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Court Nixes Class of 30,000 Costco Workers In California Challenging Lockdown Policy

Thursday, April 17, 2014

By Jay-Anne B. Casuga  

April 16 --A federal judge in California April 15 decertified a statewide class of approximately 30,000 hourly Costco Wholesale Corp. employees who alleged the company violated California law by requiring them to remain inside warehouses at the end of their closing shifts without pay until supervisors completed lockdown procedures.

Judge Gonzalo P. Curiel of the U.S. District Court for the Southern District of California found that common issues wouldn't predominate over individualized inquiries as to whether Costco's alleged lockdown policy actually resulted in employees performing unpaid, off-the-clock work.

“[U]ndertaking individualized inquiries as to approximately 30,000 individuals … would result in the common questions here being overcome by individualized inquiries,” Curiel said.

The court also decertified a related Fair Labor Standards Act collective action, ruling that opt-in plaintiffs aren't similarly situated because the lockdown policy didn't always result in employees being detained without pay.

The ruling follows a Northern District of California decision last December denying certification of a proposed statewide class of more than 50,000 hourly CVS Caremark Corp. employees who claimed the retailer didn't pay them for off-the-clock time spent transporting merchandise and medication between stores .

Furthermore, the broader issue of whether employees are entitled to compensation for time in which they are subjected to post-shift security procedures is currently before the U.S. Supreme Court in Integrity Staffing Solutions v. Busk, U.S., No. 13-433 .

Workers Allege Centralized Lock-In Policy

According to the court, Costco employees Eric Stiller and Joseph Moro alleged that various employee manuals, agreements and other closing, payroll and timecard policies together demonstrated the company's policy of locking employees in warehouses without pay until the completion of lockdown procedures.

Specifically, the workers alleged the companywide policy directed supervisors and managers to lock warehouses to prevent employees from leaving while various closing activities were performed, such as collecting and securing money from the registers and removing jewelry from display cases.

The workers initially sued Costco in state court for violations of the FLSA and California law. The company removed the lawsuit to federal court in November 2009.

In November 2010, Stiller moved to represent an FLSA opt-in class consisting of “all persons who worked for Costco … in the United States as full-time, hourly, non-exempt employees who were subject to Costco's closing lockdown procedures between April 8, 2007, and October 1, 2009.”


 

“[U]ndertaking individualized inquiries as to approximately 30,000 individuals … would result in the common questions here being overcome by individualized inquiries,” Judge Curiel said, decertifying an FLSA collective action and a state law class action.  

 


In addition, Moro sought to represent an opt-out state law class consisting of “all persons who worked for Costco … in California as hourly, non-exempt, non-union employees who were subject to Costco's closing lockdown procedures between May 15, 2005 and October 1, 2009.”

Judge Marilyn L. Huff in December 2010 conditionally certified a nationwide FLSA collective action and certified a statewide California class action under Rule 23 of the Federal Rules of Civil Procedure . Costco moved to decertify both the collective and the class actions. The case subsequently was transferred to Curiel.

Individualized Inquiries Predominate, Court Says

Granting the motion, Curiel found that the California class didn't satisfy the certification requirement under FRCP Rule 23(b)(3) that issues common to the class “predominate” over issues unique to individual class members.

To prevail on an off-the-clock claim under California law, the court said, the employees must demonstrate that they performed work for which they were not compensated, and that Costco was aware or should have been aware of the unpaid work.

The court acknowledged there are common issues regarding the existence and companywide enforcement of Costco's alleged lockdown policy. However, the court said those common questions wouldn't predominate over individualized inquiries as to “how often and for how long class members actually experienced unpaid [off-the-clock] time as a result of the alleged policy.”

For example, the court said Costco argued that such inquiries would include whether an employee, as a result of the policy, actually experienced more than a de minimis delay at closing, whether an employee personally chose to wait in the warehouse, whether an employee either remained clocked in or clocked back in during lockdown procedures, and whether an employee used an exception log to receive pay for any departure delay.

The California class, as currently defined, includes anyone subject to the alleged lockdown policy, the court said. It found that the class would need to be redefined to include only those employees who experienced unpaid detention times as a result of the purported lockdown policy.

“Defining the California Class in this way, however, would--in essence--require a liability finding as to each employee to determine whether he or she [was] even a member of the California Class,” the court said. “And undertaking individualized inquiries as to approximately 30,000 individuals … would result in the common questions here being overcome by individualized inquiries.”

Court Also Dismantles FLSA Collective Action

The court also decertified the FLSA collective action, finding that the opt-in plaintiffs aren't similarly situated.

The court agreed with Costco that differences in how warehouse managers nationwide implemented the alleged lockdown policy would require individualized inquiries to establish FLSA liability.

Liability “would hinge on factors related to when the last customer left each day, when employees clocked out, whether employees were permitted to exit after clocking out, and whether employees were detained for a compensable time,” Curiel said.

“The Court finds these differences weigh against a finding that the opt-in claimants are 'similarly situated,' ” the court concluded.

Although continued FLSA certification would “conserve judicial resources and significantly lower the burden on individual opt-in claimants,” the court said it “cannot escape the fact that Plaintiffs have failed to offer a viable method of establishing liability on a classwide basis.”

David W. Sanford, Jill S. Sanford, Katherine E. Lamm, Thomas Henderson and Kyle Chadwick of Sanford Heisler in Washington represented the employees. Daniel P. Hart, David D. Kadue, Dennis A. Clifford, Rachael Urquhart, Rocio Herrera, Theresa Y. McDaniel and Thomas J. Wybenga of Seyfarth Shaw in Atlanta, Los Angeles, Houston, Chicago and Issaquah, Wash., represented Costco.

 

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com


Text of the opinion is available at http://www.bloomberglaw.com/public/document/Stiller_et_al_v_Costco_et_al_Docket_No_309cv02473_SD_Cal_Nov_04_2.

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