Cal Court of Appeal Hands Sheppard Mullin a Victory - Affirms Denial of Class Certification in an Expense Reimbursement/Uniform Action

by Sheppard Mullin Richter & Hampton LLP
Contact

[author: Thomas Kaufman]                       

On November 7, 2012, the First District Court of Appeal published an order affirming the denial of class certification entered in favor of Sheppard Mullin’s client, Wet Seal, Inc, in a case alleging that Wet Seal forced its employees to purchase clothing as a condition of employment and denied them certain mileage reimbursements.  As explained below, the decision, Morgan v. Wet Seal, Inc., is noteworthy on multiple levels, including (1) that it rejects this plaintiff’s attempt to obtain class certification based on an alleged “unlawful policy”; (2) that it clarifies the scope of the requirement to reimburse under Labor Code Section 2802; and (3) that it provides a good framework for an employer to use to establish predominant individualized issues.

The Facts

Plaintiffs were three retail store employees from Wet Seal clothing stores.  They alleged that Wet Seal required all of its retail employees to purchase Wet Seal clothing to wear at work in order to look suitably stylish to fit the Wet Seal image.  Plaintiffs further alleged that Wet Seal refused to reimburse its employees when they drove their car between stores for work purposes (e.g., to work in another store for the day).  Plaintiffs asserted claims for violation of Labor Code Section 450 (preventing employers from requiring employees to purchase a product from a specific vendor) and Section 2802 (requiring employers to reimburse employees for necessary business expenses).   They further alleged that the clothing they were required to purchase and wear qualified as a “uniform” which, under the wage order, Wet Seal would be required to furnish its employees.

Plaintiffs asserted that Wet Seal had a company policy that mandated the purchase of clothing.  However, the actual policy did not expressly state that employees were required to buy or wear Wet Seal clothing.  Rather, it stated that Wet Seal employees were “encouraged to wear Wet Seal merchandise at all times” and instructed that they should dress to work “consistent with the current fashion attire that is reflected in the stores.”  In fact, Company policies from 2005 and after expressly notified employees that they were not required to wear Wet Seal clothing, although they were offered employee discounts on such purchases.  As for mileage, the company expense reimbursement policy on its face provided that the travel expenses at issue were reimbursable, although plaintiffs contended that nobody told them of the policy or actually reimbursed them for this mileage.

Plaintiffs contended that their managers expressly instructed them that they had to wear Wet Seal clothing at all times and that they were not provided reimbursement for these purchases.  They also submitted 51 declarations of other former employees who were told by management either that they had to wear Wet Seal clothing or that they had to wear clothing in current fashion in the stores.  They contended that this showed that the “policy” as carried out in practice was to force people to purchase clothing for special use in Wet Seal stores that was akin to a uniform. The declarations were more mixed on the mileage reimbursement issue, with some not addressing the topic, some saying that they were unaware of the mileage reimbursement policy, some saying they were expressly denied reimbursement requests, and some simply saying that they could not remember if they got reimbursed.

In addition to the declarations, Plaintiffs submitted some specific e-mails managers had written in which managers had complained that employees were not wearing suitable clothing to work.  None of these e-mails, however, included a statement that management was requiring employees to purchase or wear Wet Seal clothing (as opposed simply to dress fashionably to work).

Wet Seal countered these declarations with more than 110 declarations of employees and managers stating that they were never required to wear Wet Seal clothing, they did not interpret the dress code for the store as requiring they do so, and that they did not have any business expenses that Wet Seal failed to reimburse.  Wet Seal also submitted proof that hundreds of employees had been reimbursed for a wide variety of expenses.

The Trial Court Order Denying Class Certification

The trial court denied class certification, primarily on the ground that individualized issues predominated over common issues.  Although plaintiffs did point to company policies that addressed what employees should wear to work, those policies did not on their face require the purchase of clothing.  While a particular manager or employee may have interpreted the policy as requiring the purchase of clothing, that was an individualized issue depending on (1) how the particular manager explained the policy; (2) how the employee understood it; and (3) if the employee contends he believed the purchase was mandatory, whether that belief was reasonable given the information the employee had.  The trial court also noted that plaintiffs had failed to present a trial plan that explained how these individualized issues could reasonably be managed at trial.

The Important Holdings of the Appellate Decision

The Court of Appeal affirmed the trial court, finding its determination that individualized issues predominated to be supported by the record.  Beyond that generally helpful holding, however, the Court of Appeal made numerous pronouncements that should be useful to other employers facing class actions:

(1) The decision implicitly held that where an employer merely encourages the purchase of a product that may be useful at work, reimbursement is not mandatory.  Rather, reimbursement is required only where the employer requires the employee to purchase the product: “Evidence that putative class members purchased Wet Seal merchandise is not evidence that they were forced to purchase that merchandise.” (p. 27)

(2) While a class action may be proper where a company policy is being challenged as unlawful on its face, for that to work there has to be a way to establish liability collectively from the face of the policy.  The mere fact that the employer has a dress code policy is not grounds to certify a class where the policy does not appear to have been applied in a materially consistent way across the class: “the common written dress code policy did not lead to common dress code practices.”  (p. 16).  Plaintiffs cannot circumvent this issue merely by claiming that it is a “merits” question whether the company policy required the purchase of clothing.

(3) This is yet another case that endorses the view that trial courts may deny class certification where the plaintiff fails to present a trial plan that explains, with some specificity, what kind of collective proof the employee will use to manage individual issues likely to arise.  Although the plaintiffs contended generally that “representative testimony, surveys, and statistical analysis all are available as tools to render manageable determinations of the extent of liability,” the court of appeal noted that plaintiffs had failed to go the additional step of “explain[ing] how their list of procedural tools can be used to effectively manage a class action in this case.” (p. 31, emphasis added).

(4) The court again distinguished the notions of varying damages among class members (which should not preclude certification) and varying liability (which should): “In this case, we are not concerned with determinations regarding the ‘extent of liability,’ but more fundamentally with the fact of liability.”  (p. 31).

(5) The court implicitly accepted the notion that a relevant factor in deciding whether a dress code amounts to a “uniform” (which must be reimbursed) is whether the employee could wear the clothing at another job in the same industry: “courts must consider whether the dress code policy requires wardrobe items that are usual and generally usable in the occupation and whether those items have a distinctive design or color.”  (p. 19).  This has been the DLSE position, but this is the first case I am aware of that adopts that limited view of a "uniform."  It is consistent with the view the IWC has long held that hospital employees can be required to purchase their own scrubs for work so long as one option is that the scrubs be white, which would allow them to be worn in any other hospital.

Conclusion

Morgan continues the encouraging trend in California class action jurisprudence to actually consider how the class action can be tried using collective proof and to delve into whether individualized issues truly predominate.  This is contrasted with the way expense reimbursement cases have often been treated at the trial court level in the past, with judges certifying a class based on a showing that significant expenses were incurred but not reimbursed and justifying that ruling on the notion that determining which employees were denied reimbursement was simply an issue of varying damages.  Instead, this court actually considered the employer’s individualized defenses and whether they could apply different to each class member.  The court also put the onus on Plaintiff to produce a workable trial plan. 

If those standards continue to be applied, a lot fewer cases should be certified. If you have further questions, please reach out to your Sheppard Mullin lawyer who can provide you guidance for your specific situation.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP
Contact
more
less

Sheppard Mullin Richter & Hampton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.