In a welcome decision for employers, Tracy v. NVR Inc., the federal District Court for the Western District of New York granted the employer’s motion to decertify a collective action under the FLSA and denied the plaintiffs’ motion to certify a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure. The case involved a putative class of Home Sales and Marketing Representatives (SMRs) who claimed they were misclassified as exempt outside sales representatives.
The key issue in the case was whether the SMRs satisfied the outside sales exemption requirement that they work away from the employer’s business for the requisite period of time each week. In denying certification of the Rule 23 state law class action, the Tracy court cited the U.S. Supreme Court’s recent decisions in Comcast Corp. v. Behrend, which held that class certification requires a classwide method of measuring damages, and Dukes v. Wal-Mart Stores Inc., which held that commonality requires not only common questions, but also common answers to those questions. Applying these principles, the court found that because the SMRs worked in different locations, under different supervisors, and performed duties outside of their offices in varying degrees and in different ways, their claims “as well as any determinations to be made concerning damages – are too highly individualized to form the basis for a class action.” Moreover, the court concluded, “the interests of judicial economy would not be served by the hundreds of fact-intensive ‘mini-trials’ that a class action of this nature would require.”
Similarly, as to the FLSA collective claims, the court reasoned that the broad variations in the SMRs’ work activities made it “impossible to make a blanket determination concerning the FLSA exempt status of the entire class of putative plaintiffs in this case . . . .” In this regard, the court noted that the evidence demonstrated a wide variety of employment practices and time management requirements among the SMRs so that dozens of mini-trials would be required to determine whether individual SMRs satisfied the outside sales exemption.
The Tracy decision is significant for a number of reasons. First, the decision is a notable exception to the many decisions by the district courts in the Second Circuit, which have generally granted certification in both FLSA collective actions and Rule 23 class actions. Although the court specifically noted that “it seems beyond peradventure that the Second Circuit’s general preference is for granting rather than denying class certification,” the court relied on Comcast and Dukes to buck the trend. In doing so, the Tracy court joins the court in Roach v. T.L. Cannon Corp., the only other decision to date within the Second Circuit to apply Comcast to deny class certification in a wage and hour case. Second, the decision is important because of its potential application to other outside sales misclassification cases in other industries, in which sales and marketing representatives who call on customers typically engage in varied activities, in different locations, for varied periods of time outside of the office.
While it remains to be seen how the Second Circuit and courts in the Southern and Eastern Districts of New York will apply Comcast to Rule 23 wage and hour class actions, and how all courts will apply Comcast to FLSA collective actions, so far Comcast has raised the burden on plaintiffs seeking class certification to show not only commonality as to their claims but also that their damages must be measurable on a classwide basis.