Staffing Models, When Merely Recommendations, Do Not Constitute A Sufficient Basis For Class Cert.

By Garrett Jensen

April 15, 2010

The United States District Court for the Central District of California recently issued an order denying Plaintiffs' Motion for Class Certification in two companion cases, Spainhower v. U.S. Bank and Williams v. U.S. Bank.  Plaintiffs, in-store bank managers at U.S. Bank branches located in large grocery stores in California, sued in California state court alleging that they were misclassified as exempt employees.  Defendant, after removal of the case to federal court on the basis of diversity jurisdiction, contended that in-store bank managers were exempt from California's overtime pay and meal and rest requirements under the executive, administrative, and outside sales exemptions:

1.         The executive exemption generally applies to management employees who direct the work of two or more employees, exercise discretion and independent judgment, and have the authority to hire or fire other employees or whose suggestions and recommendation as to the hiring or firing of other employees will be given particular weight. 

2.         The administrative exemption includes employees whose duties and responsibilities involve the performance of office or non-manual work directly related to management policies or general business operations.  However, courts have drawn distinctions between administrative employees and production employees, the latter defined as employees "whose primary duty is producing the commodity or commodities, whether goods or services, that the enterprise exists to produce."  A 2001 California appellate court decision determined that insurance claims representatives were production employees because claims adjusting was the sole mission of the branch offices and the claims representatives were fully engaged in performing the day-to-day activities of that important component of the business.  

3.         The outside sales exemption applies to employees 18 years of age or older, who customarily and regularly work more than half the working time away from their employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities.

Plaintiffs, in seeking to certify a class of salaried in-store bank managers, contended the Court should look to Defendant's staffing models to determine how an in-store branch manager was likely to have spent his or her day.  However, the Court found the staffing models were recommendations because Defendant treated the managers as owners of their individual branches with limitless discretion as to how to achieve the company's goals.  Since there was the likelihood of substantial differences in how each member of the proposed class spent his or her day, the court denied to certify the class.

Despite the decision, employers should be mindful that classification of employees based solely on staffing models, rather than on duties performed, will leave employers open to individual and class action lawsuits.  In addition, employers should carefully review the classification of their employees to determine whether their employees are exempt from California's overtime pay and meal and rest requirements.