California Supreme Court Refines the Scope of Considering "the Merits" of the Case in Class Certification Motions

by Larry M. Golub and Sandra I. Weishart

On April 12, 2012, the California Supreme Court issued its long-awaited decision in Brinker Restaurant Corp. v. Superior Court. Plaintiffs had sought to certify three subclasses of California restaurant employees based on the employer’s alleged violations of California’s wage and hour laws relating to rest breaks and meal breaks. The decision provides critical guidance for all employers, including insurers, as to how they should address the issue of rest breaks and meal breaks for their employees.

The trial court in San Diego certified the three subclasses, and the Court of Appeal, Fourth Appellate District, reversed that order, rejecting certification of all three subclasses. The Supreme Court accepted review in October 2008 and, on review, affirmed certification of one subclass, rejected certification of one subclass, and remanded the case to the trial court for further proceedings as to whether the third subclass should be certified. More significantly, the Supreme Court clarified when trial courts may consider the merits of a claim at the certification stage – and the Court itself addressed the merits on one issue in the case so as to provide guidance to the trial court in the next phase of the lawsuit.

In the course of its opinion, the Supreme Court also provided important substantive rulings as to the nature of employers’ duty to provide rest periods and meal breaks to non-exempt restaurant employees, in particular, and non-exempt employees in other industries, more generally. This post addresses the Court’s class certification rulings, and Michael Newman of this office analyzes the substantive employment law questions here

Considering the Merits:

After reviewing the basic class certification principles, the Supreme Court addressed the often-disputed issue as to when a trial court should consider the merits of a plaintiff’s claims in deciding a motion for class certification. In Brinker, the only class certification element at issue was whether individual questions or questions of common interest predominated with respect to the three subclasses the plaintiffs sought to certify. 

The trial court ruled that the three subclasses presented common questions that predominated and, in certifying the class, it refused to consider the correctness of the employer’s legal position concerning its obligations to provide rest breaks and meal breaks. In contrast, the court of appeal concluded the refusal to consider the merits was erroneous because the trial court needed to resolve the “threshold issue” of duty in determining whether individual or common issues predominated. The Supreme Court charted a mid-course between these two extremes.

In analyzing the issues, the Supreme Court reviewed a number of its prior decisions, confirming that class certification is essentially a procedural device “that does not ask whether an action is legally or factually meritorious,” and that “resolution of disputes over the merits of a case generally must be postponed until after class certification has been decided.”  The Court nevertheless explained that there are “issues affecting the merits of a case [that] may be enmeshed with class action requirements.” In those instances, when “evidence or legal issues germane to the certification question bear as well on aspects of the merits, a court may properly evaluate them.” In other words:

“To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them.”

Independent of these basic tenets of class certification, the Supreme Court next explained that a trial court can, at the parties’ request, examine the merits of their substantive legal disputes. Quoting its well-known decision on the ability of trial courts to consider the merits on class certification motions, Linder v. Thrifty Oil Co., 23 Cal. 4th 429, 443 (2000), the Court stated:

“[W]e see nothing to prevent a court from considering the legal sufficiency of claims when ruling on certification where both sides jointly request such action.”

While the Court did not address any merits issues “enmeshed” with the class action requirements, it did nevertheless analyze a merits issue specifically requested by the parties concerning whether the employer’s duties to provide employee rest periods and meal breaks are common issues in the plaintiffs’ three subclasses. 

The Class Certification Rulings:

The first subclass the Court examined was the “rest period subclass” that covered class members “who worked one or more work periods in excess of three and a half (3.5) hours without receiving a paid 10 minute break during which the Class Member was relieved of all duties.” On this subclass, the plaintiffs merely asserted that the employer failed to provide the requisite rest periods for non-exempt employees based on the employer’s own “uniform corporate rest break policy” that allegedly violated the applicable Wage Order.  The Court observed that the employer “conceded” the existence of “a common, uniform rest break policy.” 

The Court rejected the employer’s argument that employees could waive their rest breaks and that this was an individual issue, advising that “[n]o issue of waiver ever arises for a rest break that was required by law but never authorized; if a break is not authorized, an employee has no opportunity to decline to take it.”  Accordingly, the Court concluded that the “rest period subclass” was certifiable and that this issue was not “dependent upon resolution of threshold legal disputes over the scope of the employer’s rest break duties.”

The Court then turned to the “meal period subclass,” defined as class members “who worked one or more work periods in excess of five (5) consecutive hours, without receiving a thirty (30) minute meal period during which the Class Member was relieved of all duties.” On this subclass, the Court found, among other issues, that the subclass not only covers every employee who might have a claim under the plaintiffs’ failure to provide meal periods theory, but also, because of the timing as to when a meal break was taken, might include employees with no possible claim under the applicable Wage Order or Labor Code statute.  

The Supreme Court merits ruling concerning the existence of employees who would have no claim was, as noted above, specifically requested by the parties.  The Court found the subclass definition adopted by the trial court to be over-inclusive since it “embraces individuals who now have no claim” against the employer. Accordingly, the Court remanded the certification question as to this subclass to the trial court to reconsider based on the clarification of the substantive law provided by the Court.

Finally, the Court addressed the “off-the-clock subclass,” which was an offshoot of the meal period subclass, and was composed of class members who worked without pay, allegedly because the employer “required employees to perform work while clocked out during their meal periods” and “they were neither relieved of all duty nor afforded an uninterrupted 30 minutes, and were not compensated.” 

For this claimed subclass, the Court found that, unlike the rest period subclass, there was no common policy or apparent common method of proof. Rather, the “only formal Brinker off-the-clock policy submitted disavows such work, consistent with state law.”  Additionally, plaintiffs had failed to present “substantial evidence of a systematic company policy to pressure or require employees to work off the clock.” Consequently, “proof of off-the-clock liability would have had to continue in an employee-by-employee fashion, demonstrating who worked off the clock, how long they worked, and whether Brinker knew or should have known of their work.” Such individual issues and a lack of common issues required dismissing any “off the clock subclass.”

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