California Federal Court Holds that Teen Adventure Tour and Travel Company Is Not Exempt from Overtime and Minimum Wage Laws

Yesterday, in a decision that may have repercussions throughout the teen tour and travel industry, Judge Edward M. Chen of the U.S. District Court for the Northern District of California held that the trip leaders of a teen tour and travel company were not exempt from the minimum wage and overtime protections of federal and California law. The case is Wright, et al. v. Adventures Rolling Cross Country, et al., 12-cv-982-EMC (N.D. Cal.), and the decision is available here. Bryan Schwartz Law represents the Plaintiffs.

The Defendants, Adventures Rolling Cross Country (“ARCC”) and its principal owner and President, Scott Von Eschen, sell trips for teenagers to destinations around the world, generating millions of dollars of revenues each year. The trips fall into categories such as “language immersion,” “multisport adventure,” and “gap semester” trips. ARCC claimed that it was exempt from the labor laws as an “organized camp,” despite the fact that ARCC does not operate any camping or other recreational facilities.

The case was brought as a class and collective action by two former ARCC trip leaders. They led groups of teenagers on several-week tours to Latin America and Europe and worked for ARCC for approximately two additional weeks in California doing mandatory preparatory, administrative, training and debriefing work before and after the trips. While ARCC charges a trip participant's parents upwards of $5,000 dollars for many of its trips, ARCC paid plaintiffs – who were responsible for chaperoning the teens – approximately $3 per hour.

After the Plaintiffs commenced the case, ARCC attempted to shoehorn itself into the “organized camp” exemption, applying for membership to the American Camp Association and referring to its trip leaders in its briefs as “camp counselors.” The exemption was enacted in order to apply to traditional summer camps that run facilities designed for outdoor group living, such as Boy Scout camps and non-profit religious camps staffed by high school students.

Plaintiffs moved for summary judgment, claiming that ARCC does not fall within the “organized camp” exemption, and Judge Chen agreed. Noting that exemptions from the labor laws are “narrowly construed,” the Court held that the language of the federal and state laws and regulations compelled a finding that because ARCC does not operate any “distinct physical location” or “facility” for the purpose of camping or recreation, “the exemption is not applicable to ARCC as a matter of law.”

Significantly, although many of ARCC’s tours are to other countries, where California and U.S. wage laws typically do not apply, Judge Chen also ruled that ARCC was required to comply with the California and federal labor laws for the entirety of any workweek during which a given employee worked at least part of the week in California or the United States, respectively.

Adventure travel and tour companies operating like ARCC may rely on a workforce of adult outdoor professionals to operate profitable tour and travel businesses that are not tied to any camping or recreational facility operated by the company. Yesterday's decision confirms that such trip leaders should generally be entitled to minimum wages and overtime.

For more information about the case or the decision, please contact Bryan Schwartz Law.

Disclaimer: Nothing in the foregoing commentary is intended to provide legal advice in any particular case. Bryan Schwartz Law cannot represent you unless you have a signed representation agreement with the firm.

Bryan Schwartz Law Case Against JPMorgan Chase for Misclassification of Appraisers Profiled in Daily Journal

Bryan Schwartz Law's principal discussed a recent lawsuit brought by the firm against JPMorgan Chase seeking to correct misclassification of a group of employees - commercial production appraisers and review appraisers - as exempt from overtime:

"Employees Try New Tack with Misclassification Class Actions," by Laura Hautala, San Francisco Daily Journal, April 16, 2013.

The full text of the article is also reproduced below.

The firm brought a similar suit against Bank of America, also this month. In both cases, major banks shortchanged workers their overtime, meal/rest periods, etc., on the premise that they are "administrative" employees - like Human Resources employees - instead of production workers in the companies' core business, working to process loan sales. In both cases, Bryan Schwartz Law is confident that the company's decisions were in error, as held by the Second Circuit years ago, in the Davis v. JPMorgan case (link here).

The firm estimates the banks owe their appraisers millions of dollars in unpaid wages and penalties.

If you would like more information about the cases brought by appraisers and/or review appraisers against JPMorgan Chase or Bank of America, contact Bryan Schwartz Law today.

Here is the full text of the article:
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DAILY JOURNAL NEWSWIRE ARTICLE

http://www.dailyjournal.com
© 2013 The Daily Journal Corporation.
All rights reserved.

Tuesday, April 16, 2013

Employees try new tack with misclassification class actions

By Laura Hautala, Daily Journal Staff Writer

Kenneth J. Lee was pulling 70-hour weeks, coming in on weekends and working through lunch, he said. He and his co-workers, property appraisers for JPMorgan Chase & Co., earned a salary, but the bulk of their pay was based on how many appraisals they completed, which required them to work overtime. But Chase classified Lee and others across the country as working in an administrative capacity, a designation that exempts Chase from paying them for overtime and meal breaks. Now Lee and another former appraiser are suing Chase with the help of Oakland plaintiffs' attorney Bryan J. Schwartz, contending that appraisers don't have the decision-making power in their jobs necessary to qualify them as administrators.

"Chase is running an appraisal sweatshop, and it's time that Chase be required to compensate its appraisers fairly," Lee said in a statement after he and another former Chase appraiser filed a putative class action against the bank earlier this month.

Lee and Mark G. Thompson are suing for a host of wage and hour violations, all stemming from his claim that the financial company misclassified employees in Lee's position. The claim hinges on the job classifications available to businesses that let them exempt managers, executives and other employees with discretion in their job activities from overtime pay and other wage and hour requirements.

Misclassification cases are appealing to plaintiffs' lawyers like Schwartz because they include opportunities for claims under wage and hour laws, California's Private Attorney General Act, as well as attorney fees. However, appellate courts have set an increasingly high bar for class certification, and changing employer behavior have made the seemingly lucrative cases more challenging to find and win.

"When there's a misclassification case, there are usually four or five derivative claims," said Cheryl D. Orr, a defense-side employment partner at Drinker Biddle & Reath LLP in San Francisco. "In some positions and in some industries, whether someone's classified correctly or incorrectly can be sometimes difficult to ascertain."

Lee's attorney Schwartz said there's no question the property appraisers he represents were misclassified. "They can't just go off and say, 'God, I love this apartment building,'" he said. "They're applying a formula set by people way above their pay grade."

Randy Renick, a plaintiffs' attorney in Pasadena with Hadsell, Stormer, Richardson & Renick LLP, said that in general, misclassification claims have to clear a higher bar than they did 10 years ago. They now must do more to prove predominance, or that their employers' policies or practices affected them in a similar way.

"Plaintiffs have to do a lot more work on the front end," Renick said. "It isn't enough anymore to show that folks were just misclassified; you need to show that there was uniform control and that class members were working the same types of jobs under the same policies."

Renick experienced the change firsthand over the past eight years, as a case his clients won in trial court went through a lengthy appeals process. In 2005, he won class certification for a group of employees allegedly misclassified at Chinese Daily News Inc., a Chinese-language newspaper based in Monterey Park. He then won both a jury trial and a bench trial.

But the case was appealed all the way to the U.S. Supreme Court, which had recently raised the bar for class certification in employment discrimination and wage-and-hour cases by siding with Wal-Mart Stores Inc. in the landmark Dukes v. Wal-Mart case in 2011. The high court ordered the 9th U.S. Circuit Court of Appeals to apply Dukes to the Chinese Daily News case.

Renick said he is confident that the record he established the first time around will withstand heightened scrutiny for class certification. However, because of Dukes and two other precedents set in appellate courts since the plaintiffs' original victory, the 9th Circuit ruled in March that plaintiffs must argue for class certification anew.

Finding cases of straightforward misclassification has also become harder, lawyers representing both workers and businesses say.

This is partly because businesses have started classifying their workers more appropriately, Renick said. "Over the last seven to eight years, most of the bigger misclassification cases have been filed and resolved, and many employers have amended their practices as a result of those lawsuits," Renick said.

Partly in response to the increasing difficulty of certifying and winning these cases, lawyers said, workers have found a back door though which to levy penalties against employers for misclassifying them.

Even if plaintiffs aren't allowed to proceed as a class, employment claims can move forward under the state Private Attorney General Act. Every claim under the statute can reap a penalty against the employer for each pay period of each affected employee. The penalties are split between the state and the plaintiffs.

What's more, defense attorneys say that while class certification is harder to attain, plaintiffs are still filing and settling these claims.

"I think there are a handful of cases recently that have very much gone our way," Orr said, "but there are still many, many cases that are getting resolved through the settlement process."

This of course includes attorney fees, which Naki M. Irvin said is the primary motivation for attorneys filing the cases. Irvin most often defends employers as a partner at Margolis & Tisman LLP in San Francisco but occasionally represents individual plaintiffs in employment cases.

"While it's commendable that we have labor laws to protect our workers, I think the laws are such that it makes things difficult for employers in California," Irvin said. "Often these lawsuits are used as leverage for negotiation, and it often comes down to attorney fees."

It's not clear how large of a settlement plaintiffs stand to receive from misclassification cases, because they're easier to defeat at class certification. "They're generally viewed as not being worth as much as other cases," said S. Brett Sutton, a partner at Sutton Hatmaker Law Corp. in Fresno who represents both workers and businesses in employment cases.

Orr said the cases are in fact still lucrative at the settlement stage. "Based on what I'm reading other folks are settling for, I'm not sure that process has caught up with a seeming shift in the law."

laura_hautala@dailyjournal.com

5-4 Supreme Court Decision in Genesis Healthcare v. Symczyk Unlikely to Snuff Out Incipient FLSA Collective Actions

Today the Supreme Court issued an odd decision in Genesis Healthcare Corp. v. Symczyk, No. 11-1059, representing another effort by the Court to limit the ability of employees to bring collective actions enforcing the Fair Labor Standards Act (“FLSA”). Justice Thomas authored the 5-4 majority opinion. The dissent, by Justice Kagan, argued that the majority’s decision will have no practical effect.

The action was brought in federal district court by a registered nurse, Laura Symczyk, against her employer, Genesis Healthcare Corp., challenging the employer’s practice of automatically deducting 30 minutes of wages per employee shift for “meal breaks,” despite the fact that employees allegedly did not actually receive such breaks. Symczyk brought the case as a collective action under the FLSA on behalf of herself and similarly situated co-workers.

Attempting to snuff out the case before other employees could opt in, Genesis made an “offer of judgment” under Federal Rule of Civil Procedure 68, offering to pay Symczyk $7,500, which Genesis contended was all that Symczyk personally could hope to recover, plus such attorneys’ fees and costs as the court deemed reasonable. Rule 68 is intended to encourage early resolution of cases by imposing relatively minor litigation costs, such as photocopying charges, on a plaintiff who refuses an early offer of judgment and then ultimately recovers no more in the suit than the defendant initially offered. By its terms, Genesis’s offer expired within 10 days if not accepted. Symczyk did not respond to the offer.

Genesis thereafter moved to dismiss the case for lack of subject-matter jurisdiction, claiming that the case was “moot” because Symczyk, the only plaintiff, had been offered an amount that, the employer claimed, would make her whole for the wages of which she had been deprived. The district court granted the motion and dismissed the case. On appeal, the Third Circuit reversed, holding that the collective action was not moot, although the court agreed that Symczyk’s individual claim was moot. The Third Circuit observed that allowing the employer strategically to use Rule 68 to terminate the suit before the plaintiff could seek certification frustrated the purpose of making collective actions available to enforce the FLSA.

The Supreme Court reversed. The Court “assumed, without deciding,” that Symczyk’s case was, in fact, mooted by her decision not to accept the defendant’s Rule 68 offer of judgment, finding that Symczyk had waived her argument to the contrary. Therein lies the oddness of the decision. If this “assumption” was incorrect, then everything the majority went on to say is irrelevant. In her dissent, Justice Kagan argued that the assumption is false, and that the employer’s unaccepted Rule 68 offer did not moot the case:  “When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer leaves the matter as if no offer had ever been made” (citation omitted). Because the majority’s holding was applicable only if, in fact, the case was moot, Justice Kagan observed that “the question the majority answers should never arise—which means the analysis the majority propounds should never apply.”
So what did the majority hold? It held that, assuming (without deciding) a plaintiff’s case is mooted by an unaccepted offer of judgment under Rule 68, then so long as no other putative FLSA collective action member has opted into the case, an employer can strategically moot the case by making a Rule 68 offer of judgment to the sole plaintiff that would provide that plaintiff with full and complete relief. The majority opinion seemed to contemplate at least two circumstances in which an offer to pay damages would not render such a case moot:  when the plaintiff is seeking injunctive relief challenging ongoing conduct, and when the plaintiff is “assert[ing] any continuing economic interest in shifting attorney’s fees and costs to others.”

Rather than acknowledge the real effect of dismissing Symczyk’s suit – i.e., that an employer who allegedly deprived a class of employees of wages due under the FLSA was allowed to escape liability by quickly offering to pay off a single employee who complained – Justice Thomas observed that the registered nurses who had been deprived of their pay “remain free to vindicate their rights in their own suits.” This will be cold comfort for Symczyk’s co-workers.

But Justice Thomas’s observation does raise an interesting question: what effect will an offer of judgment, if accepted by the plaintiff, have in a subsequent case brought by others in the putative class? Will employers really be willing to accept the consequences of conceding liability? If a suit seeks injunctive relief, will the employer be willing to offer a judgment in which it agrees to reclassify its employees?  Will counsel who represents an employee offered such judgment (e.g., including reclassification) still be entitled to full fees for the class-wide relief based on the catalyst theory? Any entry of judgment is likely to invite a subsequent collective and class action by those who “remain free to vindicate their rights,” and in such an action, the employer’s liability may be a foregone conclusion as a result of the prior entry of judgment. Given that the majority did not overrule Barrentine v. Arkansas-Best Freight System, 450 U.S. 728 (1981), which held that FLSA rights cannot be waived, employers will not be able to manufacture a finding of mootness by making a mere settlement offer, but rather will be required to offer bona fide complete and final judgment, to be entered by the court.

To the extent that the majority’s decision has any life notwithstanding Justice Kagan’s argument and the practical risks an employer would face by conceding liability, plaintiffs should easily be able to avoid the impact of Genesis Healthcare. The case was sui generis: the plaintiff “conceded that [the employer’s] offer ‘provided complete relief on her individual claims’”; she “failed to assert any continuing economic interest in shifting attorney’s fees and costs to others”; she was a sole named plaintiff without a single opt-in; she apparently did not seek injunctive relief; and she apparently did not assert class claims under Rule 23. The absence of any of these attributes would take a case outside of Genesis Healthcare’s holding, and a garden variety FLSA collective action suit often lacks them all. In addition, the decision should have no impact on cases that include Rule 23 class claims or similar actions under state law (such as California Code of Civil Procedure § 382), because ample precedent establishes that class claims (unlike FLSA collective claims) cannot be nullified simply by offers of judgment to the named plaintiff.

If you have questions about your class action rights, contact Bryan Schwartz Law today.

Disclaimer:  Nothing in the foregoing commentary is intended to provide legal advice in any particular case. The author and Bryan Schwartz Law cannot represent you unless you have a signed representation agreement with the firm.