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In <em><a href="http://newsandinsight.thomsonreuters.com/uploadedFiles/Reuters_Content/2013/02_-_February/espenscheidvdirectsat.pdf">Espenscheid v. DirectSat USA, LLC</a></em>, Case No. 12-1943 (7<sup>th</sup> Cir. Feb. 4, 2013), in a combined collective/class action asserting claims under the Fair Labor Standards Act and state law, three satellite installation technicians sought to represent 2,341 technicians on claims their employer’s “piece-rate” pay structure violated federal and state wage laws by failing to compensate them for work over 40 hours in a given week, and for missed meal breaks.  The district court initially certified the class, but decertified it when the plaintiffs’ proposed trial plan was unworkable.  The technicians were paid a flat amount per job, either installing or repairing customer’s satellite equipment, in an arrangement the court found to be more akin to independent contractor than employee.  Nonetheless, the court found them to fall within the FLSA’s “broad definition” of covered employees.

The district court had divided the class into three subclasses: 1) technicians who were denied overtime because they recorded a lunch break they did not take, or otherwise underreported hours in a day; 2) technicians who were not compensated for work performed before their first installation or service job of the day, or after their last of the day; and 3) technicians whose regular and overtime pay for “nonproductive” (i.e., work other than installation or repair) were calculated improperly.  The district court proposed to bifurcate liability and damages and asked class counsel to propose a specific litigation plan within that framework. Class counsel opposed bifurcation and, at least initially, refused to suggest an alternative or a feasible method of determining damages. Ultimately class counsel proposed to present testimony of 42 “representative” members of the class, though counsel could not explain in either the briefing or oral argument how the “representatives were selected.

Putting aside the absence of a statistically valid “sample,” the Seventh Circuit noted that the plaintiffs’ proposed trial by formula would be inadequate even if the 42 technicians represented a statistically valid, random sample.  Because of the nature of the work, proof that the 42 worked in excess of 40 hours would not prove which, if any, of the other 2,341 technicians worked more than 40 hours in a week or, if they did, by how much. In addition, awarding damages based upon plaintiffs’ model would undercompensate some and overcompensate others because it would apply averages to a group whose hours are not uniform. As an example, the Court noted that if the average number of overtime hours per class member per week was five, then awarding 5 x 1.5 x hourly wage to a class member with only 1 hour of overtime would be overcompensating, while awarding the same amount of damages to one who had 10 hours of overtime (assuming the same wage) would undercompensate him.

More problematic, the Court found, was the piece-rate system of compensation that results in a different effective hourly rate for each worker.  Providing another example the Court posited that a job for which the piece rate is $500 would result in an hourly wage of $16.67 for a worker able to complete it in 30 hours.  If that worker did nothing else that week the worker’s wage would be above minimum wage and, not working more than 40 hours, would not be entitled to overtime.  However, the same job performed by a worker taking 60 hours to complete it would result in an hourly wage of $8.33, which is still above minimum wage, but would not compensate the worker for the 20 hours of overtime. The plaintiffs’ proposal to have 42 witnesses testify to their own experiences would do nothing to differentiate between such workers, meaning the district court would have had to conduct 2,341 damages hearings. Moreover, the Plaintiffs were forced to acknowledge that it would be difficult to provide a method of identifying each class member within the sub-class definitions without individual findings of liability. For these reasons, the Seventh Circuit affirmed the district court’s decertification order.

This case illustrates the importance of a trial plan in evaluating class certification so the court can envision how the claims can be tried.  Of course, if the court requires plaintiffs’ counsel to address these issues as part of class certification briefing then this evaluation can occur at the same time as consideration of all other factors under Rule 23 rather than, as here, certifying a class on the promise of things to come and having to decertify when plaintiffs’ cannot deliver.

Seventh Circuit Rejects Class Trial By [Un]Representative Sample