SCOTUS Makes It Easier for Employees to Bring Group Lawsuits

May 19, 2016

The U.S. Supreme Court recently ruled in Tyson Foods Inc. v. Bouaphakeo that employees could rely on statistical and sampling evidence (“representative proof”) as a means of proving the number of hours they worked for purposes of establishing liability in a Fair Labor Standards Act (FLSA) donning and doffing case. However, the Court declined to adopt a clear-cut rule governing the use of representative proof, holding use of such proof is limited to circumstances in which an employer fails to keep adequate time records and by general principles of admissibility and relevancy.

Background: FLSA Liability

The FLSA requires covered employees who work more than 40 hours a week receive compensation for excess time worked at 1½ times their regular rate of pay. Congress amended the FLSA in the Portal-to-Portal Act to clarify time spent walking to and from workstations and other “preliminary or postliminary activities” is not compensable. However, the FLSA still requires employers to pay employees for activities that are “integral and indispensable” to their regular work, even if those activities are performed away from an employee’s workstation. Employers are also required to keep records of the wages, hours, and other conditions and practices of employment.

The FLSA allows employees to bring “collective actions” on behalf of “themselves and other employees similarly situated.” In practice, such claims are often paired with claims under state wage and hour laws and brought as class action lawsuits under Federal Rules of Civil Procedure.

Tyson Workers Sue for Donning and Doffing Pay

Peg Bouaphakeo and other employees who worked at Tyson Foods’ pork-processing plant in Iowa brought an FLSA collective action and class action lawsuit asserting state-law wage and hour claims based on their employer’s failure to pay them for time they spent donning and doffing protective equipment before and after their regular work time. Tyson paid its workers under a “gang-time” system that compensated them only for time spent at their workstations.

After the U.S. Department of Labor (DOL) obtained an order in federal court, Tyson began paying its employees “K-code time” for time they spent donning and doffing protective gear. The company ceased paying K-code time in 2007 and instead compensated some, but not all, employees for a portion of their time spent donning and doffing protective gear.

Tyson didn’t record the time each employee spent donning and doffing. Not all employees spent the same amount of time donning and doffing protective gear, and not all employees worked the same hours.

Employees Rely On Representative Proof

Because Tyson didn’t keep track of the hours its employees spent donning and doffing protective gear, Bouaphakeo and the other employees were forced to rely on statistical sampling performed by Dr. Kenneth Mericle. After studying the time spent by various Tyson employees donning and doffing protective equipment, Mericle averaged the time he observed during his tests to produce donning and doffing estimates for various departments at Tyson.

Using Mericle’s data, another expert, Liesl Fox, estimated the amount of uncompensated work each employee performed. Fox was able to exclude 212 employees who didn’t meet the 40-hour threshold and thus couldn’t recover back pay for uncompensated time. She opined that the remaining class members had been uncompensated for some time spent donning and doffing protective gear.

Bouaphakeo and the other employees asked the court to bifurcate the liability phase from the damages phase of the trial. Tyson objected, and both liability and damages were tried before the jury. The jury returned a verdict of $2.9 million in unpaid wages, without any explanation for how the award was calculated.

Tyson asked the district court to set aside the jury verdict, arguing that the court shouldn’t have certified the classes because there were variations in employees’ donning and doffing time and hours worked. The district court denied the motion, and the U.S. 8th Circuit Court of Appeals affirmed. The U.S.Supreme Court granted Tyson’s petition for review.

Court Allows Representative Proof On Case-by-Case Basis

Tyson made two arguments before the Supreme Court. First, it argued that the classes were improperly certified because there were individual variations in employees’ donning and doffing time and hours worked. Second, it argued that the damages award was inappropriate because the jury verdict would result in uninjured class members receiving damages to which they weren’t entitled. The Court rejected both arguments.

Addressing the first argument, the Court declined to establish a clear-cut rule governing the use of representative proof in all collective and class action cases. Instead, it held that “whether and when statistical evidence can be used to establish class-wide liability will depend on the purpose for which the evidence is being introduced” and the nature of the underlying claim. The Court noted that use of statistical evidence in class action proceedings is governed by the same rules as individual actions—that is, such evidence is admissible if it “is reliable in proving or disproving the elements of the relevant cause of action.”

Addressing the facts before it, the Court ruled that in accordance with its previous decision in Anderson v. Mt. Clemens, use of representative proof is permissible when an employer fails to keep records that employees need to establish individual liability. In other words, use of representative proof in this case was permissible because each employee would have been required to rely on representative proof in an individual lawsuit.

Because representative proof could have sustained a finding of liability with regard to each employee in an individual suit, it was proper to use it in a collective action. Thus, the Court rejected Tyson’s argument that use of representative proof “absolve[d] the employees from proving individual liability” and instead ruled that such proof “was a permissible means of making that very showing.” According to the Court, representative proof and the inferences drawn from it can be used to establish classwide liability as long as the inferences are “just and reasonable.”

The Court also rejected Tyson’s argument that use of representative proof was improper under its decision in Wal-Mart Stores v. Dukes. The Court explained that Dukes “does not stand for the broad proposition that a representative sample is an impermissible means of establishing class-wide liability.” The problem in Dukes was that the plaintiffs—a nationwide class of 1.5 million employees working at different stores, in different positions, and subject to different policies—were not similarly situated, and it was therefore improper to use representative proof to establish liability. By contrast, the Tyson employees “worked at the same facility, did similar work, and [were] paid under the same policy.”

The Court indicated that use of statistical evidence wouldn’t be proper in all FLSA cases: “Representative evidence that is statistically inadequate or based on implausible assumptions could not lead to a fair or accurate estimate of the uncompensated hours the employee has worked.” In other words, an employer can establish that representative proof is improper under the standard set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc. by showing that the methodology underlying the sample isn’t reliable or that the study isn’t based on sufficient facts and data. Here, Tyson made no attempt to exclude the representative proof under the Daubert standard.

The Court also rejected Tyson’s second challenge to the verdict. Tyson argued that the damages award was improper because the employees hadn’t demonstrated that there was a reliable mechanism to determine which class members were in fact injured and thus entitled to recover damages. In other words, the company claimed that the damages award couldn’t be supported because there was no method of apportioning it so that it would be distributed only to class members who suffered an FLSA violation. The Court avoided this question by concluding that it wasn’t yet ripe for determination “because the damages award has not been distributed” and the record didn’t indicate how it would be distributed.

The Court explained that it is theoretically possible to distribute the jury verdict in a manner that doesn’t compensate uninjured employees—for example, by working backward from the damages award, calculating the average donning and doffing time the jury must have used, and then applying that figure to each employee’s known work hours. The Court chastised Tyson for bringing this problem upon itself by objecting to the employees’ proposed bifurcation of the trial, which could have resulted in the jury limiting the members of each class who would be entitled to recovery before awarding damages.

Bottom Line

The Supreme Court was careful to indicate that its ruling in Bouaphakeo does not create a clear-cut rule governing the use of representative proof in all collective or class action lawsuits. Whether it’s permissible to use such proof must be decided on a case-by-case basis. Yet, based on the language in the Court’s decision in Bouaphakeo and its earlier decisions in Mt. Clemens and Dukes, the use of representative proof is restricted in several ways.

First, it appears that use of representative proof is permissible only in cases in which an employer fails to maintain adequate records and employees have no other means of establishing liability. Second, based on the Court’s decision in Dukes, it’s improper to use representative proof if the employees in the putative class or collective action are not similarly situated to begin with. Stated differently, representative proof will be permissible only if individual employees would be allowed to rely on such evidence in separate trials.

Third, representative proof is limited by the principles of Daubert. That is, to be admissible, such proof must be reliable and based on sufficient facts and data. Consequently, representative proof is subject to attack by showing that the underlying methodology was improper or there are other errors that make it unreliable for assessing liability on a groupwide basis. Finally, the Court’s decision indicates that representative proof doesn’t allow class members to recover damages if they cannot establish that they have in fact been injured. However, as the concurring and dissenting opinions indicate, it’s unclear how a district court can effectively “filter” damage awards in cases where employees rely on representative proof.

To avoid increased exposure to liability from representative proof, employers would be well-advised to keep records of hours employees spend in preliminary and postliminary work activities, regardless of whether those hours are compensated.

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This article, slightly modified to note recent updates, was featured in the May 2016 issue of the Wisconsin Employment Law Letter, which is edited by Axley Brynelson Attorney Saul Glazer and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.