Cable Installers Proved FLSA Claims, Split 6th Cir. Rules

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Kevin McGowan

March 2 — A federal district court properly certified cable installers’ overtime claims as a Fair Labor Standards Act collective action, when they cited a companywide policy against reporting overtime hours, a divided U.S. Court of Appeals for the Sixth Circuit ruled March 2.

In a 2-1 decision, the Sixth Circuit affirmed that FTS USA LLC and its parent company, UniTek USA LLC, violated the FLSA rights of a group of 296 cable technicians employed across the country. The U.S. District Court for the Western District of Tennessee also properly approved a trial plan that allowed the employees to prove the violations to a jury through the representative testimony of 17 technicians, the appeals court said.

But the trial court miscalculated damages by using the wrong multiplier for adjusting the employees' wages and the Sixth Circuit remanded for a recalculation of damages.

In dissent, Judge Jeffrey S. Sutton said the district court improperly certified the case as a single collective action under the FLSA, rather than certify subclasses of technicians who actually were “similarly situated.”

Employees who alleged that FTS used several different means to deny overtime didn't form a coherent group under the similarly situated employee standard, the dissent said. The district court should either have denied a collective action or certified separate actions among smaller groups of “similarly situated” employees challenging specific employer practices, the dissent said.

Plaintiffs' Lawyers Applaud Decision

The Sixth Circuit appropriately ruled that the district court didn't abuse its discretion by certifying the FLSA collective action, said Adam Hansen of Nichols Kaster PLLP in Minnesota, which represented the plaintiffs.

Sutton's dissent provides “an incredibly myopic view” of what occurred in this case, in which company instructions “came from the top” to “shave” the cable installers' hours as a cost-cutting move, Hansen told Bloomberg BNA March 3.

Company executives told line managers to use any means necessary not to compensate for overtime work, whether that meant deleting such hours claimed on timecards, telling installers to work through their lunch hours or tacitly encouraging “off the clock” work, Hansen said.

That's a “uniform” company policy and can’t be characterized as “discrete policies” not amenable to collective action treatment, Hansen said. It “doesn’t make common sense” to say FTS had multiple policies when the basic policy was to shave hours and deny overtime pay, he said.

The Sixth Circuit case has some issues in common with a pending U.S. Supreme Court case in which Tyson Foods Inc. is challenging certification of an FLSA collective action and a class action on state law wage claims, Hansen said. He referred to Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, in which the justices heard oral argument Nov. 10 .

In both cases, the court is considering the effects of Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 6 WH Cases 83 (1946) on FLSA collective actions when an employer fails to keep adequate time records. In Mt. Clemens, the court said employees in such cases can introduce representative proof that raises a “reasonable inference” about the number of hours worked, and the employer then must disprove the unpaid hours allegation.

The Sixth Circuit's decision “clarifies the appropriate use of representative proof” in an FLSA collective action, said William Jhaveri-Weeks, a lawyer who filed an amicus brief for the National Employment Lawyers Association supporting the FTS technicians. It also upholds the use of averaging to craft a remedy when an employer fails to keep adequate records, he told Bloomberg BNA March 3.

From NELA's perspective, the appeals court ruling is “a great outcome” that makes it feasible for employees to pursue overtime pay claims on a collective basis, said Jhaveri-Weeks, a partner with Goldstein Borgen Dardarian & Ho in Oakland, Calif.

Lawyers representing FTS weren't available for comment March 3.

Factors Favor Collective Action

The Sixth Circuit panel agreed that whether the cable technicians' FLSA claims were properly certified as a collective action turns on the test set out in O'Brien v. Ed Donnelly Enterprises, Inc., 575 F.3d 567, 15 WH Cases2d 225 (6th Cir. 2009).

Under O'Brien, a court considers the “factual and employment settings” of the individual plaintiffs; the “different defenses to which the plaintiffs may be subject on an individual basis” and the “degree of fairness and procedural impact” of certifying the case as a collective action.

But the Sixth Circuit majority and dissent disagreed on how the O'Brien factors play out in the technicians' case.

Regarding the factual and employment settings, the FTS cable technicians worked in the same position, had the same job description and performed the same job duties regardless of geographic location, the Sixth Circuit said. The record contained “ample evidence” of a companywide policy that originated with FTS executives to underreport overtime hours, Judge Jane Branstetter Stranch wrote.

The underreporting policy, which both managers and technicians testified about at trial, applied regardless of FTS location or supervisor, the court said.

The FTS technicians identified different techniques by which the policy was implemented, the court said. These included requiring technicians to work off the clock before or after scheduled hours or during supposed lunch breaks and altering the times technicians had previously entered on their time cards, the court said.

“As in O'Brien, such plaintiffs will be similarly situated where their claims are ‘unified by common theories of defendants' statutory violations, even if the proofs of these theories are inevitably individualized and distinct,' ” Stranch wrote.

In dissent, Sutton said the FTS technicians defined the “company-wide policy” at such a “high level of generality” that it “encompasses multiple policies.”

The plaintiffs “come up short” in proving that all 296 technicians were “similarly situated” because they acknowledge that FTS supervisors in different locations used different methods, ranging from falsifying time sheets to “creating incentives” for employees not to work overtime, the dissent said. Some of those methods violate the FLSA, but others might not, the dissent said. At least some of the technicians included in the class didn't experience any statutory violation, Sutton wrote.

“The problem with the plaintiffs' theory is that a jury could accept some of their theories of liability while rejecting others, and yet the verdict form gave the jury only an all-or-nothing-at-all option,” the dissent said.

But the Sixth Circuit majority said the definition of “similarly situated” under the FLSA “does not descend to such a level of granularity.”

“Many FLSA cases do focus on a single action, such as the donning and doffing cases that the dissent's reasoning would suggest is the only situation where representative proof would work,” Stranch wrote. “But neither the statutory language nor the purposes of FLSA collective actions require a violating policy to be implemented by a singular method.”

The dissent would compel employees to bring a separate collective action, “or worse, separate individual actions,” for each individual method an employer uses to get employees to underreport their working hours, the court said. “Such a narrow interpretation snubs the purpose of FLSA collective actions,” Stranch wrote.

That an employer uses more than one technique to deprive employees of overtime doesn't prevent those employees from being similarly situated for collective action purposes, the court said.

“This is not a new concept to our court or other courts,” Stranch wrote. “In accordance with O'Brien, we have approved damages awards to FLSA classes alleging that employers used multiple means to undercompensate for overtime.”

Individualized Defenses Don't Bar Group Approach

As for the individual defenses factor, FTS argued it must be allowed to examine each plaintiff about his alleged unrecorded hours. The district court denied that right by allowing representative testimony at trial and using an estimate-average approach to calculate unpaid hours, the defendants argued.

But individualized defenses don't compel decertification of a collective action when “sufficient common issues or job traits permit collective litigation,” the Sixth Circuit said.

The district court didn't abuse its discretion by refusing to decertify the collective action based on FTS's claimed right to examine and raise individual defenses against each of the 293 opt-in plaintiffs, the Sixth Circuit said.

The final factor, the degree of fairness and the procedural impact of certifying the case as a collective action, supports the district court decision, the Sixth Circuit said.

“This case satisfies the policy behind FLSA collective actions and Congress's remedial purpose by consolidating many small, related claims of employees for which proceeding individually would be too costly to be practical,” Stranch wrote.

7th Circuit View ‘Not Controlling.'

FTS argued that the Seventh Circuit's decision in Espenscheid v. DirectSat USA, LLC, 705 F.3d 770 (7th Cir. 2013) compels decertification.

In Espenscheid, the Seventh Circuit imported the principles for certifying class actions under Rule 23 of the Federal Rules of Civil Procedure into the FLSA collective action inquiry, reasoning that “there isn't a good reason to have different standards” in wage and hour cases for certification of class actions versus collective actions. Espenscheid also involved cable technicians employed by the same companies involved in Monroe, challenging the same “worker-incentive” plans, Sutton noted in dissent.

But Espenscheid conflicts with Sixth Circuit precedent and differs factually and procedurally from the FTS cable technicians' case, the majority said.

The district court in Espenscheid decertified the collective action before trial, after which the named parties settled their claims but appealed the decertification ruling. The Seventh Circuit affirmed decertification, noting that the plaintiffs themselves had recognized the possible need for individualized liability findings for a class of 2,341 members, the Sixth Circuit said.

In contrast, the FTS collective action involved 293 opt-in plaintiffs, the employers had the full opportunity to submit evidence at trial, the parties agreed to representative testimony prior to trial and a jury returned a verdict for the technicians.

“In light of those legal, factual and procedural differences, Espenscheid is simply not controlling,” Stranch wrote.

Judge Danny J. Boggs joined the majority opinion.

Sutton in dissent said he would follow the Seventh Circuit's approach because the problems it identified with a collective action are no different from the defects in this case.

In each case, the plaintiffs' collective action “offered no way” to “distinguish benign under-reporting” of hours from an employer's “unlawful conduct” but rather presented “multiple, conflicting theories of liability” on an “all-or nothing” classwide basis, the dissent said.

“We could adopt the Seventh Circuit's opinion as our own in this case, since it highlights precisely the same problems that afflicted the plaintiffs' trial plan,” Sutton wrote. “Because the employees did not offer a ‘feasible method of determining' liability and damages, the district court should have decertified their case.”

The plaintiffs' contention that they identified a “uniform” company “time-shaving” policy obscured that the purported uniform policy was a multitude of policies with varied effects on different employees, the dissent said.

“The FLSA does not bar ‘benign underreporting' where workers try ‘to impress the company with [their] efficiency in the hope of obtaining a promotion or maybe a better job elsewhere—or just to avoid being laid off,' ” Sutton wrote, quoting Espenschied. “Nor does it violate the FLSA to reduce an employee's amount of work to avoid increasing overtime costs.”

“A company-wide ‘time-shaving' policy is lawyer talk for a company-wide policy of violating the FLSA,” the dissent said. “That does not do the trick. And most assuredly it does not do the trick when one of the theories does not even violate the FLSA.”

Nichols Kaster PLLP and the Donati Law Firm LLP represented the employees. Gibson Dunn & Crutcher LLP and Fox Rothschild LLP represented the cable company.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

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