1.27.16

Tyson Foods decision is expected to have sweeping implications for wage and hour litigation, use of statistical proof

By Naveen Kabir, New York City Office

On November 10, the U.S. Supreme Court heard oral argument in a case that some are predicting will usher in the next chapter in workplace class actions, Tyson Foods, Inc. v. Bouaphakeo. The case is expected to have repercussions for defending wage-and-hour claims generally, and it has the potential to affect the use of statistical proof in other class contexts as well.

Background

The named plaintiffs sued Tyson Foods for overtime based on time spent donning and doffing sanitation and protective gear. Although Tyson paid them for 4 to 8 minutes for this time, the plaintiffs contended they should have been paid for the additional time it took them to change and walk to the time clock to punch in for their shift.

Tyson asserted that the claims of 3,300 employees could not be maintained as a class when they worked more than 400 jobs and spent varying amounts of time donning and doffing, depending on their assigned job and locations for each shift. Nevertheless, a federal district court in Iowa certified the case under both Rule 23 of the Federal Rules of Civil Procedure and the less-exacting collective action standard under the Fair Labor Standards Act. The court relied on statistical proof presented by the plaintiffs' expert, who calculated the amount of donning, doffing and walking times based on videotaped evidence of 744 employees. The times were then averaged and extrapolated to the class to estimate the amount of donning and doffing time that was not captured by Tyson's time records.

The same proof was presented to the jury at trial, who awarded a $5.9 million lump-sum verdict to the class — significantly less than the plaintiffs' expert had calculated. Despite the Supreme Court's mandate rejecting a trial-by-formula approach to class actions in Wal-Mart v. Dukes, the U.S. Court of Appeals for the Eighth Circuit upheld the class certification on appeal — even though Tyson had managed to prove that more than 200 class members were not owed any overtime at all, either because they did not work overtime or because they were not underpaid. Tyson petitioned for certiorari by the Supreme Court, which was granted in June.

The Supreme Court Review

The Supreme Court will review two main issues: (1) whether it was proper to ignore individual differences when the statistical model used to prove liability and damages class-wide was based on averages and extrapolations, and assumed all class members were identical; and (2) whether it was proper to maintain a Rule 23 class or FLSA collective action when hundreds of class members had no legal injury entitling them to recover damages in the first place.

In Dukes, the Supreme Court rejected the notion that a class-wide back pay award could be established by the trial-by-formula methodology that had been endorsed by the U.S. Court of Appeals for the Ninth Circuit:

Similar to the statistical model at issue in Tyson Foods, such a formula allowed for recovery for all of the class members — even if some individuals did not actually have valid claims. Furthermore, it prevented Wal-Mart from litigating its defenses to back pay awards in further individualized proceedings — something it would ordinarily be entitled to do after liability has been established in a Title VII pattern-or-practice case. The Dukes Court held that this violated the Rules Enabling Act because "a [Rule 23] class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims."

If the Supreme Court were to extend this reasoning to Tyson Foods, then it is possible that district courts may find themselves denying (or limiting) class certification upon a showing that a significant number of class members did not in fact suffer any injury. Alternatively, district courts could require separate individualized proceedings, to the extent they would be necessary to vindicate defendants’ rights to present certain defenses.

At oral argument, the Justices appeared to be focused on a narrower issue that was raised in the U.S. Department of Labor’s amicus brief: whether this case ultimately turns on a nearly 70-year-old decision interpreting the FLSA, Anderson v. Mt. Clemens Pottery.

In Mt. Clemens, the Court allowed for the use of representative proof in FLSA cases where, as in Tyson Foods, the employer did not maintain time records for the violation at hand. Reasoning that plaintiffs should not be penalized for their employer’s recordkeeping failures, the Mt. Clemens Court held that if employees come forward with “sufficient evidence to show the amount and extent of [uncompensated] work as a matter of just and reasonable inference,” then the burden of proof shifts to the employer to negate the inference. If the employer ultimately fails, then an employee is entitled to damages, “even though the result may only be approximate.” Indeed, the employer “cannot… complain that the damages lack the exactness and precision of measurement that would [have been] possible had he kept [accurate] records” as required by the FLSA.

If the issues presented in Tyson Foods can be decided within the framework of the Mt. Clemens decision, then the Supreme Court will not have to reach the issue of whether the lower courts’ rulings run afoul of the trial-by-formula prohibition for Rule 23 cases set forth under Dukes.

What Employers Should Look For

The Court’s decision is expected before its term ends in June 2016. It is impossible to predict the outcome, but here are some reasons employers should pay attention.

First, even a narrow decision is likely to affect the manner in which wage-and-hour cases should be litigated generally. Multiple federal appellate courts – for example, the U.S. Court of Appeals for the Eleventh Circuit in Morgan v. Family Dollar Stores – have already applied Mt. Clemens to establish liability on FLSA claims on the basis of representative proof. However, as the U.S. Department of Labor acknowledged at oral argument in the Tyson case, this would be the first time the Supreme Court extended Mt. Clemens’ application of “approximations” and burden-shifting outside of the damages context. Given that the rate of wage-and-hour class and collective actions filed each year shows no signs of slowing down, any Supreme Court decision elaborating on the merits of FLSA cases can help guide employers on early case assessment.

Second, employers should consider being creative when it comes to their class action defense strategies. Even though Tyson challenged the cohesiveness of the class at every opportunity, the company still ended up with a jury award that was overly inclusive with respect to “undeserving” class members. At the same time, the final lump sum had been somewhat mysteriously reduced. At oral argument, the Supreme Court justices highlighted some alternatives that may have avoided such consequences, such as bifurcating the damages and liability phases for trial, precluding the problematic expert testimony on statistical averages with a Daubert challenge, or requesting a special jury verdict form to account for the allocation of damages.

Finally, Tyson Foods is a good reminder that employers should audit business practices that affect their wage-and-hour recordkeeping. Although employers may not be able to monitor every minute of their employees’ workday, implementing operational changes — like moving a time clock closer to the employee locker room if compensable donning and doffing is taking place there — may well be preferable to “bridging the gap” with statistical evidence in costly litigation. This is just as true in donning-and-doffing cases as it is in misclassification cases (where employees contend their “primary duty” consisted of non-exempt work) or tip credit cases (where employees claim they spent more than 20 percent of their time on non-tipped work).

The Class Action Practice Group can help you explore how to integrate wage-and-hour compliance into your business operations to minimize your risk of trial-by-formula.

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