Tag Archive for 'class action'

Wage and Hour Lawsuits are on the Rise

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It looks like plaintiffs’ lawyers have their work cut out for them in a new breed of lawsuit that’s quickly grabbing hold of the nation.  “Wage and Hour” litigation is getting bigger, especially in federal court.  Wage and Hour claims typically involve situations where an employer fails to pay an employee minimum wage or overtime pay according to the standards set out in the Fair Labor Standards Act (FLSA).

Wage and hour claims are different from your usual employment lawsuits involving harassment or discrimination- those tend to involve only one employee in a somewhat isolated incident.  In comparison, these newer wage and hour claims we’re seeing can involve an entire class of employees- sometimes hundreds or even thousands working for the same company.  These class action suits can create huge chunks of losses for the employer, with many of them ending in settlements of anywhere from $10 to $90 million dollars.

Federal Judicial Caseload Statistics reports that well over 6,000 wage and hour lawsuits were filed in each of the years 2011 and 2010.  Overall, the federal courts have seen a 325% increase in these types of claims since 2001.  For anyone familiar with legal trends, this represents just an absolutely massive increase in labor cases.  These figures actually should raise some concern, especially for major employers who might be negatively affected by this new trend.  Why the sudden spike in wage and hour claims?

For starters, legal analysts suspect two distinct factors that may be linked to the increase in wage and hour claims, both of which have to do with exemption laws (if an employee is classified as “exempt” they may not be entitled to overtime pay).  First, it’s possible that many employers have been intentionally misclassifying employees as exempt in efforts to cut company costs.  Though this is illegal, with today’s economy, some outfits have been desperate enough to engage in this type of conduct.

The second, more complicated factor is that employers might be lacking a thorough understanding of wage and hour laws.  Exemption laws are difficult to navigate already; combine this with the many changes in the workforce that we’ve seen in the past decade, and it starts to become clear why so many employees may have been misclassified.  For example, wage-hour laws are not at all clear on many new developments like:

  • Alternative Work Weeks:  A good chunk of the working sector doesn’t follow a rigid, 9-5, M-F schedule anymore.  More and more people are working odd weeks, like M-Thu, and Sat., or weeks involving 10 hour days.  Nurses and other care providers are especially known for working non-standard shifts.  Exemption laws also don’t specifically define what a “working day” is and so it’s getting more difficult to monitor employee hours.
  • Odd Management Structures:  Exemptions apply especially to persons working in executive, administrative, or professional positions.  In practice, more and more businesses are actually being run by persons with titles like assistant managers rather than actual managers.  This makes it difficult to classify managers, since exemption eligibility is based on duties performed and not generic job descriptions.
  • Interns:  Full-time unpaid internships are particularly prone to employment abuse, as we’ve blogged about in the past.  Many have debated about whether interns should be paid minimum wage, and some employers may be engaging in FLSA violations with regards to their interns.
  • Work-related Technological Advancements:  Technology always seems to throw a wrench in the legal system.  Here we’re talking specifically about mobile devices that allow a person to put in work while away from the office.  It makes it much more difficult to determine exemption status if a worker is constantly performing work tasks while away from the office.

At first I thought this was just another case of the frivolous lawsuit craze that is (sadly) characteristic of our so-called “litigious society”.  But upon closer examination, to me it looks like something more serious is going on here.  I mean, there are literally thousands of these cases being filed, all of them having to do with FLSA and exemptions.

Yes, these people need to be compensated for lost pay, but I don’t think this is a case of bandwagon litigation.  Something seriously needs to be done on the employers’ parts, such as getting a better grasp of wage and hour laws.  Part the danger here is that one employer’s mistake or intentional disregard of the law can affect entire classes of workers.  And also the law itself needs to be updated in this area.  The Fair Labor Standards Act is well over 70 years old, which makes it a dinosaur by legislative standards.  No one has done anything in a long while in terms of incorporating information-age changes into FLSA.

If you actually think about it, business owners and managers need to start protecting themselves against wage and hour claims, because they can be deadly to a company, especially class action lawsuits.  We’re talking major, major losses for corporations, not to mention the time and frustration involved for laborers.  If these trends continue (which it looks like they will), more and more lawyers might be billing for overtime pay as well.

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Top Legal Stories of 2011

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2011 has been an interesting year. The economy remained sluggish. The 2012 presidential campaign got into full swing. We had a war in Libya (remember that?). Of course, this is a law blog, so I won’t dwell on those subjects except to the extent that they have a significant legal angle.

But there’s still plenty to write about – 2011 has been an incredibly eventful year in the legal world. Important constitutional questions about the power of the president were brought to the forefront of public discussion. The Supreme Court agreed to hear what may well be its most momentous case in decades. A longstanding policy regarding sexual orientation and military service was changed. And there were plenty more, far too many to discuss in a single blog post.

So, without further ado, here are what I view to be the most important legal news stories of 2011, in no particular order, and chosen by my subjective opinion of which stories were the most interesting, along with a bit of arbitrary whim. So, it’s the definitive list, obviously.

  1. The legality of the military invention in Libya: 2011 may be remembered as a year of profound change in the Middle East, with one of the most notable cases being in Libya, where the U.S. and its allies, backed by a UN resolution, launched air strikes, helping rebels overthrow Moammar Ghadaffi. However, there has been some controversy over America’s role in the operation. Under the War Powers Resolution, passed after the Vietnam War, the President must obtain the approval of Congress for any overseas military engagement lasting longer than 60 days. President Obama did not seek such approval (to be fair, every president since the law was passed has ignored it, arguing that it’s unconstitutional). Given the divided political culture in Washington, some politicians and commentators have argued that the U.S. intervention in Libya was illegal. This controversy brought the War Powers Resolution back into the public limelight, and sparked a heated (though brief) public debate about this important constitutional issue.
  1. “Don’t ask, don’t tell” is repealed: The policy that barred gay and lesbian soldiers from serving openly in the U.S. military was repealed in December of 2010, and the repeal went into full effect in September of 2011. As of the writing of this blog post, there have been no reports of any significant problems resulting from the repeal. There are predictions that, in the long run, allowing gays and lesbians to serve openly will have broader positive implications for expanding the legal rights of gays and lesbians.
  1. Massive employee lawsuit against Wal-Mart thrown out: The largest class-action lawsuit in U.S. history (and it’s now likely to hold on to that record forever, for reasons that will soon be obvious) was thrown out by the U.S. Supreme Court on the grounds that the proposed class – comprising 1.6 million current and former female Wal-Mart employees – was too large. The court never ruled on the merits of the plaintiffs’ claims that Wal-Mart engaged in a pattern of gender discrimination, leaving the plaintiffs open to bring a new lawsuit with a smaller class of plaintiffs, which marks a trend of the Roberts court limiting consumer class-action lawsuits.
  1. New York legalizes same-sex marriage: The state of New York became the largest state in the country to legalize same-sex marriage. It also marked the first time a Republican-majority state legislature passed such a law. Once again, it brought into focus the fact that the federal government does not recognize these unions, denying lawfully-married same-sex couples the many federal benefits that come with marriage.
  1. States take immigration enforcement into their own hands: Several U.S. states set themselves up for a legal showdown with the federal government over who has (and doesn’t have) the power to enforce federal immigration laws. Immigration is generally considered the exclusive domain of the federal government. However, with immigration becoming a hot-button political issue, many states began passing laws giving state authorities unprecedented authority to enforce immigration laws. The federal government, concerned about diplomatic relations with foreign countries and maintaining a consistent nationwide immigration policy, is challenging some of these laws in court. You can bet that 2012 is going to see much more of this.
  1. Supreme Court to hear healthcare reform cases: Legal challenges to President Obama’s signature legislative accomplishment – the Patient Protection and Affordable Care Act – began almost immediately after the law was passed. Federal courts considering the constitutionality of the “individual mandate” (the provision of the law that requires almost all Americans to obtain health insurance or pay a financial penalty) have come out on both sides. The Supreme Court, as everybody predicted, is going to hear the case, and hopefully resolve the issue once and for all. However it rules, you can bet that the court’s decision (expected in the summer or fall of next year) is going to be one of the top legal news stories of 2012.
  1. Free speech applies to the worst of the worst: Westboro Baptist Church, the group best known for its virulent anti-gay stances, and its claims that every bad thing that happens in the world is a result of God punishing humanity for allowing gay people to exist, and picketing the funerals of U.S. soldiers killed overseas, which, naturally, the friends and families of these soldiers found incredibly upsetting. One family sued the church for intentional infliction of emotional distress. The Supreme Court ruled that the church’s actions were protected by the First Amendment. Most legal commentators reluctantly agreed that the court’s ruling was correct, even if almost everyone found it personally distasteful.

2011 was definitely an eventful year in legal news. And considering that most of the stories discussed above are far from over, I wouldn’t be too surprised if a lot of them make the 2012 list, as well.

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Walmart Settles Class Action Netflix Lawsuit, Plaintiffs Can Now Afford That Cup Of Coffee

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How many times have you walked around your neighborhood, running errands and generally being the baddest dude on the planet, when you suddenly realize that the freezing chill of winter has rendered you numb with cold.  “Oh wait,” you say, “a coffee shop in the distance, I’ll just pop in for a cup of joe to warm my body and spirit.”  But oh no!  Upon entering said café you find that you have no cash on hand.

Well now you can kiss that problem goodbye, because thanks to the latest class action settlement from Walmart you now have a chance to get enough money to buy that bottomless cup of coffee you were eyeing all along.  Oh, but actually you may want to seek a cheaper beverage because this isn’t the 1950s anymore and that whopping $1.50 you get for filing your claim can’t get you much of anything anymore.

Overly long, but amusing, introductory paragraphs aside, Walmart has just thrown in the towel on its latest class action lawsuit.  The company has agreed to payout a total of $27.25 million to Netflix DVD subscribers.  You may have already gotten an email about it and likely probably deleted thinking it was a Nigerian money scam.  It’s not, by the way.  So if you were a Netflix DVD subscriber between May 19, 2005 to September 2, 2011, you have until February 14, 2012 to file a claim on this website to get a piece of that settlement.

How much of a piece you ask?  Well, as it turns out, only about a $1.50 of that $27.25 million settlement.  The attorneys heading the class action have requested about $6.8 million of the settlement for legal fees and an additional $1.7 million for costs.  At last count, Netflix had about 23.6 million subscribers since last September, so with a little arithmetic and legal history, which states that usually only about half of all class action members ever file a claim, the typical payout per subscriber will only be a slightly over a buck per head.

But hey, money is money, right?  And it’s better that the actual claimants get some of it rather than let it all go to the attorneys.  The bigger head scratcher to most people is probably why they’re getting money in the first place and why Walmart, unlike Netflix, decided to call it quits before the case ever got to court.  Well my friends, it’s a funny tale to say the least.

For those of you following the case, you’ll know that the lawsuit was first filed in 2009 by a few angry Netflix DVD subscribers who didn’t like the sudden increase in Netflix’s monthly fees.  What happened was that back in early 2000s, Walmart launched an ill-fated mail-order DVD rental service á la Netflix.  The new program didn’t do well enough to be very profitable, but it did serve as a thorn in Netflix’s side because it funneled potential subscribers away from the internet DVD rental king and cut into their potential profits.

The two companies were at an impasse: if Walmart shuttered the program, they’d lose out on a potential revenue stream, but if they kept it going it would have taken a lot more investment to keep it afloat.  So the two companies instead decided to come to an agreement.  In exchange for bowing out of the DVD rental business, Netflix would promote Walmart’s DVD sales business and Walmart in turn would promote Netflix.  It was all hunky-dory except for the fact that what they did sounds a lot like collusion.  And thus a class action lawsuit was born.

“But wait!” you may be asking. “What’s wrong with companies promoting each other? Aren’t companies and people free to contract as they please?”

Well, yes and no.  Certainly everyone is free to enter into and set the terms of their contracts.  The problem is that even if the parties agree to a contract, it doesn’t necessarily make the contract itself legal.  For instance, an agreement to buy heroin is completely void because the subject matter of the contract is illegal.

However, the problem here isn’t that renting and selling DVDs is illegal, but rather the collusive nature in the way that the companies went about it.  Collusion is the name of the game.  It happens particularly often in cases where companies or people are the sole players in an industry, in other words when a monopoly or oligopoly is involved.  Netflix is the most dominant DVD rental provider in America today. By Walmart opting out of the market and working with Netflix to help further cement itself, Walmart gave Netflix not only an unfair advantage against other companies looking to jump into the same territory, but it also gave Netflix the ability to essentially dictate the price for online DVD rentals.  And that’s the harm.  Because when Netflix decided it needed to increase its fees, subscribers had few other options to turn to in order to get their DVD rental fix.

But did collusion happen here?  There certainly always some good arguments against it.  I mean, Dish Network’s Blockbuster company is arguably a viable alternative for consumers unwilling to pay Netflix’s fees.  However, the problem is that there isn’t much more competition out there other than Blockbuster.  So because of Netflix’s position in the industry, they still would be able to dictate the prices as their resources far outpaces that of the competition.  And because of this, I think Netflix is making the wrong move by continuing to wage their losing battle against this class action.  Walmart was smart to opt out when it did as they’ll probably save much more money in the long run.

Though in the end, all this legal mumbo jumbo probably won’t be much to calm all you cranky Netflix clients out there.  But hopefully you’ll get some pleasure out of that $1.50.  Maybe the payout will come soon enough before the price for a bag chips increases again.

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Walmart Gender Discrimination Lawsuit Starting Again at Square One

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I blogged a few months ago about the Supreme Court, in a 5-4 decision, nixed a huge class action lawsuit against Walmart, alleging that the company engaged in discrimination against its female employees, passing them up for promotion in favor of men.

However, after several years of procedural wrangling (without ever touching on the merits of the lawsuit), the Supreme Court finally ruled earlier this year that a class action could not proceed, because the proposed class (all of Walmart’s female employees, as well as many former female employees. – about 1.5 million people) was too large, and would be completely unmanageable, considering the distinct factual and legal issues that each individual plaintiff might raise.

But as I said, the Court didn’t rule on the merits of the case. So, there’s nothing stopping the plaintiffs from filing a new, more narrowly-tailored lawsuit. With the same lead plaintiff, a new case has been filed in a federal court in California. This one has a much smaller class – it only covers Walmart’s California employees – about 45,000 people.

That’s still a very large class action, but it’s by no means the largest one that has ever been approved, and then been litigated to a final conclusion.

I think this is probably the better strategy for the plaintiffs to pursue. First of all, it’s far more manageable for the courts, which means it has a better chance of surviving motions to dismiss on the grounds that the proposed class is too large.

It also, in theory, allows the plaintiffs to do a more thorough job of vetting potential members of the class, ensuring that the issues they would raise are similar enough to warrant lumping their claims together. Furthermore, the media coverage of the case might focus more on the substantive issues this time around, rather than focusing on the record-breaking class size, and the resulting spectacle, of the previous one.

Also, by tailoring the plaintiff class more narrowly, and by region, it allows the plaintiffs to file multiple, simultaneous class-action lawsuits against Walmart across the country. Defending against several smaller class action lawsuits is probably more expensive and time-consuming than defending against just one, even if it is much larger. This might put more pressure on Walmart to settle these cases quickly, rather than take them to trial.

Of course, this says nothing about whether or not Walmart actually did discriminate against women, or if it still does. It’s worth noting that, since the first class action was filed several years ago, the company has instituted new policies designed to put more female employees on the management track, and changed its employee and manager training to make their policy against gender discrimination clearer. That’s very good news. However, if they did engage in discrimination in the past, they still can, and should, be held accountable.

For that reason, I hope that these class action lawsuits aren’t dismissed. Although we’ve made great strides in addressing gender and racial discrimination in recent years, we still have a long way to go.

Remedying this depends, in part, on holding employers who engage in discrimination accountable. And if the plaintiffs are able to prove that Walmart did, in fact, engage in discrimination, and a court holds the company liable, it will show that even the biggest corporations are not above the law. And given today’s political climate, where people on both the left and the right seem fed up with a lack of accountability, this would be a small but significant step in the right direction, and send a message to workers that at least one branch of government still cares about protecting their rights.

And, if the plaintiffs are unable to prove by a preponderance of the evidence that Walmart engaged in discrimination, the lawsuit will, and should, fail.

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Can You Sue Over a Credit Card Fee?

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Over the last few years, the Supreme Court, under Chief Justice John Roberts has, without question, taken a hard turn to the right. This is not a condemnation or commendation; it’s simply a statement of fact. Whether you view this as a good or a bad thing depends largely on your political views.

However, critics of the current court have plenty to complain about lately, with some arguing that the Court is tripping over itself to make it as easy as possible for large corporations to ride roughshod over the rights of consumers. The court has held, in a few cases, that corporations can essentially contract themselves into immunity from certain consumer lawsuits, essentially by putting a provision saying “you can’t sue us” into their standard contracts or terms of use.

This case at issue involved a consumer lawsuit against a credit repair organization, which issued its customers a low-limit Visa card, as part of its strategy to help them rebuild a credit rating. However, the lawsuit alleged that the company charged hidden fees, which actually made their customers’ credit ratings worse than they were before, in some cases.

Under the terms of the 1996 Credit Repair Organizations Act, a federal law designed to protect consumers from fraud and/or exploitation by credit repair companies, consumers have a right to sue credit repair services that engage in deceptive practices. The law clearly states that the right to sue under those circumstances cannot be waived by the consumer, even if they sign an agreement purporting to waive that right.

However, the contract that consumers entered with the credit repair organization stated that consumers could not sue in court, and that any disputes arising from the contract would be resolved in private arbitration. Arbitration is a process by which two parties to a dispute agree to have a private entity (usually a professional arbitrator) resolve their dispute, as opposed to taking it through the judicial system. Arbitration is sometimes cheaper and less time-consuming than litigation in the courts. However, arbitration agreements often call for arbitration in a location that’s likely to be very inconvenient for the weaker party (in this case, the consumer) to get to. For example, if most of a company’s customers are in big cities on the West and East coasts, it might set the location for arbitration somewhere in the Midwest.

Furthermore, there are some concerns that arbitrators might be biased against consumers.

In this case, the credit repair company argued before the Supreme Court that their arbitration clause satisfied consumers’ right to sue for deceptive practices.

Judging by the oral arguments (summarized and linked to in the HuffPo article linked above), and the questions that the Justices asked the attorneys, it appears that a majority have already made up their mind, and they’re going to come out the side of the company, not the consumers.

Justice Ginsburg, long known as one of the more liberal Justices on the current Supreme Court, seemed to be the only one who indicated any sympathy to the arguments of the lawyer representing the consumers.

Recently, I blogged about another recent Supreme Court decision that would also seem to limit the rights of consumers who think they’ve been wronged by corporations to seek redress. In that case, the Court held that companies, through so-called “adhesion contracts,” can draft their way out of a class action lawsuit.

“Adhesion contracts” are contracts, generally between large companies and individual consumers, which are drafted by the party with the most bargaining power (usually the company), and presented to the consumer on a take-it-or-leave-it basis, with no real opportunity to negotiate the terms. Contracts for cellphone coverage are a prime example. The court held that a provision in such a contract that bars consumers from suing the company in a class action lawsuit, and instead directs them to individual arbitration, which would be far more expensive for an individual consumer.

The Supreme Court held that these provisions are perfectly valid.

In all of these cases, the court was not involved in constitutional interpretation. Instead, it was interpreting statutes that were passed by Congress. This means that if Congress disagrees with these rulings, it could change the law. And if they’re not inclined to do so, we can elect members of Congress who are.

Of course, whether or not that will actually happen depends largely on the willingness of consumers to educate themselves about these issues, and form informed opinions about them.