California Court Holds Class Certification Properly Denied in Store Manager Misclassification Case

A California appellate court recently affirmed the denial of class certification in a misclassification case involving managers and assistant managers at Sears auto centers. In Dailey v. Sears, Roebuck and Co., the court rejected the plaintiff’s argument that liability could be determined on a class-wide basis, holding that the trial court acted within its discretion when it denied class certification based on evidence showing a substantial variation in the way different managers allocated their working time. A copy of the court’s opinion can be downloaded here.

Plaintiff William Dailey worked as an assistant manager and manager at the Sears auto center in Carlsbad, California from 2007 to 2009. Sears classified all auto center managers and assistant managers as exempt from overtime. In April 2009, Dailey filed a class action lawsuit against Sears on behalf of himself and a proposed class of all Sears auto center managers and assistant managers who worked in California during the previous four years. In his complaint, Dailey alleged that uniform policies and procedures effectively required all managers and assistant managers to work at least 50 hours per week, and that a majority of their working time was spent performing nonexempt work. Dailey alleged that the duties of the managers and assistant managers was “virtually identical” at all Sears auto centers throughout California. In his motion for class certification Dailey submitted declarations from himself and four other managers stating that they spent most of their working time performing nonexempt work. He also argued that representative sampling of the class members could be used to determine both liability and damages.

In opposing class certification, Sears presented declarations and deposition testimony from 21 class members and six corporate managers. The declarations stated that wide variations existed with respect to how managers and assistant managers allocated their time, and that auto center managers had substantial discretion to set their own weekly work schedules, adjust staffing levels, and make adjustments to displays and pricing. Sears’ evidence also tended to show that managers and assistant managers spent a majority of their time on managerial tasks, but that the amount of time spent on nonexempt tasks varied substantially, anywhere from 1% to 40% of their working time. The trial court denied certification, finding that individual issues predominated over common issues.

The Court of Appeal held that the trial court acted within its discretion in denying class certification, holding that the existence of uniform policies is not by itself sufficient to support class treatment. Rather, the proper focus is on how much time class members spend on exempt versus nonexempt tasks. The court further held that the trial court acted within its discretion in crediting one party’s (in this case, Sears’) evidence over another, and that doing so was not an improper evaluation of the merits of the case.

The court also held that the trial court properly rejected Dailey’s proposed plan to determine liability by employing representative sampling techniques. The court explained that even if sampling might be permissible to determine liability in some cases, it was not proper in this case given the predominance of individual issues among the class members.

This case is good news for California employers who may be faced with wage and hour class actions alleging employee misclassification. It is also a timely reminder to employers that the job duties of exempt employees should be periodically reviewed to ensure that they are spending the majority of their working time on exempt, managerial tasks.

Aaron Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

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