HAYWOOD S. GILLIAM, JR., District Judge.
On January 25, 2018, the Court held a hearing on Jonathan Strickland and Starvona Harris's motion for class certification and Defendant Best Buy Stores, L.P.'s ("Best Buy") motion for summary judgment on Plaintiff Jonathan Strickland's claims. See Dkt. Nos. 85 ("Mot."), 91; see also Dkt. Nos. 97 ("Opp."), 104 ("Reply"). The Court took the motions under submission, and granted Defendant's motion for summary judgment. Dkt. No. 123 ("Strickland Summary Judgment Order").
Because the Court's summary judgment order altered the bases for class certification, on April 19, 2018 the Court heard further argument on Plaintiff Harris's class certification motion. See id. at 20. After carefully considering the parties' arguments, the Court
Plaintiff bears the burden of showing by a preponderance of the evidence that class certification is appropriate under Federal Rule of Civil Procedure 23. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011). Class certification is a two-step process. First, Plaintiff must establish that each of the four requirements of Rule 23(a) is met: numerosity, commonality, typicality, and adequacy of representation. Id. Second, Plaintiff must establish that at least one of the bases for certification under Rule 23(b) is met. Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013). Where, as here, Plaintiff seeks to certify a class under Rule 23(b)(3), Plaintiff must show that "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).
"[A] court's class-certification analysis must be `rigorous' and may `entail some overlap with the merits of the plaintiff's underlying claim.'" Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 465-66 (2013) (quoting Wal-Mart, 564 U.S. at 351). Nevertheless, Rule 23 does not permit "free-ranging merits inquiries at the certification stage." Id. at 466. "Merits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied." Id. If a court concludes that the moving party has met its burden of proof, the court has broad discretion to certify the class. Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir.), opinion amended on denial of reh'g, 273 F.3d 1266 (9th Cir. 2001).
Plaintiff's putative class comprises "Defendant's non-exempt employees who were employed in California during the period from four years prior to the filing of the Prior Federal Action (February 11, 2011) until this Court's order granting class certification who fall within one or more of the following subclasses. . . ." Dkt. No. 55 ("SAC") at 6-7.
Id. at 7.
The parties generally agree on the systems and procedures that Defendant uses to produce wage statements. To track employee hours worked, Best Buy maintains a time entry system called the Time and Labor Center ("TLC"). Mot. at 2; Opp. at 10; see Dkt. No. 97-1 ("Compendium of Evidence" or "CE") at 317. The TLC requires managers to approve certain time entries input by employees, referred to as "timesheet exceptions." CE at 318-19. Timesheet exceptions can include manually input time entries and corrections to prior time entries. See id. Other timesheet exceptions include:
See Mot. at 2; Opp. at 10-11; CE at 318-19. The TLC does not require managers to approve non-timesheet exceptions (i.e., those that can be input using buttons "to clock on for a shift, to clock out for a meal period, to clock in from a meal period and clock out at the end of a shift"). Mot. at 2; CE at 318.
TLC time entries determine how much an employee is paid and when. Best Buy's pay periods are two weeks, and Best Buy's work week is Sunday (12:00 am) to Saturday (11:59 pm). Opp. at 11; CE at 457. It is an employee's responsibility to ensure that "their time records are complete, accurate and authorized by 5:00 pm (local time) on Sunday." Opp. at 11; CE at 319-320. If a timesheet exception lacks approval by 5:00 pm Central Time on the Monday following the end of a payroll week, the corresponding time entry will not be paid on the Friday pay date for that pay period. Opp. at 11; Mot. at 4; CE at 320. Those time entries appear on the following wage statement as "Previous Period Hrs." Opp. at 11; Mot. at 4.
Plaintiff contends that the "Previous Period Hrs." wage statement entry is misleading. According to Plaintiff, this entry prevents Best Buy employees from determining "whether the hours were worked and the wages were earned in the prior pay period or an earlier pay period." Mot. at 4. Plaintiff claims that the TLC's deficiencies are further compounded by other procedural inadequacies, including Best Buy's failure to: (1) instruct employees to use automatic entry buttons and/or correct missing or inaccurate entries; (2) provide adequate instruction regarding which entries might trigger delayed approval; or (3) instruct mangers that they need to approve timesheet exceptions without delay. Id. at 3.
In response, Defendant contends that Plaintiff's Wage Statement Subclass cannot satisfy Rule 23's commonality and predominance requirements. To begin, Defendant claims that the "Previous Period Hrs." entry does not itself violate California Labor Code Section 226. Opp. at 13-14. Defendant stresses that Plaintiff cannot show, as she must, that Defendant's violation was knowing and intentional. Id. at 15-16. Defendant argues that discerning the question of intent on these facts requires adjudicating "thousands of distinct decisions" made by Defendant's employees and managers with respect to when a timesheet exception was approved, and why that approval may have been delayed. Opp. at 13-16.
The Court agrees with Defendant. As set forth in the Prior Federal Action, California Labor Code Section 226 "requires an employer at the time that wages are paid to provide an accurate itemized statement that contains nine items." See infra n.2; Harris Summary Judgment Order at 13. Those nine categories of information include, in relevant part, gross wages earned, total hours worked, net wages earned, "the inclusive dates of the period for which the employee is paid," and all "applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee. . . ." See Cal. Lab. Code § 226. "To recover under § 226(e), a plaintiff must show: (1) a violation of § 226(a) that (2) was knowing and intentional, and (3) an injury suffered as a result of the violation." Harris Summary Judgment Order at 13. A "knowing and intentional violation" occurs when the employer actually knows that it has omitted from a pay statement any item required by § 226(a). See id. A knowing and intentional failure "does not include an isolated and unintentional payroll error due to a clerical or inadvertent mistake." Cal. Lab. Code § 226(e)(3).
Here, Plaintiff fails to set forth how she could show, on a classwide basis, that Best Buy managers knowingly and intentionally delayed their approval of timesheet exceptions. To meet Rule 23(a)'s commonality requirement, Plaintiff's wage statement claim "must depend upon a common contention. . . capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Dukes, 564 U.S. at 349. As the Dukes Court stated, the commonality analysis is "rigorous." Id. at 350. Plaintiff accordingly cannot assert "any common question"—rather, she must define a question that "will produce a common answer" to the question driving the resolution of the litigation. Ellis v. Costco Wholesale Corp., 657 F.3d 970, 981 (9th Cir. 2011) (citing Dukes, 564 U.S. at 349). That question in this case is whether Defendant's managers knowingly and intentionally failed to timely approve timesheet exceptions. Notably, Plaintiff fails to show that Best Buy, as a corporate actor, knew or intended for timesheet exceptions to be approved late. Plaintiff also fails to present evidence demonstrating that Best Buy otherwise sought to mislead employees as to their hours worked and wages earned through the Previous Period Hrs. entry.
Partly as a consequence, answering Section 226's liability inquiry requires individual examination of numerous context-specific factors. Those factors include the circumstances in which an employee entered a timesheet exception, when the manager approved the exception, and why the manager failed to timely approve the exception. To discern each of these factors, a factfinder needs to evaluate the mental state and conduct of, and perhaps even the relationship between, the relevant manager and employee. See Opp. at 16; Dukes, 564 U.S. at 351 (rejecting that a putative class member can "sue about literally millions of employment decisions at once").
Contributing to the difficulty of classwide proof is the decentralized nature of entering and approving hours worked at Best Buy. Considering that the TLC gives employees and managers some discretion in how to enter and approve timesheet exceptions, liability will in most cases hinge on individualized assessments of the conduct of particular employees. As mentioned, Plaintiff fails to present evidence that Best Buy, at the corporate level, knowingly or intentionally administered the TLC so as to violate Labor Code Section 226. See Dukes, 564 U.S. at 353 (noting that the plaintiffs lacked "significant proof' that the defendant operated under a generally unlawful policy). Defendant, in contrast, presents evidence that 99.6% of the checks issued during the class period did not include a Previous Period Hrs. entry. Time entries were accordingly approved without delay in the vast majority of cases. In ".14% of the total checks" issued during the class period (i.e., 2,177 out of 1,576,198 total checks), the Previous Period Hrs. entry appeared where an employee appropriately entered their time before the end of the pay period, but the manager failed to timely approve the entry. Mot. at 11; CE at 24, 32-33.
In the absence of evidence showing liability on a systematic basis, Plaintiff cannot satisfy Rule 23(a)'s commonality requirement. The Dukes court rejected the premise that providing "local supervisors" with discretion comprises a "uniform employment practice." 564 U.S. at 356. As in Dukes, Plaintiff here has not presented evidence of a "common mode of exercising discretion that pervades the entire company." Id. Rather, it will be up to the trier of fact to find on a case-by-case basis why a Best Buy manager failed to timely approve an employee's timesheet exception. See Opp. at 12-13.
Plaintiff does not expressly dispute that late approvals can result from error or unintentional conduct. Rather, Plaintiff argues that this conclusion requires the Court to make an inappropriate finding on the merits. But Dukes clarified that a rigorous commonality analysis "will entail some overlap with the merits of the plaintiff's underlying claim." 564 U.S. at 351. Though Plaintiff claims that the commonality showing is "minimal," virtually all of the authorities cited Plaintiff predate Dukes. See Mot. at 13.
Even if Plaintiff's putative subclass could satisfy Rule 23's commonality requirement, it would not survive under its predominance requirement. Under Rule 23(b)(3), "the separate adjudication of each class member's individual claim or defense" renders certification inappropriate. Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1189 (9th Cir.), opinion amended on denial of reh'g, 273 F.3d 1266 (9th Cir. 2001) (finding causation and damage determinations could present "triable individualized issues" unsuitable for class treatment despite the possibility of common issues pertaining to the defendant's liability). "[T]he main concern in the predominance inquiry" is "the balance between individual and common issues. In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009) (finding that the district court abused its discretion in certifying a class based on a uniformly applied exemption policy, by disregarding "the existence of other potential individual issues that may make class treatment difficult if not impossible"). In striking that balance, the Court searches for some "common proof' to dispose of "otherwise individualized issues," and thereby facilitate judicial economy. Id. at 958.
As mentioned, Plaintiff does not present evidence suggesting that Best Buy knowingly or intentionally instructed or encouraged managers to unlawfully delay their approval of timesheet exceptions. See Pryor v. Aerotek Scientific, LLC, 278 F.R.D. 516, 531 (C.D. Cal.2011) (collecting cases, and concluding that "[t]he predominance requirement is more likely to be satisfied when the conduct complained of is the result of a common practice by the employer, and when the individualized inquiries that will be required concern class members' damages if the employer is found liable"). Contrary to Plaintiff's suggestion, nothing about the TLC system on its own is unlawful or inadequate under Section 226. See Mot. at 21. Rather, "the questions susceptible of classwide proof' (for instance, whether an employee's pay statement includes the Previous Period Hrs. entry) offer limited answers as to Defendant's liability. See Pryor, 278 F.R.D. at 533. Plaintiff provides no aggregate method for determining the issue of intent, which Defendant's records cannot show on their own. Thus, the factfinder will need to determine in each case the conduct and circumstances giving rise to a delayed approval.
Plaintiff's own authorities recognize that these "individualized inquiries" are inappropriate for certification under Rule 23(b)(3), and would "bog down the action in a series of `mini-trials.'" See Mot. at 20 (citing cases); Torres v. Air to Ground Servs., Inc., 300 F.R.D. 386, 403 (C.D. Cal. 2014) (quoting Pryor, 278 F.R.D. at 536). For instance, in Torres, the court found that Rule 23(a)'s commonality requirement was satisfied because the liability inquiry reduced to whether the defendant's uncompensated time off policy complied with a municipal living wage ordinance. See 300 F.R.D. at 403. Nonetheless, the court concluded that certification of this class claim was inappropriate under Rule 23(b)(3) because "whether a given Class member suffered any injury due the policy, in the event it is found unlawful, [would require] an individualized assessment." Id. That injury assessment would, as here, necessitate inquiry "into whether each member was denied uncompensated time off, the reasons for the Class member's request, whether the reason for the request was sufficiently related to illness, when the request was made, and the context in which the request was presented to the supervisor." Id.
The Court turns next to Plaintiff's putative Waiting Time Subclass. As set forth in the Prior Federal Action, there are three key provisions of the California Labor Code. Section 201 states: "If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately." Cal. Lab. Code § 201(a). Section 202 continues: "If an employee not having a written contract for a definite period quits his or her employment, his or her wages shall become due and payable not later than 72 hours thereafter. . . ." Id. § 202(a). Finally, California Labor Code § 203 provides:
Cal. Lab. Code § 203 (emphasis added). In analyzing Harris's individual claim for untimely payment, the Court in the Prior Federal Action concluded that there were genuine factual disputes as to whether: (1) Harris resigned voluntarily or was terminated; (2) Harris timely received her wages on September 15, 2014, or received them late on September 16, 2014; and (3) there was a good faith dispute regarding wages owed that would preclude Harris's ability to recover. Harris Summary Judgment Order at 11-12.
With respect to this putative subclass, the parties at least agree that the following procedures govern the termination of Best Buy employees. For involuntary terminations, the responsible manager contacts an individual from Defendant's Employee Relations ("ER") department to issue an "Involuntary Separation Notice" ("ISN"). The ISN provides a termination date, the reasons for the employee's termination, and signature and signature date lines for the manager and employee. Mot. at 8; see CE at 256. An online "Manual Pay Request" ("MPR") is then created for the employee's final wages. Id. The MPR draws time entries from the TLC. CE at 256. ER therefore asks the responsible manager to ensure that all time in the TLC is up to date through the date of the MPR. Id. The MPR provides: (1) whether the termination was involuntary or voluntary; (2) the termination date; and (3) whether the final payment would be made by direct deposit or paper check and, if the latter, where the paper check would be mailed. Id. The MPR is sent to Defendant's Payroll Department. Id. A manager then obtains the requisite signatures for the ISN and faxes the completed ISN to ER. Mot. at 8; CE at 257. Following that, an ER Coordinator enters the termination date into Oracle. Id.
Defendant's system for processing voluntary terminations differs slightly. Upon learning of a resignation, a manager processes the MPR. Mot. at 8; CE at 258. The MPR states the nature of the termination (voluntary or involuntary), the termination date or final day worked, and the form of final payment (direct deposit or check by mail). Id. The manager also completes a Voluntary Separation Notice ("VSN"), which is similar to an ISN. Id. The MPR is transmitted to the Payroll Department. The date of termination entered in Oracle is the date last worked (or the resignation date) listed in the MPR. Mot. at 8; CE at 258.
As for issuing final pay, the same general process pertains to voluntary and involuntary terminations. Those MPRs received between noon on business day one and business day two are processed for payment on business day two. Opp. at 18. The paydate recorded in the payroll system is business day three. Id.; see CE at 458-59. Direct deposit instructions are delivered on the evening of business day two. Id. If the employee has requested a live check, the check is overnight mailed on business day two for receipt on the next calendar day. Id.
According to Plaintiff, the aforementioned procedures are deficient in that they "do not inform managers and other employees when final wages must be paid to employees. . . ." Id. at 7. Plaintiff asserts that understaffing contributes to Defendant's poor record keeping practices, and has "resulted in hundreds of employees not receiving timely final wages." Mot. at 14; Reply at 13. In response, Defendant claims that its training to managers is adequate and complies with California law. Opp. at 18. Defendant submits evidence, including employee declarations and training materials, to show that it instructs managers on the following three pay requirements: (1) involuntary terminations must be paid immediately; (2) voluntary terminations with 72 hours' notice must be paid immediately; and (3) any other voluntary termination must be paid within 72 hours of receiving notice. See id.; CE at 255-56, 287, 736. Defendant contends that its actual pay practices reflect those instructions. Opp. at 18.
This putative subclass also fails under Rule 23(a). Plaintiff does not identify a general policy maintained by Best Buy that resulted in late payments, or some method for sampling records to provide common proof that individual Best Buy managers acted unlawfully on a systemic basis. See Dukes, 564 U.S. at 351. "While commonality may be established based on a pattern of officially sanctioned illegal behavior, merely pointing to a pattern of harm, untethered to the defendant's conduct, is insufficient." Civil Rights Educ. & Enf't Ctr. v. Hosp. Properties Tr., 867 F.3d 1093, 1104 (9th Cir. 2017) (concluding that the district court did not abuse its discretion in finding that a class lacked commonality because the plaintiff failed to set forth evidence of a non-compliant policy) (internal quotations and alterations omitted). Not only does Defendant present sufficient proof that its training program is adequate, but also shows that individual and unintentional payroll discrepancies preclude the type of common proof required for class certification. See Opp. at 19. For instance, Oracle termination dates and payroll records can differ, obscuring when a terminated employee received his or her final pay. Id. at 19-20; see CE at 262-64. Discrepancies can also arise where a manager forgets to remove an employee from the TLC system after ER inputs their ISN. See Opp. at 18-19; CE at 256-258. In those instances, employees receive a duplicate payment for hours already paid. Id. Defendant claims, and Plaintiff does not dispute, that Best Buy would not be liable for late payment in those cases. Opp. at 18-19. Furthermore, Defendant provides numerous examples of duplicative payments, or allegedly late payments that were actually paid on time. Id.
These examples illustrate that resolving each allegation will require an individualized assessment of each employee's time records, wage statements, and deposition testimony. See CE at 257, 262-63. California district courts have rejected requests for certification on similar grounds. See Washington v. Joe's Crab Shack, 271 F.R.D. 629, 641 (N.D. Cal. 2010) (denying certification because the defendant maintained a "facially compliant policy" and the plaintiff's putative class required "individualized assessment of why employees did or did not take meal breaks"); Pedroza v. PetSmart, Inc., No. ED CV 11-298-GHK, 2013 WL 1490667, at *8 (C.D. Cal. Jan. 28, 2013) (declining to certify a class despite the existence of a common training program in part because the defendant's records provided "only piecemeal information" of the alleged wrongdoing). To the extent that Best Buy's payroll records contain discrepancies, that itself is not evidence of non-compliance with any particular labor code section. Plaintiff cites no authority suggesting that Best Buy is liable under California Labor Code Sections 201, 202, or 203 for these individual errors, or for allegedly understaffing the relevant processing departments.
Even if Plaintiff could present a common question to satisfy Rule 23(a), the Court concludes that individual issues predominate over common ones pursuant to Rule 23(b)(3). Plaintiff does not dispute that her expert, to assess the number of untimely payments, simply identified instances in which an employee's Oracle termination date occurred before their final payout as recorded by Best Buy's Payroll Department. See Opp. at 24; Reply at 12-15. Based on that analysis, Plaintiff claims that "[o]ne simply needs to compare the termination date with the final payment date" for common proof of untimely payments. Reply at 14. Plaintiff's position ignores numerous other factual findings required to show liability, including: (1) whether the employee voluntarily or involuntarily resigned; (2) the information in the employees' ISN or VSN and their MPR; (3) the day of the week the final payment was due; (4) what days were actually worked and when; (5) when the final pay was processed, how that pay was delivered, and, if the payment was a direct deposit, when the individual's financial institution deposited that pay. See id.
Harris's claim in the Prior Federal Action is exemplary in this respect. As the Court observed there, a claim for untimely payment under these circumstances entails evaluating how much Defendant owed that employee for hours worked, when they were paid, how many hours the employee actually worked, whether the employee was voluntarily or involuntarily terminated, and the method of payment. See Harris Summary Judgment Order at 13. Individual testimony will in many instances be required to assess the claim of each putative subclass member. Plaintiff accordingly fails to provide "common evidence to support extrapolation from individual experiences to a class wide judgment that is not merely speculative." Mario v. United Parcel Serv., Inc., 639 F.3d 942, 945 (9th Cir. 2011) (holding that the district court did not abuse its discretion in decertifying a class where the plaintiff failed to provide common proof to support his allegation that 1200 employees were unlawfully misclassified as exempt). Plaintiff's authorities can be distinguished based on this lack of common policy or proof. See Reply at 14-15; cf. Moreno v. AutoZone, Inc., 251 F.R.D. 417, 426 (N.D. Cal. 2008), vacated, No. CV 05-4432 CRB, 2009 WL 3320489 (N.D. Cal. Oct. 9, 2009), aff'd, 410 F. App'x 24 (9th Cir. 2010) (certifying a timely payment class partly because the plaintiff planned to challenge a general practice "of not cutting final checks until after an employee's shift," and liability could be determined by reference to the defendant's records); Romero, 235 F.R.D. at 490 (approving a class because key liability questions could be resolved with "reference to a sample of several employees" "given the purported uniformity of [employees'] activities").
For instance, in Brewer v. General Nutrition Corp., the district court certified a timely pay subclass based on evidence of "a policy suggesting that [the defendant] was willful in its efforts to circumvent [a] statute's requirements of immediate payment at the time of discharge by including a period of suspension to allow its payroll department to prepare a final paycheck." 2014 U.S. Dist. LEXIS 159380, *35. Considering that evidence, and statistics showing a systematic failure by the defendant to pay upon discharge, the court concluded that "the liability question for involuntary terminations presents a corporate-level issue amenable to class treatment." Id. (quotations omitted); see Reply at 15. But here, the only "uniform policies or practices" to which Plaintiff expressly refers pertain to Defendant's failure to pay overtime on Monthly STI bonuses, a claim that Harris lacks standing to bnng.
For these reasons, the Court
