trends and important developments in Worker Adjustment and Retraining Notification Act, or WARN Act class action litigation. So class actions brought under the WARN Act remain an area of key focus for skilled class action litigators in the plaintiffs’ bar. In recent years, dozens of COVID-19-related lawsuits have been filed under the WARN Act, as well as under state counterparts to the WARN Act, and new class actions are being filed almost daily. The mass layoffs that arose in the aftermath of the pandemic and related to quarantines and those spawned countless WARN Act class actions, resulting in courts having issued several significant decisions in that area – in COVID-19-related WARN Act cases, including rulings that can shape the contours of future WARN Act class action litigation beyond the pandemic and for years to come.

Tyler, can you explain to our listeners some of the requirements for employers under the WARN Act?

Tyler: Absolutely. So, the WARN Act requires employers to give written notice to affected employees at least 60 days before conducting a plant closing or mass layoff at a single site of employment. Now as you’d expect, the statute has very specific definitions of each of those teams. A “plant closing” is the permanent or temporary shutdown of a single site of employment or one or more facilities or operating units within that site of employment where the shutdown results in an “employment loss” during any 30-day period for at least 50 full-time employees. A “mass layoff” is a reduction in force – sometimes called a “RIF” – that is not a plant closing and results in an employment loss at a single site of employment during any 30-day period for either A) at least 50 full-time employees who comprise at least 33 percent of the employee population, or B) 500 or more full-time employees. The WARN Act regulations require aggregation of employment losses at a single site of employment during a rolling 90-day period, which in essence extends the statute’s 30-day period to 90 days. And the statue has teeth in the sense that covered employers that do not satisfy the statute’s requirements, or qualify for an exemption, can be liable to affected employees for back pay and benefits.

Jen: Thanks so much Tyler for that great overview. In terms of class action litigation relating to the WARN Act, how often do courts or are courts certifying these types of cases?

Tyler: In short – very, very often. In the year 2022, plaintiffs’ lawyers actually won every single motion for class certification that was filed in a WARN Act case pending in federal court. And the jurisdictions where those rulings were issued were clustered in the Third, Fourth, and Eleventh Circuits.

Jen: Wow, pretty good success rate! Can you tell our listener about some of the most significant rulings in the WARN class action space?

Tyler: Sure. So, one case from 2022 involving Rule 23 in the context of a WARN Act class action is Jones, et al. v. Scribe Opco, Inc. The plaintiff filed a class action alleging that the defendant, his former employer, violated the WARN Act when he and other employees were furloughed due to the COVID-19 pandemic. The plaintiff claimed that while the employer gave notice of the initial furlough, the defendant employer failed to provide a follow-up notice once it became reasonably foreseeable that the furlough/layoff would exceed six months. The court granted the plaintiff’s motion for class certification, finding that all the requirements for Rule 23 were satisfied. The court determined that the putative class of 344 people met the numerosity requirement. The court further ruled that although the determination of each class member’s damages would be individualized based on their rate of pay and the benefits to which they were entitled, all of the class members’ claims involved the same legal questions. Specifically, the court ruled that common questions underlying the elements of the WARN Act claim and the defendant’s affirmative defenses were common and predominated over any individual issues. Finally, the court concluded that the plaintiff met the superiority requirement of Rule 23 because of the small individual values of the respective claims for class members, and the fact that it would be difficult to have potentially dozens of individual WARN actions filed by affected employees.

Jen: Thanks, Tyler. So one question that intrigues me in terms of WARN Act litigation is this question of what is this “single site of employment” and how does that bear when employees are working from home. So as the pandemic has spurred this trend and great rise of remote work, how does that “single site of employment” test apply? Do you have any rulings that address that question?

Tyler: Yes, absolutely. A case that got a lot of attention in the legal media is Piron, et al. v. General Dynamics Information Technology Inc., which was issued in 2022. In this case the court analyzed what constitutes a “single site of employment” under the WARN Act for employees who remotely, and the court analyzed that statutory term in the context of a motion for class certification under Rule 23(b)(3). So in the Piron case, the proposed class consisted of remote employees who had worked under the employer’s Flexible Work Location policy. Under that policy, employees could work from a company-provided setting (e.g., an office) or from an alternative setting like their home. Employees frequently moved from location to location to conduct their work duties depending on their schedules and where they preferred to be that day. When the defendant laid off the employees, many of whom who fell into that group who were subjected to the policy, the employees filed a class action against the defendant under the WARN Act, asserting they were not given the 60 days’ notice required for “mass layoffs” occurring at a “single site of employment.” In opposing class certification, the defendant argued that the putative class could not show that questions of law and fact for the class “predominate” over the same questions for the individual plaintiffs. Specifically, the defendant argued that the plaintiffs did not work at a “single site of employment” and thus could not trigger the WARN Act’s notice requirements for mass layoffs. Instead, the court would have to look at each class member’s individual situation to determine his or her place of employment. For example, for each class member you’d have to look at how often they work in the office versus at home or some other location. The court rejected the defendant’s predominance argument, and ruled that the class could be certified under Rule 23(b)(3). So in its ruling, the court emphasized that the remote-work policy applied to all employees, and this policy would guide its determination of what constituted the site of employment for each employee. Meaning the critical inquiry – the application of the remote work policy and its application to the work arrangements of the employees – would be common to all potential class members, even if some class members utilized that policy a little bit differently. This case illustrates one potential pitfall that can arise with the shift from an office workforce to a remote or hybrid workforce – and that pitfall is the possibility of layoffs to a remote or hybrid work force triggering WARN Act liability. It also highlights how the use of a common remote work policy for remote workers can potentially render a class of workers sufficiently similar for purposes of Rule 23 class actions.

Jen: Very interesting ruling. How about any issues or rulings on exemptions provided to employers under the WARN Act?

Tyler: Sure – so this is the last case I’ll go over for today’s video blog, and it’s a significant one issues by the Fifth Circuit where the court provided guidance regarding the “Natural Disaster” Exception to the WARN Act. The case was Easom, et al. v. US Well Services, Inc., in which the Fifth Circuit held that COVID-19 does not qualify as a natural disaster under the WARN Act’s natural disaster exception. So as background, in that case the plaintiffs filed a WARN Act class action claiming that the defendant terminated their employment without the 60-day noticed required by the WARN Act. The defendant, US Well, argued that the termination was caused by COVID-19, and therefore notice of the layoff with 60-day notice was not required due to the WARN Act’s natural-disaster exception. Both the plaintiff and defendant in the trial court moved for summary judgment on that issue regarding the exception. The district court denied both motions. In doing so, the trial court concluded that COVID-19 was a natural disaster because people did not start or consciously spread it and it was a disaster based on how many people were killed or infected. The trial court nonetheless denied the defendant’s motion for summary judgment because the exception in the WARN Act uses a but-for causation standard and the court found that the record did not show that COVID-19 was the but four cause of the layoffs – meaning other factors could have been in play as for what led to the layoffs. On appeal, the Fifth Circuit basically disagreed with the trial court’s entire order. The Fifth Circuit held that COVID-19 does not qualify as a natural disaster and in doing so the appellate court narrowly construed the statutory language which limits examples of natural disasters to “flood, earthquake, or drought” and other hydrological, geological, and meteorological events. The Fifth Circuit also examined whether the phrase “due to” in the natural disaster exception requires but-for or proximate causation and unlike the trial court, the Fifth Circuit determined that the natural disaster exception incorporates proximate causation not but-for causation.

Jen: Great insights and analysis Tyler, thank you so much. I know that these are only some of the cases that had very interesting rulings in WARN Act class actions over the past year. The remainder of 2023 is sure to give us some more insights and more examples of the way that class actions are continuing to evolve in this space. That brings us to our conclusion, thanks to our listeners for joining us today – we’ll see you on the next edition of the Class Action Weekly Wire.

Gerald L. Maatman, Jr., Jennifer A. Riley, and Nick Baltaxe

Duane Morris Takeaways: On July 18, 2023, in Mey v. Levin, Papantonio, Rafferty, Proctor, Buchanan, O’Brien, Barr & Mougey, P.A., et al., Case No. 5:23-CV-46 (N.D. W. Va. July 18, 2023), the Court denied a motion to dismiss Plaintiff’s claims for alleged violations of the Telephone Consumer Protection Act (the “TCPA”).  In doing so, the Court held that, despite the fact that Levin Law did not direct and was not involved in the alleged calls, the Court had personal jurisdiction over Levin Law, and Plaintiff had Article III standing to pursue the TCPA claims.  In doing so, the Court found allegations concerning the law firm’s alleged agency relationship with a co-defendant sufficient to confer broad authority to adjudicate Plaintiff’s claims against Levin Law under the TCPA.  Additionally, the Court concluded that Plaintiff had alleged sufficient facts to support a do-not-call claim under the TCPA by alleging that her cell phone was a residential phone on the National Do-Not-Call Registry. 

Case Background

Plaintiff Diana Mey, a resident of West Virginia, initiated this lawsuit against two law firms, Levin Law and Principal Law Group, LLC, alleging that those defendants violated the TCPA by soliciting clients for a mass tort litigation related to toxic water exposure at Camp Lejeune.  Mey, Doc. 33 at 1-2.  Defendant Levin Law filed a motion to dismiss on numerous grounds, including that the Court lacked personal jurisdiction, that Plaintiff lacked Article III standing, that Plaintiff failed to plead direct or vicarious liability, and that Plaintiff failed to plead a violation of the TCPA.  Id.  The Court denied the motion.  Id.  Specifically, Levin Law argued that it was not directly involved in any of the phone calls, which were made by co-defendant MCM Services Group, LLC (“MCM”), and therefore could not be sued for violation of the TCPA.  Id. at 8.

Initially, Levin Law, a Florida professional corporation with a principal place of business in Pensacola, Florida, argued that it did not have sufficient minimum contacts with West Virginia because it did not purposely direct the alleged tortious activity toward the state.  Id. While the Court acknowledged that Levin Law was not directly involved in the telephone calls placed to Plaintiff, it held that Plaintiff had provided sufficient facts to find that the calls were made by an agent under Levin Law’s control.  Id. at 12.  Specifically, the Court noted that Plaintiff allegedly received a representation agreement from Principal Law, under which Levin Law would provide legal services to Plaintiff, and Principal Law would serve as Levin Law’s associate counsel.  Id.  The Court found that these allegations were sufficient to plausibly connect Levin Law to the alleged calls.  In a final point regarding personal jurisdiction, the Court did not address whether it had personal jurisdiction over out-of-state class members noting that, to proceed with the case, it needed to find personal jurisdiction only over the named Plaintiff and Defendants.  Id. at 13.

The Court then addressed Levin Law’s argument that Plaintiff did not have Article III standing.  Specifically, Levin Law argued that the calls, which were initiated by MCM, were not traceable to any conduct by Levin Law, which was a necessary prong in establishing Article III standing.  Id.  The Court, however, noted that because the representation agreement identified Principal Law as Levin’s Law associate counsel, and Plaintiff received the agreement from Principal Law, the Court reasonably could infer that the calls were made by someone under Levin Law’s control.  Id. at 14.  As such, the Court found that Plaintiff had pled sufficient facts to trace the challenged conduct to the defendant and, as such, had asserted Article III standing.

The Court addressed Levin Law’s final arguments that Plaintiff failed to plead a theory of liability against it and, further, failed to state a do-not-call claim under the TCPA.  First, the Court held that Plaintiff asserted sufficient factual allegations to show vicarious liability and to survive a Motion to Dismiss.  Id. at 15.  Second, the Court found no case law supporting dismissal of a TCPA claim on the basis that the defendant allegedly placed a call to a cell phone instead of a residential phone.  Id. at 17.  Specifically, the Court noted that Plaintiff had alleged that her cell phone was used for residential purposes and was placed on the National Do-Not-Call Registry, making the claim actionable under the TCPA.  Id. 

Key Takeaways

In this ruling, the Court made interesting findings that will extend to plaintiffs outside the TCPA context to survive attacks at the pleading stage of litigation.  Specifically, the Court found both personal jurisdiction and Article III standing despite the fact that Levin Law did not purposefully direct the activity at issue.  By doing so, the Court agreed with arguments that the conduct of an alleged agent was enough to establish both personal jurisdiction and Article III standing.  Going forward, plaintiffs will have yet another way to support personal jurisdiction and Article III standing at the outset of the case even against defendants who they do not contend were directly involved in the conduct about which they complain.  Additionally, while there is a split in authority as to whether the TCPA extends to wireless telephone numbers, the Court in this litigation had no issue finding that a cell phone could be a residential phone for purposes of the TCPA, potentially extending its reach and keeping it relevant as a potential source of claims against corporate defendants.

By Alex W. Karasik, Gerald L. Maatman, Jr., and George J. Schaller

Duane Morris Takeaways:  On July 26, 2023, the EEOC issued a new Guidance entitled “Visual Disabilities in the Workplace and the Americans with Disabilities Act” (the “Guidance”).  This document is an excellent resource for employers, and provides insight into how to handle situations that may arise with job applicants and employees that have visual disabilities. Notably, for employers that use algorithms or artificial intelligence (“AI”) as a decision-making tool, the Guidance makes clear that employers have an obligation to make reasonable accommodations for applicants or employees with visual disabilities who request them in connection with these technologies.

The EEOC’s Guidance

The EEOC’s Guidance endeavors to address four subjects, including: (1) when an employer may ask an applicant or employee questions about a vision impairment and how an employer should treat voluntary disclosure; (2) what types of reasonable accommodations applicants or employees with visual disabilities may need; (3) how an employer should handle safety concerns about applicants and employees with visual disabilities; and (4) how an employer can ensure that no employee is harassed because of a visual disability.

The EEOC notes that if an applicant has an obvious impairment or voluntarily discloses the existence of a vision impairment, and based on this information, the employer reasonably believes that the applicant will require an accommodation to perform the job, the employer may ask whether the applicant will need an accommodation (and, if so, what type). Some potential accommodations may include: (i) assistive technology materials, such as screen readers and website accessibility modifications; (ii) personnel policy modifications, such as allowing the use of sunglasses, service animals, and customized work schedules; (iii) making adjustments to the work area, including brighter lighting; and (iv) allowing worksite visits by orientation, mobility, or assistive technology professionals.

For safety concerns, the Guidance clarifies that if the employer has concerns that the applicant’s vision impairment may create a safety risk in the workplace, the employer may conduct an individualized assessment to evaluate whether the individual’s impairment poses a “direct threat,” which is defined as, “a significant risk of substantial harm to the health or safety of the applicant or others that cannot be eliminated or reduced through reasonable accommodation.”  For harassment concerns, the EEOC notes that employers should make clear that they will not tolerate harassment based on disability or on any other protected basis, including visual impairment.  This can be done in a number of ways, such as through a written policy, employee handbooks, staff meetings, and periodic training.

Artificial Intelligence Implications

As we previously blogged about here, the EEOC has made it a priority to examine whether the use of artificial intelligence in making employment decisions can disparately impact various classes of individuals.  In the Q&A section, the Guidance tackles this issue by posing the following hypothetical question: “Does an employer have an obligation to make reasonable accommodations to applicants or employees with visual disabilities who request them in connection with the employer’s use of software that uses algorithms or artificial intelligence (AI) as decision-making tools?”According to the EEOC, the answer is “yes.”

The Guidance opines that AI tools may intentionally or unintentionally “screen out” individuals with disabilities in the application process and when employees are on the job, even though such individuals are able to do jobs with or without reasonable accommodations. As an example, an applicant or employee may have a visual disability that reduces the accuracy of an AI assessment used to evaluate the applicant or employee. In those situations, the EEOC notes that the employer has an obligation to provide a reasonable accommodation, such as an alternative testing format, that would provide a more accurate assessment of the applicant’s or employee’s ability to perform the relevant job duties, absent undue hardship.

Takeaways For Employers

The EEOC’s Guidance serves a reminder that the Commission will vigorously seek to protect the workplace rights of individuals with disabilities, including those with visual impairments. When employers are confronted with situations where an applicant or employee requests reasonable accommodations, the Guidance provides a valuable roadmap for how to handle such requests, and offers a myriad of potential solutions.

From an artificial intelligence perspective, the Guidance’s reference to the use of AI tools suggests that employers must be flexible in terms providing alternative solutions to visually impaired employees and applicants. In these situations, employers should be prepared to utilize alternative means of evaluation.

By Gerald L. Maatman, Jr., Alex W. Karasik, and George J. Schaller

Duane Morris Takeaways: In Webb et al. v. Injured Workers Pharmacy, LLC, No. 22-1896, 2023 U.S. App. LEXIS 16650 (1st Cir. June 30, 2023), the First Circuit reversed a district court’s ruling finding that Plaintiffs’ complaint plausibly alleged a concrete injury in fact where Defendant misused personally identifiable information, affirmed the district court’s ruling on injunctive relief , and remanded the case for further proceedings consistent with its First Circuit’s findings. For employers facing data breach class actions, this decision is instructive in terms of what courts consider for Article III standing requirements and, in particular, the “injury in fact” and “concrete harm” requirements.

Case Background

Alexis Webb and Marsclette Charley (“Plaintiffs”) brought a putative class action against Defendant, Injured Workers Pharmacy, LLC (“IWP” or “Defendant”), asserting various state law claims related to a data breach that allegedly exposed their personally identifiable information (“PII”) and the PII of over 75,000 other IWP patients.  Id. at *2.  In January 2021, IWP suffered a data breach.  Id. at *3.  Plaintiffs’ complaint alleged hackers infiltrated IWP’s patient record systems and gained access to the PII of over 75,000 IWP patients, and stole PII including patient names and Social Security numbers.  Id.  As a result of the breach, Plaintiff Webb alleged she “fears for her personal financial security and [for] what information was revealed in the [d]ata [b]reach,” she “has spent considerable time and effort monitoring her accounts to protect herself from identity theft,” and she “is experiencing feelings of anxiety, sleep disruption, stress and fear.”  Id. at 4-5.  In 2021, Webb’s PII was used to file a fraudulent 2021 tax return.  Id. at *5.  Plaintiff Charley alleged that she, “fears for her personal financial security,” “expends considerable time and effort monitoring her accounts to protect herself from identity theft,” and “is experiencing feelings of rage and anger, anxiety, sleep disruption, stress, fear, and physical pain.”  Id.

On May 24, 2022, Plaintiffs filed a class action complaint against IWP in the U.S. District Court for the District of Massachusetts, and invoked the court’s jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”).  Id. at *5-6.  The complaint asserted state law claims for negligence, breach of contract, unjust enrichment, invasion of privacy, and breach of fiduciary duty.  Id. at 6.  The complaint sought damages, an injunction “enjoining IWP from further deceptive and unfair practices and making untrue statements about the [d]ata [b]reach and the stolen PII,” “other injunctive and declaratory relief … as is necessary to protect the interests of [the] [p]laintiffs and the [c]lass”, and attorneys’ fees.  Id.  Plaintiffs also sought to certify a class of U.S. residents whose PII was compromised during the data breach.  Id.

On August 9, 2022, IWP moved to dismiss the complaint for lack of Article III standing, under Rule 12(b)(1), and for failure to state a claim as to each of the complaint’s asserted claims, pursuant to Rule 12(b)(6).  Id.  Plaintiffs opposed the motion.  On October 17, 2022, the district court granted IWP’s motion and dismissed the case under Rule 12(b)(1).  Id.  The district court concluded that Plaintiffs lacked Article III standing because their complaint did not plausibly allege an injury in fact.  Id.  The district court reasoned that the complaint’s allegations that the fraudulent tax return filed in Webb’s name did not sufficiently allege a connection between the data breach and this false return.  Id. at 6-7.  The district court also reasoned the complaint’s other allegations that the potential future misuse of the Plaintiff’s PII was not sufficiently imminent to establish an injury in fact and that actions to safeguard against this risk could not confer standing either.  Id. at 7.  The district court did not reach IWP’s Rule 12(b)(6) arguments because the case was dismissed under Rule 12(b)(1).  Id.  Plaintiffs timely appealed the district court’s decision.  Id.

The First Circuit’s Decision

The First Circuit reversed the judgment of the district court and held that Plaintiffs plausibly alleged a concrete injury in fact.  In regards to Plaintiff Webb, the First Circuit concluded that “the complaint plausibly alleged a concrete injury in fact as to Webb based on the plausible pleading that the data breach resulted in the misuse of her PII by an unauthorized third party (or third parties) to file a fraudulent tax return.”  Id. at *10-11.  The First Circuit rejected the district court’s conclusion that the complaint did not plausibly allege a connection between the data breach and the filing of the false tax return.  Id. at *13.  Instead, the First Circuit opined “[t]here is an obvious temporal connection between the filing of the false tax return and the timing of the data breach.”  Id.

Turning to Plaintiff Charley, the First Circuit held that in light of the plausible allegations of some actual misuse, the complaint plausibly alleged a concrete injury in fact based on the material risk of future misuse of Charley’s PII and a concrete harm caused by the exposure to this risk.  Id. at *15.  Further, the First Circuit opined that the totality of the complaint plausibly alleged an imminent and substantial risk of future misuse of the Plaintiffs’ PII.  Id at *19.

In addition, the First Circuit found the complaint’s allegations satisfied the traceability and redressability standing requirements.  Id. at *21.  The complaint alleged IWP’s actions led to the exposure and actual or potential misuse of Plaintiffs’ PII, making their injuries “fairly traceable to IWP’s conduct.”  Id.  As to redressability, the First Circuit stated “monetary relief would compensate [the plaintiffs] for their injur[ies], rendering the injur[ies] redressable.”  Id. at *22.  The First Circuit thus held that Plaintiffs supported each of their five causes of action for damages with at least one injury in fact caused by the defendant and redressable by a court order.  Id.

Finally, the First Circuit affirmed the district court’s ruling that Plaintiff’s lacked standing to seek injunctive relief.  The sole allegation in the complaint that injunctive relief was necessary was that Plaintiffs’ PII was still maintained by IWP with its inadequate cybersecurity system and policies.  Id.  The First Circuit rejected the idea that an injunction requiring IWP to improve its cybersecurity measures would protect Plaintiffs from future misuse of their PII and instead would only safeguard against a future breach.  Id.  The First Circuit declined to extend injunctive relief where IWP faces, “much the same risk of future cyberhacking as virtually every holder of private data.”  Id. at *24.  For these reasons, the First Circuit affirmed the district court’s holding that Plaintiffs lacked standing to seek injunctive relief.

Implications For Employers

For employers facing data breach class actions, Article III standing defenses are often an optimal avenue to attack the pleadings at the outset, especially in situations involving questionable “injuries” to the named plaintiffs. Businesses that endure data breaches should take note that the First Circuit relied heavily on the temporal connection between the data breach and fraudulent tax filing which constituted a concrete injury.  Accordingly, the lowered pleading threshold that results from this ruling suggests that employers should carefully evaluate the safeguards in place for any personally identifiable information stored, and swiftly respond to any data breaches.