Chipotle Wins One, Loses One, in Wage and Hour Class Litigation

by BakerHostetler
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A Tale of Two Cases . . .

We’ve commented on numerous occasions about the peculiar paths taken by wage and hour class litigation, particularly with respect to collective actions under the FLSA. Two cases involving the same employer decided only days apart continue to highlight the challenges and sometimes surprising outcomes in those cases.

Both cases were brought against the Chipotle food chain, but they involved different classes of employees and were filed in different jurisdictions. In the first, Scott v. Chipotle Mexican Grill, Inc., Case No. 12-CV-8333 (ALC)(SN) (S.D.N.Y. March 29, 2017), the plaintiffs alleged that the company misclassified its “apprentices,” essentially management trainees, as exempt. They brought a collective action under the FLSA and parallel state law wage and hour claims under the laws of several states against Chipotle in federal court in New York. Applying a low standard for conditional certification under the FLSA, the court conditionally certified a class. It based its decision largely on the company’s use of a single job description and its albeit limited study about the similarity of the work performed by apprentices nationwide. A total of 516 apprentices opted in to the case. After years of additional litigation, Chipotle moved to decertify the collective class and the plaintiffs moved to certify several smaller state law class actions.

The court addressed the state law claims first. While it found that the class did satisfy Rule 23(a), it concluded that in fact the class did not meet the requirements of Rule 23(b)(3). In doing so, the court looked at the standard for the executive exemption under 29 C.F.R. § 541.100(a), and specifically the need to examine “the employees’ actual job characteristics and duties” to determine their primary duties. In doing so, the court found, not surprisingly, substantial variation in the experiences of the apprentices based on geographic location, local management, store size, the ability to influence hiring and firing, and scheduling. Thus, the court found, class issues did not predominate. Further, for the same reasons, and based on differences among the state laws applicable in the various jurisdictions, the court concluded that superiority was lacking as well.

The court then turned to the motion to decertify the collective action under the FLSA. It rightly found that the standard was different under the FLSA, and focused instead on the similar, but not identical, factors such as the existence of disparate employment settings, defenses and procedural fairness. These, too, suggested that the class members’ claims were not similarly situated and should be decertified. The court therefore refused to certify the state law claims, decertified the FLSA class and dismissed the opt-ins’ claims without prejudice.

Meanwhile, halfway across the country, the company had tried to avoid the decertification process altogether in a case involving FLSA claims only. In the case of In re Chipotle Mexican Grill, Inc., Case No. 17-1028 (10th Cir. March 27, 2017), the plaintiffs asserted claims that they were required to work off the clock at the end of some shifts. Although this seems to be an inherently individual case that would turn on the practices of individual managers and stores, the district court conditionally certified the case under a low standard. Turner v. Chipotle Mexican Grill, Inc., Case No. 1:14-cv-02612-JLK (D. Colo. Sept. 22, 2014). This was particularly surprising because a different court had refused to certify a similar case in which the same plaintiff had opted in, because it viewed the practices as involving a single store. Following conditional certification, thousands of plaintiffs opted in.

At this point, Chipotle faced the difficulty that makes many defendants settle at this stage. Unlike Rule 23(f), there is no right to appeal (even on a discretionary basis) a decision granting conditional certification. An employer at this juncture must therefore make the decision whether to litigate the case through decertification or beyond, or to attempt settlement. Chipotle tried to create a third option by petitioning for mandamus relief to the Tenth Circuit. The difficulty with this third approach, however, is that mandamus review is extremely limited and requires something beyond even an abuse of discretion by the district court. Ultimately, the count concluded that although the district court’s order “may be debatable,” it was not a sufficient abuse of discretion to meet this standard.

The takeaway from these two decisions is that a statutory provision, section 16(b) of the FLSA, which was enacted in an effort to curb wage and hour class actions, is being interpreted by the courts in a manner that not only encourages these but makes them lengthy and expensive cases for even an entirely innocent employer to defend. Courts apply varying, but generally low, standards on conditional certification. At that point, the employer has a Hobson’s choice of settling or continuing the case at least through conditional certification. Even then, should the case be decertified, the employer faces the specter of individual cases that would never have been brought but for the prior conditional certification. In the New York case above, it took the company nearly four years to get out from under the conditional certification order, and even now it will likely face individual claims from the former opt-ins. In the Tenth Circuit case, the litigation will now continue further even though it seems obvious that the case should not proceed as a class. Employers defending these actions must continue to consider the increased risk caused not by any wrongdoing on their part, but by the mechanisms courts have created that expand rather than manage wage and hour litigation.

The Bottom Line:

Appellate courts are reluctant even to review conditional certification decisions, but decertification remains a viable if expensive means to defend collective actions under the FLSA.

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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