RECENT FEDERAL CASES IN CALIFORNIA LIMITING WAGE AND HOUR CLASS ACTIONS

A series of recent cases demonstrate a growing tendency among federal courts in the Northern District of California towards greater scrutiny and limitation of wage and hour class actions.  For example, in Lu v. AT&T Services, Inc., the federal court upheld a clause in a severance agreement barring plaintiff, a former employee, from participating in or initiating any Fair Labor Standards Act ("FLSA") collective action, or any individual or class actions under the California Labor Code or other state laws, against his former employer, AT&T. 

Lu filed an action against AT&T under the FLSA, and on behalf of himself and a class under California wage and hour law, for unpaid wages, unpaid overtime, and various wage-related claims.  AT&T filed a motion to dismiss the lawsuit, asserting that a waiver of his claims (signed in Lu's severance agreement) barred him from pursuing the lawsuit.  Lu opposed, claiming that the FLSA collective action waiver violated public policy, and was unconscionable and unenforceable.  The court held that, although an employee's rights under the FLSA generally cannot be waived, this restriction only applies to the employee's substantive (not procedural) rights, and the right to bring a collective action under the FLSA was a procedural right.    Further, the court rejected Lu's unconscionability argument because he had a voluntary choice whether to sign the severance agreement containing the waiver, and the waiver explicitly stated that it did not release any claims that could not be released as a matter of law.  Thus, the court held that the collective action waiver was enforceable and granted the employer's motion to dismiss Lu's claims.

In another recent Northern District case, Hill v. R + L Carriers, Inc., the court granted the employer's motion to decertify a FLSA collective action of trucking dispatchers who asserted claims for misclassification, failure to provide meal and rest breaks, and failure to provide proper wage statements.  Because the class members were not similarly situated, and individual inquiries would be required to determine whether they were properly classified, the court concluded class treatment was not proper.  It noted that plaintiffs had conceded that two of the three types of dispatchers within the class were properly classified as exempt.  As to the third type of dispatcher, the court found that these dispatchers exercised differing levels of discretion and that the circumstances of each dispatcher's employment varied significantly. 

For almost identical reasons, the Northern District decertified two more FLSA collective actions in Beauperthuy v. 24 Hour Fitness USA, Inc. stating that the class members were not similarly situated and the employer's defenses required individualized inquiries.  The two classes consisted of: (1) personal trainers who claimed they were required to perform off-the-clock work and were not compensated for personal-training related "session hours" and (2) managers who alleged they were misclassified as exempt and denied overtime pay.  The court found the members' duties, responsibilities, and training substantially varied, and that the allegedly improper overtime practice in issue only affected about half of the class members.  Moreover, the court was further persuaded to decertify because the employer's defenses (i.e., the class members would qualify for various exemptions from overtime given the wide range of differing duties and responsibilities) would have required individual inquiries.       

These cases signal that the Northern District is taking a closer look at the appropriateness of class action claims in the wage and hour context, realizing that inherent factual disparities may render class treatment improper.  While such careful judicial scrutiny is emerging, employers should be cautious recognizing that state courts are still more likely to allow such class actions to proceed.