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class actions

The possibility of a wage and hour class/collective action is a risk that truly keeps in-house counsel up at night. These cases present unique issues that aren’t typically present in run-of-the-mill, single-plaintiff cases—much higher defense costs, exclusion of wage and hour cases from most insurance policies, large scale disruption across the company, and considerable potential liability. This anxiety will only increase given the upheaval to businesses caused by the COVID-19 pandemic. As we saw after the financial crisis in 2008, the amount of wage and hour litigation swells during periods of economic disruption. This will be exacerbated in the current environment, as the pandemic has changed the workplace overnight, and put many companies in unchartered wage and hour territory.

This article will discuss seven specific steps companies can take to successfully defend a wage and hour class/collective action. These steps often go overlooked if companies and their counsel dust off the same old playbook used for run-of-the-mill, single-plaintiff cases. Most importantly in a wage and hour class/collective action, in-house and outside counsel must, from the very beginning, work hand-in-hand to steer the ship in the direction that puts the company in the best position to defend itself and achieve its objectives.

Step 1—Understanding the Complaint

The first step in any litigation is to investigate the allegations. In a wage and hour class/collective action, however, counsel must dig deeper into the allegations in the complaint to fully understand the potential scope of the case—i.e. what violations are being alleged, and which employees are alleged to be affected. The complicating factor in a wage and hour class/collective action is that plaintiffs’ counsel may intentionally leave the complaint vague to keep the putative class as broad as possible until moving for certification. This requires counsel to think outside of the box to determine whether there are groups of employees or potential violations that, while not apparent on the face of the complaint, could be the subject of discovery or of class/collective certification. Of course, this evaluation will evolve as the investigation into the allegations proceeds, and counsel assesses where the company stands from a wage and hour compliance perspective. Suffice it to say, at all times, counsel must view the complaint with an eye toward identifying—and preparing for—any possible avenue for plaintiffs’ counsel to broaden the litigation.

Step 2—Coordination Within the Company

In-house counsel must coordinate among the various departments within the company to ensure that counsel have access to the proper information necessary to investigate and defend the case. This could include the payroll department, human resources, the IT individuals who have access to employee data, and, of course, the actual business line(s) affected. Unlike a single-plaintiff case where the allegations are focused on the circumstances of one individual’s employment, a class/collective action implicates a broad range of corporate policies, pay practices, management training, actions by individual managers at various levels, and the individual employment circumstances of the named plaintiff(s).

Step 3—Honest Evaluation

Throughout its investigation, counsel must honestly and objectively evaluate all of the legal issues in the case. This includes evaluating the merits of class/collective certification separate from the merits of the underlying allegations, and determining whether there are any threshold legal issues that could result in early dismissal (see, e.g. Pettanto v. Beacon Health Options, Inc., 425 F. Supp.3d 264 (S.D.N.Y. Oct. 25, 2019) (court rejected nationwide collective action because court could not assert personal jurisdiction over out-of-state plaintiffs); Hsiang Yeh v. Han Dynasty Inc., 2019 WL 633355 (S.D.N.Y. Feb. 14, 2019) (dismissing putative class/collective action because plaintiff did not sufficiently plead he was defendant’s employee)).

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