OVERTIME CLASS ACTIONSOVERTIME CLASS ACTIONS

What is Happening and Why What is Happening and Why

Elizabeth ZepedaElizabeth Zepeda

Smart & Final Stores Corp.Smart & Final Stores Corp.

Angel Gomez, IIIAngel Gomez, III

Epstein, Becker & GreenEpstein, Becker & Green

An Avalanche of Claims An Avalanche of Claims and Large Settlementsand Large Settlements

An Unprecedented Number of An Unprecedented Number of Lawsuits and Claims FiledLawsuits and Claims Filed

Very High Reported Settlements Very High Reported Settlements and Verdictsand Verdicts

Reported Settlements and Reported Settlements and VerdictsVerdicts

Farmers Insurance ($90 Farmers Insurance ($90 million for claims adjusters) million for claims adjusters)

Pacific Bell ($28 million for Pacific Bell ($28 million for sales support managers) sales support managers)

Rite-Aid Corp. ($25 million Rite-Aid Corp. ($25 million for store managers) for store managers)

Bank of America ($22 Bank of America ($22 million for personal bankers) million for personal bankers)

Blockbuster ($12 million for Blockbuster ($12 million for store managers) store managers)

Mervyn’s ($11 million)Mervyn’s ($11 million)

Taco Bell ($9 million for Taco Bell ($9 million for managers and assistant managers and assistant managers)managers)

U-Haul ($7.5 million for U-Haul ($7.5 million for managers) managers)

First Union Bank/Money First Union Bank/Money Store ($6 million for loan Store ($6 million for loan officers, assistant officers, assistant managers and commercial managers and commercial loan representatives)loan representatives)

Rent-A-Center ($3 million Rent-A-Center ($3 million for assistant managers)for assistant managers)

Wendy’s ($2 million for Wendy’s ($2 million for assistant managers)assistant managers)

Why is this Happening?Why is this Happening?

California Law is Unique and ConfusingCalifornia Law is Unique and Confusing Most Employers Operated in Good Faith Most Employers Operated in Good Faith

and Classified Employees as “Exempt”- and Classified Employees as “Exempt”- that is, that is, notnot Eligible for Overtime Pay Eligible for Overtime Pay

Under Federal Standards, Most of These Under Federal Standards, Most of These Employees Would be “Exempt” Employees Would be “Exempt”

Under California Standards, the Rules Under California Standards, the Rules are Very Different are Very Different

What is the California What is the California Standard?Standard?

Every employee is presumed Every employee is presumed to be “Non-Exempt”- that is, to be “Non-Exempt”- that is, mustmust be paid overtime be paid overtime

UnlessUnless

The employee falls into an The employee falls into an “exemption:”“exemption:”

• ExecutiveExecutive

• Administrative Administrative

•ProfessionalProfessional

““If they have a Manager If they have a Manager title, they’re exempt, title, they’re exempt, right?”right?”

California Rule is a Strict Duties-Based California Rule is a Strict Duties-Based TestTest

In addition to normal elements (must In addition to normal elements (must actually supervise two or more actually supervise two or more

employees, etc.), the tough part of the employees, etc.), the tough part of the test for most employers is that the test for most employers is that the

employee must spend more than 50% employee must spend more than 50% of time in actual “managerial duties”of time in actual “managerial duties”

Lots of Detailed Issues Lots of Detailed Issues AriseArise

Mixture of Exempt and Non-Exempt Mixture of Exempt and Non-Exempt DutiesDuties

How to Compute Alleged Back Pay How to Compute Alleged Back Pay DueDue

Waiting Time PenaltiesWaiting Time Penalties Attorney’s Fees, Interest, and CostsAttorney’s Fees, Interest, and Costs Statutes of LimitationsStatutes of Limitations Class CertificationClass Certification

Settlement IssuesSettlement Issues

Whether, When, How, and What,Whether, When, How, and What,and other Unanswerable Questionsand other Unanswerable Questions

Whether ...Whether ...

Obviously depends …Obviously depends …• Strength of Case on MeritsStrength of Case on Merits• Strength of Arguments on Class Cert. Strength of Arguments on Class Cert.

IssueIssue• Reasonableness of Other Side’s DemandsReasonableness of Other Side’s Demands• Operational ConcernsOperational Concerns• Financial Status of EmployerFinancial Status of Employer• Status of Discovery/Internal InvestigationStatus of Discovery/Internal Investigation

When ...When ...

Do It Early?Do It Early?• Saves attorney’s fees and costsSaves attorney’s fees and costs• May “signal weakness”May “signal weakness”

Around Time of Class Cert. Around Time of Class Cert. Question?Question?• Just before/Just after?Just before/Just after?

Hang Tough Until Just Before Trial?Hang Tough Until Just Before Trial?• Riskier, but may get a better dealRiskier, but may get a better deal

How ...How ...

Mediated Settlement DiscussionsMediated Settlement Discussions• Can Be Very Useful to Handle LogisticsCan Be Very Useful to Handle Logistics• Split of Mediator’s FeeSplit of Mediator’s Fee• Mediator May be Able to Bring Fresh IdeasMediator May be Able to Bring Fresh Ideas

Non-Mediated DiscussionsNon-Mediated Discussions• Don’t Have Another Schedule to Work Don’t Have Another Schedule to Work

AroundAround• Save the Mediator’s FeeSave the Mediator’s Fee• Mediator May Take Non-Helpful ViewMediator May Take Non-Helpful View

What ...What ...

This is the Tough Part - What Should This is the Tough Part - What Should the Settlement Be (If Any …)the Settlement Be (If Any …)• Typical Place to Start: Work Weeks x Typical Place to Start: Work Weeks x

Number of Employees x Average Claimed Number of Employees x Average Claimed Differential x “Risk Factors” for Both SidesDifferential x “Risk Factors” for Both Sides

• ““Risk Factors” include Risk of No Class Risk Factors” include Risk of No Class Cert., Risk of Success/Loss on the MeritsCert., Risk of Success/Loss on the Merits

• Can Include “Creative” Elements Other Can Include “Creative” Elements Other Than Cash - Vacation Time, Coupons, etc.Than Cash - Vacation Time, Coupons, etc.