Tuesday, December 8, 2020

FYI: 9th Cir Upholds Denial of Class Cert in "Wage and Hour" Case Against Bank

In a putative class action against a bank for alleged underpayment of overtime wages, the U.S. Court of Appeals for the Ninth Circuit recently held the use of a potentially improper pay structure was not evidence of harm in every instance, and thus the predominance requirement provided for in Fed. R. Civ. Pro. 23(b)(3) necessary to certify a class action was not met.


A copy of the opinion is available at:  Link to Opinion


An employee worked in a call center for an employer who operated thirteen call centers and employed 5,031 call center employees in the state of California.


Call center employees could receive a flat-sum, nondiscretionary incentive bonus each month. If the employee worked overtime and received a bonus in the same period, the employer would apply the bonus to the employee's straight pay to calculate the employee's regular rate of pay for purposes of overtime premiums.


The employer's methods of payment could be divided into two separate periods distinguished by both the time period and the way bonuses were calculated and paid.


During the first period, the employee "divided the incentive pay amount by the number of total hours worked in the previous two pay periods, even if those two pay periods did not coincide with the month for which the incentive pay compensated, then multiplied that amount by the overtime hours worked in those pay periods."


For the second period, the employer "divide[d] the month's incentive pay by weekdays in the month regardless of how many days an employee actually worked that month." The employer then "multiplie[d] that number by five, representing the days worked in a week, regardless of how many days an employee actually worked." The employer then divided "that number by total hours worked instead of only non-overtime hours worked." Finally, the employer would then divide "that number by two to get the new overtime 'half rate,' which it multiplied by the overtime hours worked to retroactively pay the underpaid overtime amount.


In March 2017, the employee filed a class action complaint against the employer primarily alleging three claims for (1) "failure to pay minimum wages," (2) "failure to accurately pay overtime wages," and (3) "failure to provide second meal periods" along with additional claims derived out of these three claims.


The employee moved for class certification in May 2019 and the trial court denied certification reasoning the first and third claims lacked commonality, typicality, and predominance, with the second claim lacking only predominance.


As you may recall, Plaintiffs seeking to certify a class under Federal Rule 23 must plead and prove: (1) an adequate class definition, (2) ascertainability, (3) numerosity, (4) commonality, (5) typicality, (6) adequacy and (7) at least one of the requirements in Rule 23(b), namely 23(b)(3) common questions predominate and a class action is superior to individual actions.


The employee appealed denial of the second claim, and any claims derivative of it.


On appeal, the Ninth Circuit first addressed the commonality requirement, which "means that the class members' claims 'must depend upon a common contention' and that the 'common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.'" Vaquero v. Ashley Furniture Indus., Inc. 824 F.3d 1150, 1153 (9th Cir. 2016) (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011)).


The employer argued there are no common questions because the proposed class's claim involves two separate pay policies, over two different time periods, which raise separate questions of liability.


The employee countered that "each policy applied uniformly to all putative class members employed during the period in which the policy was in effect." So, all putative class members were subject to one of the two policies for calculating overtime wages during the two periods that they were in effect. Thus, the alleged defect (using all hours worked in the divisor) was "equally applicable to all Class Members."


The Ninth Circuit agreed with the employee and the trial court that although there are differences between the two policy periods, a common question remains regarding the lawfulness of the employer using total hours worked in the divisor and thus a common legal question exists central to determining liability.


The Ninth Circuit next examined the typicality prerequisite of Rule 23(a) which "is fulfilled if 'the claims or defenses of the representative parties are typical of the claims or defenses of the class.'" Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998) (quoting FRCP 23(a)(3)), overruled on other grounds by Dukes, 564 U.S. at 338). "Under the rule's permissive standards, representative claims are 'typical' if they are reasonably co-extensive with those of absent class members; they need not be substantially identical." Id.


The Ninth Circuit found that the employee had shown that she "was subject to [the employers] policies regarding its inclusion of bonuses in the regular rate of pay for purposes of calculating overtime and suffered injury therefrom." Further, despite the differences between the two policies, the employee demonstrated she was subject to the employer's policies and suffered injuries arising from the same allegedly unlawful policy of using total hours worked in the divisor.


For this reason, the Ninth Circuit found that the employees claims are "reasonably co-extensive" with the putative class members, and thus the employee satisfied the requirement of typicality.


Then, the Ninth Circuit examined the crux of the claim, the predominance requirement, explaining "[u]nder Rule 23(b)(3), a plaintiff must demonstrate the superiority of maintaining a class action and show 'that the questions of law or fact common to class members predominate over any questions affecting only individual members.'" Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 596 (9th Cir. 2012) (quoting FRCP 23(b)(3)). "[T]he focus of the predominance inquiry" is whether "a proposed class is 'sufficiently cohesive to warrant adjudication by representation.'" Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 469 (2013) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997)). But the rule "does not require a plaintiff seeking class certification to prove that each element of their claim is susceptible to classwide proof," so long as one or more common questions predominate. Id.


Moreover, the Ninth Circuit added, individual differences in calculating the amount of damages will not defeat class certification where common issues otherwise predominate. Vaquero, 824 F.3d at 1155. However, "[i]f the plaintiffs cannot prove that damages resulted from the defendant's conduct, then the plaintiffs cannot establish predominance." Id. at 1154.


The employer argued that the employee had not established predominance because she sought to certify a class that would require highly individualized inquiries to determine whether class members suffered an injury in the first place. Namely, those employees who did not work overtime or did not earn a bonus during the same period in 2016 or 2017 can have no claim for compensation based on an erroneous method of overtime rate calculation.


Both the employee and employer relied on Alvarado v. Dart Container Corp. of Cal., which held that under California law, employers must pay non-exempt employees who work overtime a premium on top of their "regular rate of pay." Alvarado specifically focused on the proper way to calculate the per-hour value of a flat sum bonus earned by weekend workers. Alvarado, 411 P.3d at 537.


The Ninth Circuit noted that while Alvarado could be an important part of the employee's case for proving liability, it says nothing about class certification or predominance. Further, Alvarado is not sufficient to establish predominance where a large portion of the proposed class either (1) did not work overtime or did not receive a bonus in the same period, and thus could not have been exposed to the employers overtime formulas in the first place; or (2) if they were exposed to a formula, they were not underpaid and thus were not injured.


The Ninth Circuit added, Alvarado does not allow the employee to demonstrate that the court could decide, on a classwide basis, issues of liability for all class members. Thus, although the method may have been deemed improper, the use of the method is not evidence of harm in every instance. Instead, determining liability for all class members would require complicated individualized inquiries.


Consequently, the Ninth Circuit held that the employee "has not provided a common method of proof to determine liability and has not rebutted evidence that many of the class members were not affected by [the employer's] overtime policies." For these reasons, the employee has not established predominance.


Accordingly, the Ninth Circuit affirmed the holding of the trial court denying class certification.




Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, Suite 603
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com


Admitted to practice law in Illinois




Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC



NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates and webinar presentations are available on the internet, in searchable format, at:


Financial Services Law Updates




The Consumer Financial Services Blog