Employment Law Daily Nurses’ Rule 23 class underpayment claims get new life from Ninth Circuit
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Tuesday, May 8, 2018

Nurses’ Rule 23 class underpayment claims get new life from Ninth Circuit

By Lorene D. Park, J.D.

In denying Rule 23 class certification to registered nurses who claimed they were underpaid due to a medical center’s policies, a federal district court erred in refusing to consider evidence just because it would be inadmissible at trial; finding that the inadequacy of one class representative precluded certification when the second named plaintiff met the adequacy requirement; concluding prematurely that counsel could not adequately represent the class due to prior sanctions; and finding as to two of the proposed classes that the plaintiffs failed to show issues common to the class predominated over individual inquiries. The Ninth Circuit reversed and remanded (Sali v. Corona Regional Medical Center, May 3, 2018, Mendoza, S., Jr.).

The two named plaintiffs filed this putative class action under California law on behalf of all registered nurses (RNs) employed by the defendants during the proposed class period “who (a) were not paid all wages at their regular rate of pay; (b) not paid time and a-half and/or double time for all overtime hours worked; and (c) denied uninterrupted, ‘off-duty’ meal-and-rest periods.” They moved for certification of seven classes of RNs. Denying the motion to certify the classes, the court found that they did not satisfy several of Rule 23’s requirements.

The plaintiffs appealed only with respect to the following four proposed classes: (1) rounding-time class (not paid all wages due to rounding-time policy); (2) regular-rate class (not paid the correct rate for overtime, double time, and meal or rest premiums); (3) wage-statement class (not provided pay stubs compliant with Labor Code Section 226); and (4) waiting-time class (not paid wages due at termination of employment).

Whether injuries typical of class. Reversing, the Ninth Circuit first addressed the lower court’s conclusion that Rule 23(a)’s typicality requirement was not satisfied for any of the proposed classes because the two named plaintiffs failed to submit admissible evidence of their injuries. This conclusion was premised on an error of law because it was reached after striking the declaration of a paralegal who had reviewed time and payroll records to determine whether the plaintiffs were fully compensated. The named plaintiffs relied on this to demonstrate their injuries for purposes of showing they were typical of the class.

Explaining that there is “greater evidentiary freedom at the class certification stage,” the appeals court concluded that the declaration should not be excluded from consideration solely because it is inadmissible at trial. “Applying the formal strictures of trial to such an early stage of litigation makes little common sense. Because a class certification decision ‘is far from a conclusive judgment on the merits of the case, it is of necessity … not accompanied by the traditional rules and procedure applicable to civil trials,’” said the appeals court.

At least one plaintiff adequately represented class. The lower court also erred in finding that certification should be denied because one of the named plaintiffs did not demonstrate that she would make an adequate class representative. While the appeals court agreed that she would not be an adequate rep because she is not a member of any class she seeks to represent, the other named plaintiffs remained an adequate representative for the class.

Premature to reject class counsel. As for proposed class counsel, it was undisputed there was no conflict of interest but the lower court held that the proposed law firm could not serve as adequate counsel because the attorneys failed to attend four scheduled depositions of putative class witnesses, failed to produce their expert for deposition as ordered by a magistrate (the Ninth Circuit previously affirmed Rule 37 sanctions for this), and failed to submit sworn testimony in support of the class certification motion. Further noting that the firm submitted nearly identical declarations from 22 putative class members attesting to personal experiences at the medical center, the district court found “counsel’s ‘lax approach’ to personalizing declarations, ensuring that declarants knew and understood what they were signing, and verifying the accuracy of the statements is ‘unacceptable’ conduct.”

Finding the lower court’s decision premature (but noting that it is not precluded from considering counsel’s adequacy if the attorneys continue to neglect their duties), the appeals court pointed out that the lower court did not state the legal standard on which it relied and discussed only the apparent errors by counsel without mentioning evidence of counsel’s “substantial and competent work on this case.” Also, the attorneys had invested significant time and money on this case, preparing discovery, retaining experts, taking and defending numerous depositions, and more. For these reasons, and considering counsel’s extensive experience litigating class actions, the lower court abused its discretion.

Predominance requirement. The appeals court also rejected the district court’s conclusion that the proposed rounding-time and wage-statement classes did not satisfy Rule 23(b)(3)’s predominance requirement. As to the rounding-time class, the plaintiffs claimed nurses were systematically underpaid because, even if they clocked in before a shift or clocked out after a shift, their time was rounded to the nearest quarter hour (so a nurse clocking in at 6:53 was rounded to starting at 7). The lower court concluded that individual inquiries were needed to determine if RNs were actually working when clocked in.

Under California law, a rounding-time policy is permissible if it does not result, over time, in failure to compensate employees for all time they “actually worked.” Thus, whether the nurses were “actually working” was a relevant inquiry. That said, the Ninth Circuit found that the lower court misinterpreted “actually worked” by suggesting noncompensable activities, such as waiting in the break room or chatting with coworkers, was categorically not time “actually worked.” The appeals court explained that California law provides that compensable time is “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” The lower court should therefore have considered whether the RNs could establish on a classwide basis that they were subject to the medical center’s control during the grace period even if they were not always engaged in work-related activities during that time.

As to the wage-statement class, the district court erred in finding that individual inquiries were required to determine if each class member was damaged by the claimed inaccuracy—the statements listed the wrong entity as employer. The Labor Code specifies that violations of Section 226(a)(8), which requires that wage statements include the employer’s name, constitute a per se injury, so there is no individualized issue of damages and predominance was met, explained the appeals court.

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