Articles Posted in Seventh Circuit

Employees of a bank with multiple branch locations throughout Illinois sued to recover unpaid overtime wages under both the federal Fair Labor Standard Act (FLSA) and the Illinois Minimum Wage Law (IMWL). After the district court certified two classes of plaintiffs, the defendant bank appealed the certification to the Seventh Circuit Court of Appeals. Based in part on a U.S. Supreme Court decision clarifying the requirements for class certification, the Seventh Circuit affirmed the district court’s order. Ross, et al v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir. 2012).

The plaintiffs alleged in their lawsuit that the bank had several “unofficial” policies that allowed it to deny overtime pay to employees, id. at 903, such as using “comp time” instead of overtime wages or altering employee timesheets. They also alleged that some assistant bank managers (ABMs), while officially exempt from eligibility for overtime pay, spent most of their time on non-exempt work. The plaintiffs therefore sought to certify two classes: non-exempt employees who were entitled to overtime compensation, and ABM employees who performed non-exempt work and were entitled to overtime pay. A class action requires four basic elements: “numerosity, commonality, typicality, and adequacy of representation.” Id.; Fed. R. Civ. P. 23(a). The district court certified both classes under Rule 23(b)(3) of the Federal Rules of Civil Procedure (FRCP), which applies to cases where the issues affecting all class members supersede those affecting individual members, and where a class action is the best way to resolve the conflict.

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An Illinois court dismissed a lawsuit against a bank alleging deceptive fees for debit card transactions, ruling that a prior settlement in a class action lawsuit, of which the plaintiff was a class member, barred the suit. Schulte v. Fifth Third Bank (“Schulte 2”), No. 09 C 6655, statement (N.D. Ill., Jun. 15, 2012). The plaintiff acknowledged being part of the class, and by accepting the terms of the settlement agreement, the court held, the plaintiff had released the bank from any further claims related to ATM fees.

The original lawsuit alleged that the defendant “resequenced” debit card transactions during a posting period in an order from highest to lowest, rather than in chronological order. Schulte v. Fifth Third Bank (“Schulte 1”), 805 F.Supp.2d 560, 565 (N.D. Ill. 2011). This meant that the balance of the customer’s account drew down faster, leading to more overdrafts and associated fees. A class action lawsuit commenced in November 2009, and the U.S. District Court for the Northern District of Illinois approved a class settlement agreement in July 2011.

The Schulte 1 settlement applied to customers of the defendant from October 21, 2004 to July 1, 2010. The court applied a five-part test established by the Seventh Circuit Court of Appeals for determining if a class action settlement is fair:

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In an appeal of the decertification of a class action lawsuit, a federal appeals court denied a motion to dismiss the appeal for lack of jurisdiction, finding that the plaintiffs/appellants, who settled with the defendants after decertification, still had a stake in the litigation. Espenscheid v. DirectSat USA, LLC, 688 F.3d 872 (7th Cir. 2012). The plaintiffs claimed that they were entitled to an “incentive award” or “enhancement fee” for serving as class representatives, but only if the case was certified as a class action. Id. at 874-75. This gave them an ongoing stake in the litigation, they argued, and therefore gave them standing to appeal decertification. The court agreed, finding that dismissing their appeal on standing grounds would not serve judicial economy, as another class member could simply step in and appeal.

Judge Richard Posner, writing for the court, does not say much about the underlying lawsuit, except that it consists of both class action and collective action claims. The three named plaintiffs brought collective action claims against the defendant for alleged violations of the federal Fair Labor Standards Act, and class action claims for supplemental state law claims. The difference between a class action and a collective action under federal law, the court notes, is not particularly relevant to the question at hand.

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The federal government passed the Fair Labor Standards Act (FLSA) to ensure that American workers would be paid appropriately for the work they provide. While some people may think of the FLSA as a statute that is concerned only with getting workers their unpaid overtime, the language of the law is broad enough to ensure that employees are paid for all of their time spent working, regardless of whether that time is overtime or not. Our Downers Grove wage and hour class-action attorneys found a case in the Seventh Circuit Court of Appeals involving employees who were not paid for the time they spent donning safety gear and wanted to share it with our readers.

In Spoerle vs. Kraft Foods Global, Plaintiffs were employed in Defendant’s plant in Madison, Wisconsin preparing meat products as hourly workers and spent several minutes at the outset of each work day putting on steel-toed boots, hard hats, and other safety gear required to perform the job. Plaintiffs filed suit to challenge a trade-off — struck in a collective bargaining agreement between Plaintiffs’ union and Defendant — where Plaintiffs would not be paid for their time spent donning this protective gear in exchange for a higher base pay rate. The FLSA permits such a tradeoff under §203(o), but Plaintiffs argued that Wisconsin law has no equivalent exception, and therefore state law requires payment for time spent donning such gear. Defendant argued that the FLSA and federal labor laws pre-empt the state law, so the CBA agreement should be honored and the time spent dressing in safety gear should remain noncompensable. The district court found in favor of the Plaintiffs, and Defendant appealed.

On appeal, defendant argued that §203(o) was the federal government’s decision to “permit a collectively bargained resolution to supersede the rules otherwise applicable to determining the number of hours worked.” The Court of Appeals did not find this argument persuasive, however, because nothing placed in a CBA exempts an employer from state laws of general application. Therefore, the Court found that the district court did not err in ruling that Plaintiffs were entitled to be paid for their time spent equipping themselves with safety gear.

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Courts have been flooded lately with claims by non-exempt employees who have not been compensated for time spent logging into computer systems and performing other start-up procedures. As experienced overtime lawyers, Lubin Austermuehle has been tracking many of these cases, and the Northern District of Illinois made a recent ruling on one such case.

In Kernats v. Comcast Corporation, Plaintiffs worked for Defendant as customer account representatives (CAE’s) who performed non-exempt work and were paid on an hourly basis. Plaintiffs worked in one of Defendant’s eight call centers in Illinois, and while all Plaintiffs did not perform exactly the same job, they did have the same job description and primary duty. Additionally, they all had similar training, were governed by the same employment policies, and were compensated in the same way. Also, all CAE’s were allegedly required to first log into a work computer, load all of the necessary computer applications, and log into Defendant’s phone system before the start of their shift. In addition to the customer service responsibilities, Defendant required CAE’s to learn about new products, services, marketing campaigns, and review company emails.

Plaintiffs filed suit alleging that Defendant failed to compensate Plaintiffs for the time after they first logged in, but prior to their scheduled start time, which violated the Illinois Wage Payment and Collection Act (IWPCA). Plaintiffs also claimed that working this uncompensated time caused them to work more than forty hours a week. This entitled them to overtime compensation pursuant to the Illinois Minimum Wage Law (IMWL). After some limited discovery, Plaintiffs moved to certify two classes, one for each state law claim, under Federal Rule of Civil Procedure 23.

In making their ruling, the Court found that Plaintiffs met the threshold requirements of Rule 23(a) because the class members were subject to standardized conduct by Defendant. This conduct was the implementation of a company-wide practice allowing CAE’s to work after their login, but before the start of their shift without being paid. The class-members’ claims also were based upon the same legal theory, and thus met the minimal requirements of typicality and commonality. The Court then held that the requirements of Rule 23(b)(3) were met because the evidence required to prove liability that was common to the class significantly outweighed the evidence particular to the individual class members. The Court also found that a class-action was the preferable means for adjudicating the issues because the individual recovery for individuals would be relatively small, while the aggregate recovery would be quite large. As such, the Court ruled that the requirements of FRCP 23 were met and certified the class-action.

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Every day there are hard working people who are denied the overtime wages that they have rightfully earned. At Lubin Austermuehle, we have much experience representing those with unpaid overtime claims in class-action litigation. As such, we track the changes in the wage laws and are always looking out for new court decisions in the field.

Alvarez v. City of Chicago is a recent class-action case brought by paramedics in the city of Chicago for the systematic miscalculation of their overtime wages. In so doing, Plaintiffs alleged that Defendant willfully violated the Fair Labor Standards Act (FLSA) when it failed to properly compensate the Plaintiffs. The parties each filed motions for summary judgment, and the trial court ruled in favor of Defendant. In making the ruling, the trial court found that the Plaintiffs were not similarly situated and they could not be “readily divided into homogenous subgroups.” The lower court then dismissed the claims and directed the parties to arbitrate the dispute.

On appeal, the Appellate Court disagreed with the trial court’s decision, and held that the case could proceed by using sub-claims if the Plaintiffs were similarly situated and common questions predominated. The Court also held that the case should not have been dismissed; instead the Plaintiffs should be allowed to proceed individually if class certification is inappropriate. The Court then remanded the case with instructions for the district court to consider which form of judicial resolution would be most efficient.

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We here at Lubin Austermuehle have extensive experience as Joliet overtime class-action lawyers and are constantly scouring the federal court dockets in Illinois for cases that may help our practice. One particularly instructive opinion was issued by the Northern District of Illinois, Eastern Division earlier this year in Ottaviano v. Home Depot Inc.

In Ottaviano v. Home Depot Inc., the Plaintiff employees worked for Home Depot as assistant store managers, and allege that they and their fellow class members were misclassified as exempt employees. Plaintiff’s claimed that Defendant’s misclassification was intentional for the purpose of circumventing the Illinois Minimum Wage Law (IMWL). Defendant Home Depot denied the claims and filed to dismiss the action through a motion for summary judgment.

The named Plaintiffs had worked for Defendant between approximately two to six years, and had worked well in excess of forty hours per week during the entirety of their employment. During the time that the Plaintiffs worked for Home Depot, they were paid a salary and were required to work fifty-five hours a week. Home Depot requires that all assistant store managers (ASM), including Plaintiffs, go through a training stage for two to eight weeks before they are deemed to be a qualified and capable ASM able to fulfill the responsibilities required for the position. The trainee ASM’s are classified as exempt by Defendants and are paid a salary during this period. Defendant has a universal policy of scheduling its ASM’s for fifty-five hours per week, and Home Depot terminates assistant store managers who fail to work the hours they are scheduled.

Plaintiffs filed their class action alleging that they were owed overtime for the training period and for every other week of their employment with Home Depot. Plaintiffs contended that Defendant’s policy of terminating ASM’s who do not work fifty-five hours a week is effectively a wage reduction under the Federal Labor Standards Act (FMLA). Plaintiffs also argued that under the salary-basis test, any employee whose wages can be reduced by their employer is non-exempt. The Court did not find Plaintiffs’ arguments persuasive, and in dismissing the claims Judge Dow cited a U.S. Supreme Court ruling that true exempt employees are disciplined by terminations, demotions, or restricted work assignments, as the Plaintiffs were, instead of wage deductions. The District Court went on to say that employers are permitted to set requirements for the overall number of hours worked by their exempt employees. Finally, the Court granted summary judgment to dismiss the overtime claims for the training period because they were barred by the applicable statute of limitations.

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We here at Lubin Austermuehle often represent our clients in federal court, and our practice includes handling wage and hour disputes so we keep an eye on such cases filed in Illinois. In re AON Corp. is the consolidation of a New York case with an action filed in Illinois District Court to certify a wage and hour class action pursuant to Federal Rule of Civil Procedure 23(a). Plaintiffs allege violations of the Illinois Minimum Wage Law (IMWL) and Fair Labor Standards Act (FLSA) for unpaid overtime. In its opinion, the Court discussed whether the purported class met the four standards required for certification as set forth in FRCP 23(a). The Court analyzed the numerosity of class members, commonality of the issues between class members, typicality of the class representatives, and adequacy of representation proffered by the named Plaintiffs and their attorneys.

The Plaintiffs in this case are former employees of Defendant AON who worked as Associate Specialists, Client Specialists, and Senior Client Specialists in the Client Services Units and Policy Maintenance Units located at AON’s facilities in Illinois and New York. Plaintiffs argue that AON improperly classified the purported class members as administrative employees, thereby violating the IMWL and the FLSA and entitling them to overtime compensation.

The Court found that the Illinois Plaintiffs satisfied the Rule 23(a) numerosity requirement because there were 515 members of the proposed class and joinder of that many actions would be impracticable. The commonality requirement was met because there is a common question of law as to whether the class members were properly classified as administrative workers. The Rule 23(a) typicality requirement was met because all of the claims arise out of the same act of classification and assert the same violation of the law. The adequacy requirement of Rule 23(a) was met because the named Illinois Plaintiffs suffered the same injury as the class and have pursued the case for over 2 years. Additionally, Plaintiffs’ counsel has the requisite resources and experience in both class action and wage & hour litigation to adequately protect the interests of the class. Finally, the Court found that the requirements of Rule 23(b)(3) were met despite the fact that the class members have different clients and peripheral duties. The Court concluded that the class members’ essential job functions were similar enough that the central legal issue regarding classification of each class member as an administrative employee under the IMWL predominated and that a class action was a superior method of resolving the case.

To conditionally certify a class under 216(b), Plaintiffs must make a modest factual showing to demonstrate that they and potential plaintiffs together were victims of a common policy or plan that violated the law. Secondly, after all or a significant portion of discovery is completed, the Court must perform a stricter examination of whether the class members are similarly situated. The Plaintiffs sought to apply the first stage of 216(b) analysis, while the Defendant asked the Court to perform the second stage inquiry. The Court held that the second stage analysis was improper due to a relative lack of discovery in the case thus far. A second stage 216(b) analysis would prejudice the New York Plaintiffs by failing to give them adequate opportunity to present a more complete evidentiary picture. Additionally, performing the second phase analysis was premature because potential plaintiffs had not yet received notice and the opportunity to opt into the suit.

The Court conditionally certified the class because there was uniformity between the class representative and the class members due to: the similar type of work they performed, the uniform Defendant-produced processes used to perform their jobs, and the common legal issue of misclassification.

In Re AON Corp. provides guidance for future wage and hour litigants by explaining the requirements for class certification under the Federal Rules of Civil Procedure. This case also provides clarification regarding class certification under the Federal Labor Standards Act. Plaintiffs who seek to certify a class must have some evidence for conditional certification, but also should be mindful that they must acquire more substantial evidence through discovery to fully certify the class under the FLSA.

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Any business owner should keep abreast of laws and court rulings that can affect the way they conduct their operation and interact with employees. The law constantly evolves, and that is why our lawyers are vigilant in tracking changes that affect our clients. Citadel Investment Group v Teza Technologies is one such ruling that provides clarity regarding noncompetition agreements between employees and employers.

In this case, Defendants Malyshev and Kohlmeier worked for Plaintiff Citadel Investment Group until February of 2009, when they resigned. When Malyshev and Kohlmeier were initially hired by Citadel, they each signed a nondisclosure agreement and an employment agreement containing a noncompetition clause. The noncompetition clauses contained language giving Citadel the discretion to set the length of the restrictive period at zero, three, six, or nine months. Citadel elected for a nine month restricted period for both Malyshev and Kohlmeier upon their resignation.

Malyshev and Kohlmeier formed Defendant Teza Technologies two months after leaving Plaintiff Citadel in April of 2009. When Citadel discovered the existence of Teza and its status as an entity performing similar high frequency trading in July of 2009, the present legal proceedings began. Plaintiffs initially sought a preliminary injunction against Defendants based upon the noncompetition agreements signed by Malyshev and Kohlmeier. This injunction was granted in October 2009 for relief through November of 2009. The trial court made its decision based upon the agreed upon nine month period contained in the noncompete and calculated the time from February of 2009 when Malyshev and Kohlmeier resigned.

Citadel appealed the decision, and asked the appellate court to grant the injunction for nine months from October until July of 2010. Citadel argued that they had not received the benefit of the restricted period prior to the preliminary injunction being entered, and the Court should adjust the start date of the restricted period accordingly. The Court did not find the Plaintiff’s argument persuasive and denied the appeal because the plain language of the agreements signed by Malyshev and Kohlmeier contained no provision allowing for an extension of time or modification of the commencement date. Thus, the restrictive covenant properly ended in November as was required by the agreement signed by both parties.

Citadel Investment Group v. Teza Technologies serves as a warning to business owners who utilize noncompetition agreements and a potential boon to employees who sign them. Whether you are a business already in a dispute over a noncompetition agreement or a former employee seeking employment with a new company in the same field, you should contact a Chicago business litigation attorney to be apprised of your rights.

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A recent decision by the Seventh U.S. Circuit Court of Appeals will have important implications for our practice as Illinois class action attorneys. In American Honda Motor Company Inc. v. Allen et al., No. 09-8051 (7th Cir. April 7, 2010), the Seventh ruled that trial courts must conclusively rule on the admissibility of expert testimony before certifying a class — when the testimony is essential to the class certification decision. The case is a proposed class action filed in the Northern District of Illinois by people who bought Honda’s Gold Wing GL1800 motorcycle. The plaintiffs claim there is a defect creating unusual amounts of “wobble,” or oscillation of the front steering assembly.

To support a motion for class certification, the plaintiffs used a report prepared by motorcycle engineering expert Mark Ezra. Ezra used a standard of his own devising to support his opinion that the Gold Wings’ wobble was beyond what was reasonable to avoid overcorrections or fear by the rider. He tested one such motorcycle, found it insufficient and suggested that Honda could fix the problem by using a different shape of ball bearings. Honda moved to strike this report, claiming it was unreliable and that the testing based on one motorcycle was not reliably applied.

The district court agreed that Honda had raised some important concerns, and that class certification rested largely on Ezra’s report, but declined to exclude the report entirely so early in the case. It dismissed Honda’s motion without prejudice and certified two classes. Honda appealed the class certification decision, and the Seventh found the appeal appropriate, because the issue is “heavily contested” and has not been addressed at the appellate level.

The Seventh wrote that the district court started off correctly by starting an analysis of the expert testimony as provided by Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). Despite the detail in its analysis and the several troubling flaws it noted, however, the district court declined to exclude the report entirely “at this early stage of the proceedings.” By ruling in this way, the district court left an open question about which aspects of the report would be excluded, and ultimately, whether the plaintiffs met the standards for class certification. That was so insufficient that it was an abuse of discretion, the appeals court said.

Furthermore, the court wrote, the record shows “exclusion [of Ezra’s report] is the inescapable result when the Daubert analysis is carried to its conclusion.” The record shows Ezra’s report fails several tests laid out in Daubert and is “unreliable,” the Seventh wrote, which means it should not be admitted. And without admission of that testimony, the plaintiffs do not have enough evidence to show that their class meets standards of class certification. Thus, the Seventh vacated the lower court decision to grant class certification and remanded the case for further proceedings. In general, the court wrote, when the testimony is essential to the class certification decision, as it is here, a district court must conclusively rule on any challenge to the expert’s submissions or qualifications.

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