Relatively few FLSA cases are certified and then reach a court of appeals on the merits, but that recently happened before the Eight Circuit. In Petroski v. H&R Block Enterprises, LLC, Case No. 13-2076 (8th Cir. May 2, 2014), the plaintiffs were tax preparers who worked for H&R Block. They brought suit under the FLSA and under state law contending that the company improperly failed to compensate them for 24 hours of training time during off season required for eligibility for rehire.
The early stages looked promising for the plaintiffs. The district court first conditionally certified the class under the FLSA, and then certified Rule 23 classes under California and New York state law. So far so good, but then the court granted summary judgment in the defendants’ favor on all claims on the grounds that the plaintiffs were not entitled to payment for the hours claimed.
The Eight Circuit affirmed. It found that while the 24 hours of training was required as a condition of rehire, it consisted of continuing professional education that was offered by other qualified providers or by H&R Block itself. Even the H&R Block training was provided by an unrelated vendor for only a nominal fee. The training consisted mostly of topics that had broad application (e.g. adjustments, property income, corporations, and estate planning) and not just preparing returns for the company. No customer work was done as part of the training, and company handbooks provided that the individuals were not employees between tax seasons. Completing the training was not a guarantee of rehire.
The plaintiffs argued that they were actually employees during this training because the training was in fact required, related to work for H&R Block, and was for a fee, but the Eighth Circuit disagreed. The training took place between, and not during, periods of employment, and the company derived no immediate benefit from it as they did not complete returns for company customers during that time or their training. It rejected the argument that the benefit it derived from having better educated tax professionals was enough to consider them employees. Since the plaintiffs were not employees during the training, the court found, they had no FLSA claims as a matter of law.
Class certification certainly raises the stakes, but Petroski shows that it is far from the end of the inquiry. The district court could have saved all of the parties and itself from a great deal of work simply by addressing this merits issue at the front end of the case, as other courts have done, but the positive result for H&R Block was that it now has a final judgment on the merits as to both the opt-in FLSA plaintiffs and the two state law classes.
The bottom line: Because certification is independent of the actual merits of the plaintiffs’ claims, summary judgment as to all class claims may be entirely appropriate.