This white paper is the culmination of the research and experiences of U.S. employment lawyers of McDermott Will & Emery LLP. It provides an overview of the law involving class and collective employee actions and provides recommendations from the U.S. members of the Human Resource Practice Group on affirmative steps that employers may take to defend against class and collective actions by current and former employees.

This paper addresses class certification in the federal courts, defenses against certification of employment discrimination class actions in federal courts, collective actions under the Fair Labor Standards Act and class action practice in California. In each section of the paper, efforts are made to provide useful advice to employers. Faced with a trend toward proliferation of collective and class employee actions, employers are well served by being proactive in analyzing their work environment and implementing changes that may help insulate them from certification. This paper provides some suggestions in this regard, as well as advice regarding defenses that may be asserted if an action is filed against an employer.

This paper provides general guidance only, and employers are advised to consider having outside counsel conduct a workplace audit to suggest company-specific affirmative steps to help defend against collective employee actions. McDermott has a cadre of experienced class action and employment litigators throughout the United States who are available to provide guidance in this area.

Overview Of Federal Court Class Action Certification

Under Rule 23 of the Federal Rules of Civil Procedure, a person bringing a lawsuit may petition the court for class-action certification to consolidate a large number of claims sharing similar factual and legal foundations against a defendant into one lawsuit. The plaintiff(s) seeking certification must overcome two hurdles to attain certification. First, the plaintiff(s) must show the court that the four prerequisites to a class action under Rule 23(a) have been satisfied: numerosity, commonality, typicality and adequacy of representation. If these four prerequisites are established, then the court will evaluate whether the action is maintainable under Rule 23(b). Under Rule 23(b), the court will have to consider whether the time, effort and money saved by litigating all the claims at once will outweigh the relinquishment of any individual's constitutional right to bring suit against the opposing party in the future. This section provides a brief overview of these requirements.

Rule 23(A): Prerequisites To A Class Action

NUMEROSITY

One or more members of a class may sue as representative parties on behalf of all class members only if class members are so numerous that joinder of all members is impracticable.1 There are no rigid numerical tests for measuring impracticability of joinder.2 However, courts have recognized numerical ranges of class size that serve as general guidelines for satisfaction of the numerosity requirement. Generally, class sizes consisting of less than 21 members are inadequate, while class sizes with over 40 members are adequate. 3

Class sizes with between 21 and 39 members vary in terms of practicability of joinder.4 As a result, in addition to class size, a court will consider surrounding circumstances such as:

  • Judicial economy arising from the avoidance of a multiplicity of actions
  • Geographic dispersion of class members5
  • Financial resources of class members6
  • The ability of potential claimants to institute individual suits7
  • Requests for prospective injunctive relief that would involve future class members8

Depending on the outcome of the analysis of these factors, courts may even allow certification for classes with less than 21 members and deny certification for classes with over 40 members.9

COMMONALITY

The group seeking certification must demonstrate that their claims share similar factual and legal questions that would make consolidation appropriate.10 Doing away with individual proofs, class actions can only proceed where the court is presented with claims premised on common questions of fact, such as the application of a common policy or practice to an entire class, and common questions of law, such as those presented by nearly identical claims (e.g., a failure to hire claim under federal and state law). If proposed class claims involve too many individualized assessments of facts or distinct legal claims, commonality will not be found and class certification will be denied.

TYPICALITY

The typicality requirement seeks to ensure that the class representatives’ interests are aligned with the interests of the other class members by presenting similar factual and legal questions characteristic of the entire class.11 Typicality refers to the individual characteristics of the named plaintiffs or the proposed "class representatives" in relationship to the class.12 At least one of the proposed class representatives must have proper standing to bring all the claims of the class against the opposing party.13 Essentially, this requirement analyzes whether there is a sufficient nexus between the claims of the class representatives and the class at large.

ADEQUACY OF REPRESENTATION

The class representatives seeking certification must show that no conflicts of interest exist between the representatives and the rest of the class.14 Conflicts of interest may involve the type or amount of relief sought, types of claims or defenses available and the nature of affiliation with class counsel.15 Courts evaluate the adequacy requirement with the utmost care because a class action receiving final judgment will bar any other claims on the issue, denying potential class members their constitutional rights to bring suit in the future. The class representatives should have a significant stake in the outcome of the litigation to ensure that they will zealously advocate not only on their own behalf, but also on behalf of the absent class members. A small financial stake will not preclude a finding of adequacy.16

The appointed class counsel may not be a plaintiff, nor may he or she be closely affiliated with the class representative, because of the possibility that the counsel will settle for a favorable financial benefit on behalf of himself or the representative rather than litigating for the benefit of the entire class.17

Rule 23(B): Permissible Types Of Class Actions

Under Rule 23(b), class actions generally are structured as opt-out or no-opt-out classes. With an opt-out class, the court directs notice to be provided to potential class members and allows them to opt out of the class by a deadline, allowing them to pursue individual claims and not be bound by any judgment in the class action. With a no-opt-out class, the class members are not provided a choice to opt out of the class and are bound by decisions affecting the class, regardless of their interest in being a member of a class.

Rule 23(B)(1)—No Opt-Out

Class actions under 23(b)(1) may be appropriate when there is a risk that individual suits will bring inconsistent results for the defendant opposing certification, barring it from properly rectifying the conduct or treatment at issue without violating any of the various judgments against it.18 Equitable (injunctive or declaratory) relief must be the primary remedy sought, but monetary relief may be requested as long as it is secondary to equitable relief.19 Unlike actions for monetary damages, the class members generally have no right to opt out or receive notice of the action because the absent class members have no financial risk tied up in the litigation. However, if some monetary relief is requested and the risk to the absent class members is substantial, the court may, in its own discretion, require an opt-out process and mandate that proposed class members receive notice of the action.20 Rule 23(b)(1) may be particularly appropriate in "limited fund" cases in which the defendant tries to fix the assets available to individual plaintiffs at an inadequate amount to satisfy all potential claims, thereby restricting recovery to those plaintiffs who bring suit first, leaving the remaining plaintiffs without relief. 21 Consolidating all of the claims into one class action ensures that a favorable result will provide relief to all participants.

Rule 23(B)(2)—No Opt-Out

Rule 23(b)(2) may be appropriate for actions where the opposing party has acted or refused to act on grounds applicable to the entire class.22 Civil rights cases most commonly fall into this category because the stated goal is to force the opposing party to change its conduct toward the entire class.23 As with Rule 23(b)(1), equitable relief must be the primary remedial measure, but monetary relief may be pursued if it is secondary to equitable relief. Class members generally have no right to opt out or receive notice of the action, but the court may use its discretion in requiring notice and the right to opt out, especially when monetary relief is requested and the risk of prejudice to class members is heightened.24

Courts differ on permissive forms of monetary relief under 23(b)(2). One court found that compensatory damages (which include back pay, the value of lost benefits and other forms of monetary relief necessary to make plaintiffs whole) could only be maintained in this category of class actions if the compensatory damages necessarily flowed from the equitable relief seeking to correct the opposing party’s conduct (otherwise known as incidental damages).25 Because the class sought compensatory and punitive damages requiring highly individualized assessments of injuries to each class member not necessarily flowing from the equitable relief, that court refused to certify the class under Rule 23(b)(2) because the assessment would ultimately detract from the efficiency of the action.26 Other courts, however, have taken a more lenient approach by permitting any type of compensatory damages, so long as equitable relief is still the primary relief sought.27

Rule 23(B)(3)—Opt-Out

When monetary relief is the primary relief sought, class members have an absolute right to opt out and notice is required so all class members are aware of the effects of a final judgment on their rights to pursue monetary relief against the opposing party in the future.28 The number and significance of common questions of law or fact between the class members must predominate over individual claims against the defendant (the predominance inquiry).29 Also, the court must be satisfied that the class action device is superior to litigating the claims separately, taking into account factors such as: the interests of class members who may fare better litigating individually, the nature and extent of pending litigation, the desirability of using one forum and the difficulties or inconvenience likely to arise (the superiority inquiry).30

Conclusion

This section provides a brief overview of the prerequisites that must be established to obtain certification of a class action in federal court. As such, it focuses upon the various factors considered by the courts when faced with a certification motion, but only as a surface level of analysis. To the extent that an employer is facing a potential class action, a more thorough analysis of these factors would be appropriate. However, for the purposes of this paper, this section should provide the background necessary to consider the defense to class certification that are discussed in the next section.

The Defenses Against Certification Of Employment Discrimination Class Actions In The Federal Courts

In defending against certification of employment discrimination class actions in the federal courts, a number of defenses can be asserted to attempt to demonstrate that the proposed class action does not satisfy the requirements of Rule 23. A survey of some of the more common defenses is set forth here.31

Challenge Numerosity

Although the following are some of the weaker defenses to a motion for class certification, employers can raise two challenges to numerosity:

  • Argue joinder is practicable and, therefore, class certification is not appropriate: When faced with an identifiable group of potential plaintiffs of a manageable size, an employer often should argue that joinder is practicable. Although prevailing in this approach leaves an employer facing a multi-plaintiff action, such a multi-plaintiff action is preferable because it does away with the possibility of class-wide proof, requiring each plaintiff to prove the elements of his or her claim. For this reason, we encourage the use of this defense where the facts allow for such an argument.
  • Argue that the proposed class is too large to be manageable: This argument may be available in cases in which the proposed class is extremely large. However, courts have certified classes consisting of members in the thousands and even millions, demonstrating that a large class size alone may not be a real deterrent to certification. For example, in a well-publicized nationwide discrimination suit against Wal-Mart, a court upheld certification for a class of over one million women and dismissed the contention that it "would necessarily be unmanageable."32 Thus, this defense has not been met with significant success in the courts, but may become more accepted in the future if courts find the management of these large classes to be too difficult in actual practice.

Challenge Commonality

Some of the stronger defenses to certification of class actions involving employment claims are those challenging the existence of commonality. Many employers have been successful when they argue that the law and the facts necessary to the analysis of the alleged discrimination against the proposed class members are too diverse to justify class treatment. General claims that all class members suffered discrimination because of their membership in an identifiable class are insufficient standing alone to establish commonality. Rather, to satisfy commonality, plaintiffs must assert that there was something about the specific pattern or policy of discrimination that affected all class members in some common fashion.33

The recent case law demonstrates that challenging commonality is one of the most effective means to defeat class certification. Some of the more effective arguments are outlined below.

  • Argue that the proposed class actions involve distinct claim: For example, in actions alleging a number of different types of claims—e.g., failure to promote, hostile work environment, wrongful termination—the courts have rejected certification because of the absence of a common legal issue or legal standard applicable to the claims.34
  • Argue that plaintiffs have not identified a common policy of practice: Conclusory or vague challenges to the results of all of an employer’s employment practices and not to a specific, common employment practice fail to meet the commonality requirement.35 Employers have been successful in defeating certification in cases in which they can establish that plaintiffs failed to identify a common policy that resulted in class-wide discrimination. Similarly, where employers can establish that the so-called "common policy" was applied based on the subjective analysis of different decision-makers, employers generally have been able to establish that the "common policy" was not applied with sufficient uniformity to support class-wide proof.
  • Argue that the terms of employment vary greatly across the class: This argument can be made with proposed classes involving managers and non-managers, union and non-union employees and employees in a wide range of positions and employees spread across a number of facilities. In such circumstances, many courts have found a lack of commonality.36
  • Argue that too large a number of decision-makers were involved to allow for there to be commonality with respect to the challenged decisions.37
  • Argue that statistics demonstrate that the alleged common policy has not resulted in disparate treatment of members in the protected class: Depending on the size of the class and the resources available, it may be advisable to retain an expert to conduct a statistical analysis to counter plaintiffs’ claim of class-wide discrimination. For example, an employer facing allegations of gender discrimination evidenced by a discrepancy of wages between men and women can conduct a statistical analysis that demonstrates that the discrepancy in pay can be accounted for by taking into consideration non-discriminatory factors.38

Challenge Typicality

In challenging certification motions, employers may be able to defeat certification by demonstrating that the claims of the proposed class representatives are not typical of the class. In general, conclusory allegations of discrimination are insufficient to establish typicality.39 Efforts to defeat certification have been successful when employers have been able to argue that the claims of the proposed class representatives are not typical of the proposed class.

  • Argue that the claims of the proposed class representatives are so distinct that they are not typical of the class: Based upon discovery, employers may be able to raise challenges to the typicality of the representatives’ claims if an employer can identify facts unique to the representatives that are not likely present for the class members, such as that they have signed a release, engaged in misconduct or are not suffering from the type of adverse employment actions challenged in the class complaint.40
  • Argue that the class is so broad and diverse that the proposed class representatives cannot be typical of the class: If an employer can establish that the class is very diverse, involving a large number of facilities, job types or skill levels, an employer may be able to show that the class representatives are not typical of the proposed class.41
  • Argue that a common policy did not impact the proposed class representatives in the manner challenged by the proposed class: For example, if the representatives were promoted in an action challenging promotion policies, the representatives may not be "typical" of the class.
  • Argue that decentralized decision-making means that the decisions challenged by the proposed class representatives cannot be typical of the entire class: At the essence, this argument relies on common sense in asserting that when decisions are made by different people not controlled by central management or central directives, the decisions affecting the representatives cannot be typical of the proposed class members.42

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Footnotes

1. Fed. R. Civ. P. 23(a)(1).

2. Moore’s Federal Practice, §23.22(1)(a) (2005); see also Cox v. American Cast Iron Pipe Co., 784 F.2d 1546, 1553 (11th Cir. 1986), cert. denied, 479 U.S. 883 (1986); Leitch v. MVM, Inc., 2004 U.S. Dist. LEXIS 14307, at *8 (E. D. Penn. July 22, 2004).

3. Cox, 784 F.2d at 1553 ("[G]enerally less than twenty-one is inadequate, more than [40] adequate, with numbers between varying according to other factors."); Leitch, 2004 U.S. Dist. LEXIS at *8 ("More than 40 people tend to be sufficiently numerous, while groups of 21 to 39 people may or may not meet the requirement depending on the surrounding circumstances."); Lawrence v. Town of Irondequoit, 246 F. Supp. 2d 150, 173 (W.D.N.Y. 2002) ("Courts will often find that the numerosity requirement has been met when the proposed class consists of 40 or more members and has not been met when the class has 21 or less members").

4. Lawrence, 246 F. Supp. 2d at 173 ("When a case falls into the ‘gray area between 21 and 40 class members’ courts are required to consider other factors"); Brown v. Eckerd Drugs, Inc., 669 F.2d 913, 917 (4th Cir. 1981) ("[I]f the class has between twenty-five and forty, there is no automatic rule and other factors become relevant.").

5. See, e.g., Ellis v. Elgin Riverboat Resort, 217 F.R.D. 415, 421 (N.D. Ill. 2003) ("[I]f class members are dispersed across a vast geographic area, joinder is less practicable."); see also Lawrence, 246 F. Supp. 2d at 173 (finding joinder not impracticable where class consists of 33 members, all of whom are residing in the same area); Andrews v. Bechtel Power Corp., 780 F.2d 124, 131-32 (1st Cir. 1985) (upholding denial of 49 member class where all members from same geographic area and joinder is practicable).

6. See, e.g., Rodriguez v. Berrybrook Farms, Inc., 672 F. Supp. 1009, 1014 (W.D.Mich. 1987) (finding certification proper where "potential class members are by definition ‘migratory’ and quite poor, making it impracticable, if not impossible, for the class members to be joined").

7. See, e.g., Aguayo v. Oldenkamp Trucking, 2005 U.S. Dist. LEXIS 22190, at *35-39 (E.D.Ca. Oct. 3, 2005) (granting certification where some potential class members are still employed with defendant and, thus, unlikely to institute suit); Jones v. Roy, 202 F.R.D. 658, 665 (M.D. Ala. 2001) (finding joinder practicable and denying certification for class of 21 where names and addresses of other class members are available); Lannin v. Southeastern Pennsylvania Transp. Auth., 176 F.R.D. 132, 147 (E.D. Pa. 1997) (class of 22 certified where "almost impossible" to find class members because did not know in what town they resided).

8. Robidoux v. Celani, 987 F.2d 931, 936 (2d Cir. 1993) (finding joinder impracticable where class members are distributed over entire state and are economically disadvantaged, and injunction would affect all potential class members); Paxton v. Union Nat'l Bank, 688 F.2d 552, 561 (8th Cir. 1982) (class certification proper where individual claimants could not individually obtain the broad based injunctive relief sought by the class).

9. See, e.g., Gaspar v. Linvatec Corp., 167 F.R.D. 51, 56 (N.D. Ill. 1996) (certifying class of only 18 members because single issue determined liability and plaintiffs dispersed throughout various states); Elliot Assocs. v. J. Henry Schroder Bank & Trust Co., 655 F. Supp. 1281, 1285 (S.D.N.Y. 1987), aff'd, 838 F.2d 66 (2d Cir. 1988) (refusing to certify putative class of 47 because joinder not impracticable).

10. Moore et al., supra note 1, § 23.23.

11. Moore et al., supra note 1, § 23.24.

12. Prado-Steinman v. Bush, 221 F.3d 1266, 1278-89 (11th Cir. 2000).

13. Moore et al., supra note 1, § 23.24.

14. Moore et al., supra note 1, § 23.25.

15. Id.

16. Moore et al., supra note 1, § 23.25; See also Robinson v. Metro-North Commuter Railroad Co., 267 F.3d 147 (2d Cir. 2001) (holding that class representative seeking purely injunctive relief could adequately represent a class seeking injunctive and monetary relief because the liability stage of litigation would determine the ultimate success of both claims).

17. Id.

18. Moore et al., supra note 1, § 23.40.

19. Id. at § 23.41-42.

20. Fed. R. Civ. P. 23(c)(2)(A).

21. Moore et al., supra note 1, § 23.42.

22. Moore et al., supra note 1, § 23.43.

23. Id.

24. Fed. R. Civ. P. 23(c)(2)(A).

25. See Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998).

26. Id.

27. See Robinson, 267 F.3d at 165 ("permitting district courts to assess issues of judicial economy and class manageability on a case-by-case basis is superior to the one-size-fits-all approach of the incidental damages standard").

28. Fed. R. Civ. P. 23(c)(2)(B).

29. Fed. R. Civ. P. 23(b)(3).

30. Id.

31. In addition to these specific defenses, employers should be prepared to argue that the plaintiffs have not made their showing that all of requirements are met, not just supported by some evidence. In the Second Circuit, it is now clear that this showing requires submission of evidence, by affidavits, documents or testimony, that the Rule 23 requirements each have been met. In re IPO Opinion., 2006 U.S. App. LEXIS 29859 (2d Cir. Dec. 5, 2006).

32. Dukes v. Wal-Mart Stores, Inc., 222 F.R.D. 137, 174 (N.D.Ca. 2004) (acknowledging liability phase will be a "substantial undertaking" but dismissing contention that it is "necessarily unmanageable.").

33. General Telephone Co. v. Falcon, 457 U.S. 147, 158-59 (1982).

34. See, e.g., Monreal v. Figueroa, 367 F.3d 1224, 1238 (10th Cir. 2004) ("The prima facie case for a failure-to-promote claim is completely different than that for a hostile work environment claim or a retaliation claim, yet plaintiffs allege all of these. There is simply no common issue that predominates with respect to this class, nor does plaintiff identify one."); Monahan v. City of Wilmington, 49 Fed. Appx. 383, 384-85 (3rd Cir. 2002) (finding no commonality where variety of claims raised by plaintiffs and court’s analysis of any alleged discrimination would be "fact intensive and specific to each Plaintiff."); Coon v. Georgia Pac. Corp., 829 F.2d 1563, 1566 (11th Cir. 1987) (plaintiff failed to demonstrate common issues between her individual claim for discriminatory denial of promotion and class claim of general pattern and practice of gender discrimination).

35. See, e.g., Bacon, 205 F.R.D. at 476-77 ("Conclusory allegations of commonality or across-the-board discrimination will not satisfy the burden of proof on certification."); Access Now Inc. v. Walt Disney World Co., 211 F.R.D. 452, 454-55 (M.D. Fl. 2001) (finding plaintiff's conclusory allegations that defendants have a corporate policy of violating the ADA insufficient to establish commonality), Washington v. Brown & Williamson Tobacco Corp., 959 F.2d 1566, 1570 (11th Cir. 1992) (denying certification where the complaint alleged racial discrimination in "basically every employment decision the company made" and "the only thing [plaintiffs] have in common with the class they seek to represent—or each other—is race") (emphasis added); Zapata v. IBP, Inc., 167 F.R.D. 147, 158-59 (D. Kan. 1996) (conclusory allegations did not demonstrate that Mexican-American employees were affected in similar fashion by allegedly discriminatory conduct); Allen v. City of Chicago, 828 F. Supp. 543, 552 (N.D. Ill. 1993) (in suit alleging discrimination resulting from practice of general application, fact that each of challenged employment decisions occurred during workplace reorganization did not, by itself, satisfy commonality requirement).

36. See, e.g., Grosz v. Boeing Co., 136 Fed. Appx. 960, 962 (9th Cir. 2005) (analyzing proposed class consists of job classifications that range from procurement specialists and clerical workers to lawyers and cutting-edge research engineers, court found that "plaintiffs are diverse in a way that affects commonality"); Bacon v. Honda of Am. Mfg., 370 F.3d 565, 572 (6th Cir. 2004) (no commonality where challenging "practices for all promotions, regardless of department or starting point in the company hierarchy, and regardless of comparability in objective qualifications"); Morgan v. Metropolitan Dist. Commission, 222 F.R.D. 220, 232 (D.Conn. 2004) (no commonality where class members vary greatly in their "departments, supervisors, the number of years they have been employed by [defendant], and their individual circumstances"); Carson v. Giant Food, Inc., 187 F. Supp. 2d 462, 471 (D.Md. 2002) ("Putative class members worked in at least thirteen different facilities, located at five different towns or cities. This geographical diversity itself would make class treatment inappropriate."); Wright v. Circuit City Stores, Inc., 201 F.R.D. 526, 542 (N.D. Al. 2001) ("Delving into the business practices of each store, warehouse, or service center facility and conceivably into the individual decisions is precisely the type of individualized inquiry that class actions were designed to avoid.").

37. See, e.g., Morgan, 222 F.R.D. at 234 ("If Court were to certify … the Court would be grouping together many unrelated employment decisions made by many individual supervisors against many individual plaintiffs. An analysis of these unrelated decisions would raise numerous individualized questions that are not amenable to generalized proof. Class certification is not appropriate in such circumstances.").

38. See, e.g., Sheehan v. Purolator, Inc., 839 F.2d 99, 103 (2d Cir. 1988) (upholding district court’s denial of class certification where defendant introduced evidence demonstrating that plaintiff's regression analysis did not take into account non-discriminatory factors such as education and prior work experience that would explain the disparities asserted by plaintiff); Ray v. Phelps Dodge Brass Company/Lee Brothers, 1983 U.S. Dist. LEXIS 11033, at 7-8 (N.D. Ala. Dec. 7, 1983) (denying class certification and rejecting plaintiff's statistical evidence where "defendant’s statistical evidence is sufficient to rebut any possible inference of commonality, typicality and numerosity which might arise from the statistical evidence offered by plaintiffs"); Michigan State Univ. Faculty Assoc. v. Michigan State University, 93 F.R.D. 54, 60 (W.D. Mich. Oct. 13, 1981) (withdrawing class certification and finding no basis to find the asserted common question of intent where defendant’s statistician explained more than 95 percent of the salary variance in plaintiff’s statistical analysis by including additional factors such as department and rank).

39. See, e.g., Paxton, 688 F.2d at 562 (typicality requires a showing of more than general conclusory allegations that "unnamed black plaintiffs have been discriminated against"); Stambaugh v. Kansas Dep’t of Corr., 151 F.R.D. 664, 671 (D. Kan. 1993) (same).

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.