Many employees, particularly professionals or paraprofessionals, prefer not to be bothered with “punching” in and out for their shifts or, more particularly, when they take a meal or a simple 15-minute break.  Tracking such punches is also an administrative hassle for the employer.  So, the solution for many employers is simply an auto-deduct policy.  If an employee works x hours, the system “auto-deducts” 30 minutes for a meal period.  Such systems typically have an override as well, so that if the employee does not take a meal period they can still be paid for it.  Although these policies can be found in many contexts, they are particularly popular in the hospital industry.

There is nothing illegal per se about auto-deduct policies.  As long as the employees receive at least the minimum wage and overtime, for example, they do not violate the Fair Labor Standards Act.  But such policies have been increasingly subject to class and collective action litigation contending that the employees were not able to take their meal periods due to workload (patient emergencies, for example), and somehow were not permitted to override the automatic deduction.

In Camilotes v. Resurrection Health Care Corp.pdf, Case No. 10-CV-366 (N.D. Ill. Oct. 4, 2012), the plaintiffs were non-exempt staff nurses who had worked for an employer that operated several Chicago area hospitals.  They contended that the employer’s auto-deduct policy caused nurses working at all of its hospitals not to be paid minimum wage or overtime.  They brought suit both as a collective action under the FLSA and as a Rule 23 class action under Illinois law.

Applying the now common two-step procedure, the court conditionally certified the FLSA collective action, and a total of 209 out of 5,029 nurses opted into the litigation.  With the original plaintiffs, this resulted in a total of 217 individuals, or less than 5 percent of the total, a very low number, and the opinion reflects that even a substantial number of those opted back out while the lawsuit was pending.

Following conditional certification, the defendant moved to decertify the FLSA class.  The court noted that the second, de-certification stage used a much higher standard than that used for conditional certification.  After reviewing the evidence, the court found that while all of the plaintiffs were nurses working for the same employer, and while there were system-wide policies relating to timekeeping and the meal and rest period and auto-deduct policies, there were many differences as well.  These included:

  • The class covered 8 different hospitals
  • Each hospital had its own human resources director
  • The plaintiffs and opt-ins worked in a total of 198 different departments
  • The plaintiffs and opt-ins worked different days, times, and shifts
  • The work environment differed based on the type of department
  • Different departments had different views on combining break and meal periods
  • Different departments had different policies on how to override the auto-deduct
  • Different supervisors administered the policies differently

Taken together, the court found that the situation of the plaintiffs varied.  Further, these variations also affected the defendant’s defenses, for example its defense that it was not aware that the time was being worked off the clock.  The court concluded that given all of these differences, “it would be impractical and unfair for this case to proceed as a collective action.”  It also specifically rejected the plaintiffs’ suggestion that the case be tried based on “representative” testimony, finding that under the circumstances such testimony could not be representative of the class as a whole.  The court granted decertification of the FLSA class and also denied the plaintiffs’ motion to certify a state law class on Rule 23(b)(3) predominance grounds.

Camilotes is an important case for several reasons.  It demonstrates, as we have discussed before, that FLSA collective actions that are conditionally certified are just as easily decertified under the higher second-stage standard.  It also reflects what might be called the plaintiff’s paradox:  seeking to certify a large class presents a larger threat to the employer, but also makes it much easier for the defendant to ultimately win decertification.  The case also reflects that auto-deduct cases are far from sure-fire winners for the plaintiffs.

The Bottom Line:  A court has decertified an FLSA collective action that relied on an auto-deduct policy for break and meal periods.