San Diego Employment Law for Employees Blog

Duran v. U.S. Bank (A125557 & A126827) was decided by the First Appellate District on February 6, 2012.  It ordered the Alameda California trial court to decertify the class action case and had strong criticism of the statistical evidence the trial court used to find U.S. Bank liable at trial.

Judge Robert Freedman certified a class of 260 sales representatives of the bank.  The court order defined the class as: "all current and former California-based salaried employees with the title -small-business banker (SBBs) and/or -business banking officers (BBOs) employed by defendant any time between December 26, 1997 and April 28, 2005."

U.S. Bank had designated the class members as outside sales representatives.  Accordingly, the bank classified them exempt and did not pay them overtime.  Duran claimed that the sales representatives worked less than 50% of the time outside the office and were, thus, not exempt under the outside sales exemption.

Before certification, the bank offered deposition testimony and 75 declarations of class members who said that they worked more than 50% of the time outside the office.  Plaintiff offered 34 declarations from class members who said that they performed sales activities outside the office less than 50% of the time.  The trial court certified the class.

At trial, the court limited the trial testimony to 20 class members who were randomly selected.  Those class members who had opted out were not allowed to testify.  Additionally, class members so selected were given the opportunity to opt-out after they had been selected to testify.  U.S. Bank argued that those procedures skewed the evidence because opt-outs did not believe U.S. Bank to be liable.

The appellate court said that the trial court's reliance on 20 class members to find liability for 260 class members was not statistically justified.  In addition, not allowing opt-outs to testify skewed the statistical results even further.  Accordingly, the court found that the statistical sample of evidence to prove liability violated U.S. Bank's due process rights.  Finally, the appellate court ordered the trial court to decertify the case.

Contradictory facts concerning liability proffered by the defendants do not necessarily deny class certification.  (See, Jaimez v. Daiohs, (2010) 181 Cal.App.4th 1286.)  However, maybe a significant volume of contradictory facts can be used to deny class certification.  At the very least, they may make it nearly impossible to try a class action case based on statistical sample of evidence because the defendant appears to have a due process right to put on large volumes of evidence that contradict the evidence plaintiffs proffer.

Plaintiff's counsel may still find ways to avoid the problem that counsel in Duran faced:

1) A different class definition might have saved the case.  Maybe the following definition would have worked: "all current and former California-based salaried employees with the title -small-business banker (SBBs) and/or -business banking officers (BBOs) employed by defendant any time between December 26, 1997 and April 28, 2005, who worked less than 50% of the time outside the office."  Then, all those who worked more than 50% of the time outside of the office would not be in the class.

2) File the case under the FLSA and California law and only represent those who elect to opt-in under the early opt-in rule of the FLSA.

3) Get the names of the class in discovery and file a mass action with those class members who sign individual contracts.

4) Allow the defendant to put on a statistically significant amount of contradictory evidence on liability.

The bottom line appears to be that the use of a statistical sample of evidence in class actions on the issue of liability may violate a defendant's due process rights.  Using statistics strategically and fairly may avoid the result in Duran.

Posted on January 19, 2012 by Alison Dearden

PAYROLL RECORDS

Employers are required to keep records of all itemized wage statement information required by Labor Code §226(a). This information includes: (1) gross wages earned, (2) total hours worked by the employee, (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, (4) all deductions,(5) net wages earned, (6) the dates of the period for which the employee is paid, (7) the name of the employee and the last four digits of his/her social security number,(8) the name and address of the employer, and (9) the employee's hourly rate. Employers are also required by §226 to keep a record of all deductions made from payments of wages. All this information must be kept for 3 years.

Employees have the right to inspect and/or copy these records.[1] The employee may make an oral or written request to inspect and/or copy these records. Then, the employer has 21 days to comply with the request.[2] The employer may choose to copy the payroll records for the employee and the cost of reproduction may be charged to the employee. An employer who fails to comply with the employee's request within 21 days may be required to pay a $750 penalty to the employee.[3]

PERSONNEL FILES

Employees have the right to inspect the personnel records related to their performance.[4] Employers can require an employee to inspect his/her personnel records on his/her own time provided the records are kept or brought to the workplace. The employer must allow this within a reasonable time of the employee's request to do so. However, if the records are stored off-site and the employee must travel to the location, the inspection must be during work hours and the employer must compensate the employee for his/her time.

The employer does not have to provide the employee with copies of his/her entire personnel file, however, he must provide the employee with copies of all documents the employee has signed that relates to obtaining or holding employment.[5] This includes signed employment applications, employment contracts, signed discipline documents, etc.

There are some documents that the employer can withhold from inspection. Employers are not required to release: letters of reference, records relating to the investigation of a possible criminal offense, records that were obtained before the employee's employment, records prepared by an examination committee, or records obtained in connection with a promotional exam.[6]

[1] Labor Code §226(b).

[2] Labor Code §226(c).

[3] Labor Code §226(f).

[4] Labor Code §1198.5.

[5] Labor Code §432.

[6] Labor Code §1198.5(d).

The law in California does not always allow discovery responses in a completed case to be used in a newly filed case.

An adverse party may "use for any purpose, a deposition of a party to the action, or of anyone who at the time of taking the deposition was an officer, director, managing agent, employee, agent, or designee under Section 2025.230 of a party."  (Code of Civil Procedure Sec. 2025.620.)  Read literally, one can conclude that deposition testimony from a previous case can be used against a party in a new case.  Certainly, exceptions to the California hearsay rule would allow it: Admission of Party (Evidence Code Sec. 1220), Declaration Against Interest (Evidence Code Sec. 1230), and Former Testimony (Evidence Code Sec. 1290).

Responses to written discovery in a previous case are another matter.  Clearly, responses to Requests for Admissions may only be used in the case in which the responses were given.  (Code of Civil Procedure Sec. 2033.410(b).)  However, at least arguably, responses to Interrogatories drafted in a closed case may be used in a newly filed case.

In regard to the use of responses to Interrogatories, Code of Civil Procedure Sec. 2030.410 states: "At the trial or any other hearing in the action, so far as admissible under the rules of evidence, the propounding party or any party other than the responding party may use any answer or part of an answer to an interrogatory only against the responding party."  Do the words "the trial or any other hearing in the action" mean that the responses to interrogatories can only be used in that action?  If the legislature did not intend for those responses to be used in a new action, why did it not have a complete prohibition similar to the one for Requests for Admissions?  If the responses to interrogatories from a closed case may be used in cases filed after that case then a "party" may use the responses against the responding party only.

The best practice is to not rely on discovery gathered in an old case as evidence in a new case.  Arguably, even deposition testimony from an old case cannot be as freely used in a new case as it could have been used in the case in which the deposition was taken.

On August 16, 2001, the California Court of Appeals unequivocally held that commercial contracts are subject to the same unconscionability analysis as other contracts. In light of that holding, the court examined a class action waiver in a commercial contract for unconscionability.

In applying the doctrine of unconscionability to commercial contracts, the appellate court in Walnut Producers of California v. Diamond Foods, Inc. stated that the deference afforded to commercial contracts arose from the facts surrounding the making of the contract and not from their character as a commercial contract. In practice, commercial contracts are subject to the same standard for determining unconscionability as all other contracts.

The present case involved a walnut producing Co-op that entered into an agreement with Diamond Foods in which the Co-op members agreed to supply Diamond Foods with walnuts. The agreement included a dispute resolution provision that required all disputes to be resolved by binding arbitration and precluded the use of class actions. The Co-op later attempted to bring a class action against Diamond for failure to pay Co-op members a reasonable price for their walnuts and argued that the class action waiver in the agreement was unconscionable.

The court concluded that the specific class action waiver in this case was enforceable. Among the things that it examined were whether the plaintiffs were surprised by the waiver, whether the plaintiffs had other business alternatives available, whether the agreement was so one-sided as to shock the conscience, and whether the class action waiver effectively operated as an exculpatory contract. Because the plaintiffs' claims were sufficiently large to seek individual legal remedies, the class action waiver was not an exculpatory clause. Further, the Court did not find that the waiver was unconscionable under any other theory.