Posts belonging to Category Caselaw Developments

In an action brought under the federal Fair Labor Standards Act (FLSA), United States District Judge Terrence F. McVerry has conditionally certified a class of employees of prominent vitamin and supplement chain General Nutrition Centers (GNC). See Vargas v. Gen. Nutrition Centers, Inc., No. 10-867 (W.D. Pa. Aug. 16, 2012) (Order on Motion to Certify Class) (available here).

Plaintiffs contended that GNC’s policies regarding overtime encouraged store managers to underreport their hours and work off-the-clock (despite a formal, written policy prohibiting off-the-clock work). Each location was assigned an “hours budget” — an allocation of straight time during which employees were expected to complete all tasks. If a store exceeded its hours budget in a given month, the responsible manager would be reprimanded or even fired. Rather than suffer the consequences of allowing employees to incur overtime, managers would regularly perform any necessary work  off-the-clock.

The court found that plaintiffs presented sufficient evidence to show a de facto policy prohibiting overtime, through “Defendants’ efforts to document overtime expenses, to individually identify those who accrue overtime expenses, to demand explanations for each use of overtime, . . . and to impose consequences for being over the allotted budget . . . .” Order at 15.

Though the FLSA maintains somewhat more relaxed standards for conditional certification than certification under Federal Rule 23, Judge McVerry’s order suggests that the plaintiffs might well have satisfied the Rule 23 requirements on the strength of their evidence of off-the-clock work. Moreover, despite the FLSA’s lack of a predominance requirement, the Vargas decision includes analysis akin to that where predominance is contested. See, e.g., Order at 10 (“This tone was carried further as the messages were transmitted to the store Managers.”).

Further, despite being outside the ambit of Rule 23, Vargas is potentially pertinent to Rule 23 and state wage-and-hour class actions in its analysis of an informal practice, as opposed to a formal policy, being the basis for a collective action. The ruling describes how the de facto policy of off-the-clock work arose through a sequence of correspondence, including emails introduced into evidence by the plaintiffs, from the highest levels of GNC management down to store-level managers. “Plaintiffs have adduced evidence of a de facto policy through their proffer of a number of records and correspondence that spans the breadth of company-wide authority. . . .” Order at 15.

In a decision likely to cast an influence across state and federal jurisdictions, the Second Circuit Court of Appeals has reversed a trial court’s grant of summary judgment in a case involving a teacher who was allegedly denied tenure for taking time off to have gallbladder surgery. See Donnelly v. Greenburgh Cent. Sch. Dist., No. 11-2448 (2d Cir. Aug. 10, 2012) (order reversing grant of summary judgment) (available here).

A key issue in the dispute is the plaintiff’s eligibility for leave under the federal Family and Medical Leave Act (FMLA), which is triggered by exceeding a threshold of 1,250 hours worked during the preceding year. Order at 6-7. The plaintiff worked 172 school days in the 12 months prior to his surgery, and under his union contract, each workday was capped at 7.25 hours. Based on those figures, the plaintiff worked only 1,247 hours — 3 hours short of the requisite 1,250. However, the plaintiff argued (and the Second Circuit agreed) that courts should look beyond the employer-defined workday when calculating hours worked for purposes of determining FMLA eligibility.

In its assessment of whether the plaintiff met the FMLA threshold, the Second Circuit recognized that teachers typically work beyond the mandated 7.25-hour workday, either outside the classroom or without students present. Id. at 18-19. Thus, even though the plaintiff was not required to remain at work after 7.25 hours, he would nonetheless have had to use time at home to prepare for class. In reversing the trial court’s grant of summary judgment, the panel found that: “The law does not preclude teachers who grade papers or plan their lessons at home from ever counting that time for purposes of FMLA eligibility.” Id. at 24.

The panel’s reasoning has implications beyond the classroom setting. The Donnelly court analogized to a Sixth Circuit case involving flight attendants and satisfaction of the FMLA hours-worked threshold. While the plaintiff in that case ultimately lost, the court held that her FMLA eligibility should be based on all hours worked, including time spent at check-in or customs that extended beyond her mandated workday. When she presented evidence that the 1,250-hour requirement was met, the court shifted the burden to her employer to prove that she could not have met the threshold, even with the additional hours worked. See id. at 17-18, citing Staunch v. Cont’l Airlines Inc., 511 F.3d 625 (6th Cir. 2008). These results suggest a broader application of the doctrine that hours worked are not strictly confined to formally designated workdays.

In a complex, comprehensive, and ultimately deferential decision, California’s Fourth Appellate District has held that Gentry v. Superior Court (42 Cal. 4th 443 (2007)) remains good law until a higher court rules otherwise. See Truly Nolen of Amer. v. Super. Ct., No. D060519 (Cal. Ct. App. Aug. 9, 2012) (available here). As such, Truly Nolen accentuates the stakes in two arbitration-related petitions currently pending before the California Supreme Court: Iskanian v. CLS Transportation and Hoover v. American Income Life Insurance.

Following an extensive summary and analysis of leading California and U.S. Supreme Court precedent, the unanimous panel concluded as follows: “Although we agree with Truly Nolen that Concepcion implicitly disapproved the reasoning of the Gentry court, the United States Supreme Court did not directly address the precise issue presented in Gentry. Under the circumstances, we decline to disregard the California Supreme Court’s decision without specific guidance from our high court.” Slip op. at 24. Thus, despite the court’s belief that the U.S. Supreme Court “disapproved” of Gentry, they nonetheless deferred to the California Supreme Court, thereby setting a benchmark for other districts and divisions within California’s intermediate appellate court to follow.

The Truly Nolen decision has been designated for publication, thus increasing the likelihood that its approach will be followed until the California Supreme Court issues a definitive ruling as to Gentry.

The Missouri Supreme Court, sitting en banc, has issued a potentially groundbreaking decision, overruling one of its own cases and rejecting a statute that limits the award of noneconomic damages to plaintiffs. See Watts v. Lester E. Cox Med. Ctrs., No. SC91867 (Mo. Jul. 31, 2012) (available here). In a 4-3 decision, the court determined that the state’s $350,000 statutory cap on noneconomic damages conflicts with the right to a jury trial guaranteed by the Missouri constitution.

The plaintiff, a child born with severe brain damage caused by medical negligence, was awarded $3.371 million in compensatory medical damages and $1.45 million in noneconomic damages by the jury at the trial level. However, the trial court reduced the noneconomic damages to $350,000, consistent with the statutory cap. The trial court also approved defendants’ payment plan as to the compensatory damages, which the plaintiff contended was unreasonable due to its extremely low interest rate and 50-year payment schedule.

On appeal, the defense relied heavily on Adams v. Children’s Hospital, 832 S.W.2d 898 (Mo. 1992), where the Missouri Supreme Court clearly stated that a statutory cap on damages is not violative of the right to a jury trial under the state constitution. The plaintiff argued that Adams was wrongly decided and should be overturned. In a bold and surprising move, the court agreed with the plaintiff, holding its own precedent to be unconstitutional. Thus, Adams was overruled, and the court remanded Watts back to the trial level to have the damages award reinstated, and also instructed the lower court to adopt a new payment plan that will ensure full recovery for the plaintiff.

The Watts case was featured in the 2011 documentary Hot Coffee, a film which explores the dangers of “tort reform” and how it can undermine the role of the jury and lead to unjust results for injured plaintiffs.