Client Alerts
Class Certification Denied in Wage & Hour Case
March 2010
The California Court of Appeals recently upheld a Los Angeles Superior court ruling denying a motion to certify a class of restaurant managers allegedly misclassified as exempt from overtime wage laws. While the decision, Arenas v. El Torito Restaurants, Inc., is currently unpublished, it serves as a warning to plaintiffs' lawyers who try to include too many potential class members in a single action.
The plaintiffs were managers employed by El Torito, El Torito Grill, and GuadalaHarry’s restaurants. They moved for certification of three classes of managers: kitchen managers or chefs, department managers, and general managers. Class actions are appropriate where there are similar issues involved, and it would be beneficial to the judicial process and to the litigants to resolve the issues in one lawsuit instead of separate lawsuits. In order to certify a wage and hour class, the court must determine whether the issues in dispute are amenable to common proof. If the predominant questions of law or fact are not similar, i.e., if the "class" would require numerous "mini trials," then the class format is not appropriate.
The plaintiffs argued that the entire class of mangers were misclassified as exempt. Thus, common issues of fact and law existed and class certification was appropriate. However, the defendants submitted substantial evidence showing that the duties and time spent on individual tasks varied widely from one restaurant to another. Thus, determining whether the managers were non-exempt employees entitled to overtime pay was not amenable to common proof.
The Arenas Court also expressly rejected an oft-advanced argument by plaintiffs’ counsel trying to certify class actions. The argument is as follows: defendant employers cannot uniformly classify managers as exempt, then attempt to avoid class certification by arguing that the court must examine each individual employee’s tasks to determine whether the classification is correct. The Court rejected this position and held that "there is no estoppel effect given to an employer’s decision to classify a particular class of employees as exempt — whether right or wrong, or even issued in bad faith; instead, only the legally relevant issue to alleged misclassification is whether the exemption in fact applies." If the duties are similar, then the inquiry is susceptible to common proof but if they are not sufficiently similar, then class certification should be denied.
