Announcing that “class-wide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof,” the California Court of Appeal reversed an order denying certification of a class of restaurant managers who claimed they were misclassified as exempt employees and denied overtime pay in violation of California law. Martinez et al. v. Joe’s Crab Shack et al., No. B242807 (Cal. Ct. App. Dec. 4, 2013). The Court found that the trial court incorrectly focused on factual disputes regarding how the managers spent their time, rather than on the employer’s policies the managers alleged resulted in their misclassification. In so doing, the trial court improperly shifted the burden of proving the exemption to the employees, the Court noted.
Roberto Martinez and others (collectively, “Martinez”) worked as restaurant managers at Joe’s Crab Shack (“JCS”) restaurants in California. They were classified as exempt from overtime pay. Martinez, on behalf of himself and others similarly situated, sued JCS for unpaid overtime in violation of the California Labor Code, alleging JCS had misclassified them as exempt employees.
In support of a motion for class certification, Martinez submitted training and operations manuals and deposition testimony. According to this evidence, JCS’s hiring and training practices were uniform throughout the chain; it utilized an operations manual that applied to all restaurants and employees; and managerial employees were evaluated using the same form and procedure. All managerial employees were classified as exempt and were expected to work at least 50 hours per week. Martinez also submitted declarations showing that managerial employees were required to perform “utility” functions, filling in where needed as cooks, servers, bussers, hosts, stockers, bartenders or kitchen staff. The declarants estimated they each spent the majority of their time (ranging from more than 50 percent to 95 percent) performing hourly tasks.
JCS submitted declarations from potential class members showing that they spent the majority of their time performing managerial duties, and, when they performed utility functions, still were monitoring the restaurant and supervising and directing employees. Many of JCS’s managers opposed the litigation.
The trial court denied the motion for class certification. Martinez appealed.
When deciding a motion for class certification, California courts examine 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.” Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal.4th 319, 326 (Cal. 2004). The focus in a class action certification dispute is on whether common or individual questions are likely to arise in the action, rather than on the merits of the case. In general, if a “defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.” Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004, 1021-22 (Cal. 2012).
Martinez argued the trial court erred in denying certification because it focused on the individual employees’ duties, rather than examining the policies that allegedly resulted in their misclassification. The appellate court agreed. It found the trial court should have focused on the employer’s expectations and overall requirements of the job, which were susceptible to common proof, rather than the individual differences in actual job duties. The Court noted the managers’ claims centered on whether they consistently worked as cross-trained utility workers who could be assigned without impacting the employer’s budget. It found the trial court’s failure “to focus on the impact of JCS policies and practices on its managerial employees essentially shifted the burden of disproving the executive exemption to plaintiffs.” Significantly, the Court explained, class relief was appropriate “even if there were individual managerial employees whose work remained more than 50 percent managerial in nature, if [the employer’s] policies as implemented across California resulted in managerial employees being undercompensated for performing exempt work.”
The Court also found that Martinez was an adequate class representative, notwithstanding his inability to estimate the number of hours he spent performing exempt and non-exempt work. It stated that this issue need not be decided on a class basis. Rather, what was common to the managers “were their assertions their tasks did not change once they became managers; they performed a utility function and routinely filled in for hourly workers in performing nonexempt tasks; and they worked far in excess of 40 hours per week without being paid overtime wages.” However, the Court noted that a “larger problem” existed because the class included general managers who opposed the litigation. This “apparent conflict” was not “fatal,” the Court declared, suggesting that the trial court exercise its discretion to create sub-classes or exclude general managers from the class.
Finally, the Court said that in California, “class-wide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof.” Accordingly, the Court reversed the order denying class certification and returned the case to the trial court for further proceedings.
To minimize the chances of wage claims, employers should regularly review and audit their policies and practices with employment counsel to ensure their compensation systems are in compliance with California law.