After Tyson, 6th Circuit reconsiders, again affirms certification of collective action and representative testimony at trial

By Kathleen Kapusta, J.D. and Lisa Milam-Perez, J.D — Responding to the Supreme Court’s grant, vacate, and remand order, which had vacated the appeals court’s prior opinion and remanded for further consideration in light of Tyson Foods, Inc., v. Bouaphakeo, the Sixth Circuit found that Tyson did not compel a different resolution and Tyson’s ratification of the Mt. Clemens legal framework and validation of the use of representative evidence supported the appeals court’s original decision.

Accordingly, the Sixth Circuit again affirmed certification of the case as a collective action and agreed that sufficient evidence supported the jury verdicts in favor of cable company technicians who sued under the FLSA alleging the employer implemented a company-wide time-shaving policy that required its employees to systematically underreport their overtime hours. The Sixth Circuit again reversed the district court’s calculation of damages. Judge Sutton filed a separate opinion concurring in part and dissenting in part (Monroe v. FTS USA, LLC, June 21, 2017, Stranch, J.).

The three named plaintiffs brought this FLSA case for unpaid overtime on behalf of themselves and others similarly situated technicians against FTS USA and its parent company, UniTek USA. The district court certified the case as a collective action, allowing 293 other cable technicians to opt in. The parties agreed to a trial and discovery plan limiting discovery to a representative sample of 50 opt-in plaintiffs with the employees choosing 40 and the companies choosing 10. Following completion of discovery, the district court denied the defendants’ motions to decertify the class and for summary judgment, finding that the class members were similarly situated at the second stage of certification. It also denied their motion to preclude representative proof at trial.

Jury verdict. The collective action proceeded to trial on a representative basis, and the employees identified 38 potential witnesses and called 24 witnesses, 17 of whom were class-member technicians. The defendants identified all 50 representative technicians as potential witnesses, but called only four witnesses—all company executives. The jury returned verdicts of liability in favor of the class, finding the employees worked in excess of 40 hours weekly without being paid overtime compensation and the defendants knew or should have known and willfully violated the law. The court used the jury’s factual findings to calculate damages for all testifying and nontestifying technicians in the opt-in collective action and ruled that the formula for calculating uncompensated overtime should use a 1.5 multiplier.

On appeal, the defendants challenged the certification of the case as a collective action, the sufficiency of the evidence as presented at trial, and the district court’s calculation of damages.

Legal framework. Before turning to the defendants’ arguments, the appeals court first addressed the legal framework for collective actions in the Sixth Circuit, observing that the core standards set out in its decisions were reinforced by the Supreme Court’s Tyson decision. Thus, said the court, the certification standards and burdens of proof for collective actions it set out and applied in its original opinion here were confirmed by Tyson, which “approved the use of representative evidence in a FLSA case similar to this one and expressly reaffirmed the principles set out in Mt. Clemens.” Explaining that Tyson reinforced the remedial nature and underlying public policy of the FLSA and explicitly declined to set broad rules limiting the types of evidence permissible in FLSA collective actions, the court concluded that the decision did not change its analysis in this case.

Certification as collective action. Turning to the district court’s refusal to decertify the collective action, the court noted there was evidence showing that regardless of location, the employees worked in the same position, had the same job description, performed the same job duties, and were subject to the same timekeeping system (recording of time by hand) and compensation plan (piece rate). There was also evidence of a company-wide policy requiring technicians to underreport hours that originated with FTS executives. While the dissent argued that the employees alleged “distinct” violations of the FLSA and “define the company-wide ‘policy’ at such a lofty level of generality that it encompasses multiple policies,” the court noted that neither the statutory language nor the purposes of FLSA collective actions require a violating policy to be implemented by a singular method.

Multiple methods, same policy. As to the dissent’s assertion that the employees’ claims do “not do the trick” because a “company-wide ‘time-shaving’ policy is lawyer talk for a company-wide policy of violating the FLSA,” the court explained: “That an employer uses more than one method to implement a company-wide work ‘off-the-clock’ policy does not prevent employees from being similarly situated for purposes of FLSA protection.” Further, said the court, it has approved damages awards to FLSA classes alleging that employers used multiple means to undercompensate for overtime, and other circuits have too. Thus, the court found the district court did not abuse its discretion in finding the employees were similarly situated.

Individualized defenses. Rejecting the defendants’ argument that they were denied the right to raise separate defenses through examining each individual plaintiff on the number of unrecorded hours he or she worked because the court had allowed representative testimony and an estimated-average approach, the appeals court noted that several circuits, including the Sixth, hold that individualized defenses alone do not warrant decertification where sufficient common issues or job traits otherwise permit collective litigation.

The defenses asserted against representative testifying technicians were distributed across the claims of nontestifying technicians, the court pointed out, and the jury’s partial acceptance of these defenses, as evidenced by its finding that testifying technicians worked fewer hours than they claimed, resulted in a lower average for nontestifying technicians. The technicians’ representative evidence allowed appropriate consideration of the individual defenses raised here, said the appeals court, finding the district court did err in refusing to decertify the collective action on the basis of the defendants’ claimed right to examine and raise defenses separately against each of the opt-in plaintiffs.

Fairness and procedural impact. The degree of fairness and procedural impact of certifying the case also supported certification, said the Sixth Circuit, noting that this case satisfied the policy behind FLSA collective actions and Congress’ remedial intent by consolidating many small, related claims of employees for which proceeding individually would be too costly to be practical.

Espenscheid. And while the defendants argued that the Seventh Circuit’s decision in Espenscheid—which affirmed the decertification of a collective action seeking unpaid overtime—compelled decertification here, the court explained not only was Espenscheid based on Seventh Circuit authority at odds with Sixth Circuit precedent, the facts and posture of the case also distinguished it, and thus it was simply not controlling. Accordingly, the court affirmed the district court’s certification of the case as a collective action.

Sufficiency of evidence. While the defendants challenged the allowance of representative testimony to prove liability for nontestifying technicians, the court noted that in FLSA cases, the use of representative testimony to establish class-wide liability has long been accepted. Further, other circuits overwhelmingly recognize the propriety of using representative testimony to establish a pattern of violations that include similarly situated employees who did not testify. Tyson, which held representative evidence to be permissible in a FLSA case certified under Rule 23, confirmed the continued validity of these precedents.

Further, the court found that technicians offered testimony from 17 representative technicians and six managers and supervisors, as well as documentary evidence including timesheets and payroll records, to prove that FTS implemented a company-wide time-shaving scheme that required employees to systematically underreport their hours. Based on the trial record and governing precedent, the court found the evidence here sufficient to support the jury’s verdict that all the technicians, both testifying and nontestifying, performed work for which they were not compensated.

Damages. As to the use of an estimated-average approach to calculate damages for nontestifying technicians, the court noted that the defendants had an opportunity at trial to present additional evidence to rebut the technicians’ evidence but failed to do so. Stressing that the jury found fewer unrecorded hours than testifying technicians claimed, the court pointed out that the defendants partially refuted the inference sought by the technicians, and their defenses were distributed to make the damages more exact and precise, as the Mt. Clemens framework encourages. Thus, the average number of unpaid hours worked by testifying and nontestifying technicians, based on the jury’s findings and the estimated-average approach, resulted from a just and reasonable inference supported by sufficient evidence.

Calculation. After rejecting the defendants’ assertion that the district court took the calculation of damages away from the jury in violation of the Seventh Amendment and finding that the defendants waived any right to a jury trial on damages that they may have had, the court turned to the lower court’s method of calculating the hourly rate in a piece-rate system. Here, said the appeals court, by not recalculating hourly rates to reflect the actual increased number of hours FTS technicians worked each week, the district court used a higher hourly rate than would have been used if no violation had occurred, which overcompensated technicians and required the defendants to pay more for unrecorded overtime hours than recorded overtime hours. For the damages calculation to be compensatory, hourly rates must be recalculated with the correct number of hours to ensure that the technicians receive the pay they would have received had there been no violation. Further, said the court, while the FLSA entitles piece-rate workers to an overtime multiplier of .5, the lower court used a multiplier of 1.5, which resulted in overcompensating the technicians. Finding that reversal of the district court’s calculation of damages did not necessitate a new trial on liability, the court remanded for a recalculation of damages.

Dissent. “[T]he only way in which representative proof of liability—evidence by some claimants to prove liability as to all—makes any sense is if the theory of liability of the testifying plaintiffs mirrors (or is at least substantially similar to) the theory of liability of the nontestifying plaintiffs,” Judge Sutton pointed out in a separate opinion concurring in part and dissenting in part. “The same imperative exists at the damages stage, where the trial court must match any representative evidence with a representative theory of liability and damages.” In Sutton’s view, however, the various trial judges who presided over the case below did not heed these requirements—mistakenly certifying a single collective action (with no subclasses) and approving a means of assessing damages that amounted to a Seventh Amendment violation.

All or nothing. The heart of the problem was the all-or-nothing approach to certifying the collective in this case, according to Sutton. There were three different ways in which the employer violated the FLSA, according to the plaintiffs. A “jury could accept some of their theories of liability while rejecting others, and yet the verdict form gave the jury only an all-or-nothing-at-all option,” Sutton wrote, or it could find specific violations at a certain locale and not others. “What, then, is the jury tasked with delivering a class-wide verdict to do? It must say either that the defendants are liable as to the entire class or that the defendants are liable as to no one—when the truth lies somewhere in the middle.” There is a risk of an unfair outcome either way: imposing classwide liability based on “representative” testimony even though some supervisors followed the law, or denying classwide liability based on “representative” testimony when some supervisors breached it.

Subclasses. Yet there was a ready solution to the problem, Sutton noted: The employees could simply have divided themselves into subclasses, one for each theory of liability asserted. “That is a tried and true method of collective-action representation, and nothing prevented plaintiffs from using it here.” While the majority countered that this would compel workers to bring separate class cases for each separate type of alleged violation (e.g., one action for “donning” and a separate collective action for “doffing”), that “level of granularity” isn’t required, Sutton responded, “and crying wolf won’t make it so. All that’s required is an approach that allows plaintiffs to litigate their claims collectively only when they can prove their claims collectively.”

“That representative proof works in some cases does not mean it works in all cases. The question—always—is who can fairly represent whom,” Sutton added in parting ways with the majority. And, while the court below didn’t have benefit of the Supreme Court’s Tyson Foods decision, that case “confirms all of this and more.” And the district court did have the Seventh Circuit’s Espenscheid holding for guidance, which Sutton cited favorably here—and rejected the majority’s attempts to distinguish it from the case at hand.

Sutton also rejected the plaintiffs’ insistence that since the defendants agreed to representative discovery, they necessarily agreed to representative proof at trial, explaining that “to take the one step does not require the other.” It was necessary to gather information about both groups of plaintiffs by conducting discovery in order to determine whether one group is representative of another. But after taking depositions, the defendants determined the selected employees were not representative of their peers, and so objected to the use of representative proof at trial, and then three more times. “We have no right to penalize them for failing to raise this objection before discovery when the targeted problem did not materialize until after discovery was complete.”

Finally, there was the Seventh Amendment, which “bars this judge-run, average-of-averages approach” used by the court here, Sutton argued. After the jury awarded damages to the 17 plaintiffs who testified, the court “on its own and without any jury findings” extrapolated that award to 279 additional plaintiffs. Yet Tyson Foods “confirms the jury’s starring role in determining damages,” Sutton noted (pointing out that the Tyson Foods jury had in fact halved the damages recommended by the expert). The jury here simply might not have thought it appropriate to extrapolate damages to the other plaintiffs, as the court did, and the court didn’t tell the jury it was going to average the damages calculations together in making a classwide finding. “All the [jury] instructions did, in effect, was tell the jury that the judge would calculate damages. But it should go without saying that a court cannot correct a Seventh Amendment violation by informing the jury that a Seventh Amendment violation is about to occur.”

Source: After Tyson, 6th Circuit reconsiders, again affirms certification of collective action and representative testimony at trial