The Fourth Bite at the Apple Uncovers a “Worm” for Duane Reade
Just last week, we offered a web training to our clients highlighting the continuing challenges faced by employers as they strive to comply with state and federal wage and hour laws. A June 9th decision by New York District Judge Paul Oetken in Mani Jacob et. Al. v. Duane Reade Inc. et al., denying Duane Reade’s fourth attempt to fight the certification of a class of assistant managers in a wage/hour case, is yet another illustration of this issue.
- Once again, the question of whether lower-level managers qualify as ‘exempt’ from overtime bedevils a major retailer. The decision clarifies that, to fit that definition, the retailer needs to give the manager real autonomy and real decision-making authority.
- It is also clear from the decision that there is a continuing trend in the federal courts, creating a relatively easy path to class certification for plaintiffs in wage/hour litigation.
- The recent changes in the FLSA salary thresholds, discussed in our blog on May 31, will only make FLSA compliance more challenging.
The Jacob case dates back to 2011, when plaintiffs, a group of assistant store managers (“ASMs”) at Duane Reade, sued the pharmacy chain claiming that they were wrongly classified as exempt and should in fact be eligible for paid overtime. The retailer pushed back, claiming that these plaintiffs were exempt under either the “administrative” or “managerial” exemptions, and that the disparities in their individual duties and employment terms did not support litigation of these issues on a class-wide basis. Rejecting those arguments, Judge Oetken first certified a class of 250 ASMs in 2012 under the FLSA’s “collective action” standard. After additional discovery, a larger “opt out” class of 750 ASMs was certified in March 2013, under the New York Labor Law. In an interesting twist, later in 2013 the Judge de-certified the classes on the issue of damages, but then declined to de-certify the two classes on liability.
In a significant decision in January 2015, the Second Circuit affirmed class certification.
(See also our related articles on class certification: Supreme Court Limits Wal-Mart, Approves Representative Proof in Employee Class Actions; and Supreme Court Refuses to Review $188M Class Action Verdict Against Wal-Mart Based Upon “Trial by Formula.”)
Undeterred, Duane Reade most recently went back to Judge Oetken to ask him to reconsider the class certification issue, citing “new evidence” which it claimed had been uncovered in later discovery.
Asking a judge to reconsider a past decision is always an uphill battle, as you are (basically) telling the judge he is wrong and asking the judge to potentially reverse himself. If this is going to be undertaken, it has to be based on something very new – a new legal precedent or new evidence that has been discovered since the first decision was issued. What was clear from the tenor of the recent decision is that Judge Oetken was frustrated, felt that the “mélange” of allegedly ‘new’ evidence presented by Duane Reade was “unconvincing”, and that the record supported his original findings that a class should be certified.
The issue which Duane Reade presented to Judge Oetken was whether new evidence, which defendant claimed was discovered since his 2012 and 2013 decisions certifying the classes of ASMs, was sufficient to convince him to reconsider and reverse those decisions. The judge was extremely unconvinced that there was any ‘new’ evidence at all, or that any of the evidence in the record should support a reversal.
In fact, he seemed more convinced on this motion that the issue of the exemptions should be litigated on a class-wide basis.
First analyzing the legal issue of commonality, the court found that the depositions of the ASMs revealed that their duties were “sufficiently similar” to allow for class certification. The judge seemed especially persuaded by the ASMs lack of independence in making management decisions. He noted that most ASMs testified that they looked to the store manager or human resources to approve hiring and termination decisions, and that most ran the stores alone only when the manager was on vacation or otherwise unavailable. The only ASMs who made hiring decisions were a few who were specifically designated to be in “hiring” roles. To quote the court: the “ASMs feel generally responsible for the management of the store, but recognize that the store manager or district manager has the final word on (supervision and scheduling).” (p. 6)
The court rejected Duane Reade’s attempt to highlight differences in the ASMs duties, finding that “‘Commonality does not require plaintiffs to show that class members perform identical duties – an impossible task,’ but only that they are ‘largely consistent…, which lends itself to common determination.’” (p. 11)
Duane Reade had also attempted to rely on ‘self–evaluations’, forms which the ASMs were asked to fill out after the suit was filed, describing their duties. The court gave these self-evaluations little weight, noting that the ASMs were told that they were to be relied upon for promotion decisions and thus were regarded as “puffery”. The judge also noted that ASMs reported filling out the forms using Duane Reade’s templates. In short, the court basically rejected these documents entirely.
On the issue of “predominance”, the court held that it had previously found that common questions had predominated over individual ones, and that the record developed since his last decision in 2013 had “reinforced the Court’s conclusion that the common questions overwhelm the individualized differences as to class members” . . . and that all ASMs “share(d) primary job responsibilities, and also have a similar understanding of their role in the (Duane Reade) organization.” (p. 15)
The Court also rejected Defendant’s arguments that the 2nd Circuit’s decision, in Fox v. Searchlight Pictures, 811 F. 3d 582(2d Cir 2015) where a determination of class certification was reversed, mandated a different conclusion. Judge Oetken found that the evidence in the record in Jacob had shown that the duties of the ASMs were “substantially similar” across Duane Reade stores, making the case very different from Fox.
Thus, the Jacob case will now move forward, to additional discovery or to a trial on the issue of liability, and later damages. On that issue, it would seem that the Court – while it did not make any final findings – has reached some preliminary conclusions that the evidence supports the plaintiff’s arguments that they were not exempt.
What can other employers take from this decision?
- First, the legal standard for certification of a class / collective action under the FLSA and state law remains relatively uncomplicated, and the path to certification seems to favor plaintiffs. Courts generally will not allow minor differences between the duties of potential class members to deter certification.
- Second, if you have assistant managers or supervisors who are classified as exempt, it is crucial that those employees be given independent authority to make managerial decisions. If these managers do not exercise authority, independent of senior management, there is a real risk that they will be viewed as non-exempt. In the Jacob case, Judge Oetken highlighted the fact that the ASMs seemed only to act after either a manager or HR had authorized their decision. Plainly, this to him was not managerial authority.
- Finally, pick your battles in litigation and approach reconsideration with kid gloves. Duane Reade was plainly frustrated with the original class certification decisions, but it is not clear that it had strong grounds for asking the judge for reconsideration. Sometimes it is best in litigation to take a ‘loss’, then lick your wounds, and move on to fight the next issue before the Court, rather than telling a judge (again) that he was wrong and asking that he reverse himself.
Tags: duane reade