IBM Class Action Defense Case-Cooper v. IBM: Defense Prevails On Appeal From Class Action Judgment On Employees’ ERISA Claims Alleging Age Discrimination In Pension Plan Due To Time Value Of Money

In Case Of First Impression of Cash-Balance Pension Plans Under ERISA § 204(b)(1)(H)(i), Seventh Circuit Agrees with Defense that Time Value of Money is not Age Discrimination and Reverses Judgment in Favor of Class Action Plaintiffs

Older employees filed a class action against IBM alleging that its cash-balance defined-benefit pension plan violates the federal Employee Retirement Income Security Act (ERISA) prohibition against age discrimination. Cooper v. IBM Personal Pension Plan and IBM Corp., ___ F.3d ___ (7th Cir. August 7, 2006). Unlike a defined-contribution plan, “the personal account in a cash-balance plan is not separately funded”; rather, “IBM imputes value to the account in the form of ‘credits.'” Slip Opn., at 1. The district court rejected defense arguments that the plan did not violate ERISA because its terms are age-neutral, and entered judgment in favor of the class action plaintiffs because “younger employees receive interest credits for more years.” _Id._, at 2. The district court’s decision turned on its interpretation of the phrase “benefit accrual” under ERISA § 204(b)(1)(H)(i), which is not defined in ERISA or its regulations. _Id._, at 4. The district court used the definition of “accrued benefit” under ERISA, which is “an amount’ expressed in the form of an annual benefit commencing at normal retirement age.'” _Id._ In so doing, “the rule against discrimination then refers not to what IBM puts into the plan, but what the employee takes out on retirement” and thus discriminates against older employees because younger workers will receive a greater payout because they benefit from compound interest. _Id._ “This approach treats the time value of money as age discrimination.” _Id._, at 4.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Skirchak v. Dynamics Research-Class Action Defense Cases: Employer’s Dispute Resolution Program Barring Class Action Claims For Alleged Violations Of Federal Fair Labor Standards Act (FLSA) Unconscionable Massachusetts District Court Holds

Federal District Court Refuses Defense Motion to Dismiss Class Action and Enforce Arbitration Agreement Holding FAA (Federal Arbitration Act) Provision Barring Class Action FLSA Claims Unconscionable Under Specific Facts of Case

Employees filed a putative class action alleging violations of the federal Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq., for failure to pay overtime. The defense filed a motion to dismiss the class action complaint and to enforce a enforce the company’s “dispute resolution program” governed by the Federal Arbitration Act (FAA) which, in part, barred class actions. Skirchak v. Dynamics Research Corp., Inc., 432 F.Supp.2d 175 (D. Mass. 2006). (This class action defense has been raised in other cases discussed in separate articles.) The district court denied the defense motion, applying the well-settled rule that FAA agreements are subject to the standard defenses available in contract actions, including fraud, duress and unconscionability. Skirchak, at 178 (citing Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652 (1996)).

The court first addressed the language of FLSA itself, and acknowledged that Congress did not expressly guarantee the right to file class actions for FLSA claims. Skirchak, at 179 (citing Kuehner v. Dickinson & Co., 84 F.3d 316, 319-20 (9th Cir.1996)). But the court believed that the fact FLSA provides for collective actions, see 29 U.S.C. § 216, meant that Congress “implicitly” intended to allow such class actions, Skirchak, at 179.

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Class Action Defense Cases-Wang v. Chinese Daily News: Class Action Reporters Owed Overtime Under Federal FLSA And Defense Vacation “Buy Back” Policy Violated State Law And Required Payment At Employees’ Hourly Rate Of Pay California Court Holds

Federal District Court Rejects Defense to Class Action Claims Under Fair Labor Standards Act (FLSA) and State Law Claims, and Grants Summary Judgment in Favor of Class

News reporters filed in California federal court a class action against their employer that alleged numerous violations of federal and state labor laws, as well as California Business and Professions Code §§ 17200 et seq. (unfair competition). Wang v. Chinese Daily News, Inc., ___ F.Supp.2d ___, 2006 WL 1663638 (C.D. Cal. June 7, 2006). The parties filed cross-motions for summary judgment; the court denied the defense motion and granted the plaintiffs’ motion. In so doing, the court _inter alia_ rejected the defense argument that the reporters were exempt under the FLSA’s “creative professional exemption,” and ruled against the defense on the applicable statute of limitations governing California Labor Code § 226.7 claims (meal and rest periods). The opinion is quite detailed; this article discusses only some of the court’s holdings.

The employer had a policy that allowed vacation time to accrue and to carryover into following years, provided that “accumulated vacation days cannot exceed 30 days” and that “[m]oney shall be paid for unused vacation days exceeding 30 days at $64 per day ” Slip Opn., at 3. California law permits employers to adopt “no additional accrual” policies, so the question before the federal court was whether $64 per day was lawful or whether the employer was required to “buy back” the vacation time at the employees’ hourly rate of pay. The court concluded that this question turned on whether the “unused vacation days” should be deemed “vested” or “accrued.” Id., at 4. The court suggested that if the employer had followed its vacation policy then it would have been lawful; however, the evidence before the court established that employees routinely accrued upwards of 70 days of vacation and held that the in “actual practice,” then, the employer treated the vacation time as “accrued.” Id., at 5. Accordingly, the employer was required to buy back the vacation days at the employees’ hourly rate of pay. Id., at 6.

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Class Action Defense Cases-Smith v. Superior Court: Employee Is “Discharged” Under California Labor Laws Not Only By Involuntary Termination But also By Completion Of Specific Assignment

California Supreme Court Rejects Class Action Defense Argument that Employees were not Discharged by Completion of Job Assignment for Which They were Hired

A class action was filed on behalf of models that worked specific projects but were not paid immediately after the projects ended. Defense attorneys argued that the employees were not “discharged” within the meaning of California Labor Code § 201 because they were not fired or otherwise involuntarily terminated. Smith v. Superior Court, 39 Cal.4th 77, 45 Cal.Rptr.3d 394 (Cal. July 10, 2006). Plaintiff was hired as a “hair model” – an audience watched a stylist color and style her hair, she walked the runway, and she remained until defendant told her that she could leave. Plaintiff was to be paid $500, but defendant waited more than two months to pay her the money owed. Plaintiff filed a class action complaint alleging various causes of action, including violations of California Labor Code §§ 201 and 203. Slip Opn., at 2.

Section 201 of the Labor Code provides that if an employer “discharges” an employee, wages earned and unpaid at the time of discharge are due and payable immediately. Under section 203, an employer’s willful failure to pay wages to a “discharged” employee in accordance with section 203 subjects the employer to penalties. Slip Opn., at 1.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Overton v. Walt Disney Company: Disney’s Class Action Defense Prevails – Disney Not Required To Compensate Employees For Time Spent Riding Shuttle From Parking Lot To Theme Park California Court Holds

California Court Holds that Disney did not Require Employees to Drive to Work and to Take Shuttle from Parking Lot to Work, So Disney was not Required to Compensate Them for Travel Time Spent Riding Shuttle

A Disney employee filed a putative class action against the company seeking compensation under California state law for travel time based on the theory that certain employees were assigned to a parking lot located one mile from the Disneyland theme park, and Disney provided shuttles to transport them between the parking lot and the park. Overton v. Walt Disney Co., 136 Cal.App.4thh 263 (Cal.App. 2006). The class action defense attorneys argued that the California Supreme Court opinion in Morillion v. Royal Packing Co., 22 Cal.4th 575 (Cal. 2000) – which held that if an employer requires employees to travel in a company vehicle to work then it must compensate the employees for their travel time – did not apply. The defense moved for summary judgment on the grounds that the undisputed evidence established that Disney did not require employees to drive to work (and, in fact, encouraged and offered financial incentives to employees who used alternative means of transportation), and that Disney did not require employees to use the shuttle to travel from the parking lot to the theme park (some employees, for example, would walk or ride a bike). Overton, at 267-68. The trial court granted the defense motion for summary judgment and plaintiff’s lawyer appealed.

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Class Action Defense and Employment Law Issues–Thorne v. All Restoration: FLSA (Fair Labor Standards Act) Overtime Claim Rejected By Eleventh Circuit

Federal Court Cites Lack of Evidence Employee was Engaged in Interstate Commerce or in Production of Goods for Commerce to Establish Coverage Under Fair Labor Standards Act (FLSA) to Support Overtime Claim

Plaintiff Joseph Thorne appealed a district court order granting All Restoration Service’s defense motion for dismissal under Rule 50 as to Thorne’s overtime pay claims based on alleged violations of FLSA (Fair Labor Standards Act). Thorne v. All Restoration Serv., Inc., 448 F.3d 1264 (11th Cir. 2006). The district court had granted the defense motion on the grounds that “Thorne had not presented evidence at trial that he qualified for either enterprise coverage or individual coverage under the FLSA” because “‘[his] activities were local in nature and really did not affect interstate commerce in general,’” id., at 1265. On appeal Thorne challenged only the finding that he failed to establish individual coverage under FLSA. Individual coverage exists only if an employee “is engaged in commerce or in the production of goods for commerce,” 29 U.S.C. § 207(a)(1) (2005). The Circuit Court affirmed.

First, the Court rejected Thorne’s claim that regular use of his employer’s credit cards in the course and scope of employment means that he “engaged in interstate commerce.” First, the Circuit Court explained that the statute requires an activity that constitutes interstate commerce, not an activity that “merely affect[s]” interstate commerce. Thorne, at 1266 (citing McLeod v. Threlkeld, 319 U.S. 491, 497, 63 S.Ct. 1248 (1968)). All Thorne alleged was that he made purchases with the credit cards; he could not even establish whether the credit card bills came from out of state. Id., at 1266-67.

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Harris v. Investor’s Business Daily: California Class Action By Telemarketing Employees Not Preempted By Federal FLSA (Fair Labor Standards Act) California Court Holds

California Appellate Court Holds that Federal Fair Labor Standards Act (FLSA) May Serve as Unlawful Act for California Unfair Competition Claim, and Triable Issues of Fact Exist As to Overtime Pay Claim and Unlawful Deductions for Cancelled Subscriptions Claim

Employees who worked as telemarketers selling newspaper subscriptions filed a class action in California state court “alleging claims under the California Labor Code for overtime pay, unlawful commission deductions, and waiting penalties, and for unfair competition pursuant to [California Business & Professions Code] section 17200.” Harris v. Investor’s Business Daily, 138 Cal.App.4th 28, 31 (Cal.App. 2006). The claims were based on a compensation system whereby employees “were compensated on the basis of a point system which rewarded them for selling longer subscriptions, winning daily contests, and meeting weekly sales goals” but they were “subject to a ‘chargeback’ – a deduction from points earned on a sale if the customer cancelled the subscription within 16 weeks.” Id. To ensure that it complied with state and federal laws, the compensation system provided that employees would be paid no less than the prevailing minimum wage. Id. The complaint was later amended to a add a claim that alleged violations of the federal FLSA (Fair Labor Standards Act, 29 U.S.C. § 207(a)(1)) as the predicate for a new section 17200 violation. Id., at 32. The defense demurrer to the new 17200 cause of action was sustained without leave to amend, and the defense summary adjudication motion as to the balance of the class action claims was granted. Id.

The appellate court first addressed the FLSA-based 17200 claim. The defense had argued that FLSA preempted the claim “because traditional opt-out class actions are available under the California law, while, under FLSA, class members must opt in.” Harris, at 32. Relying upon several unpublished federal court decisions, id., at 34-36, the appellate court concluded that FLSA did not preempt section 17200, and that the purpose behind the federal “opt-in” requirement – “to protect employers from facing ‘financial ruin’ and prevent employees from receiving ‘windfall payments, including liquidated damages'” – is not implicated by a section 17200 claim “limited to restitution.” Id., at 33-34.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense And Employment Law Issues–Loving v. Johnson: Prison Inmates Are Not Employees Under Federal FLSA (Fair Labor Standards Act) For Working At Prison Fifth Circuit Holds

In Case of First Impression for Federal Courts in Fifth Circuit, Court Joins Sister Circuits in Holding that Fair Labor Standards Act (FLSA) Does not Cover Prisoners Working at Prison On July 7, 2006, the Fifth Circuit Court of Appeals considered the appeal of a prison inmate from a federal district court judgment dismissing his action as frivolous. Loving v. Johnson, ___ F.3d ___, 2006 WL 1868320 (5th Cir. 2006). The prisoner filed suit claiming that under the federal Fair Labor Standards Act, 29 U.

Class Action Court Decisions Class Actions In The News Employment Law Class Actions Uncategorized

Defense of Class Action Employment Law Issues–District Court Order Granting Defense Motion for Summary Judgment In Class Action Arising Out Of “English-Only” Policy Affirmed In Part And Reversed In Part By Tenth Circuit

English Only Policy Supports Claims for Disparate Impact, Disparate Treatment, Intentional Discrimination and Violation of Equal Protection

After the City of Altus, Oklahoma, implemented an “English-only” policy for its employees because “other employees could not understand what was being said on the City radio” when Hispanic employees spoke in Spanish to one another, plaintiffs filed a putative class action asserting numerous discrimination-based claims. Maldonado v. City of Altus, 433 F.3d 1294 (10th Cir. 2006). The district court granted the defense motion for summary judgment with respect to all claims advanced by the class action plaintiffs. The Tenth Circuit affirmed the ruling in part, but permitted the class action to proceed on several key grounds because it found a triable issue of fact as to the allegations of “disparate impact and disparate treatment under Title VII; intentional discrimination under [42 U.S.C.] § 1981; and violation of equal protection under 42 U.S.C. § 1983.” Maldonado, at 1298. We provide but a cursory review of the opinion here; a link to the detailed opinion may be found at the end of the article.

Cutting to the chase, in analyzing the class action claims the Tenth Circuit explained that “disparate-impact claims[] ‘involve employment practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and cannot be justified by business necessity.’” Maldonado, at 1303 (quoting Int’l Bhd. Of Teamsters v. United States, 431 U.S. 324, 335-36 n.15, 97 S.Ct. 1843 (1977) (italics added)). The Court further explained that in considering whether a plaintiff’s lawyer has established a prima facie case of disparate impacts (whether in class actions or otherwise), the Court employs a sliding scale: “The less the apparent justification for mandating English, the more reasonable it is to infer hostility toward employees whose ethnic group or nationality favors another language.” Maldonado, at 1305. Maldonado held that a prima facie case existed: “Here, the very fact that the City would forbid Hispanics from using their preferred language could reasonably be construed as an expression of hostility to Hispanics. At least that could be a reasonable inference if there was no apparent legitimate purpose for the restrictions.” Id.

Class Action Court Decisions Employment Law Class Actions Uncategorized

ViChip v. Lee: Employment Issues

California Federal Court Grants Summary Judgment Under CFAA (Computer Fraud and Abuse Act) Following Seventh Circuit Opinion In Citrin

On June 9, 2006, the federal district court for the Northern District of California granting summary judgment in favor of an employer (ViChip) against its former CEO, CFO, president, secretary, and sole director (Tsu-Chang Lee), for several wrongful acts, including violating the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030. ViChip Corp. v. Lee, 2006 WL 1626706 (N.D. Cal. 2006), Case No. C 04-2914 PJH. The court rejected defense arguments that Lee’s action did not fall within the class of conduct intended to be covered by CFAA because his actions were “authorized.” Slip Opn., at 11-12.

The case arose out of a 2002 joint venture entered into by ViVoDa (through its president Lee) with two other companies; the joint venture created ViChip to “research, develop, and outsource the production of a particular type of integrated circuit.” Slip Opn., at 1. All ViChip employees, including Lee, signed employment agreements that, in pertinent part, assigned to the company anything the employee invented and promised to maintain in confidence any proprietary information. ViChip filed a patent application in June 2003. Id., at 2.

Class Action Court Decisions Employment Law Class Actions Uncategorized