California Workers' Rights Survive Duran v. US Bank

This morning, the California Supreme Court upheld a Court of Appeal decision reversing a multi-million dollar plaintiffs' verdict in a wage/hour class action against US Bank, in Duran v. US Bank. On March 4, 2014, the Court heard oral argument, which I discussed in this blog in detail here, including a background on the case and what was at stake. In a 51-page majority opinion by Justice Corrigan, with a lengthy concurrence by Justice Liu, the Court detailed how trial courts hearing would-be class claims must determine whether the claims are manageable on a class-wide basis.

Duran's Key Holdings

Though the Duran decision is not an outright victory for workers - or for the plaintiffs in that case - the decision also does not foreclose wage/hour class actions, and most significantly, recognizes that "statistical sampling may provide an appropriate means of proving liability and damages in some wage and hour class actions." Slip Op. at 2. Because the reason for a class action in  this context is to create a more efficient means of proving a commonly held wage claim, class actions would not survive without the possibility of using common proof of liability and damages. If each person had to prove his or her own case entirely separately, there would be no reason for a class action. Duran, while remanding for a new trial, did not kill the plaintiffs' class claims in that case, as had the Court of Appeal, and the plaintiffs may yet prove class-wide liability, following the decision's guidance, and particularly that of the concurrence.

The Supreme Court stopped short of holding that a defendant has a due process right to litigate an affirmative defense as to each individual class member. Slip Op. at 35. However, if "trial proceeds with a statistical model of proof, a defendant accused of misclassification [as in the Duran case] must be given a chance to impeach that model or otherwise show that its liability is reduced because some plaintiffs were properly classified as exempt." Id.

The issue in Duran was whether a group of employees, Business Banking Officers (BBOs), were improperly classified as exempt from overtime based upon the notion that they were outside salespeople. Plaintiffs proved at trial that they predominantly worked inside bank branches - not outside. However, the Supreme Court criticized the trial court's refusal to allow defendant's "sworn declarations from 75 class members stating that they worked more than half their time outside the office" - which would negate any claims by these individuals. Slip Op. at 31. The trial court also refused to admit or allow experts to consider as part of their statistical sampling "live testimony from witnesses about their work outside the office as BBOs." Id. "Instead, extrapolating findings from its small sample [21 BBOs out of 260] and ignoring all evidence proffered to impeach these findings, the court found that the entire class was misclassified. The injustice of this result is manifest." Id.

As such, the trial plan in Duran, rejected by the Supreme Court, will be readily distinguishable by workers and their advocates when seeking to certify a class action and to propose a trial plan. If individuals disclaim any entitlement to unpaid wages, and defendants want to put forth such evidence limiting their liability, they must be able to do so. As the Supreme Court explained, "While representative testimony and sampling may sometimes be appropriate tools for managing individual issues in a class action, these statistical methods cannot so completely undermine a defendant's right to present relevant evidence." Slip Op. at 31-32.

Importantly, Duran also did not categorically reject common forms of class proof of liability or damages, like surveys and statistics. Slip Op. at 38. "Procedural innovation" is encouraged, but "must conform to the substantive rights of the parties." Slip Op. at 29, 38. Neither did the Supreme Court categorically reject the ability to prove misclassification on a classwide basis, where an employer has a "consistently applied policy or uniform job requirements and expectations contrary to a Labor Code exemption, or if it knowingly encouraged a uniform de facto practice inconsistent with the exemption." Slip Op. at 34-35.

Duran Reinforced Sav-On, Bell, and the Brinker Concurrence

Repeatedly in the decision, Duran reinforced Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, and Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715.  Sav-On and Bell have provided - and will continue to provide, along with Duran - a roadmap to all workers' advocates in how to certify a wage and hour class action and prove class claims. Notably, the Court seemed to encourage what happened in Bell - summary judgment on liability, followed by a damages trial involving sampling - as a means for adjudicating wage/hour class actions. "Once the issue of liability had been decided, both sides benefited from a fair, cost-effective approach to determining damages. By agreeing on a sampling approach, both sides could expedite resolution while preserving their competing interests in calculating damages." Slip Op. at 37 n. 34.

Similarly, Duran's repeated invocation of Justice Werdegar's concurrence in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1054 (see, e.g., Duran slip op. at 23, 25) reaffirms that individualized liability and damages questions do not bar use of the class action mechanism or class-wide relief - but rather, that trial courts must act carefully in such situations, when fashioning a "procedurally innovative" and efficient trial plan, to ensure fairness. Slip Op. at 29; Slip Op., conc. at 2 (citing Sav-On and City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 459). Before Duran, advocates on both sides were uncertain as to what weight to accord the Brinker concurrence - authored by the same justice as the majority opinion - but now, the answer is clear: a great deal of weight.

Justice Liu's Concurrence Shows the Way

Justice Liu's concurrence illuminates the path forward for employee advocates confronting unlawful misclassification of groups of employees as exempt from overtime and meal/rest period requirements. Building on Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, the concurrence explains that the relevant consideration in deciding on a misclassification allegation is whether the employer's realistic requirements of the job would lead to more exempt, or more non-exempt work, being performed. Slip Op., conc. at 4-5. Thus, "it is not difficult to contemplate that employees in a given job classification will often be either wholly exempt or wholly nonexempt, since a job classification often entails a common set of employer expectations or requirements for performance of the job." Slip Op., conc. at 5. Both before and after Duran, an employer cannot evade liability based solely on a seemingly exempt job description; conversely, certification of a misclassification claim will not be appropriate based solely on a seemingly non-exempt job description. "How employees actually spend their time obviously matters." Id. But, as the Supreme Court discussed in Sav-On, "[v]ariability in such hours does not necessarily prove that the employer's realistic expectations or the realistic requirements of the job were not the same for all employees in a given job classification." Id.

As Justice Liu explained, providing guidance to the trial court on remand in Duran, employer-side declarations cannot be ignored, and "must be assessed for [their] weight and credibility together with all other evidence bearing on the ultimate issue." Slip Op., conc. at 8. But "the need to manage individual issues does not foreclose the use of sampling, representative testimony, or other statistical methods to obtain relevant evidence in a class action trial on employee misclassification." Id. A valid sampling plan will "capture heterogeneity within the class" - and a defendant may "raise individual issues that challenge the results of the plan as implemented." Id. Ultimately, a court (and the court in the Duran v. US Bank case) "might find that the individualized evidence lacks credibility and that the sampling evidence is reliably probative of the employer's realistic expecations" or that "the individualized evidence, while credible, does not show variability in the class but rather provides strong, consistent evidence of the employer's realistic expectations for the job at issue." Slip Op., conc. at 9. Both individualized and aggregate forms of proof as to the realistic requirements of the job must be weighed and considered along with the job description, company policies, industry customs, and the testimony of those who set expectations for the employees in the class. Slip Op., conc. at 10.

The Take-Away from Duran

While the defense bar sought a total victory in Duran, to undermine all possibility of wage/hour class action certification and trial, they did not get it. Though some language in Duran will undoubtedly be canonized by employer advocates seeking to erect major roadblocks to class actions, the overall impact of the decision is not to dismantle class litigation. Rather, Duran stands for the proposition that all of us who litigate wage/hour class claims must work carefully to craft trial plans that will be fair to both sides - apparently, unlike what occurred in that case. When we are able to do so, proceeding with a class action will be appropriate.

Veteran practitioners of wage/hour law will recall that the employers' spin doctors' original take on Brinker in 2012 was that it was a major victory for employers and would doom meal and rest period class actions. Though several of the grant-and-hold decisions, on remand, had this knee-jerk response, they were ultimately depublished. See Hernandez v. Chipotle Mexican Grill, 146 Cal.Rptr.3d 424 (2012) (depublished 12/12/2012); Lamps Plus Overtime Cases, 146 Cal.Rptr.3d 691 (2012) (depublished 12/12/2012); and Tien v. Tenet Healthcare Corp., 147 Cal.Rptr.3d 620 (2012) (depublished 1/16/2013). Instead, the test of time has shown that Brinker set the stage for a major advance by workers' rights advocates seeking to certify wage/hour class actions, employing the Brinker guidance. See, e.g., Bradley v. Networkers Int’l, LLC, 211 Cal.App.4th 1129 (2012) (review denied 3/20/13); Faulkinbury v. Boyd & Assoc., Inc., 216 Cal.App.4th 220 (2013) (review denied 7/24/13); Benton v. Telecom Network Specialists, Inc., 220 Cal. App. 4th 701 (2013) (review denied 1/29/14); Bluford v. Safeway Stores, Inc., 216 Cal.App.4th 864, 871 (2013) (review denied 8/28/13); Jones v. Farmers Insurance Exchange, 221 Cal.App.4th 986 (2013) (review denied 3/12/14); Williams v. Superior Court (Allstate Ins. Co.), 221 Cal.App.4th 1353 (2013) (review denied 3/19/14); Hall v. Rite Aid Corp. (Cal.App. May 2, 2014) 2014 WL 1989384.

Duran may prove likewise to be an aid to employees seeking class certification.

It is a good thing Duran did not kill class actions. Without the ability to prove wage/hour violations by employers using class actions, workers would have little recourse for addressing wage theft by employers. Wage practices tend not to be individualized, but tend to be pursuant to employers' policies - and employers engaged in Labor Code violations will receive a massive windfall if they can force workers to prosecute wage theft individually. Few will have the courage to do so, and even fewer will have any viable representation, because the economics of wage claims do not support individual wage actions. If 1,000 low-wage workers were cheated of $20,000 each in wages, the employer stole $20 million from workers. But attorneys will not undertake representation of each $20,000 claim for wages, when trying such a case to verdict would accrue hundreds of thousands of dollars in fees and costs. Class action is often the only means of rectifying wrongdoing by Labor Code violators- and will remain so, after today's decision in Duran.

Defining Who is an "Employer" Under California and Federal Wage Laws

Bryan Schwartz Law's principal recently spoke at the State Bar of California's 2014 Annual Meeting on the subject of defining a liable "employer" under California and federal wage laws. His paper presented at the conference is available here.

Mr. Schwartz's perspective, articulated in previous articles on this blog (see, e.g., this July 2013 post), is that the 2010 Martinez v. Combs decision in the California Supreme Court redefined the definition of an "employer" under California law, for overtime, minimum wage,  meal/rest period, and other claims arising from the Wage Orders. The new, broader standard rejects the prior Reynolds v. Bement decision's narrower "employer" definition, articulating that an "employer" is one who 1) controls the wages, hours, or working conditions of an employee, or 2) suffers/permits him/her to work, or 3) "engaged" the employee to work, as defined by the common law. Under this broader standard, individual owners who meet any part of the three-prong test, and a variety of companies and agencies exercising control, can be "employers" liable for labor code violations. 

The Private Attorneys General Act of 2004 (PAGA), Labor Code section 2698, et seq., makes any individual liable for penalties under Labor Code section 558 for violations of numerous Labor Code provisions, and for the employees' attorneys' fees and costs. 

Under Business and Professions Code section 17200, employers benefiting from stealing wages may also be liable for restitution - the Code implicates any party unjustly enriched by a practice.

Under Labor Code section 2802 - involving failure to reimburse workers - the relevant test appears to be California's four-prong "integrated enterprise" test. A well-reasoned, recent decision by the United States District Court for the Northern District of California by Judge Lucy Koh, Trosper v. Stryker, 2014 WL 1619052 (N.D. Cal. April 22, 2014)  adopts this test, invoking the California Court of Appeal decision in Laird v. Capital Cities/ABC, Inc., 69 Cal.App.4th 727 (1998) (overruled on other grounds by Reid v. Google, 50 Cal.4th 512 (2010)). The test considers: 1) centralized control of labor relations; 2) interrelation of operations; 3) common management; and 4) common ownership or financial control.

When the question is whether someone is an employee or independent contractor, the common law test is defined in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relns., 48 Cal.3d 341 (1989) - which would only seem to affect the third prong of the Martinez v. Combs analysis - i.e. traditional agency principles. However, how Martinez v. Combs affected the definition of an "employer" where the employer is claiming the worker was an independent contractor may be answered in the Supreme Court's impending decision in Ayala v. Antelope Valley Newspapers (see our discussion of Ayala here).

The definition of an "employer" under federal wage laws has always been broad - and recent case law only reaffirms Lambert v. Ackerley, 180 F.3d 997 (9th Cir. 1999) and other jurisprudence discussing the expansive interpretation given to the Fair Labor Standards Act (FLSA) definition of "employer." What is new are authorities indicating that California's definition of a covered "employer" is now broader than the federal protection. See, e.g., Carrillo v. Schneider Logistics Trans-Loading & Distribution, 2014 WL 183956 (C.D. Cal. Jan. 14, 2014) (citing Guerrero v. Sup. Ct., 213 Cal.App.4th 912, 945 (rev. denied June 12, 2013)).

Stay tuned to see whether California will continue its trend to embrace the nation's strongest worker protections in Ayala....

Emerging Trends in Wage-Hour Class Actions 2014

Bryan Schwartz Law's principal spoke at the California Employment Lawyers Association's annual advanced wage and hour seminar last week, joining a panel with Senator Bill Monning and Scot Bernstein regarding legislative and case law developments in the last year. He presented a paper detailing emerging trends in wage-hour class actions, available here: Bryan Schwartz - Emerging Trends in Wage-Hour Class Actions 2014

Using a stock market analogy, Mr. Schwartz identified that class certification and joint employer claims are trending up, discussing extensive California and federal court precedents. He argued that the application of Wal-Mart v. Dukes to the detriment of wage/hour class actions is down, and that "drowning in arbitration" is down. Mr. Schwartz predicted that Duran v. US Bank would be the blockbuster, game-changing decision of the year. Finally, continuing the stock market theme, he identified sleeper picks, including seating cases and piece-rate cases, along with cases alleging misclassification in different industries - e.g., NFL cheerleaders.

Pre-Employment Medical Screening - a Class Action Opportunity

Bryan Schwartz Law's principal presented this week at the ABA's 4th National Conference on Employment and Education Law Impacting Persons with Disabilities, in Los Angeles, on a panel entitled, "Are Your Selection Criteria Screening Out Persons with Disabilities?"

His paper for the conference entitled “Pre-Employment Medical Screening: a Class Action Opportunity,” available by clicking here, discusses how pre-employment medical screening violations readily lend themselves to class action claims by job applicants under Fed.R.Civ.P. 23(b)(2), 23(b)(3), and 23(c)(4).

The paper highlights three areas ripe for class litigation: if the employer routinely reviews medical records too early in the process, before a bona fide offer; if the employer conducts medical testing too early in the process, i.e., before all other pre-employment steps have been taken; and if the employer fails to provide individualized consideration concerning reasonable accommodations as part of its medical qualification process.

If your rights have been violated by improper pre-employment medical screening, contact Bryan Schwartz Law today.

California Supreme Court Hears Iskanian and Ayala Oral Arguments - Many Workers' Rights Hang in the Balance

Today, the California Supreme Court heard oral argument in two cases that will help shape employment law and litigation in the state for many years - Iskanian v. CLS Transportation of Los Angeles, S204032, and Ayala v. Antelope Valley Newspapers, S206874.

Iskanian will decide whether Gentry v. Superior Court (2007) 42 Cal.4th 443, discussing the unconscionability of mandatory, pre-dispute arbitration agreements with class action waivers, in the labor and employment context, where there are unwaivable statutory rights, survived AT&T Mobility LLC v. Concepcion (2011) 131 S. Ct. 1740, which overruled California's Discover Bank rule in the consumer context. For a further discussion of Concepcion, click here.

Equally importantly, Iskanian will decide whether Concepcion trumps the California statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (PAGA), discussed in Arias v. Superior Court (2009) 46 Cal.4th 969.

Furthermore, the Supreme Court in Iskanian will determine under what circumstances a defendant has waived its right to compel arbitration, after it has taken advantage of judicial process.

Insiders report that plaintiffs' counsel and Michael Rubin, of Altshuler Berzon, who argued on behalf of amici (including the California Employment Lawyers Association, CELA) for the workers, impressed upon the Court the need to maintain the integrity of PAGA as a vital California enforcement scheme which does not discriminate in any way against arbitration, but promotes enforcement through representative actions of numerous Labor Code penalty provisions. Justice Liu grappled with, and appeared to grasp, the significance of the National Labor Relations Board's decision in In Re D. R. Horton, Inc. (2012) 357 NLRB No. 184, which held that the National Labor Relations Act (Section 8(a)(1)) does not permit employers to outlaw joint, class, or collective employment-related claims in any forum, arbitral or judicial, because such interferes with employees' Section 7 right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Plaintiffs' counsel further argued that the California Supreme Court got it right in Sonic Calabasas v. Moreno (2013) 57 Cal.4th 1109 (Sonic II) after Concepcion (read about Sonic II here), and should not backtrack from its strong position upholding California's unconscionability doctrine in the context of wage claims.

In Ayala, the Supreme Court heard the most important independent contractor misclassification case since S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, and appeared to focus on how Martinez v. Combs (2010) 49 Cal.4th 35, may have reshaped Borello, with its new definition of "employer" under the Labor Code. For more on Martinez v. Combs, read here and here.

Borello determines when an entity's control over a worker is sufficient to render an independent contractor an employee, and Martinez v. Combs defines an employer as (among other possibilities) one who controls the wages, hours and working conditions of the workers. Though discussing the interrelationship between these seminal cases may lead to additional guidance on the critical question of joint employer status in California, insiders note that such is not the question regarding which the Supreme Court originally granted review, namely:

"This case presents questions concerning the determination of whether common issues predominate in a proposed class action relating to claims that turn on whether members of the putative class are independent contractors or employees."

Regardless of the outcome of the "employer" definition, as argued by counsel for amici (including CELA and the Legal Aid Society - Employment Law Center), Aaron Kaufmann, of Leonard Carder, the determination of this definition and whether the workers meet the test predominates over all other questions in an independent contractor misclassification case, and as such, the Ayala trial court's decision denying class certification should be reversed. See Brinker Rest. Corp. v. Superior Court (2012) 53 Cal. 4th 1004, 1021 ("The 'ultimate question' the element of predominance presents is whether 'the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.' [Citations.]....The answer hinges on 'whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.'”) (citing Sav–On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326-327).

If the Supreme Court in Ayala actually answers the question accepted for review - regarding the class certification standard - it should be a boost for workers with independent contractor misclassification claims. Such a decision would reinforce Bradley v. Networkers Int’l, LLC (2012) 211 Cal.App.4th 1129, regarding which review was denied only last March, in which the Court of Appeal (on remand after Brinker) certified a class alleging misclassification of independent contractors. Read about Bradley by clicking here.

A win for the plaintiffs in Ayala, reinforcing Bradley, would also weaken Sotelo v. MediaNews Grp., Inc. (2012) 207 Cal. App. 4th 639, 659 (regarding which review was denied in 2012), a factually similar case to Ayala in some respects, but where predominance was missing because different contractor relationships existed between the company and individual class members.

While smart insiders are too cautious to predict the outcome of Iskanian and Ayala, today's cases present a major opportunity to reinforce California's best-in-the-nation worker protections. I hope the Court takes it.

Supreme Court Decision Extends Protections Against Whistleblower Retaliation to Employees of Private Companies Providing Services to Public Companies

The United States Supreme Court issued a landmark decision today in Lawson, et al. v. FMR, LLC, et.al., expanding whistleblower protections under the Sarbanes-Oxley Act of 2002 (SOX) to employees of private companies who are subcontractors or contractors for public companies. The eight-to-one decision, with a majority opinion delivered by Justice Ginsburg, is the first describing the scope of protection from retaliation for securities-fraud whistleblowers. In its decision, the Court highlighted that employees of contractors and subcontractors for public companies, including lawyers, mutual fund managers, and accountants, have often been exposed to retaliatory measures such as discharge and demotion for engaging in whistleblower activities, due to gaps in federal whistleblower protections. No more.

The Court granted certiorari to address the specific question of whistleblower protections in SOX applied to employees of privately-held companies working as contractors and subcontractors for public companies. SOX was enacted to safeguard investors in public companies and restore trust in financial markets. The specific provision of the Act, § 1514A, states that “no [public] company…, or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].” The case arose on the heels of Senate reports and investigations of the Enron scandal showing widespread retaliation against investment bankers, brokers, and accounting firm professionals who raised concerns of potential securities fraud. As the Court explained, "The Sarbanes-Oxley Act contains numerous provisions aimed at controlling the conduct of accountants, auditors, and lawyers who work with public companies. [Citations] Given Congress’ concern about contractor conduct of the kind that contributed to Enron’s collapse, we regard with suspicion construction of §1514A to protect whistleblowers only when they are employed by a public company, and not when they work for the public company’s contractor." Slip Op. at 3.

Plaintiffs, Julie Lawson and Jonathan Zang, are former employees of different FMR, LLC, subsidiaries. FMR is a private company that contracts to advise and manage the Fidelity family of mutual funds. While the mutual funds are public companies, as is common in the mutual fund industry, the funds have no employees themselves who would otherwise act as gatekeepers to detect or deter fraud. Lawson alleged that she suffered adverse actions culminating in constructive discharge as a result of raising concerns that her employer overstated expenses associated with operating mutual funds. Zang also alleged that his employment was terminated after reporting inaccuracies concerning certain funds managed by the company in a statement intended for the SEC.

The Supreme Court decision today reverses the First Circuit Court of Appeals’ split decision holding that the term "employee" in § 1514A whistleblower protections refers only to employees of public companies and does not cover a contractor’s own employees. The decision paves the way not only to prevent future fraud on investors in public companies, but also provide meaningful remedies to whistleblowers subjected to retaliatory measures by their employers - whether such are publicly-held companies or not.

Employees of privately-held contractors and subcontractors exposing securities fraud in public companies may now seek remedies such as reinstatement or backpay for retaliation resulting from protected whistleblower activity. If you have experienced retaliation as a result of whistleblowing activity at your employer that contracts or subcontracts for a public company, contact Adetunji Olude.

Justice Liu Leads the Questioning as California's Supreme Court Hears Oral Argument in Duran v. US Bank

Hundreds waited in line and packed into the California Supreme Court today to hear oral argument on Duran v. US Bank, the most important case on the manner of proving a class action yet to be heard in California. The sitting judges of Alameda County’s Complex division were barely able to squeeze into the Court after waiting in line with non-profit advocacy organization leaders, plaintiffs’ and defense practitioners, and classes full of high school and law students. The crowd was dwarfed, however, by the millions around the state who will be impacted by the Court’s anticipated decisions on whether: in a wage and hour misclassification class action, the defendant has a due process right to assert its affirmative defense against every class member; whether a plaintiff can ever make class claims if a defendant has such a due process right; and whether statistical sampling, surveys and other forms of representative evidence can prove classwide liability in such a case. At stake in Duran is no less – if the Supreme Court decides the questions presented – than whether the class action is a viable mechanism in California for proving violations of law by a company or agency against a large group of people. Whether or not all of the justices were prepared to address this monumental question, Justice Goodwin Liu appeared ready.

In Duran, the plaintiffs alleged that Business Banking Officers (BBOs) at US Bank were misclassified as exempt from overtime and other California wage requirements based on the notion that they are outside salespeople, when, in fact, they were expected to, and did, spend the bulk of their time selling from inside the bank branches. After long and contentious litigation, the plaintiffs prevailed at trial before Judge Robert Freedman of the Alameda County Superior Court’s complex division, winning close to $15 million for over 200 BBOs. The trial court heard testimony from a survey of 19 randomly selected BBOs, plus the two named plaintiffs, plus about 17 defense witnesses, and received thousands of documents. US Bank refused to agree to any trial plan where the trial court would determine liability based on a selection of witnesses in the class action, but insisted that they had a constitutional right to call every class member individually to be heard on liability.

Experts determined that the sampling methodology used would have a 13% margin of error in determining liability based upon the 21 class members’ testimony, but, the trial court weighed the evidence and determined that, with the case as presented, the “point estimate” was that 100% of the class was misclassified as exempt. In other words, as between US Bank being liable to 87% and 100% of the class, the proof supported a conclusion that 100% of the class was misclassified.

Justice Liu immediately keyed in on the key issue, asking Edward Wynne, plaintiffs’ counsel, whether it was acceptable that up to 13% of the liability could be erroneous, based upon the margin of error. Wynne and Michael Rubin, who argued for the plaintiffs and amici (including the Impact Fund and the California Employment Lawyers Association), respectively, emphasized the 100% point estimate, based upon not only the experts, but upon the numerous other sources of common evidence of liability – corporate documents, the sample testimony of BBOs, adverse inferences from missing documents, and the testimony of US Bank’s own officials.

Importantly, Wynne and Rubin argued that even if some of the class members were not misclassified (as some had testified in declarations that the court rejected as lacking credibility and as lacking any representative character – i.e., being of no evidentiary value), the Court in Sav-On v. Superior Court (2004) 34 Cal.4th 319, and in denying review to Bell v. Farmers Ins. Exch. (2004) 115 Cal.App.4th 715 (2004) (Bell III), implicitly recognized that some degree of error is accepted – in Bell III, it was 9% - and urged that there are numerous mechanisms that courts can use to ensure due process, so that defendants’ aggregate liability is not greater than appropriate. Rubin reiterated Sav-On’s holding that classwide liability can be found where the challenged practice is “widespread but not uniform.” Where a common factor accounts for the (for example) 10% of the class to whom liability is not owed, that group can be segregated out of the class – e.g., a particular job title, or particular dates of employment. A second phase/bifurcated trial of damages, involving claim forms and surveys, could help assure that the correct overall extent of liability is paid by a corporate defendant.

Justice Liu questioned US Bank’s attorney as to whether the company was taking the position that courts could never find liability through statistical extrapolation. US Bank’s attorney indicated that the company was not making such an argument, and assured the justices that Sav-On (involving what he called “task misclassification”) would not be undermined by embracing the company’s position, which the company argued only applied when liability arose from individualized circumstances. Justice Liu noted that – notwithstanding US Bank’s protestations – the company was taking a “very categorical” position that in this kind of case (a misclassification involving outside sales) reliance on statistical evidence for a liability finding would violate the company’s due process.

Justice Liu addressed what he called the “overhang of uncertainty” that the company was arguing could not be dispelled by statistics, but only by unlimited live testimony. He pointedly asked defense counsel, “None of those inferences [created by statistics and other forms of common proof] can dispel any uncertainty, except to hear testimony straight from a person’s mouth?” Justice Liu then addressed the fallacy that an employee’s recollections – in a situation where neither he nor the company kept precise records – would necessarily be superior to other forms of class action proof. “Employees themselves are making estimates. These things are very imperfect,” he presciently observed. Justice Liu asked the defense counsel and his listening colleagues, "Why would we privilege that information – live testimony – which is all relying on inference and gap-filling – over evidence concerning policies and company expectations?”

Ultimately, as Wynne argued, defendants are entitled to due process, but not absolute process. Class actions are superior in many employment, consumer, and other matters where small individual damages or the threat of retaliation would tend to prevent wronged individuals from stepping forward to assert their rights, and where judicial economy would best be served by deciding a disputed legal question once: here, whether the BBO position was primarily an inside (non-exempt) or outside sales job. Though plaintiffs did not ultimately oppose a remand for a damages proceeding (the first damages finding was based upon data with a 43% margin of error), the Supreme Court should uphold class certification and the classwide liability finding in Duran, giving the trier of fact’s findings and the trial court’s handling of the proceedings over many years the due deference they deserve.

I hope the whole Court was listening to Justice Liu's questions and their answers from counsel. If he authors the final opinion, I am optimistic that it will be a fair result, for not only companies, but for workers and consumers around California.