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William J. Anthony, Shareholder, Jackson Lewis P.C. August 6, 2014

!   After Wal-Mart Stores, Inc. v. Dukes and AT&T Mobility LLC v. Concepcion, many predicted that class action filings would decline as certification became more difficult and more classes were sent to arbitration.

!   Numbers say otherwise:

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Year

Class Action Filings Percentage Increase or Decrease

2010 6,425 N/A 2011 6,674 3.9% 2012 6,890 3.2% 2013 6,561 (4.8%) 2014 7,191 (est.) 9.6%

Class Action Filings: Federal Court (2010–April 2014)

!   Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) o Supreme Court decertified nationwide class of 1.5 million

female employees who alleged they were subjected to discriminatory pay and promotion practices

o Policy of delegating discretion and decision-making to local store managers allegedly resulting in discriminatory pay or promotion practices did not qualify as common practice or policy that could satisfy commonality requirement under Rule 23(a)(2)

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!   McReynolds v. Merrill Lynch (7th Cir. 2012) (cert. denied)

o  Seventh Circuit affirmed class certification of plaintiffs’ race discrimination disparate impact claims that sought injunctive relief only where plaintiffs were able to point to two discrete company-wide policies

o  Resulted in $160 million settlement in August 2013

o  One of the largest employment discrimination settlements in history

!   Ellis v. Costco Wholesale (N.D. Cal. 2012)

o  Hybrid certification for injunctive relief class and monetary relief class granted; suit focused claims on company’s promotion policies to only the GM and AGMs

!   Scott v. Family Dollar Stores (4th Cir. 2013) (cert. denied)

o  Existence of allegedly subjective decision making, at least where high-level managers exercising a greater degree of discretion are involved, does not preclude plaintiffs from satisfying Rule 23(a)(2) commonality standard)

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!   Broad view: If damages cannot be measured on a class-wide basis and require individualized inquiries, the case cannot be certified under Rule 23(b)(3)

o  Roach v. T.L. Cannon Corp. (N.D.N.Y. 2013) (wage-hour)

!   Narrow view: Methodology of proving damages must be tied to theory of liability; damages attributable to class-wide injury need not be measurable on class-wide basis

o  Jacob v. Duane Reade (S.D.N.Y. 2013) (wage-hour)

!   Both cases have been consolidated, briefed, and argued before the Second Circuit o  Will decide breadth of Comcast and whether it permits certification of a

liability-only class under Rule 23(c)(4) (“issue certification”) to avoid class-wide damages issues

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!   Assessing damages in a wage-and-hour class action (Important Issue)

!   Two Very Different Approaches – Calculating Backpay in Misclassification Cases

!   Half-time method o  Treats employee’s salary as earned during all hours worked in workweek and divides

weekly salary by hours worked during week to yield regular rate with resulting OT equaling one-half of the regular rate

!   Time-and-a-Half Method o  Treats salary as earned during only the first 40 hours per workweek unless employer

has satisfied all criteria for “fluctuating workweek” method of calculating OT resulting in OT rate equaling regular rate multiplied by one-and-one-half

!   Differences in damages under two different rates of OT are significant

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!   Half-Time Method (DOL has long required this method) (29 CFR § 778.109) o  Weekly salary = $600

o  Hours worked = 50

o  600/50 = $12/hour

o  12 x Half-Time ($6) for each of 10 hours of OT worked

o  OT entitlement of $60 for workweek, over and above $600 weekly salary

!   Time-and-a-Half Method o  Weekly salary = $600

o  Hours worked = 50

o  600/40 = $15/hour

o  15 x Time-and-a-Half ($22.50) for each of 10 hours of OT

o  OT entitlement of $225 for workweek, over and above $600 weekly salary 7

!   Glatt v. Fox Searchlight Pictures Inc. (2d Cir.)

!   Wang v. The Hearst Corp. (2d Cir.)

o  Standard that should apply for determining whether unpaid interns qualify as employees deserving protection under the FLSA

! Fraticelli v. MSG Holdings, LP (S.D.N.Y. 2014) o  Conditional certification denied because significant differences existed among

interns in terms of activities performed, supervision, training and benefits, burdens imposed on MSG, and manner selected for their positions

!   Grant v. Warner Music Group Corp. (S.D.N.Y. 2014) o  Class of approx. 3,000 interns in various departments conditionally certified

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!   EEOC’s systemic cases represented 23% of active litigation docket in 2013

!   EEOC hopes to increase to 22-24% of docket by 2016 o  Commission looking to convert individual-based charges to

systemic, class-based cases.

!   EEOC’s top systemic enforcement priority: investigation of “systemic barriers” in recruitment and hiring, including pre-employment tests & assessments

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!   Systemic claims challenging hiring/promotion practices o  Statistical analyses reveal that pre-employment screening

assessments may have disparate impact under Title VII

o  The bigger the data set, the more people being pushed through these assessments, the greater the risk for the employer

•  EEOC v. Dolgencorp LLC d/b/a Dollar Gen., N.D. Ill. (Jun. 11, 2013)

•  EEOC v. BMW Mfg Co. LLC, D. S.C (Jun. 11, 2013)

!   But agency has had little success in existing cases •  EEOC v. Peoplemark, Inc. (W.D. 2011)

•  EEOC v. Freeman (D. Md. 2013)

•  EEOC v. Kaplan Higher Ed. Corp. (6th Cir. 2014) 10

!   Stolt-Nielsen S.A. v. Animal Feeds Corp., 559 U.S. 662 (2010) o  Party may not be compelled to submit to class-wide arbitration under FAA

where parties’ arbitration agreement is silent on issue

!   AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) o  State law invalidating class action waivers is preempted by FAA

!   American Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013) o  Courts can’t invalidate class arbitration waiver just because pursuit of claims

on individual basis is cost-prohibitive o  Applied in wage-hour context in Sutherland v. Ernst & Young, LLP, 2013 US

App LEXIS 16513 (2d Cir. 2013)

!   D.R. Horton v. NLRB (5th Cir. 2013) (Rejected NLRB’s conclusion that mandatory class action waivers violate federal labor law)

o  NLRB declined Supreme Court review by failing to petition for review 11

!   Davis v. Nordstrom (9th Cir., June 23, 2014)

o  Employer permitted to unilaterally change terms/conditions of employment as long as it gives employees reasonable notice

o  After notice/continuing to work, employee deemed to have accepted; compliance with 30-day notice requirement

! Johnmohammedi v. Bloomingdale’s (9th Cir. 2014)

o  Employer did not interfere with, restrain, or coerce employee in exercise of right to file class action; opt-out provided

! Iskanian v. CLS Transportation (Cal. Sup. Ct. June 2014)

o  Class action waiver is enforceable; however, agreement barring arbitration of PAGA representative claims invalid

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! Opalinski v. Robert Half International Inc. (3d Cir. 7.30.14) o  Whether arbitration agreement permits class-wide arbitration is question for

courts—not arbitrators—to decide

o  Third Circuit, in a precedential opinion, joined the Sixth Circuit and answered question on which employment lawyers had hoped the Supreme Court would have answered in Sutter v. Oxford Health (U.S. 2013)

•  SCOTUS did not squarely address issue because Oxford Health agreed that the arbitrator should decide if the underlying arbitration agreement authorized class proceedings.

o  Employers don’t want arbitrators deciding whether class proceedings are available

•  Arbitrator decisions are extremely difficult to overturn

•  Financial incentives for arbitrators to rule in favor of class proceedings

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!   Significant uptick in implementation of class waivers in arbitration agreements

!   2012: less than 20% of companies had arbitration agreements that included a class action waiver

!   2013: almost 40% with arbitration agreements contain a class action waiver

!   2014: Has there been a significant drop in class action litigation filings?

o  We see a negligible change in the number of employment-related class actions

o  Appears to be significant increase in litigation over class action waivers

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!   New Strategies o  Filing countless individual arbitration proceedings on behalf of

employees who, in other circumstances, might have been part of a class

o  Makes case expensive to defend since most arbitration arrangements call for employer to cover arbitrator’s fees

•  Ex. 650 potential claimants each with an arbitration agreement and the initial filing fee, ultimately to be paid by the employer is about $1,300 per case—so that’s about $845,000 in filing fees before an arbitrator even looks at the case.

•  Prominent plaintiff’s attorney likens strategy to “letting go of the rope” in a game of tug-of-war.

!   CAUTION!!! o  Very limited right to appeal

o  Consider cost of arbitration, especially when trying to coordinate a slew of individual claims

o  Ramifications of losing a jury trial or the other benefits of court process

o  Closely decided Concepcion and Amex may not withstand future changes in court composition

o  Consider using class action waiver, yet be aware of the possible consequences in doing so

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