A federal judge in Georgia recently denied conditional collective-action certification for a proposed class of more than 65,000 hourly employees of the national restaurant chain Steak ‘n Shake.  While the court’s opinion is notable in several respects, its most striking feature is the court’s apparent receptiveness to evidence that undermined the plaintiffs’ claims on the merits and put the employer’s overarching business practices in the proper context for the court. 

In Beecher v. Steak'n Shake Operations, Inc., two hourly employees brought a suit against Steak ‘n Shake on behalf of all of the national restaurant chain’s employees nationwide, alleging that Steak ‘n Shake violated the FLSA’s minimum wage and overtime provisions. Specifically, they alleged that Steak ‘n Shake’s managers were incentivized to keep their labor costs low and, therefore, improperly shaved hours from employee time records to avoid paying overtime and improperly inflated tips to avoid paying a minimum wage differential to its hourly employees. 

In support of their bid for conditional certification, the two named and 21 opt-in plaintiffs submitted cookie-cutter employee declarations that reiterated the allegations in the complaint, print-outs of the company website that noted generic employee complaints about improper compensation, and numerous emails and reports in which management expressed concern about the accrual of overtime in an effort to manage their labor costs.  Steak ‘n Shake opposed plaintiffs’ motion by explaining that the adjudication of plaintiffs’ claims could only be done on a edit-by-edit basis and, therefore, they were not suitable for collective treatment.  In support, Steak ‘n Shake submitted scores of evidence that undermined plaintiffs’ allegations, including manager declarations that detailed numerous legitimate business reasons why edits were made to time and tip records.  This seems to have struck a chord with Judge Orinda Evans, who recognized that the individualized nature of the claims could result in “correction-by-correction mini-trials of more than 2 million corrections made to time and tip records of the putative class.”  Steak ‘n Shake further attacked the merits of plaintiffs’ claims by providing evidence that demonstrated that the company paid more than $18 million in overtime and $1.3 million in minimum wage differentials to the proposed class during the limitations period.  

Even though courts do not usually consider the merits of the parties’ claims at the conditional certification stage, these merit based arguments seem to have influence the judge’s opinion about the absence of a uniform policy or procedure that violated the law.   The court noted that the evidence provided by Steak ‘n Shake “undercut some of the Plaintiffs’ broad assertions that all hourly-paid employees were not properly compensated” and held that the mere existence of a national practice of reviewing and sometimes revising hours and tips received “is not enough glue to hold [the] proposed class together . . . neither is the fact that Defendant generally discourages managers from allowing overtime.”    

The court also determined that the number of plaintiffs in the case was simply too small, and its members too homogenous, to suggest that there was sufficient interest in joining from other members of the large proposed class: “twenty-three Plaintiffs, twenty of whom worked in one state and almost exclusively in four stores, is insufficient to conditionally certify a nationwide class of 65,000 employees.”   

Given the court’s opinion, employers should not be afraid to proffer evidence at the early stages of litigation that goes to the merits of the case and undercuts plaintiffs’ allegations.  Moreover, even if the court does not consider such evidence on the merits, a company may be able to influence a judge’s opinion by simply putting its overarching business practices in proper context and re-framing the terms of the debate.