Labor & Employment Law Daily Class certification reversed by CA-3 in American Airlines workers’ Rule 23 state-law overtime suit
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Tuesday, January 7, 2020

Class certification reversed by CA-3 in American Airlines workers’ Rule 23 state-law overtime suit

By Lisa Milam, J.D.

The district court erroneously approached the class certification motion as though it were conditionally certifying an FLSA collective. But under the rigorous analysis required for Rule 23 certification, commonality and predominance were not satisfied.

American Airlines fleet service workers, passenger agents, and mechanics at Newark Liberty International Airport could not proceed as a class on their overtime suit under the New Jersey Wage and Hour Law (NJWHL). The employees alleged that the airline shorted them on pay through its use of a timekeeping system that, by default, compensated them only for their scheduled hours, and required them to seek approval for “exceptions” to their normal work hours. The Third Circuit reversed a district court’s order certifying a Rule 23 class, finding the lower court had erroneously approached certification as though it were conditionally certifying an FLSA collective action. Applying the proper Rule 23 analysis, the appeals court found the workers could not satisfy commonality or predominance under Rule 23(b)(3). To determine whether and when the employees worked hours beyond their scheduled shifts, and in excess of 40 hours per week, individualized inquiries were needed (Ferreras v. American Airlines, Inc., December 24, 2019, Jordan, K.)

Default timekeeping system. The airline’s timekeeping system assumes that employees work only during their scheduled shifts. If an employee clocks in before his or her shift begins or clocks out after the shift ends, the system does not record the extra work time. The system also automatically deducts a 30-minute meal period. According to the airlines, this allows employees “grace periods” so they don’t have to clock in exactly when their shift starts or clock out right when their shift ends; likewise, the automatic deduction for meals lets employees avoid clocking in and out before and after meals. If employees do work during these grace periods or meal breaks, they must inform their supervisor and ask for approval of an “exception” to their regular work hours. If they fail to do so, they don’t get paid for the time.

State-law wage suit. New Jersey-based employees brought a putative overtime class action contending that the timekeeping system violates the NJWHL because it does not capture additional hours they work outside their scheduled shifts, including time worked in excess of 40 hours per week. Moreover, they allege that while the airline purports to have a system in place to compensate workers for this time, management regularly refuses to pay them for pre- and post-shift work, for work done during meal breaks, and for additional off-the-clock time.

Class certification granted. The district court granted the employees’ motion for class certification and created a “grace period” subclass, a “meal break” subclass, and an “off-the-clock” subclass. American challenged the certification order, arguing that the court had failed to conduct a rigorous analysis of the Rule 23 requirements, and that the employees could not satisfy the commonality and predominance factors. The Third Circuit agreed, and reversed.

Court applied the wrong standard. In ruling on the motion for certification, the district court cited approvingly caselaw addressing conditional certification under the FLSA, and concluded that the employees had presented sufficient “allegations and initial evidence” for certification “at this juncture” (twice citing “at this juncture” in its reasoning). But this is not the proper standard for granting class certification under Rule 23.

There were three problems with the lower court’s analysis. First, the court effectively granted conditional certification. For a court to certify a Rule 23 class, however, it must conclude that the preponderance of the evidence proves that each of the Rule’s requirements is met, and reliance on more forgiving conditional certification principles are impermissible. Second, the court said the plaintiffs met the “pleading requirements” by setting forth “allegations and initial evidence.” But Rule 23 is not a mere pleading obligation. “The District Court’s acceptance of pleading and initial evidence as an acceptable standard is similar to the ‘threshold showing’ standard we rejected,” the Third Circuit explained. “Rule 23 requires more than allegations, initial evidence, or a threshold showing. It requires a showing that each of the Rule 23 requirements has been met by a preponderance of the evidence at the time of class certification.”

Finally, the district court left unresolved evidentiary conflicts. American contended that the employees could not satisfy predominance because they would need to present individualized proof that they were actually working during the time for which they claim they were not paid. Rather than undertake the rigorous analysis required to resolve such disputes at the class certification stage, the court punted “at this juncture,” saying that the matter would be addressed during discovery.

Appeals court calls it: Rule 23 factors not met. Noting that discovery was “essentially complete” when the court ruled on the certification motion, and that the employees said no further discovery was needed for the court to rule on class certification, the Third Circuit did not simply vacate and remand for the court below to perform a proper analysis; it reversed class certification outright, finding it clear that the putative class could not satisfy commonality, let alone the more demanding predominance requirement.

Common evidence. The district court had identified two common questions: (1) whether hourly workers are not properly compensated for all hours worked by operation of the timekeeping system; and (2) whether the airline violates the NJWHL “by imposing a schedule-based compensation system that in theory permits a supervisor to authorize compensation for work performed outside of a scheduled shift, but in practice discourages employees from seeking such authorization.” These could not be resolved by common evidence.

Common evidence about the timekeeping system won’t suffice to resolve whether the employees were paid for all the hours they worked “because a yes or no answer tells us nothing about actual common work habits, if there are any.” The employees would still need to prove that each individual employee worked overtime and thus is entitled to overtime pay. As for the second question, it was unclear how it can “generate common answers apt to drive the resolution of the litigation.”

In the end, the employees’ claims were that they were not paid overtime for hours worked in excess of 40 in a week, “not that American’s overarching policy regarding exceptions has deprived anyone in particular of compensation to which he or she was entitled,” said the court. Here, there was record evidence for only one subgroup of employees (the mechanics) that submitted requests for overtime may have gone unpaid. Yet the court certified subclasses comprised of fleet service and passenger service employees too. “Even if one of the groups was affected by such a policy, that would not drive the resolution of the litigation on a classwide basis.”

Individualized proof. Individualized proof would be needed to show liability, as whether the employees were actually working pre- and post-shift was an “open and inherently individualized question.” Although some employees testified that they started working right after clocking in, others said they chatted with coworkers or watched TV after clocking in but before their shifts began. Because there is conflicting evidence about whether they actually were working during the pre- and post-shift time in which they were clocked in, the grace period subclass could not simply rely on the timekeeping system to make their case.

Likewise, as to the meal break and off-the-clock subclasses; the record shows that employees were not all working during their meal breaks. Individualized evidence was needed to show which meal breaks employees spent working and for how long; and off-the-clock claims would require an individualized inquiry as to when and to what extent employees performed such work. Because particularized evidence would have to be presented, common issues do not predominate over individual ones.

The plaintiffs pointed to the Supreme Court’s 2016 decision in Tyson Foods, Inc. v. Bouaphakeo in support of their assertion that such individualized inquiries should not defeat class certification. However, in that case, the activity in question was the same for all employees—the donning and doffing of protective gear—regardless that it took some workers longer to don and doff than others. Here, though, there was substantial variation in what employees were doing during the unpaid time for which they were seeking compensation. Thus, Bouaphakeo was easily distinguishable.

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