California Court Denies Conditional Certification of “Regular Rate” Overtime Case

by BakerHostetler
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With waves of cases already having addressed common targets for wage and hour litigation – assistant managers, healthcare workers, loan officers, donning and doffing claims, and the like – cases alleging more arcane claimed violations are becoming more common. In many of these cases, plaintiffs’ counsel have sighted popular employee perks, like free meals or other benefits, as potential new avenues to assert class or collective claims. The crux of such claims is that the perk or benefit should be added into the regular rate for overtime purposes.

Some of these claims do raise colorable technical violations of the statute. Non-discretionary bonuses, for example, should be rolled into the regular rate for purposes of calculating overtime. 29 C.F.R. § 778.211. But frequently, the amounts involved are fairly small. A $100 annual production bonus may translate to only a few cents per hour, and possibly little or nothing if the employee does not routinely work overtime. And what if the amount involved is debatable as being part of the regular rate? Is it really worth an expensive lawsuit that will only discourage the employer from offering anything? Is it really in a class’s best interest to challenge free meals?

A recent case reflects yet another issue in this area, which is that such programs tend to change frequently and thus undermine the notion of a class. In Blanco v. City of Rialto, Case No. 5:17-cv-00994-R-DTB (C.D. Cal., Oct. 31, 2017), the city of Rialto, California, and its unions reached various agreements to allow bargaining unit employees to accept a cash payment in lieu of participating in its health insurance program. At least in theory, this was the proverbial win-win, as the city would save on health insurance costs, and employees with other coverage would receive a monetary benefit completely at their own choice. Such a benefit was likely popular among the employees, and certainly agreed to by the union; but the plaintiff brought suit anyway, contending that those payments should also have been included in the regular rate.

By way of background, ordinarily health insurance premiums would be excluded from the regular rate, but the argument (with some potential support) was that the payment of cash in lieu of benefits was not. The Department of Labor has previously addressed the rules relating to the payment of cash in lieu of health coverage in a 2003 opinion letter, Wage & Hour Division, FLSA2003-4. The answer is not a simple yes or no.

The plaintiff in City of Rialto tried to rely on at least one of the pay-in-lieu-of-benefits policies to create a “common policy” and to seek conditional certification of a proposed class of city unionized employees. While some courts grant motions for conditional certification as a matter of course, and while California courts have historically been viewed as favorable plaintiff forums, in this instance the court denied the motion. In particular, the court noted the number of union contracts or memoranda of understanding, and the fact that none covered all of the employees over the entire relevant time frame. It also noted the relatively thin evidentiary showing (declarations only from the named plaintiffs). Ultimately, the court concluded that the showing was simply insufficient even under the lenient rules for conditional certification.

This case is interesting for two quite likely related reasons. First, it demonstrates that conditional certification is not a foregone conclusion, especially if the plaintiff is having difficulty identifying a single allegedly illegal policy. Second, while conditional certification was not an express part of the court’s opinion, courts may be less willing to jump to conditional certification for purely technical violations that may actually have benefited many class members.

The bottom line: Conditional certification is less likely when the challenged practice causes no harm to the class members.

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.

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