Class Action Defense

June 16, 2023June 16, 2023 by Class Action Defense

The Class Action Weekly Wire – Episode Seventeen: The Illinois BIPA: Fingerprints, Facial Recognition, And The Future Of Privacy Litigation

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jennifer Riley and Alex Karasik with their analysis of privacy class action trends and rulings from 2022, and predictions for what 2023 may bring for Corporate America given key developments in the BIPA class action litigation landscape so far this year. We hope you enjoy the episode.

Episode Transcript

Jennifer Riley: Welcome listeners, thank you for joining us for the latest edition of the Class Action Weekly Wire. We’re here this week to talk about privacy class actions and I’m joined by my colleague Alex Karasik. Alex can you tell our listeners how this area of privacy class actions has evolved over the last few years?

Alex Karasik: Thanks, Jen. Well, the BIPA statute was relatively dormant since it became law in 2008, and since then the number of BIPA class actions has exploded. In addition, if other states start enacting similar statutes regarding biometric privacy we think there will be a similar uptick in class actions for those states throughout the country, so this is definitely an emerging area of law.

Jennifer: The plaintiffs’ class action bar has sought to capitalize in this area on ambiguous statutory provisions, plus slow to develop compliance programs, coupled with stiff statutory penalties and fee shifting, to really leverage some sizable settlements in this area.

Alex: And adding to this minefield, lots of states are considering similar copycat statutes which can make it difficult for employers if you have operations in two different states that have two different laws, plus there’s been some grumblings of a potential federal statute – while none of those have come to fruition yet it’s something that they should definitely pay attention for.

Jennifer: Let’s turn to some of the key rulings in this area both this year and in 2022. Alex, what are some of the key rulings that come to mind?

Alex: In February 2023, the Illinois Supreme Court issued two long-awaited rulings that will undoubtedly shape the BIPA landscape. In Tims, et al. v. Black Horse Carriers, the Illinois Supreme Court held that a five-year statute of limitation applies to the BIPA. The statute itself doesn’t have an express limitations, so some advocates were arguing that a one-year or two-year statute of limitations should apply, but this ruling undoubtedly increases exposure for BIPA cases. In addition the Illinois Supreme Court held in Cothron, et al. v. White Castle that each individual scan is a violation of the BIPA – as opposed to being a per person basis – so once again, if multiple employees are scanning in and out of a factory or office each day, each scan being a violation will again substantially increase potential damages in this space.

Jennifer: Thanks, Alex – what kind of impact do you think these rulings are apt to have on future privacy class action litigation?

Alex: That’s an excellent question, Jen. I think that these rulings are going to increase the plaintiffs’ bar appetite knowing that there’s substantial damages to be had in this space, but at the same time one has to wonder – if it’s a per scan, each violation – plus a five-year statute of limitation – with damages now creeping into the millions and billions of dollars, is it even going to be feasible for plaintiffs to recover on a per scan basis? So that’s something to keep in mind, as I doubt plaintiffs’ counsel will want to litigate these cases in bankruptcy court against businesses. It’ll also be interesting to see the different defenses that an employer or company might offer when defending one of these cases in terms of the constitutionality of such damages, so it remains to be seen how these new goal posts that have been set by the Illinois Supreme Court in February of 2023 will impact both how these cases are tried and resolved, but there’s definitely going to be some big changes on the forefront.

Jennifer: Wow, no wonder this area has really exploded over the past year. Are there any other impactful or interesting rulings that come to mind from 2022-2023?

Alex: Absolutely, Jen. The first BIPA jury trial occurred in 2022 in the fall, and that left a huge impression in this space. In that case, Rogers, et al. v. BNSF Railway, approximately 45,000 truckers sued a railway company in terms of BIPA violations. There the jury found there were approximately 45,600 discrete violations of the BIPA, and at that point, after entering judgment, the damages were $228 million dollars – that’s a lot of money, and the jury there didn’t sympathize with the employer’s arguments, and awarded the full willful damages available under the statute. So I think that for businesses and employers that are thinking about trying one of these cases in front of a jury pool in Chicago or potentially beyond – there’s a lot of risk there.

Jennifer: Thanks, Alex – that is some serious money awarded by the jury in that case. We’ll be sure to keep our listeners up to date on happenings in that matter. Are there any other important rulings that our listeners should know about?

Alex: Yeah, absolutely Jen, there are some cases that come to mind that are trying new novel approaches to the BIPA statute. First, in Wilks, et al. v. Brainshark, this case involved the facial recognition in recording of presentations. In the traditional BIPA context, especially in the early years when these class actions first started to get filed, it would predominantly involve allegations of thumbprint or fingerprint scanning, but I think you’re starting to see more in the facial recognition space. Jen, were there any rulings from 2022 that you found interesting?

Jennifer: Thanks, Alex – one that comes to mind immediately is a ruling called Kukovec, et al. v. The Estée Lauder Companies, Inc. That was an interesting ruling because it involved try-on technology. The plaintiffs brought suit against The Estée Lauder Companies alleging that their try-on tool collected or captured facial geometry, and that the defendants had failed to get users consent and failed to inform users regarding the collection and the retention of such data. The defendant in that case moved to dismiss on various grounds.

First, the defendant moved to dismiss on the ground that the court lacked personal jurisdiction – this is an interesting argument because the defendant said the tool was available to Illinois consumers, but more as a passive tool that was available and therefore there wasn’t this purposeful availment of the jurisdiction. The court disagreed and said that the try-on tool was part of the defendant’s marketing and sales strategy, and that the consumers actually had the option to use buttons, to add products to the cart, to send products as gifts through the website, so it was sufficient for personal jurisdiction – and the court noted that the defendant’s argument took an overly narrow view.

Secondly, the defendant argued that venue was improper because there was an arbitration agreement. This is interesting as well because the defendant claimed that the arbitration agreement was part of the terms of use for its web page, but the court disagreed and said that the plaintiff lacked constructive knowledge or there was a lack of evidence that the plaintiff had constructive knowledge of the arbitration agreement, and therefore a lack of evidence the plaintiff accepted those terms.

Third, the defendant sought to dismiss the complaint on the grounds that the plaintiff had alleged only conclusory statements and had failed to allege facts and support of allegations that biometric information was actually collected. The court disagreed and found the pleading sufficient to meet the pleading standards, and that the plaintiff had alleged enough to infer that the defendant had captured biometric information. However, the court ruled that since recklessness and intentionality requires a specific state of mind, that the plaintiff had failed to allege facts in support of those claims, and the court ran a dismissal of those.

Finally, the defendant contended that because the plaintiff had not used the websites of four other brands that also utilize the virtual try-on tool, that the plaintiff lacks standing to represent a class of consumers as to those websites. The court said that argument was premature because the plaintiff had not actually moved to certify a class yet. So that is an interesting ruling, and I think as the popularity of try on tools and technologies continues to grow, we’re going to see more lawsuits attacking similar products and similar technologies fueling or helping to fuel that growth in the biometric data privacy front.

Alex: Wow, that’s a great example Jen, and I can imagine that in the Renaissance Era of e-commerce, virtual try-on tools become more and more popular as people seek to purchase goods and retail products online and we’re going to see a lot more of those from the plaintiffs’ bar in the near future.

Jennifer: How about top settlements, Alex, was the plaintiffs’ bar able to capture big dollars for plaintiffs in privacy class actions over the past year?

Alex: Oh yeah – there’s been a lot of big money dollars in BIPA settlements! There’s a Google settlement for $100 million and a TikTok settlement for $92 million that lead the way, and in fact over the whole tenure of the BIPA statute there’s been over a billion dollars recovered under this law, so it’s absolutely worth a lot of money to employers and businesses – and I think these eye-popping numbers alone should be reason to convince companies of the potential financial risk of not complying with the BIPA.

Jennifer: Thanks, Alex. I think one of our key takeaways here is that it’s very important for companies and corporate counsel to implement policies and procedures that fully comply with the BIPA and other state and federal privacy regulations and statutes. Companies should implement proper safeguards, they should implement consent processes for the collection and retention of biometric data – particularly with respect to Illinois consumers – and in other states either with or considering similar legislation. Companies should also take heed of how they notify users and obtain their consent before collection of biometric information.

Alex: Thank you Jen for your time today, and thank you to our listeners for paying attention to our BIPA and privacy presentation. This is obviously a rapidly emerging area of law that absolutely will continue to evolve day by day in the near future.

Jennifer: Thank you Alex, thank you for joining us and thank you to our listeners for viewing another episode of the Class Action Weekly Wire – we’ll see you next week.

Alex: See you soon!

June 15, 2023 by Class Action Defense

New York Federal Court Finds Employer’s Unlawful Written Policy Provides A Basis For Conditional Certification

By Gerald L. Maatman, Jr., Maria Caceres-Boneau, and Gregory Slotnick

Duane Morris Takeaways: In Carabajo v. APCO Insulation Co Inc., Case No. 22-CV-04175 (E.D.N.Y. June 9, 2023), Magistrate Judge Sanket J. Bulsara of the U.S. District Court for the Eastern District of New York granted Plaintiffs’ motion for conditional certification and found an employer’s enforcement of a written policy, unlawful on its face, was evidence enough to secure a conditional certification of a collective action under the Fair Labor Standards Act, despite questions of fact concerning supporting declarations. The ruling is a warning and reminder to employers, especially those in the Second Circuit, that a written policy on its own may support conditional certification where enforcement of the policy would violate the law on its face.

Case Background

On July 15, 2022, Miguel Carabajo (“Carabajo”), a former insulation prep and installer working at APCO Insulation (“APCO”), a building insulation and construction company in New York City, filed a class and collective action claiming APCO and its president (“Defendants”) violated the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”) by failing to pay him and others similarly situated overtime pay for weekly hours worked over 40, unlawfully deducting 30 minutes per day for meal breaks they did not actually take, and requiring them to come into work 15 minutes early before they could clock-in. On December 8, 2022, Carabajo moved for conditional certification of a collective action under the FLSA consisting of all current and former employees employed by APCO as non-exempt laborers or similarly situated employees between July 15, 2016 and December 8, 2022. Carabajo filed a declaration in support of his motion, and APCO filed a brief and declarations in opposition.

The Court’s Ruling

As detailed in the Court’s ruling of June 9, 2023, the Magistrate Judge found Carabajo met his burden to show that while employed by APCO and its owner, he and others similarly situated were subject to a policy running afoul of the FLSA per se from at least March 2019 forward: “the practice of not paying for all hours worked (including overtime) when workers failed to clock in and out correctly.” Id. at 4. In support of its conclusion, the Court pointed to APCO’s written policy notifying Carabajo and other laborers they would not be paid for a day’s work if they did not clock-in or clock-out properly. The Court also found support in APCO’s Employee Agreement, which stated that if laborers fail to punch-in when they get to a job site, or fail to punch-out when they leave the job site, they “will not be paid.” Id. The Magistrate Judge found it significant that APCO did not dispute the existence and application of the policy to Carabajo and other similarly situated laborers.

The Court faulted Defendants for attempting to “skirt liability” under the FLSA by justifying implementation of their unlawful policy in a number of ways, such as stating the policy was necessary to convey to workers the importance of clocking-in and out each day and that overtime and breaks will be compensated, except if there is a failure to correctly log their time. Defendants did not contest that their employees worked overtime and did not unequivocally state the policy was not enforced or deductions were not taken under its application. The Court explained that if an employee believed the policy to be lawful and was docked pay for improperly clocking-in or out, the employee would mistakenly believe they were paid correctly; however, they would still have a FLSA claim, be entitled to such docked pay, and the policy would still be illegal on its face.

Carabajo claimed Defendants enforced the policy against him and other similarly situated workers, that he did not receive payment for at least 8 overtime hours a month as a result, and that discussions with other workers revealed Defendants failed to pay them for all the days they worked.

The Magistrate Judge found that resolution of the merits of Defendants’ denials and contradictory declarations in response to Carabajo’s motion was inappropriate at the conditional certification stage of a lawsuit, and that the only pertinent question was whether Carabajo satisfied the required modest factual showing there was an illegal policy that applied to him and others. The Court ruled in the affirmative and determined that Defendants’ written policy was illegal on its face and that Defendants applied it to Carabajo and others similarly situated. The Magistrate Judge also held that the existence of the illegal written policy rendered much of the parties’ briefing and arguments irrelevant. The Court noted even if Defendants could prove Carabajo never spoke with other employees about the issues, the policy alone was sufficient to warrant conditional certification because it was illegal on its face and applied to all employees.

Although the Court granted the motion for conditional certification in part, the Court agreed with Defendants that the scope of the collective action that Carabajo sought to conditionally certify was overbroad. Since Carabajo alleged he only worked as a mechanical engineer and had not shown that other workers to whom he had spoken worked in a different position, notice to “all non-exempt employees at APCO” was not appropriate. Id. at 10. The Court limited the collective action to non-exempt mechanical insulators or individuals who had the same job duties as Carabajo since he had only demonstrated enforcement of the illegal written policy as to those individuals. The Magistrate Judge also reduced the six-year notice period sought by Carabajo to three years, differentiating between the appropriate statute of limitations periods under the NYLL and the applicable FLSA.

Implications Of The Decision

The Carabajo decision is a stern reminder that employers must always analyze their internal wage and hour policies for potentially widespread compliance issues based on enforcement. While APCO’s written policy of not paying wages to employees for days on which they did not properly clock-in or clock-out was on its face improper, the ruling is an example of a Court using such an implemented per se unlawful policy as the sole basis to grant conditional certification of an FLSA collective action regardless of factual concerns based on plaintiff-supplied declarations and allegations. As a result, and in light of the minimal burden district courts in the Second Circuit require plaintiffs meet to satisfy the first step of conditional certification, employers are reminded of the need to consult with experienced wage and hour counsel well in advance of enforcing internal policies. It also bears noting that under the law, employers must pay employees for all of their hours worked, regardless of timekeeping issues and employees incorrectly punching-in or out.

June 9, 2023 by Class Action Defense

New York Federal Court Denies Lead Plaintiff Status In Securities Fraud Class Action Based On A Loss Of $323.20

By James J. Coster and Nelson Stewart

Duane Morris Takeways: The U.S. District Court for the Eastern District of New York recently declined to reverse a Magistrate Judge’s denial of a motion seeking to appoint two investors as lead plaintiffs, and their attorneys as class counsel, in a securities fraud class action where the combined losses alleged by the two investors totaled just $323.20. In Guo v. Tyson Foods, Inc., et al, 1:21-CV-00552 (E.D.N.Y. June 1, 2023), putative class members alleged Tyson Foods, Inc. had misled investors about the adequacy of its Covid-19 safety measures, which resulted in a decline of the company’s share price when the misleading information was publicly disclosed. Magistrate Judge James R. Cho found that the movants’ losses were not sufficient to demonstrate an interest in the outcome of the litigation that would ensure compliance with the vigorous advocacy requirements of Rule 23 of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). In denying the motion on Rule 72 review, District Judge Anne M. Donnelly held that the decision was comprehensive, and not “clearly erroneous” or “contrary to law,” as required by the highly deferential standard of review for non-dispositive motions under Rule 72(a). The Court’s refusal to reverse the decision illustrates that a mere prima facie showing of certain damages may not be sufficient to satisfy the adequacy requirements of the PSLRA.

Background

Plaintiff Mingxue Guo filed a putative class action against Tyson asserting violations of the Securities Exchange Act of 1934. The complaint alleged that Tyson and certain officers and directors of the company had failed to disclose the financial implications of its purportedly inadequate Covid-19 safety protocols in publicly filed documents to the SEC between March 13, 2020 and November 16, 2020. On December 15, 2020, the Comptroller of New York City called on the SEC to investigate Tyson and its alleged failure to implement proper safety protocols. Tyson’s share price dropped 2.5%, or $1.78, per share on December 15, 2020.

Tyson investors Chen Porat and Keagan Marcus filed a motion that sought their appointment as lead plaintiffs, and approval of their attorneys as class counsel. Porat alleged losses in the amount of $156.25 and Marcus allegedly incurred losses of $166.95. None of the parties had identified a class member that suffered a greater financial loss and no other member of the class had filed a competing motion for appointment as lead Plaintiff within the required time frame. Porat and Marcus argued that courts typically approve lead Plaintiffs with losses similar to, or less than, the losses they incurred. As discussed in Judge Cho’s decision, a purported class member seeking appointment as lead Plaintiff in a securities class action must meet the typicality and adequacy requirements under Rule 23 of the PSLRA. Porat and Marcus were found to have met the typicality requirement because both parties asserted claims that were based on the same facts concerning the alleged misrepresentations as other class members during the same period. With respect to the adequacy requirement, however, they had not established that they would fairly and adequately protect the interests of the class. Judge Cho held that the PSLRA requires lead Plaintiffs to have a significant financial interest in a class action to avoid Plaintiffs from simply acting as an instrument of counsel, who may have recruited them for that purpose. This requirement incentivizes the lead Plaintiff to monitor and control the litigation in a fashion that will best serve the interests of all the class members. Because Porat and Marcus lacked a significant financial interest in the outcome of the litigation, the Court opined that they failed to satisfy the requirements of the PSLRA and their motion was denied. The ruling concluded that that the case should proceed on an individual basis.

The Court’s Decision

In denying the Rule 72 objections to reverse Magistrate Judge Cho’s decision, Judge Donnelly noted that the deferential standard of review for non-dispositive motions under Rule 72(a) created a heavy burden for a party seeking reversal. The decision of a Magistrate Judge denying or approving a lead Plaintiff is non-dispositive. Thus, a movant must demonstrate that the Magistrate Judge’s decision denying appointment of proposed lead Plaintiff was “clearly erroneous” or “contrary to law,” and the Court found that Porat and Marcus had not met that burden. Porat and Marcus had argued that Magistrate Judge Cho’s ruling was erroneous because it would preclude small class actions by appointing only lead Plaintiffs who had suffered a large loss, thereby creating a loss requirement that does not exist under the PSLRA. They further argued that a small loss should not preclude a prima facie showing of adequacy.

Judge Donnelly held that the lack of a specific minimum loss requirement in the PSLRA does not alter the broad discretion the statute grants to the courts in determining the adequacy of a lead Plaintiff. Judge Donnelly opined that the Magistrate Judge’s decision was comprehensive and in accordance with the exacting requirements of the PSLRA. The Court determined that the necessity of a significant financial interest advanced the historical purpose of the PSLRA, and the decision was in line with a number of prior case law authorities that denied motions of proposed lead Plaintiffs on similar grounds.

Key Takeaways

The existence of some measure of damages may not be sufficient to meet the adequacy requirements of the PSLRA unless a proposed lead Plaintiff can demonstrate an interest that will incentivize forceful advocacy on behalf of the entire class. Clearly, damages of $323 is not enough. The decision in Guo indicates that proving adequacy will often necessitate a substantial financial stake in a litigation to serve the restrictive purposes of the PSLRA. Class members who seek appointment as lead Plaintiff without the requisite financial interest will also face a very narrow standard of review if their motion is denied.

June 9, 2023June 9, 2023 by Class Action Defense

The Class Action Weekly Wire – Episode Sixteen: Wage & Power Hour: Key Takeaways From FLSA Class Actions In 2022

June 8, 2023 by Gerald L. Maatman, Jr.

Illinois Federal Court Denies Class Certification In Chicago Water Department Race Discrimination Lawsuit

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

Duane Morris Takeaways: In Edmond, et al. v. City of Chicago, No. 17-CV-4858 (N.D. Ill. June 6, 2023), Judge Matthew F. Kennelly of the U.S. District Court for the Northern District of Illinois denied a motion for class certification filed by a group of current and former employees alleging workplace race discrimination in violation of state and federal law. The ruling highlights the viability of defense positions relative to Plaintiffs’ failure to meet the Rule 23 commonality requirement, which was instrumental to defeating their bid for class certification.

Case Background

Nine African-American workers currently or previously employed by the Chicago Department of Water brought a putative class action against the City of Chicago and several individuals employed by it in 2017, alleging race discrimination and a hostile work environment on behalf of a group of employees. Plaintiffs alleged the existence of an ongoing and pervasive “culture of racism” fostered by organizational leadership across five bureaus and various sub-bureaus, treatment plants, and construction sites. Id. at 4. The lawsuit was brought after the City’s Inspector General uncovered emails containing racist exchanges between Department commissioners and deputies, which resulted in resignations of two executives. Id.

Plaintiffs alleged that the hostile work environment included racially offensive language, threatening gestures, and disparate treatment of Black employees in violation of 42 U.S.C. §§ 1981 and 1983 and Illinois law, and filed a motion to certify a class that included all Black workers employed by the Water Department since 2011 and three sub-classes for individuals who had been eligible for overtime, those with disciplinary infractions, and those who had been denied promotions.

In 2018, the Court granted Defendants’ partial motion to dismiss. Plaintiffs then brought a motion to amend the complaint in order to drop the individuals from the suit, which was granted without prejudice. Subsequently, Plaintiffs filed a motion to certify the classes pursuant to Rule 23 of the Federal Rules of Civil Procedure.

The Court’s Decision

The City argued that because Plaintiffs were unable to establish a shared work environment in their hostile work environment claim due to the Department’s dispersed workforce, Plaintiffs failed to identify a common contention whose resolution would resolve class claims, as required under Rule 23(a)(2)’s commonality element. The Court agreed with this position. It opined that there was no “evidence of common areas shared by all Department employees or instances of harassment broadcast across the entire Department.” Id. at 10. The Court found that the experience of putative class members varied across the Department, with individual claims of discrimination ranging from verbal to visual conduct, while others alleged bias in duty assignments or disciplinary actions.

Plaintiffs additionally contended that a pervasive culture of discrimination permeated the Water Department. They cited statements made by members of the city administration and the Inspector General’s investigation, and posited that this was proof of a “de facto policy of racism” across the workplaces. Id. at 11. The Court was not convinced that this had a uniform impact on all the named Plaintiffs and putative class members to satisfy the commonality question, and it denied the motion for class certification based on Plaintiffs’ failure to meet this threshold under Rule 23(a).

Likewise, Judge Kennelly rejected Plaintiffs’ arguments for certification of each sub-class based on a pervasively racist culture. The Court concluded that disciplinary, overtime, and promotion decisions were made by individual supervisors based on their personal discretion and varied across the Department, and that Plaintiffs failed to show evidence that the same decision-makers were responsible for such actions. Id. at 23. The Court was not convinced by Plaintiffs’ expert witness’ use of statistical data to show a disparate impact, noting that similar evidence had not been sufficient to demonstrate commonality for purposes of class certification in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).

Implications For Employers

The Edmond ruling underscores the importance of maintaining and utilizing a well-organized workplace reporting structure and managerial discretion in employment matters in anticipating arguing the absence of Rule 23’s commonality requirement, as seen in the Wal-Mart decision. In dismissing all of Plaintiffs’ arguments after finding an absence of a work environment common to all putative class members and no top-down decision-making policy regarding wages and promotions, the Court signals its steady reliance on the well-established standards for these types of claims, providing a valuable reaffirmation to employers’ reliable defense strategies.

June 7, 2023 by Class Action Defense

Georgia Federal Court Approves Consent Judgment For Department Of Labor-Initiated FLSA Action

By Gerald L. Maatman, Jr., Jennifer A. Riley, and George J. Schaller

Duane Morris Takeaways: In Su v. 811 Autoworks LLC et al., No. 3:21-CV-00220 (N.D. Ga. June 5, 2023), a federal district court in Georgia entered a consent judgement requiring an employer to pay approximately $40,000 for back wages and liquidated damages to end an FLSA suit filed by the U.S. Department of Labor (DOL) last year. The circumstances of the award are far from typical, and show how context is everything.

For employers facing DOL-initiated lawsuits involving retaliation, overtime, and recordkeeping prohibitions of the FLSA, this decision is illustrative of the potential for liquidated damages for failures to adhere to the FLSA, particularly in disputes over back wages and final wages where retaliation occurs.

Case Background

The DOL filed an FLSA action on behalf of former workers (“Claimants”) of 811 Autoworks LLC d/b/a/ AOK Walker Luxury Autoworks (“AOK”) and AOK’s owner, Miles Walker. The Claimants alleged they were denied pay for final wages and did not receive required overtime pay when they worked over 40 hours in a workweek. In its investigation, the DOL also determined Walker failed to keep adequate and accurate records of employees’ pay rates and work hours in violation of the FLSA’s recordkeeping prohibitions.

Additionally, at least one Claimant, Andreas Flaten, alleged he was retaliated against for requesting his final paycheck where AOK delivered his final $915 paycheck as 91,500 oil covered pennies with an expletive marked pay stub left on the driveway of his residence. Subsequently, the oil covered pennies damaged Flaten’s driveway and took nearly seven hours to remove.

The Court’s Decision

The Court resolved the DOL suit by entering its consent judgment. The consent judgement directed AOK to compensate workers who exceeded 40 hours in a workweek at a rate of “at least one-half times the regular rate at which such employee is employed, unless such employee qualifies for an exemption . . .” Id. at 2. The consent judgment also ordered that AOK must “not threaten or intimidate (verbally or in writing), terminate or threaten to terminate, coerce or attempt to influence behavior, disparage in person or electronically, or retaliate or discriminate against any current and/or former AOK employees based on AOK’s belief that an employee was engaged in protected activity.” Id. at 2-3. The Court further included a definition for “protected activity.” Id. at 3. The consent judgement required AOK “shall not fail to make, keep and preserve adequate and accurate employment records as prescribed by Regulation.” Id. In response to Flaten’s retaliation allegations, the Court sought immediate removal from AOK’s website all photographs and references to Flaten and permanently enjoined AOK from posting photographs or references to Flaten on any other website or social media site. Id.

As to payments, the Court held AOK was “restrained from withholding back wages in the total amount of $19,967.9 plus liquidated damages in the amount of $19,987.09.” Id. at 4. The Court provided a schedule for the payments, where the payments must be delivered to, and noted AOK would be in default for failure to make any payments per the schedule. Id. at 4-5. Finally, the Court required AOK to post this Consent Judgment and immediately post U.S. Department of Labor, Wage and Hour Division Fact Sheet #77A in all conspicuous places in or about its facility. Id. at 6.

Implications For Employers

Employers that are confronted with DOL-initiated litigation involving FLSA prohibitions should, from a practical standpoint, continuously review recordkeeping procedures, overtime policies, and final wage policies to ensure FLSA compliance. Employers should also note that, in response to the alleged retaliation, the Court sought removal of and enjoined the company from referencing the retaliated claimant on its own website and any other website or social media site. And obviously, paying disputed wage by dumping a truckload of oil-covered pennies on the driveway of a worker is ill-advised.

June 5, 2023 by Class Action Defense

Nebraska Federal Court Allows EEOC-Initiated ADA Lawsuit To Proceed

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

Duane Morris Takeaways: In EEOC v. Werner Enterprises, Inc., No. 8:18-CV-00329, 2023 U.S. Dist. LEXIS 95981 (D. Neb. May 31, 2023), a federal district court in Nebraska denied an employer’s partial motion to reconsider the Court’s prior denial of its motion for summary judgment, holding that facially discriminatory policies can be demonstrated through evidence other than hiring policy documents.

For employers facing EEOC-initiated lawsuits involving ADA claims in the hiring process, this decision is instructive in terms of the evidence courts will consider at the summary judgment stage, particularly training documents that may be discriminatory on their face.

Case Background

The EEOC filed suit on behalf of a hearing-impaired truck driver applicant (the “Claimant”) who submitted an application with Defendant Werner Enterprises, Inc. (“Werner”). The Claimant, along with other hearing-impaired applicants, allegedly were subject to a different workflow for applications. The EEOC claimed an internal training document provided by Werner instructed its recruiters to provide a different workflow for applications from hearing-impaired drivers – if the recruiter was “aware of an FMCSA waiver or a hearing issue, then the recruiter was directed ‘do not Pre-Approve the application.’” Id. at *3. Instead, the recruiter would send the hearing-impaired applicants completed application “to the manager basket,” and management would decide to move forward or not. Id. Therefore, the EEOC contended Werner’s pre-approval procedure adversely affected hearing-impaired applicants.

After the Claimant filed an administrative charge, and the EEOC ultimately filed a lawsuit on his behalf, Werner moved for summary judgment. It argued that its training document at issue “does not unlawfully classify applicants because of their disability.” Id. at *4. Instead, Werner maintained diverting applications from hearing-impaired applicants was to verify that an applicant had a valid exemption from physical qualification standards. Id.

The Court rejected Werner’s argument and reasoned that the training document does instruct recruiters to treat hearing-impaired applicants differently from other applicants. Id. at *4-5. Subsequently, Werner filed a motion to reconsider the denial of its motion for summary judgment.

The Court’s Decision

The Court denied Werner’s motion for reconsideration.

In Werner’s motion for summary judgment, it asserted that the EEOC’s claim of a “facially discriminatory” hiring policy could only be based on a single training document without considering other evidence. In its motion to reconsider, Werner pivoted and argued that the Court erred by considering what might be shown by evidence beyond the face of the training document. Id. at *5-6. The Court reasoned that applicable case law authorities consider whether the policy is discriminatory on its face, but this inquiry is not dispositive of the entire claim. The Court also opined that the EEOC could demonstrate discriminatory intent through other evidence if the policy is not discriminatory on its face. Id. at *8. The Court also noted that the policy at issue was facially discriminatory – “even if a policy isn’t discriminatory on its face (which, to reiterate, this document is.)” in light of Werner’s assertion. Id.

The Court rejected Werner’s argument that the EEOC’s claim of a facially discriminatory hiring policy was based exclusively on the training document itself. First, the Court explained the basics of a discrimination claim require the EEOC must show, among other things, an adverse employment action because of disability. Second, the Court explained that discriminatory intent can be proved either through direct evidence of discrimination, or through a showing of disparate treatment. Id. at *6. As to this point, the Court clarified there is direct evidence of discrimination when the “evidence shows a specific link between the alleged discriminatory animus and the challenged decision, sufficient to reasonably support a finding that an illegitimate criterion actually motivated the adverse employment action.” Id.

The Court held that Werner’s training document evidenced disparate treatment, but the effect of that treatment, if any, occurred after the applications from hearing-impaired drivers were diverted to the “manager basket.” Id. at *9. The Court also found the EEOC was not bound by its pleading to rely exclusively on the face of the training document to support its claim. Id. Finally, the Court determined the disputed issue for the parties to focus on is whether accommodating a hearing-impaired placement driver is reasonable. Id. at *10-11. Therefore, the Court denied Werner’s motion to reconsider the denial of Werner’s motion for summary judgment.

Implications For Employers

Employers confronted with EEOC-initiated litigation involving hiring practices should take note that the Court relied heavily on additional evidence demonstrating discriminatory intent supporting the purported facially discriminatory policy. Further, from a practical standpoint, employers should carefully evaluate training documents that may impact applicants with disabilities, as courts are apt to scrutinize these materials.

June 2, 2023 by Class Action Defense

The Class Action Weekly Wire – Episode Fifteen: Labor Class Actions

June 1, 2023 by Class Action Defense

Colorado Federal Court Denies Class Certification Without Uniform Job Conditions In Hybrid Wage & Hour Litigation

By Gerald L. Maatman, Jr., Emilee N. Crowther, and Nicolette J. Zulli

Duane Morris Takeaways: In Levine v. Vitamin Cottage Natural Food Markets, Inc., No. 20-CV-00261, 2023 U.S. Dist. LEXIS 92027 (D. Colo. May 25, 2023), Magistrate Judge Scott T. Varholak of the U.S. District Court for the District of Colorado granted Defendant Vitamin Cottage Natural Food Markets, Inc.’s (“Vitamin Cottage”) Motion to Decertify Plaintiff’s FLSA collective action, and denied Plaintiff’s Motion for Rule 23 Class Certification. The Court’s decision in this case aptly illustrates the standards under which courts should analyze, and defendants should move, for decertification of FLSA collective actions, as well as the standards for certification of a Rule 23 class in wage & hour misclassification lawsuits. This opinion is well-worth a read by corporate counsel, as it underscores the importance of well-planned and strategic discovery in defending class and collective actions in the context of an exemption misclassification case. Furthermore, it also demonstrates the contingent relationship and outcome of concurrently filed motions to for decertification brought by defendants and motions for Rule 23 class certification brought by plaintiffs.

Case Background

Vitamin Cottage owns and operates more than 150 grocery stores in nineteen states, and employs over 3,000 individuals. Plaintiff, a former Assistant Store Manager (“ASM”) in Colorado, filed suit under the Fair Labor Standards Act (“FLSA”) and Colorado Wage Claim Act (“CWCA”) alleging improper classification of ASMs as exempt employees and denying them overtime.

In November 2020, the Court granted Plaintiff’s Motion for Conditional Certification and conditionally certified a collective action for the purposes of Plaintiff’s FLSA claims. In total, one-hundred fifty-eight (158) individuals opted-in to the collective action against Vitamin Cottage. Thereafter, Plaintiff and Vitamin Cottage conducted written discovery and depositions.

After the close of discovery, Vitamin Cottage filed a Motion to Decertify the conditionally certified collective action on the grounds that the opt-ins and Plaintiff were not similarly situated. Two months later, Plaintiff filed a Motion to for Class Certification, seeking to certify a Rule 23(b)(3) class of ASMs for the purpose of Plaintiff’s state law claims.

The Court ultimately granted Vitamin Cottage’s Motion to Decertify, and denied Plaintiff’s Motion for Class Certification.

The Court’s Decision On The Motion For Decertification

In granting Vitamin Cottage’s Motion for decertification, the Court emphasized that its review at the post-discovery decertification stage of whether workers “are similarly situated” under the FLSA is “strict.” Id. at *5. The Court evaluated the following factors in its strict “similarly situated” analysis: “(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 *5; see also Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1102-05 (10th Cir. 2001) (known as the Thiessen factors).

As the basis of the suit was a misclassification claim, for the first factor, the Court conducted “a fact-intensive inquiry into the daily activities of each individual plaintiff in order to adequately identify the actual scope of Plaintiffs’ job duties to determine the extent and consequences of any disparities among them.” Id. at *10 (quoting Green v. Harbor Freight Tools USA, Inc., 888 F.Supp. 2d 1088, 1099 (D. Kan. 2012)). After noting that FLSA claims are permitted to proceed collectively “when disparities among the opt-in plaintiffs are ‘not material’ and are ‘outweighed by the similarities between those Plaintiffs,’” the Court held that the discovery responses and deposition testimony established “material disparities” that weighed against the matter “proceeding collectively.” Id. at *10-11.

While Plaintiffs argued that the disparities between the opt-ins were minor and non-material, and that the ASMs collectively spent the majority of their time on non-exempt tasks, the Court reiterated that “determining the exemption status of any given individual depends on all the facts in a particular case and demands an examination of the character of the employee’s job as a whole.” Id. at *18. Expanding on that general proposition, the Court noted “the amount of time spent performing exempt work . . . is not the sole test of whether an employee is exempt,” and analyzed the disparities that arose during discovery between potential collective members’ involvement in: (1) management (extent and type); (2) scheduling and task assignment; (3) managing and reporting store finances and performance; (4) ensuring store compliance with food safety regulations, including managing safety audits; (5) managing employee complaints and grievances; (6) directing the work of other employees; (7) hiring and firing employees. Id. at *11-16.

Ultimately, despite some uniformity (including a uniform job description, employment policies, and Vitamin Cottage’s uniform policy of classifying ASMs as non-exempt), the Court stressed that “the decertification analysis must turn on whether the [collective action] members were actually performing similar duties,” and where opt-ins “effectively disavow the job descriptions as not reflective of their day-to-day responsibilities,” opt-ins “may not rely on the job description itself as generalized evidence of the scope and similarity of their daily activities.” Id. at *20. As such, the Court held that the disparate factual and employment settings of the individual opt-in ASMs weighed in favor of decertification. Id. at *22.

The Court also found that the second factor weighed in favor of decertification, as the application of the defenses denied on each Plaintiff’s specific job duties, and Plaintiffs failed to establish that they were “similarly situated.” Id. at *22-23. Finally, as to the third factor, “[b]ased on the material disparities within and among the opt-in’s discovery responses and deposition testimonies . . . individualized defenses and credibility concerns would result in at least dozens of the type of ‘mini-trials’ that undercut the efficacy and fairness of a collective action.” Id. at *24. Thus, for the same reasons as the Court found in considering the first and second factors, the Court found that the fairness and procedural considerations weighed against proceeding collectively, and granted Vitamin Cottage’s Motion to for decertification. Id.

The Court’s Decision On The Motion For Rule 23 Class Certification

In denying Plaintiff’s Rule 23(b)(3) Motion for class certification, the Court conducted a “rigorous analysis” under both Rule 23(a) and 23(b)(3), relying, in large part, on its findings in granting Vitamin Cottage’s Motion for decertification of Plaintiff’s FLSA claim. For starters, the Court cited the seminal ruling of Walmart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011).

Here, Plaintiff sought to certify a class for his unpaid overtime claim under CWCA. The Court noted that relevant state exemptions are similar, but not identical, to the FLSA exemptions discussed in the context of a Motion for decertification, and therefore required a separate, fact-intensive inquiry into the daily activities of an employee.

In considering the issue of commonality under Rule 23(a) together with the requirement of predominance under Rule 23(b)(3), the Court focused on whether the questions of law or fact common to class members predominated over any questions affecting only individual members, such that a class action would be superior to other available methods for fairly and efficiently resolving the controversy.

The Court held that while Vitamin Cottage’s uniform exemption policy showed that it considered the employees to be similar to at least some degree, a blanket exemption policy does not eliminate the need to make a factual determination as to whether class members are actually performing similar duties in the context of a misclassification claim.

Relying primarily on the briefing and exhibits associated with the Motion for decertification and the executive exemption as an illustration, the Court likewise found there were disparities in putative class members’ “supervisory” duties and hiring and firing authority.

In discussing the final element of the executive exemption, the Court noted an important difference between the Colorado executive exemption and the FLSA executive exemption: Whereas time spent performing exempt duties is not a dispositive element under the FLSA exemption, the Colorado executive exemption expressly requires the employees spend a minimum of 50% of the workweek in duties directly related to the supervision in order to qualify as exempt. Based on the evidence (i.e., deposition testimony and written discovery), the Court held there were plainly material disparities among the class members regarding the degree to which their day-to-day duties as ASMs involved supervisory or management-related objectives.

The Court reasoned that these material disparities went to the heart of liability in this matter – whether the class members were classified properly. And for that reason, the question of exemption was not capable of class-wide resolution. It further opined that due to the centrality of this question in the context of this case, whether other issues in the matter were capable of producing class-wide answers did not matter, as those issues did not predominate over the individualized question of whether each ASM was properly classified under Colorado law.

Ultimately, the Court held that for the same reasons it granted Vitamin Cottage’s Motion for decertification, Plaintiff did not meet his Rule 23 burden by relying on Vitamin Cottage’s common policies and procedures or uniform job description for ASMs.

Implications For Employers

The decision in Levine precisely delineates the standards for decertification of FLSA actions and certification of state law corollary class action claims. It also highlights the symbiotic nature of its analysis of these actions in the misclassification context and the important role that discovery plays in driving the outcome.

The Levine decision provides helpful guidance for employers that general uniform policies and procedures, such as the exemption policy analyzed by the Court in this case, are not enough to show that putative class or collective action members are actually performing similar duties. In order to withstand the Court’s “rigorous analysis,” an employer’s written discovery, such as interrogatory answers, and deposition testimony of putative class or collective action members must reflect that the specific duties and responsibilities of the putative class or collective action members at issue are uniform across-the-board.

May 31, 2023June 26, 2023 by Class Action Defense

Federal Court Bars Job Applicant and Employee Lawsuits For Recreational Marijuana-Based Adverse Action in New Jersey, But Calls For Legislative Action

By Gerald L. Maatman, Jr., Brad A. Molotsky, and Gregory S. Slotnick

Duane Morris Takeaways: In Zanetich v. Walmart, Inc., Case No. 1:22-CV-05387 (D.N.J. May 25, 2023), a case of first impression, the Judge Christine O’Hearn of the U.S. District Court for the District of New Jersey found the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“CREAMMA”), the 2021 law legalizing recreational marijuana use in the state, does not allow job applicants and employees to file lawsuits alleging adverse actions based on marijuana use. The ruling is a boon for employers across New Jersey, who will not face the possibility of private lawsuits filed by applicants and employees based on adverse employment actions by employers for their workers’ off-duty marijuana use. However, the victory may be short-lived, as the Court invited re-examination of the law by way of legislative amendment, enforcement guidance, or New Jersey state court clarity on application of the state’s common law “failure to hire” theory to claims under the CREAMMA.

Case Background

On January 21, 2022, the plaintiff applied for a job with defendants in the Asset Protection Department in one of defendants’ New Jersey locations. A few days after his January 25, 2022 interview, on January 28, 2022, defendants offered plaintiff the job, beginning on February 7, 2022, “subject to him submitting to and passing a drug test.” Id. at 2. Plaintiff alleged that at the time, the defendants had a Drug & Alcohol Policy that stated “any applicant or associate who tests positive for illegal drug use may be ineligible for employment,” which included marijuana. Id.

After plaintiff took a drug test on January 21, 2022 and tested positive for marijuana, he contacted defendants on February 10, 2022 for an update on his application. Two days later, defendants informed Plaintiff that his job offer would be rescinded. When plaintiff asked for the reason for this decision, he was advised it was because he had tested positive for marijuana.

On June 13, 2022, plaintiff filed a class action lawsuit on behalf of himself and others similarly situated asserting two claims, including: (i) violation of the CREAMMA; and (ii) failure to hire and/or termination in violation of New Jersey public policy.

The defendants filed a motion to dismiss the complaint, arguing that the CREAMMA does not provide a private right of action and that New Jersey common law does not recognize a cause of action based on an employer’s failure to hire. In response, the plaintiff argued that the CREAMMA provides for an implied private cause of action and that his common law cause of action was cognizable as both a wrongful termination and failure to hire.

The Court granted the defendants’ motion in its entirety, dismissing both claims.

The Court’s Ruling

The Court noted the parties agreed there is no explicit private cause of action in the CREAMMA and undertook a three-part analysis to determine whether the CREAMMA included an implied private cause of action.

First, the Court held that the CREAMMA’s focus was on regulating the manufacture, sale, and use of marijuana in NJ – not expanding employment rights for applicants and employees. However, it ultimately read the statute liberally to include plaintiff in the class of persons for whose special benefit the statute was enacted. This factor, the Court concluded, weighed in favor of an implied private cause of action.

Second, the Court looked to legislative intent. It reasoned that other employment statutes adopted by the NJ legislature, such as the Conscientious Employee Protection and the New Jersey Law Against Discrimination, explicitly provide for a private cause of action. The Court found that the other employment statutes also expressly provide for a remedy, and that the CREAMMA did not provide either, which weighed against a private cause of action. The Court opined that unlike the CREAMMA and the New Jersey Cannabis Regulatory Commission (“CRC”), cases from other states finding an implied private cause of action in similar employment-related provisions in other state’s medical marijuana statutes involved statutes that are distinct in that no agency or commission was created and tasked with enforcement of the statute. In other words, creation of the CRC and tasking it to handle all aspects of enforcing the CREAMMA differentiated New Jersey from the other states.

Third, the Court determined that the legislative scheme of the CREAMMA does not support an inference that it provides an implied private cause of action given its delegation of authority to the CRC to create regulations and enforce violations. As such, the Court dismissed plaintiff’s CREAMMA claim.

Finally, the Court held that New Jersey common law does not provide a cause of action for failure to hire, and that plaintiff was only offered a job subject to his passing a drug test; he was never employed by defendants. Since plaintiff was never employed by defendants, the Court concluded that he failed to state a wrongful discharge claim because a failure to hire claim cannot support a common law wrongful discharge claim under New Jersey law.

Implications Of The Decision

For the moment, businesses in New Jersey have a viable defense to individual or class action claims brought by recreational marijuana users for adverse actions taken against them due to their use. This includes the ability to rescind conditional job offers to applicants who fail a drug test for marijuana. However, the Court noted that its decision left the plaintiff without a remedy and rendered the language of the CREAMMA employment provision at issue “meaningless.” The Court called on the New Jersey legislature, the CRC, or the New Jersey Supreme Court to act. The Court even mapped out suggestions to allow workers to sue for remedial relief, including: (i) amending the law; (ii) adopting regulations allowing the CRC to enforce the provision; or (iii) issuance of a New Jersey Supreme Court decision finding it appropriate to depart from prior New Jersey common law rejecting failure to hire claims based on the CREAMMA’s statutory language. In fact, shortly after the Court published its opinion, plaintiff appealed the decision to the Third Circuit Court of Appeals. As a result, New Jersey-based employers should stay tuned to the appeal and proceed with caution before taking adverse action based on applicant or employee recreational marijuana use.