Before the pandemic (remember then?), you may recall a case last year that drew headlines: Chip’s Family Restaurants was having issues with a class action lawsuit filed against the small chain by allegedly improperly deducting a tip credit from server earnings thereby paying those potential class members below the minimum wage for the performance of “non-service” tasks.
In part as a reaction to that lawsuit, various legislators passed a bill that was little-noticed at first that revoked a key regulation that formed the basis of such claims. That bill was later vetoed and new compromise legislation was passed. Regulations on that new law were set to be released as I noted in an earlier post.
But what happened with the original lawsuit? Notably, the legislation did not retroactively repeal the prior regulation; it only repealed it on a going-forward basis from date of publication. The legislation did add requirements for class certification but the impact on pending lawsuits (and on future ones) is still playing out.
So the lawsuit is very much still alive. And yesterday, the Connecticut Supreme Court upheld the class action status and answered an important question: To what extent should a court consider the merits of a party’s legal theory before certifying a class action?
The court’s answer? Inquires into the merits of a plaintiff’s case shouild be performed only to the extent necessary to ensure that the plaintiff has met the class action requirements. (In plain English, a court need not look much into the merits.) The employer here wanted the court to get into a full-fledged analysis of the differences between service and non-service work.
But the Supreme Court (in Rodriguez v. Kaiaffa LLC et al — download here) suggested that there wasn’t a persuasive reason why a determination of the meanings of “service” or “non-serivce” would have an impact on how class certification sould be handled. The court ultimately concluded that issues of commonality and predominance — two necessary elements for a class action — need not rely on a deep-dive into the legal merits of the underlying claim.
Thus, the court concluded that trial court was correct in not analyzing the merits of the plaintiff’s legal theory in certifying the class.
For employment law attorneys, the case will be an important marker in how class actions certification motions are handled. In some important ways — at least on wage/hour class actions — the case brings such class actions closer to the federal model. In FLSA collective actions (which are slightly different than class actions and would involve at least a blog post or two on its own), early certifications without a deep dive into the merits are routine. At least in this case, the court had no issue with postponing a similar review into the merits.
For employers, there are a few other takeaways:
1) For restaurants, the tip credit issue can remain costly. While the rules are changing going forward (and the new law does make it more challenging to bring class actions — more on that in another post), it’s vitally important to get this right. There are plenty of attorneys looking for these types of cases to take against employers.
2) For other employers, wage/hour class actions might be a bit easier for employees to bring and to get certified. It’s not a sure thing and the full impact isn’t exactly known; however, because of the uncertainty, the cost of defending against such claims is also now up. As a result, employers should again be mindful to follow the rules, no matter how complex they may be seem.
Wage and hour class actions remain expensive — expensive to defend against and expensive to settle. Employers that seek to use any gray areas in the law — whether for misclassification of workers or for overtime purposes — do so at their peril. And it serves as yet another reminder that an experienced employment law attorney can help but can’t work miracles.