Vargas v. GNC: Off-the-Clock Class Certified

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In an action brought under the federal Fair Labor Standards Act (FLSA), United States District Judge Terrence F. McVerry has conditionally certified a class of employees of prominent vitamin and supplement chain General Nutrition Centers (GNC). See Vargas v. Gen. Nutrition Centers, Inc., No. 10-867 (W.D. Pa. Aug. 16, 2012) (Order on Motion to Certify Class) (available here).

Plaintiffs contended that GNC’s policies regarding overtime encouraged store managers to underreport their hours and work off-the-clock (despite a formal, written policy prohibiting off-the-clock work). Each location was assigned an “hours budget” — an allocation of straight time during which employees were expected to complete all tasks. If a store exceeded its hours budget in a given month, the responsible manager would be reprimanded or even fired. Rather than suffer the consequences of allowing employees to incur overtime, managers would regularly perform any necessary work  off-the-clock.

The court found that plaintiffs presented sufficient evidence to show a de facto policy prohibiting overtime, through “Defendants’ efforts to document overtime expenses, to individually identify those who accrue overtime expenses, to demand explanations for each use of overtime, . . . and to impose consequences for being over the allotted budget . . . .” Order at 15.

Though the FLSA maintains somewhat more relaxed standards for conditional certification than certification under Federal Rule 23, Judge McVerry’s order suggests that the plaintiffs might well have satisfied the Rule 23 requirements on the strength of their evidence of off-the-clock work. Moreover, despite the FLSA’s lack of a predominance requirement, the Vargas decision includes analysis akin to that where predominance is contested. See, e.g., Order at 10 (“This tone was carried further as the messages were transmitted to the store Managers.”).

Further, despite being outside the ambit of Rule 23, Vargas is potentially pertinent to Rule 23 and state wage-and-hour class actions in its analysis of an informal practice, as opposed to a formal policy, being the basis for a collective action. The ruling describes how the de facto policy of off-the-clock work arose through a sequence of correspondence, including emails introduced into evidence by the plaintiffs, from the highest levels of GNC management down to store-level managers. “Plaintiffs have adduced evidence of a de facto policy through their proffer of a number of records and correspondence that spans the breadth of company-wide authority. . . .” Order at 15.