Supreme Court Case May Spark More Class Actions

By Allen Smith Nov 13, 2015
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The pendulum may be swinging back toward favoring plaintiffs in wage and hour class actions in a case where statistics figure prominently, according to Mark Batten, an attorney with Proskauer in Boston who observed a case argued before the Supreme Court Nov. 10, 2015. More than 3,000 employees at an Iowa meat-processing facility are seeking overtime pay for time spent putting on and taking off work clothes.

“This is an important case employers should pay close attention to,” said Bob Cooper, an attorney with Buchalter Nemer in Los Angeles. If the Supreme Court affirms the 8th U.S. Circuit Court of Appeals’ verdict in favor of the plaintiffs, losses calculated through formulas and statistics will become more common in class actions in place of proof of actual losses. He said that would mean “Class actions would become much easier to prove and win.”

Use of Statistics

The statistical part of the case involved getting a statistically significant sample of time employees spent donning and doffing protective gear, noted Seth Rafkin, an attorney with Cooley in New York City. The plaintiffs alleged that they weren’t sufficiently compensated for the time spent changing clothes, but they didn’t have records of the actual amount of time.

Tyson Foods, the defendant, did not keep time records of the employees donning or doffing. An expert estimated that some employees took 30 seconds to get dressed and others 10 minutes. Tyson said class-action liability could not be based on such “wildly different” estimates. And it took issue with a class being certified where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample.

In this case, the plaintiffs represented a class of 3,300 employees at Tyson’s meat-processing facility in Storm Lake, Iowa. Their jobs required widely differing amounts of time to don and doff protective gear. The plaintiffs claimed Tyson failed to provide overtime compensation for time spent donning personal protective equipment and clothing before production and again after lunch, and for doffing the equipment and clothing before lunch and again after production.

From 1998 until 2007, Tyson paid four minutes beyond production line time for all production employees—referred to as “K-code time.” From 2007 to 2010, it stopped paying nonknife-wielding employees for the time spent donning and doffing sanitary gear. During that time, it paid knife-wielding employees between four and eight minutes of K-code time, depending on the job.

The plaintiffs claimed that the K-code time was not enough to cover compensable pre- and post-production line activities in violation of the Fair Labor Standards Act (FLSA) and the Iowa Wage Payment Collection Law. A jury returned a verdict of $2.89 million—doubled by virtue of liquidated damages to $5.78 million. The 8th Circuit affirmed the award.

At oral argument Nov. 10, 2015, the Supreme Court did not, much to Batten’s surprise, examine the class action to see whether it might be a “trial by formula” (statistical sampling in litigation). This type of trial is not permissible, according to the Supreme Court’s ruling in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011).

Instead, the high court zeroed in on whether employees can prevail as a class if there is, as held in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), a just and reasonable inference from the evidence for damages, even though the damages may be only approximate. Batten described Mt. Clemens as a “thorn in the side of wage and hour defenders.”

In Mt. Clemens, the Supreme Court said plaintiffs may use formulas for the purpose of allocating damages. But it did not extend this to using formulas to find liability, Cooper noted.

Carter Phillips, an attorney for Tyson who is with Sidley Austin in Washington, D.C., argued before the justices that Mt. Clemens should be limited to allocating damages and should not be applied to liability.

“What you’re basically saying is that Mt. Clemens is completely wrong,” Justice Sonia Sotomayor said to Phillips. “You can’t estimate your time when the employer doesn’t keep records.”

“We don’t have any quarrel with Mt. Clemens the way it was written,” he replied.

“Mr. Phillips, you say the question is whether it can proceed as a class,” remarked Justice Elena Kagan. “But it seems as though that’s really not the question in this case because of Mt. Clemens; that’s what Mt. Clemens does is to suggest that certain kinds of statistical evidence are completely appropriate in FLSA cases generally.”

Phillips answered that averaging in this instance “simply papers over the problems of the class.” He later added, “It’s one thing to do some kind of sampling. It’s another thing to say, ‘I’m going to take wildly different [estimates]—30 seconds vs. 10 minutes—and average everybody across the plant’ without any effort to be more tailored in our approach than that.”

What’s the Right Standard?

David Frederick, an attorney for the plaintiffs who is with Kellogg Huber Hansen Todd Evans & Figel in Washington, D.C., noted that the case centered around the compensability of donning and doffing time and whether that time resulted in overtime.

“The average worker worked 48 hours per week before you even got to any of the counting of the donning and doffing,” he observed. “The plant ran on Saturdays 60 percent of the time, which would be a six-day workweek.”

The vast majority of workers were in overtime status. “That’s why the fulcrum of the case came down to whether putting on this gear, which was standard sanitary gear for every single worker in the class, was compensable or not,” he remarked.

Justice Anthony Kennedy asked, “Can the employer be charged with not keeping adequate records by not following every single person every part of that person’s day? You spend four hours on this line, four hours on that line. You have to put on a certain kind of doffing. Can the employer really keep records for every single employee?”

Frederick answered, “Had they put the punch clock right outside the locker room so that the workers, as soon as they went in the locker room, punched in, this problem would have been eliminated.” He continued, “So when they’re putting on their equipment in the locker room, if they punched in, the company has satisfied the FLSA and this problem goes away.”

Kennedy asked Frederick, “If the court is writing an opinion of reaching the result you want, what is the standard we put? Representative evidence? Average evidence of injury is sufficient? What do we write?” He probed further, “An average is possible if what—there’s no other way to do it? If it’s an FLSA case and has a special policy? Neither of those seem quite satisfactory to me.”

“I think every case is going to be different, as we would all candidly recognize,” Frederick answered. “An antitrust case is going to be different from a labor case. … I think you do have to look at the substantive context in which the averaging is going to occur so that any deviations at least are explicable.”

“Don’t you also have to say that the jury accepted the averaging? And that doesn’t seem to have happened here,” Justice Antonin Scalia asked. “When the jury comes in with less than half of what the averaging would have produced, how can we say that there has been averaging?”

“The fact that it awards a lesser amount may be based on its own doubts about the number of minutes or the quantity,” Frederick replied. “We have always deferred to juries in the way these kinds of damages are calculated.”

Elizabeth Prelogar, assistant to the solicitor general at the U.S. Department of Justice, also argued in favor of the plaintiffs, noting, “It is the Department of Labor’s position here that Tyson was in violation of the FLSA, both by not keeping the actual records and by not fully compensating the employees for the time worked in this case.”

This case is Tyson Foods v. Bouaphakeo, No. 14-1146.

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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