Trial Court did not Abuse Discretion in Denying Class Action Certification of Store Manager Misclassification Claim because Individual Questions Predominate California Appellate Court Holds
Plaintiffs filed a putative class action against their former employer, Big Lots Stores, alleging violations of California’s Labor Code for failure to pay them overtime or to compensate them for missed meal and rest periods. Mora v. Big Lots Stores, Inc., ___ Cal.App.4th ___ (Cal.App. April 18, 2011) [Slip Opn., at 2]. According to the allegations underlying the class action complaint, defendant “uniformly misclassifies its store manager as exempt employees based on their job description alone rather than on consideration of actual work performed, which involves a significant amount of time on nonexempt tasks.” Id. Specifically, plaintiff’s class action complaint alleged that Big Lots operates “closeout retail stores in California, [and] has intentionally and improperly designated certain employees as ‘exempt’ store managers in order to avoid payment of overtime wages and other benefits required by [California law].” Id. Plaintiffs’ counsel moved to certify the litigation as a class action; the trial court denied the motion finding “the company does not operate its stores in a standardized manner and has no systematic practice of misclassification of managers.” Id. Plaintiffs appealed. The California Court of Appeal affirmed.
The evidence presented by both sides was substantial. Plaintiffs cited defendant’s deposition testimony to establish that Big Lots “classified all its store managers in California as falling within the ‘executive exemption’” as its basis for failing to pay them overtime or provide meal and rest breaks. Mora, at 4, Plaintiffs also submitted declarations from 44 putative class members to “demonstrate that the basic job duties of store managers in California are the same regardless of location and that Big Lots runs all its stores in the state in a uniform and standardized manner.” Id. These declarations also stated that “Strict compliance with corporate manuals and actions plans, which set forth state-wide policies and procedures, is required; and such compliance is ensured by district managers, who supervise all store managers.” Moreover, “training of store managers is standardized, and their job performance is evaluated on the same basis and on the same form regardless of purported store-to-store differences.” Id. The declarations “averred that store managers are primarily engaged in nonexempt activities and routinely work more than 40 hours per week,” and that they “typically spend more than 75% of their time performing the same physical labor and routine clerical tasks” as nonexempt employees. Id., at 4-5. Finally, plaintiffs submitted an expert declaration in support of their motion for class action treatment. Id., at 5-6.
In opposition, defendant “submitted declarations from 141 putative class members, a number of district managers, deposition testimony from 23 of the 44 witnesses whose declarations had been submitted in support of the motion and expert opinion testimony based on in-store observations of 44 store managers.” Mora, at 6. In brief, defendant’s evidence painted a picture of stores and store managers that there individual in nature. For example, the stores range from 20,000-60,000 square feet in size, and the employees in each store range from 20-60 sales associates (which can vary within each store depending on the season). Id. Further, “[e]ach store manager performs different activities and spends different amounts of time on those activities depending on the needs of the store.” Id. Big Lots expects its store managers “to be primarily engaged in exempt work” and there is no evidence to suggest that the company has “any common policy or practice requiring managers to spend more than half their time on nonexempt activities.” Id. From this, defendant argued that “whether any individual manager has been misclassified as exempt…requires an individualized inquiry into the activities that were actually performed in each workweek (what they were and how much time was spent on them),” because “[t]he actual time spent on exempt activities, depending on individual, store, season, and other factors, varies from 40% to 100%.” Id.
In denying class action treatment, the trial court concluded that plaintiffs “had failed to meet their burden to establish a well-defined community of interest among proposed class members.” Mora, at 9 (citation omitted). This test “involves three factors: ‘(1) predominate common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.’” Id. (citation omitted.) The trial court found that individual questions would predominate because “the activities performed by managers of Big Lots stores vary substantially based on the size of the store, the type of merchandise the store carries, the number of employees supervised, the time of year, the personality and judgment of the individual store manager and additional, periodic challenges at particular stores (for example, remodeling),” and because “Big Lots does not operate its stores or supervise its managers in a uniform and standardized manner that would permit a determination of liability for misclassification of managers on a class-wide basis.” Id., at 9-10. The court found that plaintiffs’ claims were not typical of the class of the “myriad of individualized factors that affect the types of activities and the time [store managers] spend on particular tasks,” id., at 10. And the trial court found plaintiffs were not adequate class representatives because each of them had “checkered work histories” so “[t]he trial of their claims would necessarily focus on their own problematic employment histories, and would not present facts typical of the claims in the class.” Id. Finally, because of the numerous individual issues presented, the court found that a class action would not substantially benefit the class. Id.
Reviewing the trial court’s order for abuse of discretion, see Mora, at 11, the Court of Appeal affirmed. Cutting to the chase, the appellate court refused to substitute its judgment for the judgment of the trial court. It recognized that the trial court could have accepted plaintiffs’ evidence and properly granted class certification, id., at 13, but applying “the deferential standard of review” appropriate in these cases, the Court of Appeal concluded that it must “necessarily hold the trial court reasonably concluded the putative class representatives’ theory of recovery was not susceptible to common proof,” id., at 15. The appellate court also found substantial evidence supported the trial court’s findings. See id., at 16 et seq. Accordingly, the appellate court affirmed the lower court order denying class action certification. Id., at 23.