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1 United States Materials You Need To Prove Your Case: California Supreme Court Confirms Wage-And- Hour Defendants Have Right To Argue Individualized Defense In Class Action Trails 2 Workplace Policies And Class Action Certification: Key Takeaways From Two California Cases...4

2 You need to prove your case: California Supreme Court confirms wage-and-hour defendants have right to argue individualized defense in class action trials Employment Alert (US) 5 JUN 2014 By: Ben Gipson Maria C. Rodriguez Class action trials have long been the bogeyman no one talks about in California. Parties had to address whether a class action was manageable before it was certified, but because the vast majority of class actions never proceed to trial, no one really knew what the rules were to craft a trial plan for these types of representative actions. On May 30, the California Supreme Court in Duran v. U.S. Bank National Association confirmed that not only must a trial plan be addressed before a case can be certified as a class action, but the trial plan, and specifically the use of representative testimony and sampling of data, cannot be used to deprive wage-and-hour defendants of their right to question the appropriateness of this methodology when there are individualized questions presented. This case has far-reaching ramifications. It has the potential to dramatically shape the way employment class actions proceed in California and how employers evaluate these cases going forward. The case at issue involved the alleged misclassification of loan officers as exempt outside salespeople. After substantial litigation, the case proceeded to trial utilizing the testimony of 20 individual loan officers, plus two named plaintiffs. This representative testimony was used to assess the liability for the entire class, despite the testimony of the plaintiff s own expert that at least 13 percent of the class was classified correctly. U.S. Bank was unable to introduce the testimony of any additional individual loan officers through live or declaration testimony; despite these shortcomings, the court extended the liability findings based on this limited representative testimony to the class as a whole. The case proceeded to the California Supreme Court, where it addressed two overall issues: (1) how does a trial plan interact with a class certification decision? and (2) at trial, how can representative testimony and statistical sampling be used to prove liability? The Supreme Court was very clear in its guidance on these points: a trial plan must be evaluated before a class is certified, and that trial plan must be developed with expert input and must afford the wage-and-hour defendant an opportunity to impeach the statistical model used or otherwise show its liability is reduced. First, the Supreme Court was extraordinarily clear on when a trial plan should be addressed in a representative action. Trial courts deciding whether to certify a class must consider not just whether common questions exist, but also whether it will be feasible to try the case as a class action.... Class certification is appropriate only if those individual questions can be managed with an appropriate trial plan. Further, even though it is determined that common issues predominate over individualized issues in the case, there must be a second analysis of how those common issues will be tried. After a class has been certified, the court s obligation to manage individual issues does not disappear.... [E]ach plaintiff must still be some means prove up his or her claim on any ground not resolved in the trial of common issues. Further, courts can no longer rely on assurances that a statistical plan will eventually be developed to assess liability there must be some proof of that plan before the certification decision is reached. The California Supreme Court did allow that if sufficient common questions exist to support class certification, it may be possible to manage individual issues through the use of surveys and sampling. However, statistical methods cannot entirely substitute for common proof. Where there is no proof of an unlawful common policy or practice, statistical analysis cannot be used to prove liability. And, if a trial plan includes representative testimony or statistical sampling, a preliminary assessment should be done to determine the level of variability of the class. If the variability is too great, individual issues are more likely to swamp common ones and render the class action unmanageable. This is not to say that a wage-and -hour defendant has an unfettered right to present individualized evidence, nor is it always a due process violation when a defendant is unable to exam every putative class member. But a wage-and-hour defendant has substantial rights here. As the court noted, If liability is to be established on a classwide basis, defendants must have an opportunity to present proof of their affirmative defenses within whatever method the court and the parties fashion to try these issues. If trial proceeds with a statistical model of proof, a defendant accused of misclassification

3 must be given a chance to impeach that model or otherwise show its liability is reduced because some plaintiffs were properly classified as exempt. Finally, the court gave some guideposts regarding the use of statistical sampling. First, the sample must be sufficiently large to provide reliable information about the larger group. Second, a sample must be randomly selected for its results to be fairly extrapolated to the entire class. And finally, there must be a sufficient indicia of reliability for the sample to be used. While this case concerned a misclassification class action, the holdings of the California Supreme Court have implications for defendants facing all manner of wage-and-hour cases. From the defense perspective, this case should also impact analysis of California Private Attorney General Act cases. Any time a defendant has an affirmative defense regarding an individual employee (which is the case with most wage-and-hour cases, including misclassification, meal and rest periods, expense reimbursement and off-the-clock work), and liability is to be determined for a group of people using statistical sampling or representative testimony, a trial plan must be developed that allows the defendant to adequately raise those defenses. Further, such issues should not be addressed only on the eve of trial, but must be evaluated earlier in the case. Gone are the days of assuming a representative action will never be tried, or that a sampling methodology can be established in the future. Now, plaintiffs must affirmatively develop trial plans, which will be a key phase in all representative actions in California. This case also highlights the need to have effective, lawful employment policies that can be presented to the court. Such lawful policies can prevent a plaintiff from simply using sample statistics to prove liability at the certification stage. To learn more about the implications of this decision, please contact: Eric S. Beane David Durham Merrili L. Escue John E. Fitzsimmons Ben Gipson Margaret Keane Maria C. Rodriguez

4 Workplace policies and class action certification: key takeaways from two California cases Employment Alert (US) 7 JAN 2015 By: Ben Gipson Maria C. Rodriguez Eric S. Beane Is the California courts pendulum swinging back to a more balanced approached to employment class action certification? In the last two days, two seemingly similar cases were decided with very different results: Koval v. Pacific Bell (published opinion) and Augustus v. ABM Security Services, Inc. In Koval, the Alameda court decided against certification of a putative class of service technicians who claimed that they were not totally relieved of their duties on meal or rest periods. The appellate court affirmed the denial of certification. In Augustus, the Los Angeles court decided to certify a class of security guards who claimed that because they were required to be on alert and respond during a rest break if certain safety or security issues occurred, they were not relieved of their duties during the breaks. In Augustus, the trial court also granted the plaintiffs summary judgment, took the case out of a jury s hands and issued a $93 million dollar award. The appellate court reversed the summary judgment (vacating the $93 million award) and affirmed the class certification. What is different about these two cases besides their outcomes (thus far), and what can we learn from them? In Koval, the employer s policies on which the plaintiff sought certification were written policies that were not distributed to employees, but delivered to the employees verbally by supervisors. While the written policies did include some limitations on employees during their meal and rest periods, the court held that the plaintiffs could not show that the policies were consistently and uniformly applied to the putative class because they were issued verbally by numerous supervisors. In Augustus, the policies on which the plaintiffs sought certification were published and provided to all of the putative class members and the employer s representative testified that the policies were applied to all. While one may want to conclude from the above that perhaps it is best not to have policies in writing, that is not the lesson here. The takeaways for human resources and with regard to instituting policies from these cases are as follows: Company policies can and will be used against employers craft them carefully with a clear focus on compliance, and keep them as simple as possible. Train supervisors and provide them autonomy to run their business units. Have a communication strategy for delivering and discussing policies. If litigation ensues, the key lessons from these cases are: The facts of the case and how they are presented very much matter. To be effective in the defense of a class action, an employer must have a strong, clearly delineated strategy from the outset that includes the presentation of documentary evidence, testimonial evidence and leveraging the law and procedure. Make sure company witnesses are properly prepared for depositions. The cost of wage-hour class actions can very quickly add up (because of penalties, generally) to tens of millions of dollars employers must act with urgency at the outset of a case, work closely with accomplished counsel to develop an offensive plan and take control of the case. To find out more about these takeaways, please contact: Eric S. Beane Phyllis Cheng David Durham John E. Fitzsimmons Ben Gipson

5 Margaret Keane Ute Krudewagen Maria C. Rodriguez