Local Joint Executive Board of Culinary/bartender Trust Fund Bartenders Union, Local 165 Culinary Workers Union, Local 226 Harvey McCoy Ron Byford v. Las Vegas Sands, Inc., Dba Sands Hotel Casino, Local Joint Executive Board of Culinary/bartender Trust Fund Bartenders Union, Local 165 Culinary Workers Union, Local 226 Harvey McCoy Ron Byford v. Las Vegas Sands, Inc., Dba Sands Hotel Casino
Docket: 98-17065
Court: Court of Appeals for the Ninth Circuit; April 11, 2001; Federal Appellate Court
Las Vegas Sands, Inc. violated the Worker Adjustment Retraining and Notification Act (WARN Act) by providing only 45 days' notice of its hotel casino closure instead of the required 60 days. Plaintiffs, including unions and individual employees, sought damages under the Act. Sands acknowledged the violation but argued that subsequent payments satisfied its obligations.
The court affirmed the district court's substantive decisions, determining that tip income counts as 'back pay' under 29 U.S.C. § 2104(a)(1)(A) and that employees are entitled to holiday pay if they can prove they would have worked. It ruled that payments made to nonunion employees to incentivize them to remain until closure, and payments made to union employees under a Memorandum of Agreement, are not deductible from WARN Act damages.
The court reversed the district court's decision on class certification for nonunion employees. Sands had informed employees of the closure on May 15, 1996, and offered severance pay to select nonunion employees under conditions. A Memorandum of Agreement was later signed on July 3, 1996, ensuring union employees received similar severance as the nonunion employees had been offered.
On June 30, 1996, Sands closed its hotel casino and subsequently paid former employees what it considered their WARN Act damages on July 18. In calculating these damages, Sands based compensation on working days instead of calendar days within the 15-day notice period and excluded tips employees would have earned during this period. Additionally, Sands did not account for double-time pay for those who would have worked on July 4. Severance was paid to both union and nonunion employees with over five years of service, consistent with prior commitments. Notably, Sands made prorated vacation pay to nonunion employees, despite its usual policy against prorating for those who left before their service anniversary.
The Union and individual plaintiffs initiated a lawsuit against Sands under the WARN Act, which mandates that employers provide a 60-day notice before a plant closing or mass layoff. Employers failing to notify are liable for back pay to affected employees, calculated at either the average regular rate from the past three years or the final regular rate. Legal interpretation of the WARN Act emphasizes the plain meaning of terms. Previous rulings define "back pay" as compensation equivalent to what employees would have earned absent the violation, but this case specifically addresses whether tips and vacation pay are included in that definition. Existing case law under other statutes supports the inclusion of tips in back pay calculations, suggesting a broader interpretation of compensable earnings under the WARN Act.
'Back pay' in federal statutes encompasses various types of compensation, including holiday and overtime pay. Relevant case law supports this interpretation, demonstrating that back pay calculations under Title VII of the Civil Rights Act and other statutes should include not just salary but also interest, shift differentials, and fringe benefits. Sands argues that 'back pay' under the WARN Act functions differently, asserting that it serves as a penalty rather than a compensatory measure, and excludes certain types of earnings like tips and holiday pay.
Sands contends that the WARN Act's provisions establish a minimum damage amount based on past earnings without reflecting actual lost wages. However, the Act specifies that back pay liability is based on the higher of two calculated compensation rates, which implies a broader scope of what constitutes back pay. Sands also argues against the inclusion of offsets for other earnings during the violation period, suggesting that such provisions would be essential for a classic back pay framework.
The court leans toward the Fifth Circuit's reasoning, indicating that Congress may have intentionally excluded offset provisions to avoid placing undue burdens on employees post-termination, allowing them time to adjust without immediate job-seeking pressures. This view aligns with the broader intent of the WARN Act to provide certain protections to employees without complicating the statutory framework.
Back pay under the WARN Act is interpreted as a compensatory remedy intended to provide employees with the income they would have earned during the two-month notice period had there been no shutdown. This interpretation aligns with the Act's purpose of ensuring a continuous income stream for laid-off workers. The Act's primary aim is remedial, although it contains some punitive elements. Employers can avoid a $500 daily penalty by paying back pay within three weeks of layoffs. The Senate report emphasizes the Act's focus on rapid readjustment and support for displaced workers.
The court clarifies that Sands must compensate employees not only for direct wages but also for tips they would have received, along with earnings for potential workdays like July 4th. Employees are required to prove the amount of tips and their scheduled workdays to claim these damages. Additionally, the Act allows employers to reduce liability with voluntary payments to employees; however, the court ruled that severance payments made by Sands under specific agreements were not voluntary and thus not deductible.
Sands' June 4th letter presented severance payments to nonunion employees with over five years of service, contingent upon their continued employment until the hotel casino's closure. Under Nevada law, this letter constituted a valid offer, with the employees' performance (working until closure) serving as consideration, thereby creating an enforceable contract. Consequently, Sands became legally obligated to fulfill these severance payments, and could not deduct these from its WARN Act liability, as the payments were obligatory.
Sands was required to negotiate severance terms with its union employees rather than unilaterally extending the same offer made to nonunion employees. The Memorandum of Agreement (MOA) with the Union was finalized on July 3, 1996, after the casino's closure, meaning union employees did not provide consideration by remaining employed through the closure. Nevertheless, the MOA is acknowledged as a binding collective bargaining agreement, enforceable without traditional consideration.
Sands also attempted to deduct payments for accrued vacation time for terminated nonunion employees, but the district court ruled against this deduction. Vacation pay is often deemed deferred compensation, and Nevada law likely obligates Sands to compensate employees for accrued vacation time, even if they had not reached their employment anniversary. The court noted that the obligation to pay was activated by Sands' closure of the workplace, which excused employees from performance.
Lastly, individual plaintiffs Harvey McCoy and Ron Byford appealed the district court’s decision not to certify a class of 162 to 215 nonunion employees under Federal Rule of Civil Procedure 23(b)(3), with the appellate conclusion indicating the district court erred in denying class certification.
The district court initially denied the class certification motion by McCoy and Byford on November 18, 1997, without explanation. On October 15, 1998, the court provided reasons for this denial, stating that the plaintiffs failed to demonstrate: 1) the predominance of common questions of law and fact as per Rules 23(a)(2) and (b)(3); 2) that a class action was a superior method for resolving their claims; 3) that the case involved a 'limited fund' justifying certification under Fed. R. Civ. P. 23(b)(1)(B); and 4) the adequacy of McCoy and Byford as class representatives. The standard for reviewing such decisions is for abuse of discretion, but lack of sufficient findings on Rule 23 criteria limits the deference given to the district court's determination. The court's October 15 order paraphrased Rule 23 provisions but lacked specific application to the case facts, preventing the usual deference. However, the factual record was deemed sufficiently developed to evaluate Rule 23 compliance without remanding the case. The plaintiffs sought 'damages class action' certification under Rule 23(b)(3) or alternatively a 'common fund' class action under Rule 23(b)(1). While the court agreed that common fund certification was inappropriate, it found insufficient grounds for denying 'damages' class action certification under Rule 23(b)(3). The court planned to review the denial based on three main issues: the adequacy of class representatives, the predominance of common questions, and the superiority of a class action for fair and efficient adjudication.
Rule 23(a)(4) mandates that representative parties must adequately protect the interests of the class, which involves evaluating the qualifications of counsel, the absence of antagonism, shared interests between representatives and absent members, and the likelihood of collusion. The district court found that McCoy and Byford did not demonstrate adequate representation; however, the record indicates McCoy's suitability as a representative. McCoy, a former dealer for Sands, received insufficient post-termination payments under the WARN Act, similar to other class members. Initially reluctant to represent the class due to unemployment and fears of being blackballed, McCoy later organized support among co-workers and took over as class representative when the original representative became unavailable. His willingness and understanding of his responsibilities as a representative are evident.
The competence of proposed class counsel is also relevant under Rule 23(a)(4). The counsel in this case consists of experienced labor lawyers, and there is no evidence to suggest they do not meet the necessary qualifications. Rule 23(b)(3) requires that common legal or factual questions predominate over individual issues, assessing whether the class is cohesive enough for representative litigation. A significant commonality exists in this case, as all class members were terminated simultaneously with inadequate notice. They share common interests regarding three key appellate issues: the inclusion of tips in back pay under the WARN Act, whether Sands can deduct severance payments from WARN Act liabilities, and the timeliness of Sands' mid-July wage payments under Nevada law.
Individualized issues within the class action are minimal and manageable, with damages calculations straightforward based on historical records of pooled tips from the casino. Although there may be minor variations among employees regarding workdays, these do not undermine the predominance of common issues under Rule 23(b)(3). The superiority requirement of Rule 23(b)(3) is satisfied, as individual claims are economically unfeasible due to low potential recoveries, which would leave many plaintiffs unable to pursue their claims independently. The desirability of litigating as a class is supported by the agreement among potential class members, none of whom expressed interest in separate actions. The district court did not address factors relevant to class certification, but the analysis indicates no barriers to class certification. While there are unresolved issues regarding class definition and representation, the appellate court affirms in part, reverses in part, and remands for further proceedings, emphasizing that costs on appeal will be split between the defendant and plaintiffs. Additional notes clarify that the adequacy of representation is met if at least one class representative is sufficient, and address misconceptions about the predominance requirement in Rule 23(a)(2).
