Wave Of Class Certification Denials Following Dukes v. Wal-Mart May Signal A Trend Away From Class Treatment In Wage Hour Cases

In the last two weeks, there have been three separate decisions out of the Ninth Circuit that have cited Dukes in support of rulings denying class certification under Rule 23 of the Federal Rules of Civil Procedure: Sepulveda v. Wal-Mart Store, Inc., Hughes v. WinCo Foods, and Aburto v. Verizon California, Inc. These decisions may signal a change in the future viability of wage and hour class action litigation, at least in federal court. Each of these cases involved facts and allegations that, before Dukes, would have presented a strong argument for class certification. In each of these cases, however, the Court relied on the U.S. Supreme Court's decision in Dukes v. Wal-Mart to deny class certification.

The Sepulveda Decision

On December 30, 2011, the Ninth Circuit vacated its prior decision reversing a district court's denial of class certification under Federal Rule of Civil Procedure 23(b)(2).

The underlying case sought to certify a class of current and former assistant managers of Wal-Mart who alleged they were misclassified as exempt from overtime requirements. Plaintiffs sought certification under Rule 23(b)(2) on the grounds that Wal-Mart's common policy of classifying assistant managers as exempt was enough to warrant injunctive relief, and also under Rule 23(b)(3) on the grounds that common questions of law and fact predominated on the misclassification issue. In 2006, a judge in the Central District of California denied class certification under both Rule 23(b)(2) and Rule 23(b)(3). The district court held that class certification was not appropriate under Rule 23(b)(2) despite the presence of a common policy, because the monetary relief sought, overtime payments, was not incidental to the injunctive relief sought. On appeal, the Ninth Circuit reversed, finding that the district court abused its discretion because it relied on the "not incidental test" not followed by the Ninth Circuit at the time. Wal-Mart then filed a petition for rehearing and the Ninth Circuit stayed its decision pending the Supreme Court's decision in Dukes v. Wal-Mart.

The Ninth Circuit vacated its prior order, acknowledging that the Supreme Court in Dukes clarified that Rule 23(b)(2) "does not authorize class certification when each class member would be entitled to an individualized award of monetary damages." Because the putative class members' claims would "require highly individualized proof of the duties each [Assistant Manager] performed, the hours spent on those duties, and the overtime hours actually worked," it was not an abuse of discretion for the district court to conclude that the monetary relief was highly individualized, and not simply incidental to the injunctive relief sought on behalf of the putative class.

The Hughes Decision

In Hughes, the plaintiffs sought to certify a class of all hourly employees at WinCo stores in California based on "late" meal period claims. Among other things, plaintiffs argued that WinCo failed to provide grocery employees with meal periods during the first five hours of their shifts because it required manager permission for employees to take a meal period.

Citing Dukes, the district court denied class certification because WinCo gave store and department managers discretion over the timing and arrangement of meal periods. As a result, the decision-making with respect to when employees took meal periods varied from store to store and department to department such that the timing of meal periods could not be proven reliably on behalf of the class with evidence in "a single stroke."

The court also concluded that plaintiffs "failed to…demonstrate the predominance of common questions." Because of the substantial individualized inquires that would be necessary to adjudicate plaintiffs' "late" meal period claim, the Court determined that the class action would devolve into hundreds or thousands of "mini-trials" and the superiority requirement was not met.

The Aburto Decision

In Aburto, the plaintiffs sought certification under Rule 23(b)(3) based on Verizon's alleged common policy of misclassifying its First Level Managers ("FLMs") as exempt from overtime. The district court denied class certification, finding that the ultimate question of whether Verizon unlawfully classified FLMs as exempt "is an individualized inquiry involving facts unique to each Plaintiff." The court noted that it was not enough merely to allege a common scheme or policy, but instead plaintiff must establish the reasons why each FLM was treated in an allegedly unlawful manner.

The evidence before the court revealed that FLMs had different job duties and carried out these duties in a variety of ways based on the location and size of each FLM's respective worksite, the number of employees assigned to each worksite and its business volume as well as the experience level of the employees and the type of work actually performed. In denying class certification, the court relied heavily on Dukes, noting that '[w]ithout some glue holding the alleged reasons for those decisions together, it will be impossible to say that examination of all the class members' claims for relief will produce a common answer to the crucial question why was I disfavored."

What Sepulveda, Hughes, and Aburto Mean For Employers

While the class certification tide may be changing, the law remains unsettled in the application of Dukes to wage and hour claims, especially those brought as collective actions under the Fair Labor Standards Act. Although Wal-Mart, Verizon and WinCo defeated class certification, it is possible that other employers with problematic policies would not have achieved the same results. As these cases demonstrate, whether a lawful policy affected each putative class member in the same manner is a question that often times can only be answered by analyzing the application of the policy with respect to each individual employee, making class certification inappropriate under Dukes.

By: Laura Reathaford

Laura Reathaford is an associate in Seyfarth's Los Angeles office. If you would like further information, please contact your Seyfarth Shaw LLP attorney or Laura Reathaford at lreathaford@seyfarth.com