By Gerald L. Maatman, Jr., Thomas E. Ahlering, Alex W. Karasik

Seyfarth Synopsis:  After a defendant in a biometric privacy class action lawsuit unilaterally implemented an arbitration clause, a federal court in Illinois granted the company’s motion to compel arbitration, holding that the plaintiff previously agreed to allow unilateral modifications of the agreement without notice, and that she agreed to arbitrate by continuing to use the defendant’s website. In this respect, the ruling in Miracle-Pond, et al. v. Shutterfly, Inc., No. 19-CV-4722, 2020 U.S. Dist. LEXIS 86083 (N.D. Ill. May 15, 2020), is important for workplace arbitration agreements in general and defense of workplace class actions in particular.

For companies defending class action lawsuits, this ruling provides a new angle of attack for these bet the company cases, by taking them into a single-plaintiff arbitration forum.

Case Background

Plaintiff was a Shutterfly user that registered for an account in August 2014 via mobile app.  The terms of use for the account, which she accepted, included a class action waiver.  Id. at *3.  In May 2015, Shutterfly added an arbitration provision to its terms of use.  Every version of Shutterfly’s terms of use since May 2015, including the most recent version from September 2019, has included an arbitration provision.

In June 2019, Plaintiff filed a class action lawsuit in Illinois state court alleging that Shutterfly violated the Illinois Biometric Information Privacy Act (“BIPA”) by using facial-recognition technology to extract biometric identifiers for “tagging” individuals and by “selling, leasing, trading, or otherwise profiting from Plaintiffs’ and Class Members’ biometric identifiers and/or biometric information.”  Id. at *5.  In July 2019, Shutterfly removed the lawsuit to federal court.

In September 2019, about three months after the lawsuit was filed, Shutterfly sent an email to all of its users nationwide. The email notified Shutterfly users that the terms of use had been updated. After listing various updates, in relevant part, the email indicated that, “We also updated our Terms of Use to clarify your legal rights in the event of a dispute and how disputes will be resolved in arbitration.”  Id.  Finally, the email advised users: “If you do not contact us to close your account by October 1, 2019, or otherwise continue to use our websites and/or mobile applications, you accept these updated terms.”  Id.

Shutterfly’s records indicated that the plaintiff opened that email on September 8, 2019, and that as of October 2, 2019, her account remained open. Shutterfly moved to compel arbitration. In opposition, Plaintiffs argued the September 2019 email “was an improper ex parte communication with Plaintiff and putative class members because it failed to advise them of the pending litigation while seeking to deprive them of their rights as plaintiffs or class members.”  Id.

The Court’s Decision

The Court granted Shutterfly’s motion to compel arbitration.  After finding that the plaintiff agreed to be bound by Shutterfly’s terms of use, the Court addressed the plaintiff’s arguments that even if a contract formed between the parties, there was no valid agreement to arbitrate because: (i) arbitration clauses subject to unilateral modification are illusory; (ii) she could not have assented to the arbitration provision because Shutterfly failed to provide notice of the 2015 modification; and (iii) arbitration clauses that apply retroactively are unenforceable.  Plaintiff further argued that even if the arbitration clause was valid, the plaintiff could not waive the right to class arbitration of the claim for an injunction.

First, the Court rejected the plaintiff’s argument that arbitration clauses subject to unilateral modification are illusory. It cited several Illinois decisions that allowed parties to agree to authorize one party to modify a contract unilaterally.  Id. at *11-12.  Second, the Court rejected the plaintiff’s argument that she could not assent to an arbitration provision of which she had no notice. The Court reasoned that when she entered into a service contract with Shutterfly in 2014, she explicitly gave Shutterfly the right to unilaterally modify the agreement at any time and without notice.  Third, the Court rejected the plaintiff’s argument that arbitration clauses that apply retroactively are unenforceable. It found that the plaintiff agreed to her arbitrate her claims in the 2015 modification, thus mooting the retroactive arbitration argument.

Finally, the Court addressed the plaintiff’s argument that under McGill v. Citibank, 393 P.3d 85 (Cal. 2017), the plaintiff could not waive the right to class arbitration of the claim for an injunction prohibiting Shutterfly from continuing to collect face scans of Illinois residents notwithstanding the class waiver provision in the terms of use.  Id. at *17. Shutterfly argued that the McGill rule only applied to claims arising under California’s consumer protection laws, and that the plaintiff in this case was not seeking a public injunction, but a private one.  The Court agreed with Shutterfly’s position, holding that the plaintiffs’ substantive claim arose under an Illinois statute, the BIPA, and did not arise under the consumer protection laws of California, and therefore the McGill rule did not apply to the arbitration agreement in this case.  Accordingly, the Court granted Shutterfly’s motion to compel arbitration.

Implications For Employers

Over the last several years, many businesses have been implementing arbitration clauses in both employment and consumer agreements.  Accordingly, it is possible that upon entering into agreements, many employees and consumers may not have initially agreed to arbitrate disputes and waive their rights to initiate class action litigation.  When businesses are thus confronted with large scale class action claims, the ruling in Miracle-Pond, et al. v. Shutterfly, Inc. demonstrates that it would be worth their while to closely examine modifications of dispute resolution provisions to determine if there is a potential avenue to attack class action claims.  In addition, businesses without arbitration provisions may consider implementing this mechanism to deter potential litigants from filing class action lawsuits.

By Gerald L. Maatman, Jr., Alex S. Oxyer, and Paul M. Waldera

Seyfarth Synopsis: In Toomey v. Arizona, No. 19-CV-0035, 2020 WL 2465707 (D. Ariz. May 12, 2020), a Magistrate Judge for the U.S. District Court for the District of Arizona recommended the certification of class claims brought under Title VII and the Equal Protection Clause regarding health care coverage of gender transition-related surgical care. The plaintiff’s support for the numerosity requirement for the certification of the claims was based primarily on approximates of the class size supported by demographic studies and not based on any direct evidence of other putative class members.  The case is a must-read for employers and provides insight into the certification standards applied by courts that are leading to the growing trend of certification of class claims.

Case Background

In Toomey, the plaintiff was an associate professor at the University of Arizona and received health insurance benefits under a self-funded health plan provided by the State of Arizona. The health plan provided coverage for medically-necessary care but had exclusions for gender reassignment surgery. The plaintiff was transgendered person, and his treating physicians recommended that he receive a hysterectomy as a medically-necessary treatment for his gender dysphoria. The plaintiff was denied coverage for the surgery under the health plan.

After being denied coverage, the plaintiff filed a class action against the State of Arizona and the University of Arizona alleging sex discrimination claims under Title VII and the Equal Protection Clause of the Fourteenth Amendment. The plaintiff then filed a motion to certify classes of University of Arizona employees and other individuals who are or will be enrolled in the Arizona health care plan and who have or will have medical claims for transition-related surgical care.

The Court’s Decision

In a Report and Recommendation issued by the Magistrate Judge, the Court assessed the Rule 23(a) numerosity, commonality, typicality, and adequacy requirements relative to the plaintiff’s proposed classes.  The Court chiefly focused on the numerosity element, as the State of Arizona challenged whether the plaintiff could satisfy such requirement. To support that the putative classes could meet the numerosity requirement, the plaintiff relied primarily on demographic studies. The plaintiff asserted that “[a]s of 2017, the Board of Regents employed 35,614 individuals at Arizona’s public universities” and that “[a]s of 2018, approximately 137,700 individuals receive healthcare through the State’s self-funded plan.” Toomey, 2020 WL 2465707 at *2. He then pointed to studies that concluded that approximately 0.62% of Arizonans identify as transgender, that 25% to 35% of transgender individuals have undergone some form of gender reassignment surgery, and that an additional 61% of transgender men and 54% of transgender women have reported wanting some kind of gender reassignment surgery in the future.

Based on the studies cited by the plaintiff, he estimated that approximately 82% of transgender individuals either have had or will have a form of gender reassignment surgery and, therefore, he approximated that 181 of such transgender individuals worked for the University of Arizona and 700 of such transgender individuals were covered by the State’s health plan.

The Court found that the plaintiff’s efforts at approximating the class size were reasonable, even though the plaintiff did not assess how many of the transgender individuals have had or will have surgery while covered by the State’s plan. Though the State challenged the plaintiff’s survey evidence, arguing that the surveys did not actually address the incidence of transsexualism in Arizona, that other reports outlined the difficulties of approximating the incidence of transsexualism, and that different studies included lower population estimates than the plaintiff’s estimate, the Court dismissed these arguments, finding that the data related to Arizona could be extrapolated from data collected from other states and that studies describing a lower population of transgender individuals were older than the one cited by the plaintiff.

The Court found that the plaintiff’s putative classes also satisfied Rule 23(a)’s commonality, typicality, and adequacy requirements before turning to the State’s argument that, even if the putative classes satisfied the Rule 23 requirements, the Court should use its discretion to deny the plaintiff’s motion anyway. The State argued that the motion should be denied because the relief sought by the plaintiff would achieve the same result as the class action. The Court rejected this argument as well, determining that class actions allow unidentified class members to enforce court orders and that certifying the class prevents the case from becoming moot if there are any changes to the plaintiff’s medical or employment circumstances. As a result of these findings, the Magistrate Judge recommended that the plaintiff’s motion for certification be granted.

Implications For Employers

The ruling in Toomey is the latest example of a rising national trend of courts granting class certification to plaintiffs. This ruling demonstrates the latitude given to plaintiffs to establish the requirements of Rule 23(a), as the plaintiff here relied only on studies and approximate calculations to satisfy the numerosity requirement and not evidence of specific individuals who might have been included in the putative class. Though the defendant challenged the sufficiency of the studies relied on by the plaintiff and the Court pointed out flaws in the plaintiff’s estimates, the Court still found that the plaintiff satisfied the requirements for certification. This decision serves as a reminder that employers should be armed with strong defenses when preparing to challenge motions for certification.

By Gerald L. Maatman, Jr., Thomas E. Ahlering and Alex. W. Karasik

Seyfarth Synopsis: Plaintiffs’ lawyers reached a landmark $550 million settlement in January 2020 in a lawsuit against Facebook by consumers in a class action brought under the Illinois Biometric Information Privacy Act (the “BIPA”) in the U.S. District Court for the Northern District of California. On May 8, 2020, the plaintiffs filed an unopposed motion for preliminary settlement approval of the class action settlement.  See In Re Facebook Biometric Information Privacy Litigation, No. 3:15-CV-3747 (N.D. Cal. May 8, 2020).

The motion provides a first look into the details of the settlement’s structure, as the matter pends before the Court to decide whether the settlement is fair and reasonable. The motion – and the genesis of the case and the settlement – are essential reading for all corporate counsel.

Case Background

As we previously blogged about here, the plaintiffs alleged that Facebook violated the BIPA when it unlawfully collected and stored biometric data of Facebook users without prior notice or consent. The claims concerned Facebook’s “Tag Suggestions” function, which identifies other Facebook users by scanning uploaded photographs. Plaintiffs alleged that Facebook created and stored digital representations of users’ faces based on the geometric relationship of facial features unique to each individual.

Facebook moved to dismiss, asserting that the plaintiffs lacked standing to bring the suit under Article III because the collection of biometric information without notice or consent did not result in any harm to the plaintiffs.  The District Court denied Facebook’s motion to dismiss and certified a class of Facebook users located in Illinois for whom Facebook created and stored a face template after June 7, 2011.  Following Facebook’s appeal, the Ninth Circuit affirmed the denial of the motion to dismiss and affirmed the grant of plaintiffs’ motion for class certification.  On January 22, 2020, the U.S. Supreme Court denied certiorari.

On January 29, 2020, the parties announced a settlement whereby Facebook agreed to pay $550 million to eligible class members (and fees for the plaintiffs’ attorneys), but offered no additional details about the settlement.

Motion For Preliminary Approval Of Class Action Settlement

On May 8, 2020, the plaintiffs filed an unopposed motion for preliminary approval of the class action settlement.  As expected, the motion contained a $550 million benefit to the class, which was notably non-revisionary.  Id. at 10.  The motion indicates that, “the parties have reached a settlement that is the largest consumer class action settlement ever in a privacy case.”  Id.  It further advocates that “the Settlement is historic. It dwarfs every previous settlement in a BIPA class action, but it also stands out on a per-class-member basis. The Settlement provides cash relief that far outstrips what class members typically receive in privacy settlements, even in cases in which substantial statutory damages are involved.”  Id.  In their pleading, Plaintiffs’ counsel estimates that class members who submit claims will receive between $150 and $300 each, which they argue compares favorably to per-class member recoveries in similar BIPA actions.  Id. at 26.

Other notable financial terms include an attorneys’ fee award of 25% of the settlement fund, and costs and expenses totaling approximately $981,000.  Id. at 18.  Additionally, the named plaintiffs intend to seek an incentive award of no more than $7,500 each, in recognition of the time, effort, and expense they incurred pursuing claims that benefited the entire class.  Finally, any settlement checks not cashed within 90 days will either be redistributed to claiming class members, or if the amount is nominal, donated to a Court-approved cy pres recipient.

In terms of non-monetary relief, the motion indicates that Facebook will turn its Face Recognition feature “off” for all class members and will delete existing face templates for class members unless they provide express consent to turn Face Recognition “on” within 180 days of the settlement’s effective date.  Id. at 16.  Further, the settlement notes that Facebook will be precluded not only by statute, but also by a separately enforceable agreement, from collecting or storing the class members’ biometric data through facial recognition technology or any other means in Illinois, unless it has specific class member consent.  Id. at 27.  In support of these provisions, the plaintiffs noted that these, “[t]hese non-monetary components of relief, in combination with recent additional changes to Facebook’s facial recognition practices, provide a structural framework of compliance and protection of the privacy rights of Class Members and the residents of Illinois.”  Id.  The motion concludes with the parties asking the Court to grant preliminary approval of the settlement.

Implications For Employers

This filing provides the first glimpse into the details of how this complex privacy class action settlement is structured.  Of course, the Court will need to grant preliminary approval and final settlement approval before effectuating the settlement.  Nonetheless, given the magnitude of this litigation and its impact on privacy rights and class action litigation, employers and business should continue to monitor this case as it progresses toward the settlement approval process.  Future privacy class action settlements will undoubtedly be shaped by this precedent-setting result.

Seyfarth Synopsis: In its recent review of Seyfarth’s 2020 Annual Workplace Class Action Litigation Report, EPLiC called it the “must have” resource that corporate counsel “cannot afford to be without it…”

We are humbled and honored by the recent review of our 2020 Annual Workplace Class Action Litigation Report by Employment Practices Liability Consultant Magazine (“EPLiC”) – the review is here.

EPLiC said: “The Report is a must-have resource for legal research and in-depth analysis of employment-related class action litigation. Anyone who practices in this area, whether as a corporate counsel, a private attorney, a business executive, a risk manager, an underwriter, a consultant, or a broker, cannot afford to be without it. Importantly, the Report is the only publication of its kind in the United States. It is the sole compendium that analyzes workplace class actions from ‘A to Z.’ In short it is ‘the bible’ for class action legal practitioners, corporate counsel, employment practices liability insurers, and anyone who works in related areas.”

We are often asked – “How does it happen – how do you produce your Annual Workplace Class Action Litigation Report”?

The answer is pretty simple – we live, eat, and breathe workplace class action law 24/7.

Each and every morning we check the previous day’s filings of EEOC lawsuits and workplace class actions relative to employment discrimination, ERISA, and wage & hour claims. We do so on a national basis, both in federal courts and all 50 states. Then we check, log, and analyze every ruling on Rule 23 certification motions and subsidiary issues throughout federal and state trial and appellate courts. This is also done on a national basis.  We put this information in our customized database; we analyze and compare the rulings on class action issues and Rule 23 topics, and then we prepare an analysis of each and every decision.

Our class action practitioners – a group of over 180 Seyfarth lawyers – contribute to the process of building the database and analyzing decisional law on a daily basis.

We have being doing this on a 24/7 basis for over 16 years, and publishing the Annual Workplace Class Action Litigation Report in the first week of January of each calendar year.

The result is a compendium of workplace class action law that is unique in its analysis, scope, and comprehensiveness.

We are particularly proud that EPLiC recognized our Report as the “state-of-the-art report” on workplace class action litigation.

Thanks EPLiC. We sincerely appreciate the kudos.

Now, even less than half way through the year, we have tracked and analyzed more class action decisions to this point in 2020 than at the halfway point in past years. On this pace, our 2021 Report will cover more decisions than ever before.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Alex S. Oxyer

Seyfarth Synopsis: Although federal courts are certifying class actions at a record rate, a recent opinion by the U.S. District Court for the Southern District of Ohio demonstrates that the requirements of Rule 23 are not mere formalities.  In Littler v. Ohio Association of Public School Employees, No. 2:18-CV-1745, 2020 WL 1861646 (S.D. Ohio April 14, 2020), the Court denied a plaintiff’s attempt to certify a class action because it found that conflicts of interest among putative class members based on the alleged harm stemming from putative class members’ “feelings” and the lack of any viable way to ascertain class membership.  The case is a must-read for employers and is a helpful tool in the arsenal of companies battling against the certification of class claims.

Case Background

In Littler, Plaintiff worked for Upper Arlington City Schools as a bus driver.  During her employment, Plaintiff joined the Defendant Ohio Association of Public School Employees (“OAPSE” or “the Union”) and agreed to pay the applicable union dues. Several years later, Plaintiff attempted to withdraw from the Union but was unsuccessful.  Her dues stopped sometime later.  Plaintiff then filed suit against the Union, alleging that the Union required public school employees either to join the Union or to pay agency fees, that the Union continued to deduct dues following the U.S. Supreme Court’s ruling in Janus v. American Federation, 138 S.Ct. 2448 (2018), that allowed public employees to opt out of paying union fees, and that the Union deducted fees without “freely given consent.” Id. at *2.

Plaintiff then filed a motion to certify a class consisting of “[e]very public employee who was offered membership in OAPSE or its affiliates while working in an agency shop,” or the “OAPSE class.”  Id.  To be “flexible” in her class definition, Plaintiff also alternatively proposed three sub-classes, which consisted of: (i) OAPSE agency fee payers (the “agency fee class”); (ii) members of the bargaining unit who opposed payments to the union but who reluctantly joined because they decided that the difference between the cost of full membership dues and the agency fees would not have been worth the loss of a voice in collective-bargaining matters (the “reluctant voting member class”); and (iii) members of the bargaining unit who opposed payments to the union but who joined because they were never informed of their right to decline union membership and pay reduced agency fees (the “reluctant uninformed member class”).  Id.

The Court’s Decision

The Court analyzed the Rule 23(a) commonality, typicality, and adequacy requirements relative to Plaintiff’s proposed classes.  The Court examined all three requirements under the standard outlined by the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and examined whether the “maintenance of a class action is economical and whether the named plaintiff’s claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.”  Id. at *8.

In analyzing whether the initial, broad OAPSE class proposed by Plaintiff satisfied the commonality, typicality, and adequacy standards, the Court found that a conflict of interest prevented the class from meeting such requirements.  Because the class contained pro-union and anti-union members who might have potentially conflicting interests, the Court determined that Plaintiff could not advance both interests at the same time, and therefore could not represent both groups.  The Court also found that the same intra-class conflict existed in the agency fee class because not every putative member of the sub-class declined to join the union out of opposition to the union.  The Court declined to certify either class on the grounds that the conflicting interests of the putative members prevented the class from meeting the applicable Rule 23 requirements.

For the remaining putative classes, the Court examined whether common questions of law and fact predominated for the class and whether a class action was the superior method to litigate the claims under Rule 23(b)(3).  For the putative class of reluctant voting members, the Court found that the method of determining the potential members of the class necessitated excessive individual inquiries because each putative class member would have to testify as to how he or she felt about the decision whether to join the Union and what he or she was told when presented with the option.  Although Plaintiff argued that individual inquiries did not prevent the Court from certifying the class because other case law authority had certified classes necessitating a single individual inquiry, the Court rejected the argument. It opined that the cases cited by Plaintiff involved inquiries of objectively-verifiable information and did not “rely solely on putative class members’ self-serving statements.”  Id. at *13.  The Court also rejected Plaintiff’s argument that it could certify a class based on the putative class members’ individual subjective desires and beliefs, holding that defining a common harm using subjective feelings undermined the entire purpose of a Rule 23(b)(3) class action.

Finally, the Court examined the ascertainability of the members of the putative classes.  Because Plaintiff’s proposed classes relied on determining the putative class members’ states of mind, Plaintiff argued that a survey of all putative class members would satisfy the ascertainability requirement for the class.  The Court rejected Plaintiff’s suggestion. It concluded that the survey would lead to issues related to the class members’ memories regarding their feelings at the time they were asked to join the union, the accuracy of their reporting of their feelings, the threshold of feelings that would satisfy the requirements of being a member of the class, and the candor with which the putative class members reported their feelings.  Because it would be “forced to undertake a burdensome analysis in order to ascertain the composition of the class,” the Court denied certification to the remaining putative classes proposed by Plaintiff.

Implications For Employers

The ruling in Littler is a departure from the growing trend of decisions granting class certification motions (a trend that we addressed in our 16th Annual Workplace Class Action Litigation Report, a summary of which is here).  The Court’s ruling is a welcome addition to the tool kits of employers seeking to avoid class certification because class members have varying interests or cannot be identified based on objective criteria.  The opinion provides a nice reminder that plaintiffs must demonstrate that common questions of law and fact predominate over individualized issues and that issues such as conflicts of interest or harm based on subjective opinions can prevent certification.

By Gerald L. Maatman, Jr. and Jennifer A. Riley

Seyfarth Synopsis: As employers begin laying the groundwork for reopening and returning their businesses to “normal,” a large threat of a different form looms on the horizon.  The Plaintiffs’ bar is poised for – and has been discussing preparation of – class actions over denied wage, discrimination during furloughs and lay-offs, and exposure to unsafe working conditions. As part of the return to normal process, employers should take steps to avoid and position themselves to defend a wave of workplace class action litigation. 

The Background & Context

As state and local governments responded to the COVID-19 threat, many employers moved their employees to tele-work or work-from-home arrangements, or laid off or furloughed workers, and many businesses and courts shut down or postponed critical operations.  The pace of court filings, however, did not match this trend as the Plaintiffs’ bar has filed more than 100 COVID-19-related class actions over the past 30 days.

As the pandemic took hold, the plaintiffs’ bar retooled their class action theories to match, and sued companies for laying off workers, as well as for maintaining allegedly inadequate leave or benefit policies.

We anticipate that the tide of workplace class action litigation will continue to rise in several key areas such as discrimination and workplace bias, wage & hour, as well as on the health & safety front.  Employers are apt to see these workplace class actions expand and morph as businesses restart operations in the wake of COVID-19.

Employers are thus well-served to take pro-active steps to avoid and position themselves to defend these suits.

Discrimination And Workplace Bias

Employers should be wary of a growing tide of class actions on the discrimination front.  These actions are likely to take several forms, including class actions for alleged discrimination or bias against Asian-Americans and other protected groups.

On March 27, 2020, the FBI issued a report warning of a potential surge in hate crimes against Asian-Americans across the United States due to the spread of COVID-19.  Shortly thereafter, on March 30, 2020, EEOC Chair Janet Dhillon issued a statement warning employers to keep an eye out for mistreatment or harassment against Asian-Americans in the workplace amid the Coronavirus outbreak.  On April 22, 2020, the advocacy group STOP AAPI HATE issued a report noting that it had received almost 1,500 reports of Coronavirus discrimination from Asian-Americans across the country.

These issues are not likely to disappear in the near term.  As employers prepare to reopen, they should take care to position themselves so as to squelch such threats with solid HR fundaments and effective leadership.  Workplace due process and administration of effective complaint procedures are a must.  Employers should look for avenues to roll out and refresh these policies for newly-hired or newly re-hired workers and should take prompt steps to respond to potential issues.

Disparate Impact Theories Of Discrimination & WARN Violations

In addition to harassment theories, mass lay-offs and mass re-hirings are apt to draw scrutiny from the Plaintiffs’ bar.  As businesses scrambled to confront the realities of stay-at-home orders, their actions have drawn claims that, for instance, lay-offs caused an unintended disparate impact on protected groups or failed to comply with WARN Act requirements.

On the other side, mass re-hirings are apt to draw similar scrutiny as employers make decisions regarding which workers to re-hire and which to bring back to work.  For instance, bringing a disproportionate number of younger workers back to work under a theory that older workers might be more susceptible to COVID-19 could walk an employer into an immediate discrimination claim, and efforts to target re-hiring efforts toward a protected group could bring the same result.

As employers bring workers back, they should take care to approach rehire efforts in a thoughtful, reasoned, and neutral manner.

Wage & Hour Issues

It is unlikely that wage & hour claims will lose popularity with the Plaintiffs’ bar, and we anticipate that COVID-19 will provide more fuel for familiar claims such as failure to pay minimum wage and failure to pay overtime.  The pandemic did not bring about a slowdown in wage & hour suits as class and collective action filings continued on the unpaid wage as well as the misclassification front.

Well-intended efforts to keep employees working during the pandemic are also apt to fuel misclassification and off-the-clock claims.  For instance, employers that cut wages or shuffled work to exempt employees could face claims that they failed to comply with notice requirements or impacted exempt status, and employers who moved their workforces to work-from-home arrangements are likely face claims that they failed to appropriately track or compensate all work hours.

These risks are likely to continue as employers move people back into the workplace, including as they impose new requirements relative to borrowing or returning necessary equipment, participating in health screenings, or modifying schedules.

Employers should take care to ensure compliance with wage & hour requirements, particularly when it comes to tracking compensable time, ensuring sign off and acknowledgement of remote work hours, and strictly complying with the technicalities of state and local laws.

Health & Safety Claims

When it comes to maintaining health and safety in the workplace, employers can garner lessons from a slew of lawsuits and protests against cruise ship lines that employers failed to take appropriate actions to address safety concerns and ensure the health of employees and customers. Those claims are likely to be the start of wide-spread class actions against employers in all industries.

Return to work protocols that fail to account for workplace safety or allow for reasonable accommodations are apt to face scrutiny.  Employers should plan ahead, including by considering bringing employees back in phases or allowing workers the option to return as they become comfortable.

To ensure the safety of the workplace, employers should take care to ensure compliance with directives from the CDC and OSHA, as well as state and local authorities.  Employers also should develop a plan for maintaining social distancing or similar mandates, such as by adding screens, staggering shifts, or modifying schedules, and should stand ready with a plan for managing an illness in the workplace.

The Bottom Line For Employers

Class action litigation is not stagnant and will continue to evolve to meet the realities of the workplace. The economic dislocations fueled by the COVID-19 pandemic are also likely to spark a surge of workplace class actions.

Employers should prepare to respond to this exposure as they restart operations in the wake of COVID-19 by taking pro-active steps to avoid those risks and position themselves to protect their businesses.

By: Gerald L. Maatman, Jr., Christopher DeGroff, Matthew J. Gagnon, and Alex S. Oxyer

Seyfarth Synopsis:  In its latest update to guidance for employers in the COVID-19 pandemic, the EEOC has now clarified that employers can test employees for COVID-19 without running afoul of the Americans With Disabilities Act (“ADA”). This new update provides a much-awaited opinion from the Commission on the use of medical testing to screen employees entering the workplace and is a must-read for employers. For employers currently crafting their return-to-work contingency plans, the EEOC latest announcement is a “must read.”

As we have reported here and here, the EEOC has updated its enforcement guidance memoranda for employers trying to navigate discrimination laws in the COVID-19 era, particularly the ADA and the Rehabilitation Act. On April 23, 2020, the EEOC released its latest update that specifically addresses whether an employer may administer a COVID-19 test before permitting employees to enter the workplace.

COVID-19 Testing Guidance

The EEOC’s updated guidance analyzes whether employers can administer a test that detects the presence of COVID-19 before allowing employees to come to work.

The EEOC’s guidance definitively advises employers that they may take steps to screen employees for COVID-19 because an individual with coronavirus poses a direct threat to the health of others, which means that an employer can administer COVID-19 testing to employees before they enter the workplace to determine if they have the virus.

Though the EEOC gives employers the go-ahead to move forward with testing, the guidance also issues a few notes of caution. First, the Commission reminds employers that they should ensure that the tests are accurate and reliable, which can be accomplished by reviewing guidance from the U.S. Food and Drug Administration, the CDC, or other public health authorities about what tests may be considered safe and accurate. Second, the EEOC cautions that some tests may cause false-positives or false-negatives. Finally, the Commission warns that a negative test does not mean the employee will not acquire the virus later, so employers should continue to implement and follow social distancing and safety protocols.

Implications For Employers

The EEOC’s latest guidance provides employers latitude to implement COVID-19 testing before employees enter the workplace, guidance that will prove valuable as employers start exploring possible methods to bring employees back to work. Before implementing any testing, however, employers should seek to confirm that any tests used are safe and accurate and, if necessary, seek assistance from public health authorities or medical professionals to verify and interpret test results.

We encourage all employers to review in detail the entirety of the EEOC’s guidance here, and to review Seyfarth Shaw’s COVID-19 Resource Center for additional guidance and information. Seyfarth Shaw also has a response team standing by to assist however we can.

By Gerald L. Maatman, Jr., Alex S. Oxyer, and Paul M. Waldera

Seyfarth Synopsis: The U.S. District Court for the Western District of Wisconsin recently cast doubt on employers’ ability to strike the class allegations in a complaint early in litigation.  In Gilbert, et al. v. Lands’ End, Inc., No. 19-CV-1066, 2020 WL 1912003 (W.D. Wis. Apr. 20, 2020), the Court denied the defendant’s motion to strike the class allegations because the plaintiffs had not yet had the opportunity to develop the record in discovery. The decision is a good read for corporate counsel on the timing of defense motions attacking the viability of class claims.

Case Background

In Gilbert, Plaintiffs asserted that their employer, Delta Airlines, launched a new line of uniforms in 2018, manufactured by Defendant Lands’ End, Inc. (“Lands’ End”), for flight attendants and gate and ramp agents. Id. at 2. Delta advertised the new uniforms as stretch, wrinkle, and stain resistant, waterproof, anti-static and deodorizing, features made possible by applying “[v]arious chemical additives and finishes.”  Id.  Plaintiffs alleged the uniforms caused a variety of adverse health effects, including “rashes, headaches, fatigue, breathing difficulties, hair loss, low white blood cell count, nausea, heart palpitations, body aches, sore throats, and scarring.”  Plaintiffs also alleged the uniforms crocked, bled, and stained the wearers and their possessions purple.

On the basis of these allegations, Plaintiffs brought a proposed class action against Lands’ End asserting claims for negligence, design defect, manufacturing defect, failure to warn, breach of express and implied warranty, and violation of the Magnuson-Moss Warranty Act.  Plaintiffs’ putative class consisted of “[a]ll flight attendants, gate agents and ramp agents employed by Delta in the United States who were required to wear Passport Plum and red-colored uniforms manufactured by Defendant.”  Lands’ End, in turn, filed a motion to strike the class allegations, arguing the proposed class was impossible to certify under the class action requirements of Rule 23.

The Court’s Decision

In its motion, Lands’ End maintained that the putative class could not be certified because it included Delta employees who suffered no injury and did not have standing to bring claims.  In support of its argument, Lands’ End pointed to numerous instances within the complaint where Plaintiffs pled that only a small sub-set of the proposed class members actually suffered the alleged harms. For example, none of the named Plaintiffs alleged that they experienced the uniforms crocking and bleeding. Further, Plaintiffs alleged that “some female flight attendants” reported illness; “hundreds of flight attendants” complained about illness on a private Facebook page with several thousand members; “some flight attendants” were told they could request disability job accommodation; and “1,900” employees complained to Delta about the uniforms.  Id. at 3.  Lands’ End argued these statements, in effect, constituted an admission that “the vast majority of the putative class is uninjured” and the class allegations should be stricken.  Id.  

The Court rejected Lands’ End’s argument for three reasons.  First, the Court reasoned that Plaintiffs’ allegations would be further developed through discovery, so the Plaintiffs should be given time to conduct discovery to determine the actual number of injured Delta employees.  Second, the Court held that Plaintiffs were not required to plead a proposed class definition in their complaint, so even if the definition provided was overbroad, a denial of class certification- or a striking of the class claims – at an early stage was unwarranted. Third, the Court held even if only a small sub-set of putative class members were harmed, class certification may still be possible.  The Court determined that even if a class definition is overbroad, the issue may result in the Court granting class certification but later entering a judgment largely exonerating Lands’ End.  Ultimately, because Plaintiffs’ class definition included individuals who could have been harmed by the uniforms, the Court held that the proposed class was not overbroad at this point in the litigation.

Lands’ End additionally argued that the class claims should be stricken because individual issues of fact and law predominated over common ones, making class treatment impossible. The company asserted that each clothing item had different “chemical treatments, fabrics, dye, style, skin contact, intended use, and more.”  Id. at *4.  Furthermore, employees would receive different uniforms depending on the employee’s job, work climate, gender, and personal selection.  Lands’ End estimated it would have to review over 64,000 items of clothing to determine causation.  The Court rejected this argument as premature and held that the issue was more appropriately addressed in discovery.

Lands’ End also argued that each employee wore the clothing in different ways and in different contexts, requiring individual assessments of each employee.  In particular, Lands’ End pointed out one Plaintiff’s use of an undershirt.  Id.  The Court was skeptical that the alleged variations were relevant, ultimately holding that it was not going to strike the class allegations “because Lands’ End assumes that confounding behavioral and environmental variables will impossibly complicate the causation inquiry.”  Id.

Finally, Lands’ End pointed out the variations in employees’ “alleged physical ailments, coupled with their inherently individualized treatment choices, medical histories, preexisting conditions, and potential alternative causes, preclude[d] class certification.” Id. at 5. The Court acknowledged that Plaintiffs “will likely face an uphill battle at class certification” due to these issues but declined to strike their class allegations before Plaintiffs had an opportunity to engage in discovery on these issues. As a result, the Court held that “this is not a case in which the pleadings make clear that the suit cannot satisfy Rule 23 such that striking the class allegations would be justified,” and denied Lands’ End’s motion.  Id.

Implications for Employers

This case serves as a warning to employers to carefully assess the pros and cons of filing a motion to strike class allegations early in litigation.  Though the Court in this case agreed that class certification could be an “uphill battle” for Plaintiffs, it still denied Defendant’s motion, thereby giving the Plaintiffs a chance to build a record in discovery.  Before filing a motion to strike class allegations, employers should be cautious that even substantial deficiencies in class allegations may still survive the pleadings stage.

By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis:  In a class action lawsuit alleging multiple fraud claims, a federal court in Illinois granted the plaintiff’s motion to sanction the defendants for interfering with the class notice process by encouraging class members to opt-out, and sanctioned their attorney for communicating directly with a represented party.

For employers (and their defense counsel) who are embroiled in class action lawsuits, this ruling serves as a cautionary tale of “what not to do” in terms of communicating with class members.

Case Background

In Mullen v. GLV, Inc., No. 18-C-1465, 2020 U.S. Dist. LEXIS 43705 (N.D. Ill. Mar. 13, 2020), the plaintiff alleged that a youth volleyball program and its owners and operators, Rick Butler and Cheryl Butler, concealed Rick Butler’s history of sexual abuse of underage girls from her and other parents who enrolled their children in the programs.  The Court granted the plaintiff’s motion to certify a class of similarly-situated parents, and in February 2019, the Court approved a class notice to be distributed.

On March 19, 2019, the class administrator published the class website and distributed class notices via e-mail.  Later that day, Cheryl Butler e-mailed the defendants’ employees alerting them that they were “starting to get phone calls” about the class action.  Id. at *2.  She told the employees that, “Opt out is crucial!”  Id.  Further, when the defendants’ vice president received an email from a class member asking whether it would affect the next season, he responded, “ . . . [i]f there is a groundswell of parents that opt out of the lawsuit, which I think will happen, then it most likely will get dismissed. If you have any questions please let me know.”  Id. at *3.  The next day, he sent a mass email to class members describing the suit and the implications of opting out.  Cheryl Butler and the vice president thereafter continued to communicate with class members about the lawsuit, and even referred one class member to a Facebook page, “Parents against the Sports Performance Class Action Lawsuit,” explaining the opt-out process.  Id. at *4.

During a March 29, 2019 status hearing, class counsel informed the Court that they suspected the defendants were improperly communicating with class members and encouraging them to opt out.  The defendants’ attorney denied the allegations, noting, “ . . . [t]hey received e-mails from class members regarding the opt-outs, regarding their opinions on the lawsuit, and every e-mail I’ve seen them respond with is, I’m very sorry, I can’t talk about this right now, you know, thank you, something along those lines.”  Id. at *5.  After the March 29, 2019 hearing, the defendants continued to communicate with class members about the suit, despite what the defendants’ attorney told the Court.  On April 11, 2019, the defendants’ attorney directly e-mailed a class member who had forwarded an email to the defendants.  Id. at *6.

Subsequently, the plaintiff moved for sanctions against the defendants for improperly interfering with the class notice process.  Further, the plaintiff moved for sanctions against the defendants’ counsel on the basis that she violated her ethical responsibilities by communicating directly with represented parties, and knowingly misrepresenting her clients’ conduct during the opt-out period when questioned about it by the Court.  The defendants separately moved for summary judgment.

The Court’s Decision

Although the Court held it would be largely granting the defendants’ motion for summary judgment in a separate opinion, it granted plaintiff’s motion for sanctions and held the summary judgment, “ruling does not render moot the motion for sanctions.”  Id. at *2.  The Court explained that when a party communicates with class members during the notice period in a way that is potentially misleading or may discourage class participation, it disrupts the Court’s authority over the class notice process.  Id. at *8.

The defendants argued that there was nothing improper about their communications with class members since they allegedly did not discourage class participation.  The Court rejected this argument, opining that this logic disregarded the potential for coercion arising from the context and source of a part’s communications with class members.  Id. at *9.  Accordingly, the Court held the Court that the defendants’ communications with class members during the notice period were potentially coercive and therefore undermined the notice process set forth in Rule 23.

Turning to the issue of sanctions, the Court explained that it may only do so if it found the abuse of Rule 23 to be willful.  Applying this standard here, the Court found that the defendants intentionally interfered with the class notice and opt-out process, and therefore granted the plaintiff’s motion for sanctions.  After noting that the sanctions must be proportionate to the gravity of the offense, the Court held that the plaintiffs were entitled to recover from the defendants their reasonable attorney’s fees and expenses for bringing the sanctions motion, and individually assessed each named defendant a civil sanction of $5,000 fine as a penalty for their misconduct.

Finally, the Court held that the defendants’ counsel violated Model Rule 4.2, which prohibits attorneys from directly contacting parties they know to be represented by counsel, by ceasing to immediately terminate communications with class members.  Further, the Court held that the representation made by the defendants’ attorney at the March 29 court hearing constituted a misrepresentation to the Court and prejudiced the class.  Accordingly, the Court reprimanded the defendants’ attorney for her false statement to the Court.  The Court further directed her to complete for her next continuing legal education cycle imposed by the state bar twice the required amount of professional responsibility hours.  Id. at *19-20.

Implications For Employers

For employers, the class notice process can be difficult to stomach as it involves adverse attorneys directly communicating with their employees.  Nonetheless, the sanctions issued by the Court here should remind employers to avoid communicating with class members about the lawsuit.  Finally, outside defense counsel should proactively educate their clients on the pitfalls of class member communications, and be sure to avoid such communications themselves.

By Gerald L. Maatman, Jr. and Paul M. Waldera

Seyfarth Synopsis: The State of New York has filed a lawsuit challenging the U.S. Department of Labor’s recent rule regarding paid sick time and paid family medical leave under the Families First Coronavirus Response Act. New York’s lawsuit signals that the fight over the newly enacted law will continue for some time. Employers are well served to watch the case closely as it winds through the court system.

The Lawsuit

On April 14, 2020, the State of New York filed a lawsuit against the U.S. Department of Labor (“DOL”) challenging the DOL’s recent temporary rule interpreting the paid sick time and paid family medical leave provisions of the Families First Coronavirus Response Act. New York contends that the new rule “den[ies] vital financial support and expos[es] millions of American workers and their communities to further transmission of infectious disease.” Complaint at 1.The new rule gives guidance to employers on the specific circumstances where an employee can take the newly provided leave time.  New York challenges the rule because it believes the rule excludes millions of workers from paid leave who would otherwise be eligible.

Background

On March 18, 2020, the U.S. Congress enacted the Families First Coronavirus Response Act (“FFCRA”).  The FFCRA has two main provisions. First, the Emergency Family and Medical Leave Expansion Act (“EFMLEA”) requires employers with less than 500 employees provide up to twelve weeks of leave for employees unable to work or telework because they have to care for their child.  The first ten days of the EFMLEA are unpaid, and the remaining ten weeks are paid at two-thirds of the employee’s salary.  Second, the Emergency Paid Sick Leave Act (“EPSLA”) requires employers with less than 500 employees to provide employees two weeks of paid sick time, to be used for any of six qualifying reasons.  Both provisions allow the Secretary of Labor to exclude healthcare providers and emergency responders from the requirement.

On April 1, 2020, the DOL released a final, temporary rule interpreting both provisions of the FFCRA.  New York challenges the DOL rule on the basis that it conflicts with the plain language and purpose of the statute by: (i) codifying broad, unauthorized exclusions from employee eligibility; and (ii) creating from whole cloth new restrictions and burdens on employees that appear nowhere in the text of the FFCRA. Complaint at 15.

Analysis Of The Claims

The new rule adds in new and additional qualifications for when an employee can take leave. First, the DOL states if an employer decides they do not have work for the employee, then the employee cannot take paid time off under the FFCRA.  Both the EFMLEA and EPSLA provide leave when an employee is “unable to work or telework” (which might be the rationale of the DOL).  New York challenges this interpretation as not being in the text of the FFCRA and because it would let employers determine when an employee is eligible for leave. The DOL’s interpretation might be a bit strenuous, as the plain language of the FFCRA only requires the employee is unable to work or telework.  If the employer does not have any work for the employee because of a temporary shutdown or furlough, then an employee likely cannot take paid leave, but the DOL’s rule seems far broader than this.

Second, the new rule broadly expands the definition of a “health care provider” excluded from the FFCRA.  The rule includes almost any individual who works at a “site where medical services are provided,” a company that contracts with a medical services site, or any employee that provides medical services or produces COVID-19 medical equipment or tests. New York argues this exclusion would include “a teaching assistant or librarian at a university; employees who manage the dining hall or information technology services at a medical school; the cashier at a hospital gift shop;” or employees who have little or no connection to the actual medical services provided. Complaint at 75. New York argues the new definition provided by the DOL denies millions of employees paid leave. The DOL’s definition of “health care provider” is significantly broader than other federal definitions, making it ripe for challenge.

The DOL’s new rule allows employees to take paid leave on an intermittent basis, only if the employee and the employer agree.  New York challenges the DOL’s authority to make this rule, on the basis that this power is absent from the FFCRA and New York argues this interpretation of the FFCRA is incorrect.  The original draft of the FFCRA allowed employees to take EPSLA intermittently, but it did not allow employees to take EFMLEA intermittently.  Congress removed all references to intermittent leave from the final text of the bill as passed.  As a result, the DOL’s rule seems like a reasonable interpretation of the legislative history, but depending on the Judge assigned to the case and the arguments litigated by the parties, New York might still be successful.

Finally, New York challenges the DOL’s broad documentation requirements.  The text of the FFCRA requires workers to provide reasonable notice before taking paid leave.  The DOL’s rule expanded the employer’s right to request documentation.  The new rule from the DOL requires any employee requesting paid leave under the act provide the: (i) employee’s name; (ii) date(s) for which leave is requested; (iii) qualifying reason for the leave; and (iv) an oral or written statement that the Employee is unable to work because of the qualified reason for leave. Complaint at 88.   Additionally, the DOL rule requires workers to provide additional documentation for each specific reason for leave.  New York challenges all of these document requirements on the basis that they are unduly burdensome and deny eligible employees the ability to take paid leave. Some of the documents employers can request appear reasonable.  Requiring workers to provide the name of the doctor ordering the employee to quarantine, or the name of the government body issuing the stay-at-home order will provide the employer with some rationale for why the employee should take leave. However, some of the document requests appear less reasonable.  The rule requires employees taking time off to care for a child to provide the child’s name, the name of the school or child care provider, and “[a] representation that no other suitable person will be caring for the Son or Daughter during the period for which the Employee” takes leave. Complaint at 90.    While requiring the name of the child’s school might be reasonable, requiring the child’s name and a certification that no one else can care for the child is not related to the text of the bill. The court will likely address each of these new documentation requirements individually, potentially invalidating some.

New York’s Challenges

 

New York seeks relief under the Administrative Procedure Act on the basis that this new rule violates the text of the FFCRA and that the DOL has exceeded their rule making authority.  New York contends that the new rule will cause fewer people to be eligible to take the paid leave, which will cause more people to get sick.  As result, New York claims it will pay out more in unemployment claims, lose tax revenue, and New York hospitals will lose money covering the costs of the uninsured.  New York asks the court to declare these sections of the rule unlawful and vacate the challenged provisions of the rule.

Implications For Employers

All employers with less than 500 employees should monitor this case because it is going to have an impact on when employers have to provide leave under the FFCRA.  What might be a reasonable interpretation of the act today could be very different in a few weeks.  With the federal government beginning to enforce the FFCRA soon, employers need to make sure they comply with the most up to date interpretation of the law.  Right now, employers should comply with the DOL rule, but if the court agrees with New York, employers across the country may have to change how they apply the FFCRA