Court Grants Summary Judgment for Employer in California Class Action Vacation Pay Case

by BakerHostetler
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Underlying claim premised on PowerPoint slide invalid

Most California employers know that California treats vacation pay largely as a vested benefit that cannot ordinarily be “forfeited.” In common parlance, the state prohibits “use it or lose it” policies. To prevent employees from accruing, or claiming to have accrued, large amounts of vacation time, most California employers have a policy that states that employees cease to accrue time once they have hit a set maximum. This neatly avoids the “forfeiture” problem because the employees simply stop accruing time and forfeit nothing.

Like many national employers, IBM had such a policy that was specifically directed to California and was different from the policy that applied in other states. Despite having such a policy, the company found itself a defendant in the Northern District of California in a class action contending that it, in fact, was applying a “use it or lose it” policy in that state. Reznik v. International Business Machines, Inc., Case No. 15-cv-02419-YGR (June 7, 2016).

In the Reznik case, the plaintiff worked for IBM beginning in 2012 and went on a long-term disability leave and was ultimately terminated. He contended that before going on the leave he had accrued 21 days of vacation and personal leave time and that IBM had somehow failed to pay it to him. He relied on a PowerPoint slide he claimed to have seen during orientation that stated that vacation time could be lost, and thus contended that the company violated California law on a classwide basis. It’s a novel theory, but the court found that it did not create any claim, for at least two reasons.

First, the PowerPoint presentation noted that it contained only a summary of benefits and that the employees should consult the actual underlying policies for their complete terms. Those policies were California compliant.

Second, IBM, in fact, paid the plaintiff for all accrued time and actually four days in addition to that. Thus, even if the employee’s claim regarding the policy were true, he was paid everything he claims was owed to him.

The Reznik case reflects that at least some courts will look peek into the merits of a case before forcing the parties to undergo class action discovery. In this case, the court spared everyone considerable grief and expense by bringing the case to a close at an early stage. It also reflects a fundamental problem in class litigation. The plaintiff’s case was weak both on the law and on the merits, and yet those problems did not serve as an impediment to the plaintiff’s seeking to assert class claims, likely bolstered by the Northern District of California’s historically pro-plaintiff class action jurisprudence.

The bottom line: Some courts, particularly in weaker cases, will reach the merits of the representative plaintiff’s claims before forcing the parties to go through class action litigation.

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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