March 28, 2013

Does the right to procedural fairness end with class action certification?

By Christina M. Martin Attorney

Today, PLF submitted an amicus brief in the California Supreme Court in Duran v. U.S. Bank Nat’l Ass’n – a case which asks whether plaintiffs can make an end run around the usual procedures governing lawsuits if they proceed as a class action.

In this case, Sam Duran and Matt Fitzsimmons brought a class action against U.S. Bank on behalf of 260 business banking officers (BBOs), claiming that the bank inaccurately labeled them as exempt from overtime pay.  The BBO’s job is to sell banking services to businesses; essentially, BBOs are sales representatives.  Under California law, sales reps are not entitled to overtime, if they spend at least half their working hours offsite.  U.S. Bank did not track BBOs’ hours or where they worked.

To prove that the bank improperly classified all of the BBOs, the plaintiffs convinced the trial court to look at only declarations from a 21-person sample of the class, from which the court was then to extrapolate to the entire class how all 260 BBOs spent their time. US Bank offered more than 70 declarations from BBOs stating that they spent more than half their time outside the bank, but the judge refused to hear any evidence about anyone outside of the sample. The judge also refused to hear evidence that some employees were exempt for other reasons (for example, for making more than $100,000 per year).  Based solely on the non-random sample, the judge decided that the bank owed the entire class overtime.  He awarded the class $15 million (averaging $57,000 each) and $18 million for their attorneys.

Setting aside the silliness of assuming that employees would receive the same wage-plus-commission pay if the bank had known it would be required to pay overtime, this judgment was obviously unfair because it violates our Constitution’s Due Process Clause. The Due Process Clause requires that defendants must be allowed to defend themselves.  Using 21 people to prove that the bank owes overtime to everyone is unfair since the only way to know whether an individual employee should get overtime is to look at when and where he worked.

The plaintiffs also fail on policy grounds. California law already provides that employees are entitled to attorney’s fees for wage and hour violations. Thus, they do not need the class action device to come to their rescue.  The plaintiff’s bar, however, would be devastated.  Class actions are a big moneymaker.  From 2007 through 2011, employers paid $2.3 billion in nonconfidential wage and hour class action settlements.

Employers looking at this case challenging the outside salesman exemption may respond by simply forbidding sales representatives from spending more than 50% of their working hours at the bank. While this may satisfy a regulator, to an employee such an outcome would likely be frustrating—changing nothing about compensation or the employer’s expectations about work product (i.e., meeting sales goals)—but merely limiting the employees’ options of where they may work.

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