Tag: Wage and Hour

Last week, in Tyson Foods, Inc. v. Bouaphakeo et al., No. 14-1146, the United States Supreme Court ruled that class certification was appropriate in a wage and hour class and collective action, despite the lack of individualized evidence for the amount of uncompensated time worked by each class member. The Court instead allowed the employees to use a statistical expert who conducted representative time studies to determine the average number of minutes that the employees spent on pre-shift and post-shift activities. The Court rejected Tyson’s arguments against the use of representative sample averaging, including Tyson’s reliance on Wal-Mart Stores. Inc. v. Dukes, 564 U.S. 338 (2011), which denied certification in a nationwide Title VII class because liability and damages would require individualized proof.

Plaintiff employees in Tyson worked at Tyson Foods, Inc.’s (“Tyson”) pork-processing facility in Storm Lake, Iowa, in the “kill,” “cut,” and “retrim” departments. In the course of their duties, they were required to wear protective gear, the composition of which varied with the tasks that each worker performed on any given day. During the applicable class period, Tyson paid some employees for donning and doffing activities, but did not compensate others at all. Tyson did not record the amount of time that each employee spent donning and doffing.

Arguing that the time that they spent donning and doffing protective gear was an integral part of their hazardous work, Tyson employees filed a lawsuit in the United States District Court for the Northern District of Iowa (“District Court”). In their complaint, plaintiffs alleged that Tyson’s failure to compensate them for donning and doffing resulted in the denial of overtime compensation under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 207(a), and the Iowa Wage Payment Collection Law, Iowa Code § 91A.3. Plaintiffs sought certification of their Iowa wage claims as a class action under Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”), and of their FLSA claim as a “collective action” under 29 U.S.C. § 216.

To certify a class action under FRCP Rule 23, the trial court must find that “questions of law or fact common to class members predominate over questions affecting individual members.” The most significant issue in Tyson was whether the time spent donning and doffing protective gear was compensable work under the FLSA; a question common to the entire class. However, in order to recover damages, a second important question was whether each employee could prove the amount of time spent donning and doffing their equipment and whether that time constituted overtime work in any work week.

In opposition to plaintiffs’ class certification motion, Tyson contended that, because of the variance in protective gear that each employee wore, the employees’ claims were not sufficiently similar to be resolved on a class-wide basis. The District Court rejected that position and concluded that there were common questions susceptible to class-wide resolution, including (1) whether the donning and doffing of protective gear could be considered work under the FLSA; (2) whether such work was integral and indispensable to the plaintiff employees’ work; and (3) if compensable, whether such work was de minimis. The District Court accordingly certified a Rule 23 class of 3,344 employees with respect to plaintiffs’ claims under Iowa law, and a class of 444 opt-ins under the FLSA.

At trial, to establish Tyson’s liability for overtime, each employee was required to show that he or she worked more than 40 hours each week, inclusive of time spent donning and doffing. Because no records of time spent donning and doffing existed, however, plaintiffs relied on a study performed by an industrial relations expert, who conducted 744 videotaped observations, recorded the amount of time that various donning and doffing activities took, and calculated an average for each department. The data from this statistical sampling yielded an average of 18 minutes a day for the cut and retrim departments and 21.25 minutes for the kill department.

Relying on this data, plaintiffs furnished another expert who estimated the amount of uncompensated time worked by each employee by adding the average donning and doffing time to the compensable/recorded time reflected in plaintiffs’ existing time records. Using this methodology, plaintiffs’ expert estimated that 212 employees did not meet the 40-hour threshold and could not recover damages for unpaid overtime; the remaining class members, however, had potentially been uncompensated to some degree.

Crucially, Tyson failed to challenge the validity of the statistical sampling and analyses prepared by plaintiffs’ experts in a hearing under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and made no effort to rebut the evidence with an expert of its own. Instead, echoing its arguments in opposition to class certification, Tyson argued to the jury that the variable amount of time that it took employees to don and doff different varieties of protective equipment made the lawsuit “too speculative for class-wide recovery.” Ultimately, although the calculations of plaintiffs’ experts supported an aggregate award of $6.7 million dollars, the jury returned a verdict of only $2.9 million in damages for unpaid wages. A subsequent ruling on liquidated damages upped the total award to $5.8 million.

Relying on Wal-Mart v. Dukes and other authority, on appeal, Tyson strenuously argued that the amount of time spent donning and doffing protective gear varied from person to person and required individualized inquiries, thus rendering class treatment improper. Rejecting this argument, the Court ruled that Wal-Mart did not stand for the broad proposition that a representative sample is an impermissible means of establishing class-wide liability. Wal-Mart involved, in part, a claim that supervisors misused their discretion in hiring and promoting female employees. The employees could not point to a common policy and instead proposed using a “sample set of selected class members” to determine both liability and damages for the entire class. The Court rejected the Wal-Mart plaintiffs’ proposed methodology as “trial by formula.”

By contrast, the Tyson Court noted there was a common policy with respect to liability, and the time study could be introduced in each individual claim to determine that employee’s overall hours for the week. The Court further noted that, unlike Wal-Mart, the Tyson employees all worked in the same facility, did similar work, and were paid under the same policy. The Court also was influenced by the principle that Tyson’s failure to keep records should not be used against the employees. In this respect, the Court relied heavily on its opinion in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 686-688 (1946), to hold that so long as “each class member could have relied on the sample to establish liability if he or she had brought an individual class action, . . . that sample [could serve] as a permissible means of establishing the employees’ hours” on a class-wide basis. Tyson, slip op. at 11.

Takeaways

Tyson does not necessarily erode the holding of Wal-Mart because, as the Court was careful to note, the two cases are so factually and legally different. However, in Title VII employment discrimination class actions, the courts may be open to smaller class actions involving employees who work in the same facility, perform similar tasks, or are supervised by common management.

Tyson’s ramifications for wage and hour class actions are far greater. The Tyson method of proving damages could be applied to other “off the clock” wage and hour class actions, such as pre-shift and post-shift administrative or maintenance work, missed lunch and meal breaks, security checks, or travel between job sites.

Finally, the Court assumed, without deciding, that the standards for certifying an FLSA collective action and a Rule 23 class action are the same. This may be significant because the relative sizes of the classes are different, with the FLSA collective action usually being much smaller. Several federal circuit courts of appeal have held that the standards for certifying an FLSA collective action and a Rule 23 class action are not the same. The Court may be forecasting that it will have to decide this issue in the future.

For further information about this alert, please contact the authors above or any member of our Labor and Employment Practice Group.

Last week the United States Supreme Court heard oral arguments in a donning and doffing class and collective action against Tyson Foods, Inc. (see full transcript of oral argument here) that has the potential to dramatically expand the certification of class and collective wage and hour “off-the-clock” actions.

The Fictional “Average Employee”

One of the primary issues in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, is whether the plaintiffs’ use of statistical averages in a Fair Labor Standards Act (“FLSA”) case was appropriate to certify a federal Rule 23(b)(3) damages class and to prove liability and damages at trial.  The plaintiffs relied on expert testimony to prove that a class of more than 3,000 workers at an Iowa pork processing plant were owed overtime wages for time spent donning and doffing personal protective equipment and walking to and from their workstations.  At trial, the plaintiffs used statistical evidence of the average donning, doffing and walking times for employees, resulting in a jury verdict against Tyson Foods in excess of $5.8 million.  They relied on individual time sheets and average times calculated by their expert from more than 700 videotape observations of employees putting on and taking off protective gear and walking to their workstations.

Relying on the Supreme Court’s recent employer-friendly class action decisions in Wal-Mart Stores v. Dukes, 131 S. Ct. 2541 (2011) and Comcast v. Behrend, 133 S.Ct. 1426 (2013), Tyson Foods appealed the verdict to the Eighth Circuit Court of Appeals.  It argued that the plaintiffs’ reliance on statistical evidence improperly “presume[s] that all class members are identical to a fictional ‘average’ employee,” which is contrary to the so-called “trial by formula” prohibition in Dukes and Behrend for determining classwide liability and damage.

A divided (2-1) panel of the Eighth Circuit disagreed with Tyson Foods’ positions.  Based on a split in the circuits, the Supreme Court granted certification on (1) whether differences among individual class members may be ignored and a class action certified under Rule 23(b)(3), or a collective action certified under the FLSA, where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and (2) whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the FLSA, when the class contains hundreds of members who were not injured and have no legal right to any damages.

Will Statistical Modeling Be Permitted to Show Classwide Violations Under the FLSA?

Some of the Justices, including the likely swing-vote, Justice Kennedy, appeared skeptical of Tyson Foods’ argument that the plaintiffs could not rely on statistical averages as the mechanism to demonstrate commonality and typicality among workers when there was evidence Tyson Foods did not keep accurate or adequate time records.  Several Justices cited to the burden-shifting framework in off-the-clock cases established after Anderson v. Mount Clemens Pottery Co., 380 U.S. 680 (1946) (where the employer’s records are inaccurate or inadequate and the employee cannot offer convincing substitutes, the burden shifts to the employer to demonstrate the precise amount of work performed or to refute the inference to be drawn from the employee’s evidence).  In addition, Justice Kennedy suggested that Tyson Foods might have waived arguments by not challenging the plaintiffs’ statistical experts at trial, by objecting to bifurcating the liability and damages phases of the trial, and by not seeking a special jury verdict for determination and apportionment of damages among class members.

On the other side, Justices Alito and Roberts questioned whether the use of averaging is appropriate when the job positions and equipment used by workers were undisputedly different among the workers included in the class, and where it was undisputed that some workers did not perform the activities in question and therefore suffered no injury.  Justice Alito asked, “How can you separate the employees who were injured from the employees who were not injured” or “how much time the employees were entitled to” except in “a very slap-dash fashion?”  The Chief Justice echoed this point, stating “once the jury rejects plaintiffs’ “average statistics, . . . there’s no way to tell whether everybody who’s going to get money was injured or not.”

Takeaways

The Tyson Foods case highlights the difficulties employers continue to face when determining whether their workers’ “preliminary” (time spent before the principal work begins) and “postliminary” activities (time spent after the principal work ends) are compensable in the first place under the FLSA. As Justice Alito asked at oral argument, “What do you think an employer should do about recordkeeping when the employer believes that certain activities need not be counted under the FLSA? . . . Is it supposed to keep two sets of records?”  The answer, according to the DOJ’s attorney, is that “Mt. Clemens . . . make[s] clear that the employer is stuck with its mistake . . . .”

Tyson Foods also shows that despite the Court’s decisions in Dukes and Comcast, which many commentators predicted would be the death knell of employment class actions, courts continue to certify classes where the plaintiffs can muster enough evidence (including statistical “averages” through qualified experts) to overcome the presumption of individualized differences among class members.  Further, while the lack of accurate time records is not an insurmountable obstacle to defeating an employee’s claim that he or she (or a group of workers) did not receive overtime for compensable time worked in excess of 40 hours, it could provide an opening under the Mt. Clemens standard for employees to take advantage of “relaxed” standards of proof (“just and reasonable inference”) to show wage violations under the FLSA, which ultimately could allow them to avoid early dismissal and get to a jury.