The most comprehensive resource available for payroll professionals. This service provides payroll news, white papers, custom research answers, webinars on the hottest payroll topics, survey and...
“There’s no way this class action is valid,” said Jeremy, an owner of a hotel chain. “The employees’ situations aren’t similar enough.”
“It’s possible that one or two employees have a genuine complaint, but those who do should face us in court individually,” said Kyle, Jeremy’s lawyer.
Facts: A resort company with four locations in Tennessee hired workers to sell timeshares. Employees were grouped into three categories of nonexempt sales representatives that each focused on a different customer base.
The resorts had common management structures and used the same timekeeping and compensation practices. All sales representatives were paid on a commission basis, with a minimum wage advance that was deducted from commissions, and were entitled to overtime pay based on commission amounts.
To avoid negatively affecting a resort’s net operating income, managers told employees that they would be paid minimum wage for hours worked exceeding 40 in a week and that such pay would be deducted from commissions, the employees said.
The employees said that they clocked out during the day even if they still were working and did not accurately record hours worked on weekends to avoid recording more than 40 hours in a week. Time cards that reflected more than 40 hours were edited by resort managers to reduce the number of hours submitted, the employees said.
The employees filed a class action claiming that the employer failed to pay overtime in violation of the Fair Labor Standards Act. They sought to recover unpaid wages and damages.
The employer and the employees initially agreed to allow representative testimonies at trial to minimize the burden for the employees while still giving the employer the chance to cross-examine them.
After trial, the employer claimed that the employees chosen to testify against the company could not represent the entire class action. There was too much variation in employees’ descriptions of how hours were falsely recorded or removed from time cards and the four resort locations were not proportionately represented in employee testimonies, the employer said.
A statistician testifying on behalf of the employer said that the 30 employees chosen to testify were inherently biased because they were not selected at random. The employees’ duties, number of hours worked, and number of unrecorded hours varied widely, so there was a higher chance for error if the court applied conclusions drawn from employee testimonies to the entire class, the statistician said.
Because accurate conclusions could not be drawn regarding the employer’s liability for the nontestifying employees, the class action must be decertified, the employer said.
The employees pointed out that some testimonies covered more than one employee’s experience. One resort manager, for example, spoke of her own actions altering time cards and of her conversations with other managers who also altered cards.
The employees also claimed that the variations in stories of off-the-clock work represented some of the several ways that the employer required employees to work unrecorded hours.
Issue: Did the employees who testified sufficiently represent the class?
Decision: The testifying employees were representative of those not testifying, a federal district court said, denying the employer’s request to decertify the class action.
The employees met the initial conditions necessary to file a class action because they worked similar schedules, were paid using the same system of commission pay and minimum wage deductions, and expectations for each position generally were similar, the court said.
The “fairly repetitive” testimonies at trial consistently mentioned that employees could not record hours worked that exceeded 40 in a week and that managers falsified time records, the court said. Testimonies that shared the experience of more than one employee were expansive enough to represent those who did not testify, it said.
Statements from all members of the class action were not needed because a pattern of employer liability had been established and it was reasonable to conclude that the testimonies from the other employees would be sufficiently similar, the court said.
The statistician’s testimony was unreliable because his findings depended on inaccurately recorded hours, the court said.
The case discussed is Pierce v. Wyndham Vacation Resorts, Inc., 2018 BL 29171, E.D. Tenn., No. 3:13-CV-641-CCS, 1/29/18.
Pointers: For the purpose of overtime calculations, employers must include commissions in the regular rate of pay for employees who do not qualify for the commissioned retail sales exemption, regardless of whether the commission is the sole source of income or is paid in addition to a base salary or hourly rate.
Employers also must accurately track and record the daily and weekly hours worked by nonexempt employees. To encourage full attendance and accurate timekeeping, employers should train managers and employees in proper timekeeping methods and periodically audit time records.
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
Notify me when updates are available (No standing order will be created).
Put me on standing order
Notify me when new releases are available (no standing order will be created)