Opinion
19-CV-10104 (ER) (KHP)
11-06-2023
MICHELE METCALF and HANNAH LAWSON, individually and on behalf of all others similarly situated, Plaintiffs, v. TRANSPERFECT TRANSLATIONS INTERNATIONAL INC., Defendant.
HONORABLE EDGARDO RAMOS, United States District Judge
REPORT AND RECOMMENDATION ON MOTION FOR CLASS CERTIFICATION
KATHARINE H. PARKER, UNITED STATES MAGISTRATE JUDGE
Plaintiffs Michele Metcalf and Hannah Lawson bring this putative class action under the New York Labor Law (“NYLL”) on the grounds that Defendant TransPerfect Translations International Inc. (“TransPerfect”) failed to pay them and other similarly situated employees overtime pay between December 31, 2018 and September 2019 (the “Relevant Period”) and failed to provide them with accurate wage statements. They now move for certification of a class pursuant to Federal Rule of Civil Procedure 23. The proposed class would consist of all TransPerfect salaried employees in New York City who were paid $1,125.00 per week or less during the Relevant Period and were not paid overtime for all hours worked over forty in a work week.
For the reasons set forth below, I recommend the motion be granted in part and denied in part. Specifically, I recommend that a narrower class than that proposed by Plaintiffs be certified, namely: “all TransPerfect salaried employees in New York City who were paid $1,125.00 per week or less during the Relevant Period who did not sign Arbitration Agreements.”
The below facts are taken from the Third Amended Complaint (ECF No. 211) and the parties' submissions in connection with this motion.
1. Plaintiffs Metcalf and Lawson
Metcalf worked for TransPerfect in New York City as a Senior Client Services Executive in the Production Department for a portion of the Relevant Period for a salary of $1,076.92 per week, or $56,000 per year. Her duties in this position included account management and sales support services. Lawson worked for TransPerfect in New York City as a Project Manager in the Production Department for a portion of the Relevant Period for a salary of $980.77 per week, or $51,000 per year. Both Metcalf and Lawson have attested that they generally worked more than 40 hours each work week during this time but that they were not required to record their hours worked, there was no way to submit for overtime, and they were not paid overtime. Additionally, during the Relevant Period their wage statements did not reflect the hours they worked each week or provide hourly and overtime rates of pay. TransPerfect concedes that both Plaintiffs were classified as exempt under the so-called administrative exemption during the Relevant Period and did not receive overtime pay (if they worked over 40 hours in a work week).
Metcalf transferred to TransPerfect's offices in Newport Beach, California in June 2019 where she performed the same role through September 2019.
Lawson received this salary from approximately December 2018 to April 7, 2019, after which her pay was changed to an hourly rate of $24.52 per hour. She was paid at an hourly rate through October 9, 2019, when she left TransPerfect.
To meet the administrative exemption, an employee must be paid on a salary basis at the requisite salary threshold and the employee's primary duty must consist of the performance of office or non-manual field work directly related to management policies or general operations. See https://dol.ny.gov/system/files/documents/2021/12/administrative-employee-overtime-exemption-frequently-asked-questions.pdf.
On December 31, 2018, the salary threshold required to qualify for an exemption from overtime pay under New York law increased to $1,125 per week for New York City employees working at companies with 11 or more employees. Absent qualifying for an exemption, the NYLL requires employers to pay employees overtime pay for all hours worked over 40 in a work week. N.Y. Labor Law Art. 19 § 650; 12 N.Y.C.R.R. § 142-2.2. Although Plaintiffs' salaries previously met the threshold to qualify for an exemption, when the threshold increased, TransPerfect did not raise Plaintiffs' salaries to the required threshold. Nevertheless, TransPerfect continued to treat Plaintiffs as exempt from overtime and did not allow for them to record their hours or request overtime pay. In or about September 2019, TransPerfect issued retroactive salary increases to Plaintiffs to bring their salaries up to the new threshold required for meeting an exemption from overtime.
2. The Putative Class
Plaintiffs contend that approximately 235 employees are similarly situated to them (the “putative class”); that is, that they were treated as exempt from overtime pay for an approximately nine-month period when their salaries did not meet the threshold for qualifying for an exemption, did not receive overtime during the Relevant Period even though they may have worked more than forty hours in a week, and did not receive wage statements reflecting hours worked or straight and overtime pay rates in accordance with New York law.
The NYLL requires that employers provide a statement with every payment of wages that include the rate or rates of pay and the basis thereof and, for non-exempt employees, include the regular hourly rate(s) of pay, the overtime rate(s) of pay, the number of regular hours worked in the pay period and the number of overtime hours worked in the pay period. N.Y. Labor Law § 195(3).
TransPerfect does not dispute that it did not record the hours worked by the putative class during the Relevant Period and that the wage statements during the Relevant Period did not provide any breakdown of the hourly and overtime rates or hours worked by the employees in the proposed class. During oral argument, defense counsel also confirmed that it treated all of the putative class members as exempt from overtime pursuant to the so-called administrative exemption. TransPerfect further asserts - and Plaintiffs do not dispute - that there was no uniform policy concerning hours worked and that each manager set schedule and hours expectations for employees in their respective departments/units. Although most of the employees in the putative class are full-time employees, a portion were scheduled to work only on the weekends. As to these so-called “Weekenders,” TransPerfect contends they did not work more than 40 hours in any week during the relevant period. As to the remainder, TransPerfect contends that Plaintiffs cannot prove that all of the putative class members worked at least some overtime during the Relevant Period through classwide proof because there are no records of hours worked - a problem relevant to demonstrating both liability and damages.
TransPerfect has submitted an affidavit from its Senior Director of Human Resources providing details about the group of 235 employees in the proposed class. (ECF No. 225) The largest portion - 148 - worked in the Production Department where Plaintiffs worked. Another 37 worked in Sales, 9 worked in Accounting/Operations, 5 worked in the OneLink (website translation) Department, 6 worked in Information Technology, 7 worked in the Trial Interactive Department, 6 worked in Client Services, 5 worked in Deposition Services, 5 worked in Administration, 4 worked in Marketing/Communications, 2 worked in technical roles, and 1 worked in Human Resources. (Id. ¶ 11.) TransPerfect has further explained that the 235 employees filled various positions with varying responsibilities and reported to 16 different department heads and approximately 100 different managers. (Id. ¶¶ 9-11.) Additionally, most of the employees in Sales received commissions, unlike employees in the remainder of the putative class. (Id. ¶ 17.) As a result of the wide variations in roles, departments, schedules, pay, and duties, TransPerfect argues that individualized issues related to determining hours worked and damages predominate, rendering class certification inappropriate. TransPerfect believes that numerous individual managers will need to testify to determine what the regular work hours were for each putative class member and that each class member will need to provide information about their hours worked.
3. Methods of Estimating Hours Worked
Plaintiffs proffer the declaration of an expert, David Breshears, CPA/CFF, who proposes a methodology to estimate hours worked by the putative class in the absence of time records, which were otherwise required to be maintained by TransPerfect. Specifically, he proposes utilizing email data to determine the times employees were sending and receiving work emails to approximate their hours worked in a day. He proposes using other available electronic records (e.g., swipe in/building access cards or computer log-in/log-out times), if available, to do the same. He states that patterns in email traffic, coupled with payroll data, testimony from witnesses about standard or expected work schedules for employees in certain job titles or departments, and other evidence developed in the case, can reveal whether an employee more likely than not worked overtime in a given week. For example, he states a certain number of overtime hours can be inferred for an employee who normally works Monday through Friday from 8:30 a.m. to 5:30 p.m. with a one-hour lunch break who shows work email activity on weekends or at times before 8:30 and after 5:30 p.m.
Plaintiffs' expert states that his data analysis can take into account sick days and holidays so as not to count times when an employee did not work in a week. He also states that he can adjust the data analysis to account for employees in different departments who might have different standard work weeks (i.e., for employees who work 9:00 a.m. to 5:00 p.m. or 10:00 a.m. to 6:30 p.m.). Plaintiff's expert concedes that he necessarily will need to rely on certain assumptions when estimating hours worked from the evidence that does exist and/or will be developed in discovery.
Solely for purposes of proffering a methodology for approximating hours on a classwide basis at the class certification stage, he explains he can estimate for employees whose standard work week is Monday through Friday from 8:30 a.m. to 5:30 p.m., “additional hours worked to be (a) the elapsed time between a date/time that is outside of the standard work week and the next date/time if less than or equal to 30 minutes plus (b) the elapsed time, if less than or equal to 30 minutes, between 5:30 pm on Friday and the first date/time that is after 5:30 pm on a Monday through Friday that is not a holiday.” (ECF Nos. 264-1, 265.) He explains that he uses the 30-minute increment because the United States Department of Labor recognizes that rest periods of 20 minutes or less are common in industry and customarily paid for as working time, such that a 30-minute increment is a conservative measure that would not exclude potential rest periods as work hours.
See www.dol.gov/agencies/whd/fact-sheets/22-flsa-hours-worked. Plaintiffs' expert also states that he can modify his model to adjust the 30-minute criteria to be fewer or greater minutes based on evidence developed in discovery.
In sum, Plaintiff's expert states that common data, such as emails and payroll records, can be used to ascertain for each individual in the proposed class whether they worked any overtime during the Relevant Period. Id.
Plaintiffs were provided with email data from a sample of eight employees from the Production Department, only six of whom turned out to be paid on a salary basis. Plaintiffs' expert analyzed that data, assuming a standard work week of Monday through Friday from 8:30 a.m. to 5:30 p.m. to demonstrate how he could conduct the analysis. Based on the assumed standard work week and the 30-minute increment estimation criteria referenced above, the data showed that six employees in the sample all worked some overtime in the Relevant Period. One employee worked only half an hour of overtime, but one worked nearly 233 hours of overtime. Plaintiffs' expert estimates a total of $21,711 in overtime wages are due for these six employees. (ECF 264-1, Exh. C.) This estimate, however, is subject to change after completion of discovery and potential adjustment of assumptions.
4. Retroactive Pay Increases and Changes in Classification
In or about September 2019, TransPerfect realized that all of the putative class members' salaries fell below the salary threshold for qualifying for an exemption. It issued retroactive salary increases to certain employees in the Production Department to bring their salaries up to the relevant salary threshold and at the same time reclassified various members of the putative class (including some in the Production Department) to hourly workers eligible for overtime pay on a going forward basis. In connection with receipt of the retroactive pay increase, TransPerfect requested that Production Department employees sign an acknowledgment stating that they had been paid all wages that they were due (the “Acknowledgement Form”). One hundred and twenty employees signed the Acknowledgement Form. (ECF No. 225 ¶ 18.) No other putative class members received a retroactive payment. Although Metcalf and Lawson both received retroactive payments, neither Metcalf nor Lawson signed the Acknowledgement Form. (Id. ¶ 19.)
5. Arbitration Agreements Signed by Members of the Putative Class
In or about November 26, 2019, TransPerfect implemented a company-wide arbitration policy and asked employees to sign an arbitration agreement (“Arbitration Agreement”). The Arbitration Agreement requires employees to arbitrate all disputes related to their pay. It also provides that the arbitrator has exclusive authority to resolve any disputes relating to the enforceability or formation of the Arbitration Agreement and the arbitrability of disputes between the parties. (Id., Exhs. E & F.) The Arbitration Agreement also mandates that disputes be brought solely on an individual, and not on a class, collective or representative basis. (Id.) Finally, the policy provides for arbitration to be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in accordance with its Employment Arbitration Rules & Procedures to the extent consistent with the terms of the arbitration agreement. Continued employment was deemed consideration for the agreement, but no employee was terminated for not signing the Arbitration Agreement. (Id.)
It states, “[t]he Arbitrator, and not any federal, state, or local court, shall have exclusive authority to resolve any dispute relating to the enforceability or formation of this Agreement and the arbitrability of disputes between the parties.” (Id.)
Although this lawsuit had been initiated at the time of the rollout of the arbitration policy, only one TransPerfect entity - TransPerfect Global - was named as a defendant at that time. That named entity did not employ any putative class members and has since been dismissed as a defendant. Additionally, the proposed class at that time included only employees with the same job title as Plaintiffs, which consisted of at most 10 people. Id.
However, TransPerfect was aware that Plaintiffs' counsel intended to amend the complaint to name other TransPerfect entities that employed the putative class members and that the proposed class definition might change. TransPerfect concedes it did not advise employees of this lawsuit at the time it rolled out the policy in 2019. Approximately 101 putative class members signed the 2019 version of the arbitration agreement. (Id. ¶ 24.)
In 2023, TransPerfect reissued the arbitration policy to employees who had not previously agreed to it. The 2023 version was substantially identical to the 2019 version but also explicitly advised employees of this lawsuit. Eleven of the putative class members signed the 2023 version of the arbitration agreement. Id. Neither Metcalf nor Lawson signed the Arbitration Agreement.
Another putative class member, Katharine Callahan, who worked in the Production Department, did sign the Arbitration Agreement and is willing to act as a representative for putative class members who signed the Arbitration Agreement. (ECF 244 & Declaration of Katharine Callahan.)
LEGAL STANDARD
Class treatment is “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979); Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011). The class representative must “possess the same interest and suffer the same injury as the class members.” Sclesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 216 (1974); Dukes, 564 U.S. at 349.
Federal Rule of Civil Procedure 23 sets forth the criteria that must be met for a case to proceed as a class action. Rule 23(a) requires that (1) the class be “so numerous that joinder of all members is impracticable;” (2) there are “questions of law or fact common to the class;” (3)“the claims or defenses of the representative parties are typical of the claims or defenses of the class;” and (4) the “representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a).
In addition, implied in Rule 23(a) is the requirement that membership of the class be objectively ascertainable. In re Petrobras Sec. Litig., 862 F.3d 250, 260 (2d Cir. 2017). This requirement “demands that a class be ‘sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member.'” Id. (quoting Brecher v. Republic of Argentina, 806 F.3d 22, 24 (2d Cir. 2015) (internal quotation marks omitted)). “A class is ascertainable when defined by objective criteria ... and when identifying its members would not require a mini-hearing on the merits of each case.” Brecher, 806 F.3d at 24-25.
Provided the above criteria are satisfied, the plaintiff also must show that one of the three requirements of Rule 23(b) is met. In this case, Plaintiffs argue the requirements of Rule 23(b)(3) are met. That provision requires the court to find 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). The Rule lists four matters courts must consider in evaluating whether Rule 23(b)(3) is satisfied. They include “(A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing the class action.” Id. These listed matters are not exhaustive, however. Advisory Committee Notes to Rule 23 1966. For example, where the amounts at stake for individuals are small, separate suits may be impracticable for not only the putative class members, but also burdensome on the party opposing the class and the court. Id.
The Advisory Committee Notes explain that certification under Rule 23(b)(3) “encompasses those cases in which a class action would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.” Id. As to the predominance requirement, the notes explain that predominance can be satisfied “despite the need, if liability is found, for separate determination of the damages suffered by individuals within the class.” Id. In contrast, class treatment “ordinarily” is not appropriate in situations where there is a likelihood that “significant questions, not only of damages but of liability and defenses of liability, would be present, affecting the individuals in different ways.” Id. At bottom, the class action procedure must be superior to other ways of proceeding. Id. The superiority requirement challenges the court to ascertain whether the class procedure is the most practical way of handling the “total controversy” and achieving efficiencies by reducing repetitious discovery, motion practice and the like. Id.
Rule 23(c)(4) provides that “[w]hen appropriate, an action may be brought or maintained as a class action with respect to particular issues.” Fed.R.Civ.P. 23(c)(4). Additionally, “[w]hen appropriate, a class may be divided into subclasses that are each treated as a class.” Fed.R.Civ.P. 23(c)(5). The court also may alter or amend a decision granting or denying class certification before final judgment. Fed.R.Civ.P. 23(c)(1)(C).
A motion for class certification should not become a “mini-trial of substantial portions of the underlying litigation;” the question before the Court is whether the plaintiff meets Rule 23's requirements, not whether the plaintiff will prevail on the merits. In re Initial Pub. Offerings Sec. Litig., 471 F.3d 24, 41 (2d Cir. 2006), decision clarified on denial of reh'g sub nom. In re Initial Pub. Offering Sec. Litig., 483 F.3d 70 (2d Cir. 2007).
At the same time, the Court's analysis under Rule 23 must be “rigorous,” Dukes, 564 U.S. at 351, which may require it to “probe behind the pleadings” and consider issues that “overlap with the merits of the plaintiff's underlying claim.” Comcast Corp. v. Behrend, 569 U.S. 27, 33-34 (2013) (internal quotation marks and citations omitted).
Plaintiffs bear the burden of showing that Rule 23's requirements are satisfied by at least a preponderance of the evidence. In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108, 117 (2d Cir. 2013). In determining the appropriateness of class certification, the court may consider the parties' pleadings, declarations and appended supporting materials. Heredia v. Americare, Inc., 2018 WL 2332068, at *2 (S.D.N.Y. May 23, 2018) (“[A] court may consider material outside the pleadings in determining the appropriateness of class certification”).
ANALYSIS
Defendant does not dispute that that proposed class can satisfy Rule 23(a)'s numerosity requirement, but contends that Plaintiffs do not satisfy the remaining three 23(a) criteria.
Defendant also contends that the class is not ascertainable. As to the Rule 23(b)(3) requirements, Defendant contends that common issues of fact and law do not predominate and that class treatment is not the superior way to proceed. The Court addresses each of Rule 23's requirements for class certification in turn below.
1. Rule 23(a)
a. Numerosity
In the Second Circuit, there is a general presumption that if a class has more than forty members it will satisfy Rule 23(a)'s numerosity requirement because joinder of more than that number of parties would be impracticable. Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995); In re Vitamin C Antitrust Litig., 279 F.R.D. 90, 99 (E.D.N.Y. 2012).
Here, the proposed class consists of approximately 235 individuals. (ECF No. 225, Decl. of Carol Chuang ¶ 8.) According to Defendant, 148 of the class members are in its Production Department. (Id. ¶ 11.) Another 37 are in its Sales Department. (Id.) The remaining 50 individuals work in one of ten other departments. (Id.) Regardless, the proposed class easily satisfies the numerosity requirements of Rule 23. See, e.g., Diaz v. FCI Lender Servs., Inc., 2020 WL 4570460, at *2 (S.D.N.Y. Aug. 7, 2020).
The Court notes that earlier in the case Defendant indicated that the class might be comprised of up to 270 members. However, it appears that Defendant has done a closer analysis and now reduced the number slightly. This reduction does not impact the numerosity analysis.
b. Commonality
To satisfy commonality, plaintiffs must show that there are questions of law or fact common to the class. Johnson v. Nextel Commc'ns Inc., 780 F.3d 128, 137 (2d Cir. 2015). Said another way, the class claims must “depend on a common contention . . . capable of classwide resolution.” Dukes, 564 U.S. at 350. Commonality therefore “turns on the ability of the action to ‘generate common answers apt to drive the resolution of the litigation.” Elisa W. v. City of New York, 82 F.4th 115, 123 (2d Cir. 2023) (quoting Dukes, 564 U.S. at 350) (internal quotation marks and citation omitted). The Supreme Court has further explained that the outcome of the common question “will resolve an issue that is central to the validity of each one of the claims in one stroke.” Id. Commonality under Rule 23(a)(2) “is generally considered a low hurdle easily surmounted.” In re Marsh & McLennan Cos., Inc. Sec. Litig., 2009 WL 5178546, at *9 (S.D.N.Y. Dec. 23, 2009). A single common question of fact or law suffices to satisfy this element. Dukes, 564 U.S. at 359. Moreover, claims of individual class members need not be identical. All that is required is that there are “issues whose resolution will affect all or a significant number of” the class. Johnson., 780 F.3d at 137-38.
Plaintiffs have identified questions common to the class: whether Defendant provided overtime pay to the putative class after the change in the NYLL and Defendant's failure to timely raise the salaries of putative class members to the threshold required to qualify for an exemption; whether Defendant failed to update its policies to account for overtime worked by employees affected by the change in the NYLL (that is, whether the affected employees were considered overtime eligible during the relevant period and whether Defendant updated its timekeeping policies for the affected employees so they could submit for overtime pay); the legal import of the retroactive payments to a large portion of the putative class; and whether Defendant provided accurate wage statements. The above-described questions will generate common answers applicable to the proposed class or a significant number of class members that will “drive the resolution” of this litigation. Dukes, 564 U.S. at 350.
Indeed, there is evidence common to the proposed class regarding Defendant's payroll practices, the eligibility of the class members for overtime during the Relevant Period, the form of wage statement provided, and the circumstances of the retroactive payments made to a large portion of the putative class that will inform answers to the questions identified above.
Additionally, all of the proposed class members' claims flow from alleged common practices of failing to treat class members as overtime eligible after their salary fell below the NYLL threshold, provide for a process to accurately record overtime during the relevant period, pay overtime for hours worked in excess of forty in a workweek during the Relevant Period, and provide accurate wage statements reflecting all hours worked and hourly and overtime rates.
Defendant argues that there is no way to determine how much overtime, if any, each putative class member worked through common proof because it did not maintain time records for the relevant period. It further states that there was no common work schedule for the affected employees, such that there will be a need for individualized inquiries into whether class members actually worked more than 40 hours in any week during the relevant period and how much overtime they worked. This argument is not persuasive on the issue of commonality.
A common policy of failing to provide overtime is sufficient to satisfy Rule 23(a)(2) commonality. Rivera v. Harvest Bakery, Inc., 312 F.R.D. 254, 271 (E.D.N.Y. 2016); Beckman v. KeyBank, N.A., 293 F.R.D. 467, 473 (S.D.N.Y. 2013) Bayne v. NAPW Inc., 2021 WL 4822426, *5 (E.D.N.Y. Aug. 10, 2021). Further, Defendant cannot rely on the absence of time records, which it was required by law to maintain, to defeat a motion for class certification. Bayne, 2021 WL 4822426, *4; see also Saldana v. Middletown Car-G-Dam Uni Corp., 2015 WL 12591678, *3 (S.D.N.Y. Sept. 23, 2015). Variations in hours worked among the proposed class are relevant primarily to damages and do not defeat commonality if class members' injuries stem from a common course of conduct, as here. Bayne, 2021 WL 4822426, at *6; Ramirez v. Riverbay Corp., 39 F.Supp.3d 354, 364 (S.D.N.Y. 2014); Espinoza, 280 F.R.D. at 127; Whitehorn v. Wolfgang's Steakhouse, Inc., 275 F.R.D. 193, 199 (S.D.N.Y. 2011); Enea v. Bloomberg, L.P., 2014 WL 1044027, at *4 (S.D.N.Y. Mar. 17, 2014). Thus, Plaintiffs have demonstrated commonality.
Defendant suggests that because a large portion of the proposed class signed Arbitration Agreements, Plaintiffs do not satisfy commonality. This is not persuasive because of the low threshold for finding commonality - a single issue will do. Here that threshold is met. It is also not persuasive because the Arbitration Agreement addresses the forum for resolution of issues. That is, all of the proposed class members have common issues as to whether they were properly paid and received proper wage statements-they just cannot all adjudicate the issues in the same forum because of the Arbitration Agreement. Thus, the impact of the Arbitration Agreements is better addressed under the Rule 23(b)(3) factors rather than under Rule 23(a)'s commonality factor.
c. Typicality
The typicality requirement is “not demanding.” In re EVCI Career Colleges Holding Corp. Sec. Litig., 2007 WL 2230177, at *13 (S.D.N.Y. July 27, 2007). It is satisfied if “each class member's claim arises from the same course of events and each class member makes similar legal arguments to prove the defendant's liability.” In re Flag Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29, 35 (2d Cir. 2009). Thus, where the claims of a class stem from a single course of conduct, “the commonality and typicality requirements of Rule 23(a) tend to merge.” Dukes, 564 U.S. at 349 n.5 (alteration adopted) (quoting Falcon, 457 U.S. at 157-58, n.13).
Here, Plaintiffs meet the typicality requirement. Plaintiffs' claims, like those of the proposed class members, all stem from the same alleged common practice and course of events and each will make a similar argument to prove liability. Plaintiffs and the putative class members will all similarly rely on testimony from Defendant's witnesses that they were subject to the same compensation policy and practices during the Relevant Period and on testimony from Plaintiffs and other class members that they were not paid overtime for hours worked in excess of 40 in a work week or provided with proper wage statements. Courts frequently find that typicality is met based on similar allegations and evidence. See, e.g., Enea, 2014 WL 1044027, *5 (S.D.N.Y. Mar. 17, 2014) (holding that typicality was met where each named plaintiff was part of a group of individuals who were subject to Bloomberg's practice of not compensating off-the-clock work); Jacob v. Duane Reade, 289 F.R.D. 408, 417 (S.D.N.Y. 2013), on reconsideration in part, 293 F.R.D. 578 (S.D.N.Y. 2013), aff'd, 602 Fed.Appx. 3 (2d Cir. 2015) (holding that typicality was met even though the named plaintiffs' testimony regarding their primary duties differed from each other).
Defendant argues that typicality is defeated because approximately half of the proposed class signed the Acknowledgment Form, which it says presents a unique defense. The issue of unique defenses is relevant to both typicality and adequacy of representation. Bowling v. Johnson & Johnson, 2019 WL 1760162, *4 (S.D.N.Y. Apr. 22, 2019). The critical inquiry is whether the presence of such defenses with respect to a class representative will detract from the focus of the litigation to the detriment of absent class members. Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 59 (2d Cir. 2000). Defendant cites no case in support of its argument. Neither of the Plaintiffs signed the Acknowledgement Form, so it does not subject them individually to any defense related to that form. Further, the legal import of the form is a common question for a large portion of the putative class that does not present issues that would detract from the focus of the litigation. Thus, Defendant's argument is unpersuasive.
Defendant also suggests that because a large portion of the proposed class signed Arbitration Agreements, Plaintiffs do not satisfy typicality. For similar reasons discussed in footnote 10 as to why this argument is not persuasive on the commonality factor, it is not persuasive on the typicality factor and is better addressed under the Rule 23(b)(3) factors rather than under Rule 23(a)'s typicality factor.
d. Adequacy of Representation
The fourth element of Rule 23(a) requires that “the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4). When assessing this element, the Court also evaluates whether Plaintiffs' attorneys are qualified, experienced, and able to conduct the litigation and whether Plaintiffs' interests are antagonistic to those of the proposed class. Baffa v. Donaldson, Lafkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000); see also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625-26 (1997). Here, Defendant does not contest the adequacy of Plaintiffs' counsel. Nor is there any basis to do so. Plaintiffs' attorneys are qualified, experienced, and able to conduct the litigation. They have engaged in zealous advocacy and demonstrated strong knowledge of applicable law throughout this litigation. Moreover, they have produced information concerning their considerable experience litigating wage and hour actions, including class and collective actions. Thus, they are adequate to represent the proposed class.
Defendant disputes that Plaintiffs are adequate class representatives. Their only issue appears to be that the Plaintiffs have not signed Arbitration Agreements and thus cannot adequately represent class members who signed Arbitration Agreements. This argument does not impact Plaintiffs' adequacy as representatives, but rather is a factor to be considered under Rule 23(b)(3). This is because “courts rarely deny class certification on the basis of the inadequacy of class representatives, doing so ‘only in flagrant cases, where the putative class representatives display an alarming unfamiliarity with the suit, display an unwillingness to learn about the facts underlying their claims, or are so lacking in credibility that they are likely to harm their case.'” In re Pfizer Inc. Sec. Litig., 282 F.R.D. 38, 51 (S.D.N.Y. 2012) (quoting Koss v. Wackenhut Corp., 2009 WL 928087, at *7 (S.D.N.Y. Mar. 30, 2009)). Plaintiffs have demonstrated that they are adequate. They timely brought this case, have participated actively in discovery, provided deposition testimony, and expressed a willingness to continue to see this case to a resolution and zealously represent the proposed class. In sum, there is no basis for the court to find that this case falls into the rare category of cases where the named plaintiffs are not adequate class representatives.
Notwithstanding the foregoing, and as discussed in more detail below, because the Arbitration Agreement at issue deprives the Court of power to determine the issues of arbitrability and enforceability of the agreements, and because including individuals who signed Arbitration Agreements in the class would render class treatment of the class proposed by Plaintiffs inappropriate under Rule 23(b)(3) factors, individuals who signed Arbitration Agreements should be excluded from the class definition.
Because I recommend that individuals who signed Arbitration Agreements be excluded from the class, I do not address Plaintiffs' proposal in their reply brief that another class member who did sign an Arbitration Agreement be deemed a class representative.
e. Ascertainability
Courts impose an ascertainability requirement when determining whether class certification is appropriate. This requirement means that it must be “administratively feasible for a court to determine whether a particular individual is a member of the class [and t]he Court must be able to make this determination without having to answer numerous individualized fact-intensive questions.” Fogarazzao v. Lehman Bros., 232 F.R.D. 176, 181 (S.D.N.Y. 2005) (citation omitted). The Second Circuit has described ascertainability as a “modest threshold” to meet that “will only preclude certification if a proposed class definition is indeterminate in some fundamental way. In re Petrobras Sec., 862 F.3d at 269.
Defendant argues that the proposed class is not ascertainable because there is no way to determine who actually worked more than 40 hours in a work week in the relevant period. This argument is unpersuasive. Courts have recognized that the fact that some members of the class do not know how much overtime they worked does not defeat ascertainability. Jankowski v. Castaldi, 2006 WL 118973, at *5 (E.D.N.Y. Jan. 13, 2006). This is because whether a person worked overtime can be determined by reference to objective evidence such as payroll records, emails, and swipe-in/work access cards. Id.; see also Flores v. Anjost Corp., 284 F.R.D. 112, 12223 (S.D.N.Y. 2012) (holding that the proposed class satisfied the ascertainability requirement because it could “be ascertained by objective documentation, such as Defendants' employee payroll records and wage statements ...; no subjective criteria is required to determine the class' contours”).
The Court also notes that Defendant has provided extremely detailed information about the proposed class including the number of class members broken down by the departments in which they each worked and the supervisors to whom they each reported. Defendant also has provided evidence showing that it knows which of the proposed class members signed Arbitration Agreements and Acknowledgment Forms. Thus, Defendant's own submissions show that the proposed class is ascertainable.
Defendant also argues that the proposed class is not ascertainable because as defined it is a so-called “fail-safe” class. A fail-safe class “is usually defined in terms of a ‘legal injury,' sometimes by reference to a particular statute, regulation, or contract that has been allegedly violated or breached.” Gregory v. Stewart's Shops Corp., 2016 WL 8290648, at *18, (N.D.N.Y. July 8, 2016), report and recommendation adopted, 2016 WL 5409326 (N.D.N.Y. Sept. 28, 2016). “A class defined in this fashion ‘begs the very legal question at issue in [the] case' and is ‘unworkable' because ‘the class definition depends upon a legal determination that has not yet been made[,]' and it is hard to understand ‘how anyone, let alone these particular proposed class members, can know whether they fall within this class.'” Id. (quoting De la Cruz v. Gill Corn Farms, Inc., 2005 WL 5419056, at *6 (N.D.N.Y. Jan. 25, 2005) (emphasis added)). Further, a failsafe class is defined in a way that “shields the putative class members from receiving an adverse judgment In a fail-safe class, either the class members win or, by virtue of losing, they are not in the class, and therefore not bound by the judgment.” Hicks v. T.L. Cannon Corp., 35 F.Supp.3d 329, 356-57 (W.D.N.Y. 2014) (internal quotation marks and citations omitted).
“Despite a fail-safe class definition, courts have the discretion to ... redefine the class to bring it within the scope of Rule 23.” Id.; see also 7A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure 1759 (3d ed. 2005) (“if plaintiff's definition of the class is found to be unacceptable, the court may construe the complaint or redefine the class to bring it within the scope of Rule 23 or it may allow the plaintiff to amend in order to limit the class”).
Courts routinely approve certification of classes defined in similar terms as the way Plaintiffs propose. See, e.g., Hardgers-Powell v. Angels In Your Home LLC, 330 F.R.D. 89, 101-02 (W.D.N.Y. 2019) (where subclass definition included limitation that members are “not paid at least one and one-half times their regular hourly rate for all hours worked in excess of forty in a single workweek,” court found this was not a fail-safe class because: “membership in Plaintiffs' proposed subclass does not hinge on a determination of Defendants' liability”; “the definition does not presume entitlement to, or the extent of, damages”; and it “is defined in terms of readily ascertainable, objective criteria that do not implicate the concerns of a fail-safe class.”); Raniere v. Citigroup Inc., 827 F.Supp.2d 294, 325-26 (S.D.N.Y. 2011), rev'd on other grounds, 533 Fed.Appx. 11, 14 (2d Cir. 2013) (holding that class defined as “all current and former employees of Defendants who [held specified positions] who were not paid overtime compensation for all hours worked in excess of 40 hours per week” was not a fail-safe class); but see, e.g., Cassie v. JB Security, 2018 WL 11449903, at *1 (S.D.N.Y. Nov. 16, 2018) (refusing to certify class defined by hours worked as fail-safe class). That said, this does not mean that inclusion of reference to hours worked is necessary or appropriate here.
Having carefully considered the matter, Plaintiffs' proposed class definition that includes reference to hours worked is improper because it would exclude individuals who may not have worked overtime but may have received a wage statement that did not comply with NYLL (for which there are separate penalties) and because reference to hours worked is not needed to ascertain the class. Ascertainability is critical for purposes of giving notice to class members. Manual on Complex Litigation 21.22. Here, there is no question that the parties can identify who should receive notice. Thus, the class definition should be adjusted to eliminate reference to hours worked.
Having found that Plaintiffs have satisfied the Rule 23(a) factors, I next discuss the Rule 23(b)(3) factors.
a. Predominance
“‘Predominance is satisfied if resolution of some of the legal or factual questions that qualify each class member's case as a genuine controversy can be achieved through generalized proof, and if these particular issues are more substantial than the issues subject only to individualized proof.'” Waggoner v. Barclays PLC, 875 F.3d 79, 93 (2d Cir. 2017) (quoting Roach v. T.L. Cannon Corp., 778 F.3d 401, 405 (2d Cir. 2015)). This requirement is “far more demanding” than the commonality requirement under Rule 23(a)(2). Amchem Prods., 521 U.S. at 623-24. Designed to test the proposed class's cohesiveness, the predominance inquiry “asks whether the common, aggregation-enabling issues in the case are more prevalent or important than the non-common, aggregation defeating individual issues.” Tyson Foods, Inc. v. Bouaphekeo, 577 U.S. 442, 453 (2016) (internal quotation marks and citations omitted). This is a qualitative, not quantitative, inquiry, where the Court “must account for the nature and significance of the material common and individual issues in the case.” In re Petrobras Sec., 862 F.3d at 271.
That damages may need to be determined on an individualized basis does not defeat certification. Roach, 778 F.3d at 405-07 (holding that damages do not need to be measurable on a classwide basis to satisfy Rule 23(b)(3) predominance; interpreting Comcast as requiring only that “a model for determining classwide damages relied upon to certify a class under Rule 23(b)(3) must actually measure damages that result from the class's asserted theory of injury” and not “that proponents of class certification must rely upon a classwide damages model to demonstrate predominance”). Further, it is clear that damages calculations need not be exact at the class certification stage. Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809-10 (2011). Thus, courts recognize that in the wage and hour case, “establishing a uniform practice or scheme” that deprives the proposed class of overtime wages “may constitute a significant step towards establishing liability to all class members” and justify a finding of predominance even if exact hours worked cannot be proven on a classwide basis. Bolanos v. Norwegian Cruise Lines Ltd., 212 F.R.D. 144, 148 (S.D.N.Y. 2002); see also Ramos v. SimplexGrinnell LP, 796 F.Supp.2d 346, 359 (E.D.N.Y. 2011), vacated in part on other grounds, 773 F.3d 394 (2d Cir. 2014) (noting that wage claims are especially suited to class litigation despite differences in hours worked, wages paid, and wages due).
Importantly here, all of the proposed class members will rely on common evidence to prove critical aspects of their claims for liability, much of which will be Defendant's own business and payroll records and witness testimony, including evidence about why class members' salaries did not meet the NYLL threshold for an exemption, whether a retroactive salary payment was made and why, the amounts of the retroactive payments, communications to affected employees about their eligibility for overtime during the Relevant Period, communications to affected employees about the retroactive payments, the format of the pay statements, and the manner in which time was or was not recorded. All of this common evidence will go a long way to proving liability and weighs heavily in favor of finding predominance from a qualitative perspective.
Defendant argues strenuously against a finding of predominance because of the unavailability of time records and difficulty in establishing whether each proposed class member actually worked more than 40 hours in a week - an issue important to both liability and damages. This argument is not persuasive and, as discussed above, has been rejected by many courts within the Second Circuit in similar cases that have recognized these quantitative differences do not outweigh the qualitative nature of the predominant common issue of an alleged unlawful pay policy. See, e.g., Roach v. T.L. Cannon Corp., 2017 WL 11529679, *8 (N.D.N.Y. Sept. 27, 2017) (denying decertification of class and finding that common issues going toward liability predominated over individualized issues as to whether each class member worked more than 10 hours in a day); Fonseca v. Dircksen & Talleyrand Inc., 2015 WL 5813382, at *5 (S.D.N.Y. Sept. 28, 2015) (“District courts ‘have routinely found that common questions predominate in wage and hour actions brought on behalf of a class of employees of the same employer challenging allegedly illegal policies and practices.'”) (quoting Murphy v. LaJaunie, 2015 WL 4528140, at *7 (S.D.N.Y. Jul. 24, 2015) (collecting cases)); Lassen v. Hoyt Livery, Inc., 2016 WL 7165716 (D. Conn. Dec. 8, 2016) (rejecting motion to decertify class; finding that the fact that different plaintiffs worked different hours, and that not all of them regularly worked overtime was more important to damages than liability because of allegations that there were across-the-board policies that violated the FLSA); Mendez v. Radec Corp., 232 F.R.D. 78, 92-93 (W.D.N.Y. 2005) (granting plaintiffs class certification and denying defendants' motion to decertify FLSA collective action and explaining that individual issues as to hours worked was more important to damages). Further, this argument ignores the totally separate issue of whether the wage statements received by the proposed class complied with the NYLL - an issue not dependent on individualized proof of hours and that is a predominant common issue for the proposed class. See Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, 538 (2d Cir. 2016) (“‘The predominance requirement is satisfied if resolution of some of the legal or factual questions that qualify each class member's case as a genuine controversy can be achieved through generalized proof, and if these particular issues are more substantial than the issues subject only to individualized proof.'”) (quoting In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d at 118 (internal quotation marks omitted)).
It also is not persuasive because a class may be certified even though class members might have to rely on representative evidence of hours worked. See Tyson Foods, 577 U.S.at 455 (2016) (affirming judgment of liability based on representative proof of hours worked; stating that permissibility of such proof turns “on the degree to which the evidence is reliable in proving or disproving the elements of the relevant cause of action” and not whether the proceeding is a class or individual action).
Defendant relies heavily on Ruiz v. Citibank, N.A., 93 F.Supp.3d 279 (S.D.N.Y. 2015), reconsideration denied 2015 WL 4629444, abrogated on other grounds by Scott v. Chipotle Mexican Grill, Inc., 954 F.3d 502 (2d Cir. 2020), to argue that class certification is inappropriate because of the difficulty demonstrating hours worked. In that case, the court declined to certify a class of personal bankers who alleged that they worked uncompensated overtime, finding that a “plethora of individualized questions going to liability and damages would defeat class certification under Rule 23(b)'s predominance requirement.” Id. Ruiz is distinguishable because, unlike here, the proposed class members were overtime eligible and asserted that they were not compensated for off-the-clock time. The predominant issue was whether individuals actually worked overtime. That is not the case here, where there is an alleged common policy of not paying the proposed class the salary necessary to meet the NYLL threshold to be exempt from overtime and not allowing for the proposed class to record overtime worked or payment of overtime, and not providing wage statements showing hours worked or hourly and overtime rates of pay. Ruiz also pre-dates the Supreme Court's decision in Tyson Foods where it clarified that representative proof of hours worked can be used to establish liability in a wage and hour case.
Defendant further argues that individualized damages issues predominate because not only will it be difficult to demonstrate hours worked through classwide proof, but also because a computation of damages depends on whether each class member qualifies for the administrative exemption under the federal Fair Labor Standards Act (“FLSA”). Specifically, under New York Law, class members are entitled to pay at 1.5 times minimum wage if they are exempt under the FLSA and 1.5 times their regular rate of pay if they are not exempt. 12 N.Y.C.R.R. § 142-2.2.
At oral argument, Defendant's counsel clarified that only the administrative exemption is at issue.
These arguments are not persuasive. The Supreme Court has recognized that reasonable inferences can be drawn as to hours worked if time records are unavailable. Anderson v. Mt. Clemens Potter Co., 328 U.S. 680 (1946); Tyson Foods Inc., 577 U.S. at 454-55. Parties can rely on proxies for time worked from which reasonable inferences can be drawn such as building access card swipes, schedules, email activity, and time-work studies. For example, in Tyson Foods, where precise hours were not measured, the plaintiffs relied on an expert who performed an observational study of the time it took employees to don and doff required uniforms/equipment. Id. at 454. At oral argument, Defendant conceded that it did not maintain records of time worked and would itself have to rely on evidence from which inferences would be drawn as to hours worked - just as Plaintiff will have to do.
Plaintiffs proffered the report of an expert, David Breshears, CPA/CFF, who explained a methodology he could use to estimate hours worked. Specifically, he proposes an evaluation of email activity of class members to determine weeks when employees worked outside of their regular schedule, which would be established through testimony or other evidence and be based on certain assumptions about working time. He also states that he can evaluate other available electronic records. Defendant has moved to strike the expert report under Daubert v. Merrell Dow Pharms. Inc., 509 U.S. 579 (1993), arguing that assumptions on which the report is based are not supported by evidence of any regular schedule of all class members but only by six individuals from the Production Department. The Court does not need to rely on Breshears' report, however, to determine that class treatment is appropriate here, as there is no prohibition in relying on representative proof, Defendant offers no more accurate way to estimate hours worked, and Breshears' report was merely a proffer of a methodology and based on assumptions that will be adjusted based on discovery developed in the case. In other words, Breshears' report is preliminary and discusses possible methods. Plaintiffs are not required to prove liability at the class certification stage, and the admissibility and reliability of Breshears' merits report will be addressed at a later stage of the litigation.
Further, given that the class I am proposing be certified will consist of only approximately 123 individuals, it will not be difficult to collect individual class members' own accounts of their hours worked through a survey or sworn interrogatories. It will then be Defendant's burden to demonstrate that it paid class members' properly because the employer is required to maintain time records. N.Y. Lab. Law 196-a(a) (the “[f]ailure of an employer to keep adequate records or provide statements of wages to employees . . . shall not operate as a bar to filing of a complaint by an employee. In such a case the employer in violation shall bear the burden of proving that the complaining employee was paid wages, benefits and wage supplements.”).
Additionally, the Court has many tools available to manage individualized damages issues and to allow Defendant to present its defenses. Rosario v. Valentine Ave. Discount Store, Co., Inc., 2013 WL 2395288, at *9 (E.D.N.Y. May 31, 2013) (listing tools); see also Hardgers-Powell, 330 F.R.D. at 105-06 (W.D.N.Y. 2019). For example, the issues raised by Defendant can be addressed by dividing the class into subclasses split by role/department if that is shown to be needed for purposes of assessing an employee's exemption status under the NYLL. See Zivkovic v. Laura Christy LLC, 329 F.R.D. 61, 75 (S.D.N.Y. 2018). At oral argument, defense counsel was not able to provide information on the positions held by individuals who signed Arbitration Agreements or the departments in which they worked. But, it is fair to assume that the number of positions and departments involved will be reduced by exclusion of these individuals from the class certified. This will also greatly ease manageability concerns. In sum, the issues Defendant raises do not defeat predominance in this case. Vaccariello v. AM Satellite Radio, Inc., 295 F.R.D. 62, 73 (S.D.N.Y. 2013) (“[N]either the existence of individual defenses nor difficulties in calculating damages in and of themselves defeat the predominance requirement.”) (citation omitted).
Finally, Defendant argues that individualized proof will be needed to show reliance on the wage statements and that this too shows that individualized issues predominate. This argument is not persuasive. Defendant cites no case stating that reliance must be proven to demonstrate standing or actual harm from receipt of wage statements that did not comply with the NYLL. Many courts within the Second Circuit have certified classes involving inaccurate wage statement claims. See, e.g., Bayne, 2021 WL 4822426; Zivkovic, 329 F.R.D. at 69.
b. Superiority
It is well-established that “[a] class action is a superior method to individually litigating the NYLL claims,” particularly where some employees may be entitled to “substantial” amounts of unpaid overtime, but many employees “who worked relatively few overtime hours are unlikely to initiate individual actions.” Jackson v. Bloomberg, L.P., 298 F.R.D. 152, 169 (S.D.N.Y. 2014). Here, Defendant argues that some putative class members may have worked only a few hours of overtime, and Plaintiffs state that some worked hundreds of hours. Thus, this is just such a case when many in the class may be disincentivized to sue due to their low dollar damages compared to the costs and burdens of bringing an individual litigation.
Defendant mentions in its opposition brief that it may have a defense to paying overtime to certain class members if their overtime worked was de minimus. It is unclear whether the de minimus defense applies to claims for overtime under the NYLL - a question the court does not answer at this time. See Strohl v. Brite Adventure Ctr., Inc., 2010 WL 3236778, at *7 (E.D.N.Y. Aug. 13, 2010) (“the court is unaware of any de minimis exception under state law”). Nor does Defendant explain how it will prove this factually without time records or even how many of the putative class members it believes would be subject to such a defense. In any event, Defendant's speculation about some class members working only de minimus overtime does not render class treatment inappropriate in light of the stronger bases for certifying a class demonstrated by Plaintiffs and discussed herein. Cf. Estrella v. P.R. Painting Corp., 356 F. App'x. 495, 497 (2d Cir. 2009) (noting that if a defendant in a FLSA case “failed to compensate [employees] properly for even one hour of overtime, liability is established” and any other issues “relate[ ] only to damages”).
As mentioned above, certifying the class proposed by Plaintiffs, however, does raise manageability concerns. Specifically, Plaintiffs urge that the class should include those individuals who signed the Arbitration Agreement, suggesting that the Court can determine at a later stage whether the Arbitration Agreement is enforceable and whether the action should be stayed as to nearly half the proposed class while those individuals arbitrate their respective claims. This argument is not persuasive.
The question of arbitrability of a dispute is presumptively for a court to decide. Wells Fargo Advisors, LLC v. Sappington, 884 F.3d 392, 394 (2d Cir. 2018). This presumption, however, falls away when the arbitration agreement clearly and unmistakably gives the question of arbitrability to the arbitrator. Id. at 395. In this case, the agreement states “[t]he Arbitrator, and not any federal, state, or local court, shall have exclusive authority to resolve any dispute relating to the enforceability or formation of this Agreement and the arbitrability of disputes between the parties.” (ECF No. 225, Exhs E at 1, F at 1.) Thus, it is crystal clear that the Arbitration Agreement here divests this Court of the power to adjudicate the issue of arbitrability, as well as the issue of enforceability.
Additionally, the Court notes that the Arbitration Agreement here contains a class and collective action waiver-something that is generally enforceable. See Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612 (2018); West v. LaserShip, Inc., 2023 WL 1972216, at *2 (S.D.N.Y. Feb. 13, 2023) ("New York courts routinely uphold contractual proscriptions against class actions," and "also uphold class and collective action waivers when applying . . . New York law in FLSA and NYLL actions") (collecting cases); Chen-Oster v. Goldman, Sachs & Co., 449 F.Supp.3d 216, 251 n.28 (S.D.N.Y. 2020) ("New York courts . . . have upheld class action waivers in arbitration agreements against challenges they are unconscionable.").
All of this means that if the class were to include that portion of employees who signed the Arbitration Agreement, the timing of the resolution of this matter will hinge on the timing and decision of multiple outside arbitrators. This is not in the interest of those employees who did not sign the Arbitration Agreement or this Court. Rule 1 mandates that this Court construe, administer and employ the Rules of Civil Procedure - including Rule 23 - in a manner designed to secure the just, speedy and inexpensive determination of every action. Fed.R.Civ.P. 1. The Court would not be complying with its obligation under Rule 1 were it to include those employees who signed the Arbitration Agreement in the class because it could not ensure the speedy resolution of all the claims.
Including these individuals in the class also would be inconsistent with the purpose of Rule 23(b)(3), which contemplates class treatment only if such treatment would achieve “economies of time, effort and expense . . . without sacrificing procedural fairness.” Advisory Committee Notes 1966 Amendment. Here, it would not be fair to the portion of the class that would have to wait for multiple arbitrators' decisions before moving forward to resolution of their class claims. Nor would it be fair to Defendant, as it would delay resolution as to a large portion of the proposed class. Cf. Errickson v. Paychex, Inc., 447 F.Supp.3d 14, 27-28 (W.D.N.Y. 2020) (discussing reasons for excluding employees who signed arbitration agreement from collective certification under the FLSA; finding such employees not similarly situated to employees who had not signed an arbitration agreement); Morangelli v. Chemed Corp., 2010 WL 11622886, at *3 (E.D.N.Y. June 17, 2010) (holding it would be a “disservice to judicial efficiency” to include those who signed arbitration agreement in collective, when they would be “subject to additional, prolonging motion practice which will likely disqualify them from the class”). The Court also has concerns whether it would even have authority to authorize class notice to those who signed the Arbitration Agreement.
All of the above demonstrates that a class action is not a superior method of adjudication for the class proposed by Plaintiffs. See Nat'l Convention Servs., LLC v. Applied Underwriters Captive Risk Ass. Co., Inc., 2019 WL 3409882 (S.D.N.Y. July 27, 2019) (holding that where a portion of the proposed class had signed arbitration agreements or class action waivers, this defeated superiority under Rule 23(b)(3)).
Plaintiffs cite to cases where courts have certified classes that included employees who signed an arbitration agreement. However, those cases do not appear to have involved arbitration agreements like the one in this case that gives the arbitrator, not the court, the power to determine the enforceability of the arbitration agreement and/or are otherwise distinguishable. Falberg v. Goldman Sachs Group, 2022 WL 538146 (S.D.N.Y. Feb. 14, 2022), cited by Plaintiffs, involved a participant in a 401(k) plan who brought claims under the Employee Retirement Income Security Act of 1974 (“ERISA”) against the Plan's sponsor and fiduciary for breach of fiduciary duty. The claims were brought on behalf of the retirement plan (i.e., they were derivative in nature) and sought damages for plan participants. The Court rejected the defendant's challenge to typicality based on the fact that many of the proposed class members had signed arbitration agreements because there was a legitimate basis for questioning whether the agreements would bar litigation on behalf of the plan. Further, there was no argument that the issue of arbitrability was reserved for the arbitrator as opposed to the Court. Finally, the plaintiff sought certification under Rule 23(b)(1), such that the issues of predominance and superiority were not relevant.
Chen-Oster, 325 F.R.D. at 84, cited by Plaintiffs, is also distinguishable. While it is true that the class included individuals who had signed arbitration agreements, the decision certifying the class did not analyze whether the fact that a portion of the class had signed the arbitration agreement defeated Rule 23 certification on grounds of commonality, typicality, adequacy, predominance, or superiority. A later decision in the same case granted the employer's motion to compel a portion of the class to bring their claims in arbitration and ordered as to another portion of the class that they be given a chance to opt-out of the arbitration agreement they had signed due to procedural unconscionability concerns over the particular agreement they signed. Thus, the court also had power to determine the question of arbitrability and enforceability, unlike here.
The other cases cited by Plaintiffs for including individuals who signed an arbitration agreement in the class are similarly distinguishable. The decision in Denson v. Donald J. Trump for President, Inc., 530 F.Supp.3d 412 (S.D.N.Y. 2021), did not address Rule 23 at all). As for B & R Supermarket, Inc. v. Mastercard Int'l, Inc., 2020 U.S. Dist. LEXIS 248650, at *10 (E.D.N.Y. Aug. 28, 2020), the certification decision did not analyze whether the fact that a portion of the class that had signed the arbitration agreement defeated Rule 23 certification on grounds of commonality, typicality, adequacy, predominance or superiority.
Because the Court has flexibility to define the class to ensure the action is fairly conducted and consistent with the objectives of Rules 1 and 23, I recommend that the class definition be “all TransPerfect salaried employees in New York City who were paid $1,125.00 per week or less during the Relevant Period who did not sign Arbitration Agreements.”
3. Class Notice
Defendant objects to the class notice in a cursory way. I do not address the class notice at this point. Rather, I recommend that should the Court adopt this Report and Recommendation and certify the class as I propose it be defined, the parties be required to meet and confer about the proposed Notice to the Class and submit it to the Court for approval within fourteen days after any decision certifying a class.
CONCLUSION
For the reasons set forth above, I respectfully recommend that the motion for class certification be granted in part and denied in part. Specifically, I recommend that the following class be certified: “all TransPerfect salaried employees in New York City who were paid $1,125.00 per week or less during the Relevant Period who did not sign Arbitration Agreements.” I further recommend that should the Court adopt this recommendation, the parties be required to meet and confer about the proposed Notice to the Class and submit it to the Court for approval within fourteen days after any decision adopting this recommendation.
NOTICE
The parties shall have fourteen days from this date to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b) to this Report and Recommendation. If Defendant files written objections to this Report and Recommendation, Plaintiffs may respond to the objections within fourteen days after being served with a copy. Fed. R. Civ. P.72(b)(2). If Plaintiffs file written objections, Defendant may respond to the objections within fourteen days.
Objections and responses to objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the Hon. Edgardo Ramos at 40 Foley Square New York, NY 10007-1312, to the chambers of the undersigned magistrate judge, and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any request for an extension of time to file objections must be directed to Judge Ramos. Failure to file timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C.§ 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).