Court: Court of Appeals for the Sixth Circuit; April 29, 2019; Federal Appellate Court
In a collective action lawsuit, sales employees of Wyndham allege violations of the Fair Labor Standards Act (FLSA) due to unpaid overtime. Following a bench trial, the district court determined that the employees were similarly situated and presented adequate representative evidence, concluding Wyndham failed to compensate them for overtime. The court found that the 156 employees averaged 52 hours of work per week and awarded approximately $5 million in damages. Wyndham appealed, challenging the certification of the collective action, the finding of FLSA violations based on representative evidence, and the determination of average hours worked.
Wyndham operates four locations in Tennessee employing three types of sales staff: front-line, in-house, and discovery sales employees, primarily compensated through commission. The company began paying overtime in 2009 but was accused of requiring employees to underreport hours or altering timesheets to avoid payment. The district court had previously dismissed some claims but allowed the collective action to proceed for the remaining employees. The court found evidence showed Wyndham prohibited overtime recording and instructed managers to manipulate timecards.
Wyndham's appeal focuses on the district court’s decision to certify the collective action under the FLSA, which allows similarly situated employees to join lawsuits with consent. The appellate court reviews such certifications for abuse of discretion, considering the factual and employment contexts, potential defenses, and procedural fairness.
The central issue is whether the plaintiffs can collectively pursue claims of liability and damages based on representative evidence. The district court found that the 156 members of the collective action were similarly situated due to Wyndham's common policy of requiring off-the-clock work and altering timesheets to evade overtime payments. Despite differing job titles, the employees shared identical job functions, compensation methods, and time tracking systems. They all participated in mandatory meetings and engaged in similar sales activities, with Wyndham enforcing a policy of not compensating for overtime, paralleling the case of Monroe v. FTS USA, LLC, where employees were also deemed similarly situated despite variations in overtime worked.
Wyndham's contention that it lacked a company-wide time-shaving policy is countered by the plaintiffs' claims of various inaccuracies in time recording. The court ruled that the essential claim—that Wyndham required off-the-clock work and manipulated recorded hours—constituted a single policy. Although Wyndham argued that employees had different roles and worked varying hours, the court found no significant differences among the in-house and front-line salespeople across locations. The district court appropriately distributed Wyndham's individual defenses across the collective, ultimately determining that the salespeople did not work as many hours as claimed, akin to the outcome in Monroe. Thus, there was no abuse of discretion in treating the employees as similarly situated.
The district court's decision to permit collective discovery for employees in different roles was flawed. The discovery salespeople held distinct titles and sold a different product than in-house and front-line employees, impacting the nature and duration of their sales presentations. Testimony from a single discovery employee did not corroborate claims that they engaged in similar activities or schedules as the other sales teams. Specifically, the discovery team began work later, missing mandatory morning meetings, and typically arrived 30 minutes to two hours after their counterparts.
The court failed to establish a separate subclass for discovery employees, despite significant differences in work hours and responsibilities. Although the district court noted that discovery employees often stayed late, it did not provide evidence on the frequency or duration of this late work. The absence of data on the timing of contract initiation and closure for discovery employees further undermined their claim of being similarly situated. The comparison to Monroe is inappropriate, as the employees in that case shared job descriptions and duties, unlike the distinctly different roles of the discovery team. Overall, the lack of consistent evidence regarding equivalent work hours and tasks indicates that the discovery employees cannot be treated the same as the in-house and front-line employees.
Wyndham contends that the employees failed to present adequate representative evidence to establish a violation of the Act. According to the Act, employees must demonstrate they were "improperly compensated" for their work, as established in Anderson v. Mt. Clemens Pottery Co. Representative evidence can be used by both testifying and non-testifying employees, allowing similarly situated employees to represent one another. The key issue is whether the presented evidence supports the district court's determination that Wyndham violated the Act by not paying overtime.
The plaintiffs presented testimony from 44 out of 156 employees, including 30 from their sample of 47—drawn from those who worked for Wyndham for more or less than six months. After excluding non-similarly situated discovery plaintiffs, 43 out of 145 similarly situated salespeople testified, representing a significant percentage compared to the Monroe case, where only 17 of 293 technicians testified. The testifying employees indicated that Wyndham had a policy to avoid overtime payments by requiring them to underreport hours worked, with reported workweeks ranging from 50 to 80 hours. Employees were instructed that overtime pay would be deducted from their commissions, and management explicitly directed sales employees not to receive overtime pay, altering timecards to reflect a maximum of 40 hours weekly.
Additional evidence included an audit by Wyndham acknowledging that salespeople worked off the clock and emails indicating a no-overtime-pay policy. This collective evidence indicated a systematic approach by Wyndham to undercompensate employees. Wyndham's arguments against the reliability of the employee sample were unconvincing, as its own expert confirmed the randomness of the sample selection. Moreover, Wyndham failed to challenge the credibility of the testifying employees, further validating the reliability of their testimony.
Wyndham contends that the plaintiffs failed to demonstrate that the testifying employees accurately represented the non-testifying employees, highlighting discrepancies in employee testimonies regarding the no-overtime-pay policy, hours worked, and wages earned. Wyndham argues that without expert testimony establishing that each class member could rely on the sample for liability, the district court improperly used the representative sample. However, Monroe rejected a similar argument, clarifying that the collective-action framework allows similarly situated employees to represent each other without needing expert statistical evidence. Wyndham attempts to differentiate Monroe by claiming that the employer there consented to the representative sample at trial; however, the court found that the employer later objected, yet this did not affect the outcome. The district court's discrediting of Wyndham's expert testimony was justified, as the expert's reliance on inaccurate recorded hours undermined the conclusions drawn. Furthermore, Wyndham argued that using representative testimony violated its due process rights by limiting its ability to present individualized defenses, but the district court allowed for thorough cross-examination of witnesses and the option to call any desired witnesses.
Regarding damages, Wyndham disputes the district court's finding that employees averaged 52 hours of work per week based on Mt. Clemens standards, but this issue remains unresolved since the district court's average was based on all 156 sales employees. The court identified an error in determining that the discovery employees were similarly situated to other salespeople, which affected the hourly average calculation, leading to a vacated damages award and a remand for reassessment of damages for in-house and front-line employees. The employees appeal the district court's decisions on (1) the average hours worked and (2) granting Wyndham summary judgment on Melissa Evans' claims. The court will allow reassessment of the damages award, but disagrees with Evans' claim that the court erred in granting summary judgment based on judicial estoppel, as Evans did not inform the bankruptcy court of her claims. Evans argues that claims arising after her bankruptcy petition were not part of the estate, asserting her right to pursue them independently.
Evans forfeited the right to argue that specific claims were not part of the bankruptcy estate because she did not present this argument in the district court. Instead, she previously contended that her claims should not have been dismissed due to an unintentional failure to inform the bankruptcy court of all claims. No valid explanation was provided for her failure to raise the current argument earlier. Consequently, the court affirmed in part, reversed in part, vacated the damages award, and remanded for further proceedings.
Judge Helene N. White concurred in part and dissented in part, agreeing that the Front-Line and In-House Sales Representatives were similarly situated and that the district court correctly granted Wyndham summary judgment on Evans's claim. However, she argued that the Discovery Sales Representatives were also similarly situated and that the maintenance of the collective action was appropriate. The majority's analysis focused on factual and employment setting differences to conclude that the Discovery representatives were not similarly situated, which White criticized as flawed. She emphasized the importance of a company-wide policy of requiring employees to underreport hours, evident across all representative positions, and noted that testimony indicated managers instructed representatives to limit reported hours. White contended that the majority's findings regarding factual differences were either unsupported or exaggerated, undermining the district court’s reasonable conclusions.
The district court found that there was no significant difference in the selling processes among various representative positions, with each tasked primarily with sales. Evidence from trial supported this conclusion, including testimony that the selling process was largely the same across roles, despite a belief by the majority that Discovery representatives sold a different product. This belief was challenged by testimony indicating that tours and closings for Discovery representatives lasted comparable durations to those of other positions. The majority's argument was undermined by a lack of evidence showing that Discovery representatives did not participate in selling events such as party weekends, as some representatives from other roles also did not testify about participation. Additionally, the majority's assertion that a Discovery representative did not work six days a week was countered by testimony indicating that they often worked five to six days, sometimes more. The later start times for Discovery representatives did not equate to working fewer hours, as they often stayed later and worked similar total hours per week compared to other representatives. Overall, the evidence supported the conclusion that Discovery representatives were similarly situated to their counterparts despite minor scheduling differences.
The testimony of Discovery representatives regarding their work hours is corroborated by multiple sources, indicating that they often worked late, typically between 5:30 and 8:30 PM. In-house representatives confirmed this pattern, noting that Discovery staff had to remain later if Front-Line representatives were still closing sales. Discovery representatives not only stayed until all tours were completed but also had to wait in case a sale fell through. Despite some testimony suggesting that Discovery representatives would leave at the same time as Front-Line representatives if sales were successfully completed, the evidence showed that the number of In-House and Front-Line representatives significantly outnumbered Discovery representatives, leading to the former leaving earlier on many occasions. In a Nashville location example, while Front-Line and In-House averaged 50 representatives each, Discovery had only five to ten. This disparity meant that Discovery representatives frequently stayed later than their Front-Line counterparts, regardless of the circumstances of the last sale. The district court's decision to include Discovery Sales Representatives in the collective action was justified, as they shared responsibilities, products, and hours similar to Front-Line and In-House representatives. All plaintiffs, including Discovery representatives, were subject to the same alleged FLSA violations, unified by common claims against Wyndham's time-shaving policy. While there were variances in the testified lengths of tours and closings, this did not justify the majority's differentiation of the Discovery representatives. Testimony from a Discovery representative at a Lodge indicated a similar ratio of representatives, reinforcing the findings. Therefore, the inclusion of Discovery representatives in the collective action was appropriate, and the district court's ruling should be affirmed.
