California Governor Jerry Brown has signed into law amendments to Labor Code section 226 — which sets forth the information that must be printed on California workers’ pay stubs — to clarify an ambiguity that allowed some non-compliant employers to elude meaningful enforcement actions.

The amendments chiefly address the language of Labor Code section 226(e), which provides that a plaintiff “suffering injury” may allege wage-statement violations. Some employer defendants have successfully argued that, in a class action, the inquiry into whether class members have suffered injury would be intrinsically individual, thus rendering individual questions predominant over common questions of law or fact. While many courts have rejected this argument, a sufficient number of state and federal courts have denied certification of wage-statement classes based on the idea that individual inquiry is required in order to make the injury determination. Under this analysis, class treatment of all wage-statement actions would effectively be precluded, despite the fact that standardized pay stubs allow for the sort of violation that is ideally suited to class treatment.

In order to remedy this inconsistency, the Legislature drafted a clarifying amendment, Senate Bill 1255, which provides that an employee is deemed to have suffered injury if the employer fails to include “accurate and complete information” on employees’ pay stubs, essentially making it a violation for an employer to omit any of the required data enumerated in Labor Code section 226(a)(1)-(9) (including gross and net wages earned, hours worked, and hourly rates). In addition, a “reasonable person” must be able to “promptly and easily determine” the information corresponding to each requirement. By making the analysis subject to a reasonable-person standard, the prospect of individualized inquiries is negated, analogous to the fraud-on-the market and presumed reliance doctrines applicable to securities and consumer class actions.

The amendments will take effect January 1, 2013

Over 4,000 California-based truckers will have their allegations of meal and rest break violations decided as a class, following the ruling by U.S. District Judge Jeffrey White granting the truckers’ class certification motion. See Bickley v. Schneider National Carriers, Inc., No. 08-5806 (N.D. Cal. Sept. 7, 2012) (Order on Motion for Class Certification) (available here).

This ruling is both procedurally and substantively significant. Procedurally, Bickley adds to the growing body of authority demonstrating that the rigorous analysis mandated by the U.S. Supreme Court’s Wal-Mart v. Dukes decision did not effectively end class actions, as many had predicted. Substantively, the Bickley decision applies the California Supreme Court’s Brinker v. Super. Ct., issued just this past spring.

In finding that common questions predominate as to the plaintiffs’ meal break claims, Judge White directly relied on Brinker’s holding that meal breaks must be 30 minutes long and that even an unwritten, informal policy of the employer that puts pressure on employees to forgo their breaks can be challenged using the class action mechanism. The defendant’s vague meal break policy, which stated that meal and rest breaks should be “not be less than ten (10) minutes nor more than two (2) hours in length”, proved decisive on the often-pivotal commonality issue. Order at 10. Judge White reasoned that, “[i]n light of Schneider’s failure to instruct its drivers regarding the timing of rest breaks and meal periods as required by California law and Schneider’s failure to keep records of its employees’ meal periods, the Court finds that Plaintiffs have sufficiently demonstrated common questions which are applicable class-wide.” Id.

The court also found that questions related to compensation for rest breaks and miles driven were common to the class. For the subclasses, the court concluded there were common questions over accrued vacation pay, itemized wage statements and rest and meal breaks. The defendant has petitioned for leave to file a motion for reconsideration of the certification order.

The consequences of the financial crisis that began four years ago this month, with the collapse of Lehman Brothers, continue to take tangible form, most recently in Bank of America’s $2.3 billion settlement of claims related to its 2008 acquisition of Merrill Lynch. While not the largest federal securities settlement of all time, the Bank of America settlement falls within the top ten, among such dubious company as WorldCom and Enron (according to Stanford Law School Professor Joe Grundfest, who systematically follows and analyzes securities litigation under the auspices of Stanford’s Securities Class Action Clearinghouse). 

Within days of Bank America’s $50-billion acquisition of Merrill Lynch, leading voices in the financial press expressed their skepticism, with one characterizing it as “the deal from hell.”  However, in ill-advised public statements that would provide evidentiary fodder for the newly-settled litigation, Bank of America boasted that the synergy between it and Merrill Lynch would create a single dominant financial-services company. Instead, the hastily-constructed deal quickly proved to be disastrous, as many of Merrill Lynch’s top executives fled in the wake of revelations of huge, undisclosed losses.

Specific terms of the settlement — including how much individual shareholders and class counsel will receive — have not been released. However, this information will be included in the preliminary approval papers, likely to be filed presently.

A federal judge has certified a class of current and former Costco employees who allege that the wholesale giant failed to promote women to management positions at a rate commensurate with male employees. Ellis v. Costco, No. 04-3341 (N.D. Cal. Sept. 25, 2012) (order certifying class) (available here). In a sprawling, meticulously detailed 86-page decision, Judge Edward M. Chen extensively distinguishes the Title VII claims against Costco from those deemed not suitable for class treatment in the U.S. Supreme Court’s Wal-Mart v. Dukes (131 S.Ct. 2541 (2011)). As such, Ellis is expected to provide widely applicable guidance to trial courts as they interpret and apply Dukes.

Ellis has traveled a long procedural path; its 2007 certification ruling by then-presiding Judge Marilyn Hall Patel was vacated by the Ninth Circuit, which directed the trial court to reprise its certification analysis in light of Dukes. See Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011). Though also a Title VII discrimination case, Dukes is distinguishable from Ellis, most conspicuously in class size. While the Dukes plaintiffs sought to certify a class of some 1.5 million female Wal-Mart employees, the Ellis class is comprised of approximately 700 current and former Costco employees. Judge Chen reasoned, “[a]lthough class size has no per se bearing on commonality, when the claims focus in part on the exercise of managerial discretion, it is reasonable to suspect that the larger the class size, the less plausible it is that a class will be able to demonstrate a common mode of exercising discretion.” Order at 24. 

Indeed, Judge Chen relied on and excerpted extensively from the Ninth Circuit’s decision, in particular its description of Costco’s store-level management structure, concluding that “[d]espite the lack of written guidelines” governing Costco’s promotion procedures, “as observed by the Ninth Circuit, Costco nonetheless imposes uniform practices and policies with regard to its promotion system.” Id. at 7. 

However, it is the “specific employment practices” identified by the Ellis plaintiffs which are cited as the “most important” distinguishing factor in the opinion: “Unlike in Dukes, which the Supreme Court concluded merely identified the delegation of discretion (i.e., the absence of a policy), here Plaintiffs identify specific practices and a common mode of guided discretion directed from the top levels of the company.” Id. at 25.

Because the Ellis opinion closely tracks the Ninth Circuit’s remand order (and in so doing distinguishes Dukes), the plaintiffs’ discovery strategy and presentation of evidence of predominant common questions are likely to be used as a template for certification motions filed in other employment class actions. Specifically, the Ellis order notes that Costco employs the “same recruitment and selection process” company-wide, and “[t]op management’s involvement in the promotion process is also consistent, and pervasive.” Id. at 28, 29.

Ellis is likely to be a key ruling in the post-Dukes era, and it provides a far more optimistic view of the possibilities for class treatment than many had predicted when Dukes was issued.