Ninth Circuit Rules that Comcast Does Not Kill Wage and Hour Class Actions

by Sheppard Mullin Richter & Hampton LLP

On Tuesday, the Ninth Circuit decided Leyva v. Medline Industries, Inc., reversing an order denying class certification in a wage and hour case.  The decision represents the first interpretation from the Ninth Circuit of the scope of the Supreme Court’s decision in Comcast Corp. v. Behrend that addressed the requirements for class certification under Rule 23(b)(3) of the Federal Rules of Civil Procedure.   As discussed below, the Ninth Circuit squarely rejected the interpretation of Comcast that some commentators had advanced that the requirement to individually calculate damages for each class member generally should preclude class certification.  Beyond that, the decision does not break substantial new ground.

Background Facts

The proposed class here was about 500 warehouse workers for a medical manufacturer.  The underlying wage and hour lawsuit in Leyva raised essentially four claims: (1) a rounding claim alleging that if workers clocked in up to 30 minutes before their shift, their start time would be rounded to the actual start time, but they were required to perform work before their shift actually began; (2) an overtime claim based on the alleged failure to include certain non-discretionary bonuses in the regular rate of pay; (3) a derivative claim for waiting time penalties for former employees in the proposed class; and (4) a derivative wage statement claim. 

Interestingly, the district court judge, Hon. Gary Klausner, denied certification even though he preliminary concluded that “[t]he putative classes appear to meet the requisites of Rule 23(a),” including the “rigorous” commonality standard established in Wal-Mart Stores, Inc. v. Dukes.  The sole basis the district court gave for denying class certification were that because each employee worked different hours and earned different bonuses during different weeks, calculation of each class member’s damages would require an individualized determination, which the district court believed made certification inappropriate under Comcast

The Ninth Circuit's Analysis

The Ninth Circuit disagreed with this broad interpretation of Comcast, noting that “damages determinations are individual in nearly all wage-and-hour class actions.”  The Ninth Circuit explained that the issue in Comcast was not mere individualized damages, but the fact that the theory of liability was based on one particular anticompetitive practice, but the damages theory was based on an amalgam of four anticompetitive practices that plaintiff’s expert could not isolate from one another.  By contrast, here each class member’s individual damages could be ascertained based on the application of a common policy to that class member.  For example, for the bonuses, one could determine whether a particular bonus was non-discretionary and excluded from the regular rate, could determine the proper overtime calculation with the bonus included, and could calculate the individual impact on each class member.  While this is an individualized inquiry, it could readily be determined performing calculations on existing time records.

The analysis seems a bit dicier with respect to the rounding. The aspect that would have made the rounding unlawful was that employees who clocked in started working before their start time but their time was rounded to the official start time.  One would think there could be a significant individualized issue as to when any particular employee started working on a given day that would at least make certification as to damages arguably problematic. 

To bypass that issue, the Ninth Circuit engaged in a bit of sophistry, noting that for purposes of CAFA removal, the defendant purported to perform calculations to show the amount in controversy was just over $5 million.  This is sophistry because CAFA removal entails the defendant assuming that all allegations in the complaint are true.  By contrast, for purposes of an actual class trial, it could be that certification is inappropriate because of the requirement to delve into individual credibility determinations or other disputes of fact will make the trial unmanageable.  The Ninth Circuit’s reasoning is similar to the now rejected ground that courts used to give to certify in almost any exemption case that “the employer treated the employees as a class by deeming them all exempt without an individual inquiry, so obviously class certification is proper.”  I would not expect that other courts will broadly cite the mere fact that the defendant calculated damages for amount in controversy purposes as a proper basis to certify a class.

In the final analysis, this decision is meaningful because it should rein in employer’s expectations that Comcast will be a silver bullet that precludes class certification in any wage and hour case (there is still hope on the arbitration front though).  At the same time, since the underlying claims involved allegations of facially unlawful policies that the district court agreed established common liability issues, this case also should not move the needle substantially toward certification either.

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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