Troy v. Kehe Food Distributors, Inc.

Citations: 276 F.R.D. 642; 2011 U.S. Dist. LEXIS 110012; 2011 WL 4480172Docket: No. C09-0785JLR

Court: District Court, W.D. Washington; September 26, 2011; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The court has granted the combined motion for collective action and class certification filed by Plaintiffs Rosemarie Troy and Mikki Cobb against Defendant Kehe Food Distributors, Inc. The motion seeks certification under the Fair Labor Standards Act (FLSA) for a nationwide collective action and under Federal Rule of Civil Procedure 23 for class certification related to claims under the Washington Minimum Wage Act (MWA) and related state labor laws. Kehe, based in Illinois, distributes specialty foods and began servicing Albertsons stores in several Western states in March 2007. 

Both plaintiffs worked as sales representatives and merchandisers for Kehe during this period. The role of merchandisers includes setting up new stores, resetting items in existing stores, and assisting sales representatives when needed. Merchandisers follow detailed schematics provided by stores for product placement and do not engage in sales; they primarily restock shelves according to these planograms. They typically work 45-55 hours per week on a salaried basis without commissions. The court's decision to grant the motion followed thorough consideration of the parties' submissions, legal arguments, and a hearing held on September 16, 2011.

Kehe sales representatives servicing Albertsons stores are primarily responsible for stocking shelves, ordering products, checking inventory for outdated items, cleaning shelves, and rotating products to maintain presentations. Kehe asserts that these representatives also engage in selling products. The duties have been consistent since Kehe acquired the Albertsons account in 2007, and they are uniform across all store locations. Albertsons centralizes product ordering and presentation, with 90% of purchasing decisions made at the national level, limiting the sales representatives' ability to influence sales. Observations from Kehe supervisors confirm that purchasing decisions are made by higher-level executives, and sales representatives only reorder stock based on predefined levels and planograms that dictate product placement. Deviations from these planograms require approval from higher management. Sales representatives do not have sales quotas, and there are no opportunities for them to seek additional customers due to limitations in Kehe's distribution capabilities. They typically travel to stores in their personal vehicles and are mainly compensated on a commission basis, with some part-time representatives earning a salary. Most work 50 to 60 hours per week.

The plaintiffs claim that Kehe failed to pay them overtime wages mandated by the Fair Labor Standards Act (FLSA) and the Washington Minimum Wage Act (MWA). The central issue is whether sales representatives and merchandisers are classified as exempt employees under the outside sales or federal Motor Carrier Act exemptions, with the court needing to determine if these exemptions can be applied on a classwide basis for the current motion.

Federal overtime requirements under the Fair Labor Standards Act (FLSA) mandate that employers pay employees time and a half for hours worked over 40 in a week, with certain exemptions applicable. Two exemptions relevant to this case are the “outside sales” exemption and the Motor Carrier Act exemption. 

The “outside sales” exemption applies to employees whose primary duty involves making sales or obtaining orders for services and who regularly work away from the employer’s premises. The determination of an employee's primary duty is based on various factors, including the importance of exempt duties, time spent on exempt work, freedom from supervision, and salary comparison with nonexempt employees. Incidental work related to outside sales, such as writing sales reports or planning itineraries, is also considered exempt.

Kehe argues that all its sales representatives qualify for the outside sales exemption, asserting that merchandisers are exempt only when covering for absent sales representatives, not when performing merchandising duties. Additionally, the FLSA provides an exemption for employees regulated by the Secretary of Transportation under the Motor Carrier Act, which applies to employees of carriers involved in interstate property transportation. Kehe claims that both merchandisers and sales representatives fall under this Motor Carrier Act exemption.

Washington State's Minimum Wage Act (MWA) mandates that employees receive one and a half times their regular pay for hours worked beyond 40 in a week, similar to the Fair Labor Standards Act (FLSA). The MWA includes an "outside sales" exemption akin to the FLSA's, defining an “outside salesman” as an employee who regularly works away from their employer's business premises, can regulate their own hours, and is engaged primarily in sales activities. To qualify for this exemption, an employee must spend no more than 20% of their workweek on nonexempt tasks, with incidental work related to outside sales not counted as nonexempt. 

The MWA differs from the FLSA in that the former looks at whether the employee is "customarily and regularly" engaged in sales, whereas the latter focuses on whether making outside sales is the employee's "primary duty." Kehe asserts that the MWA exemption applies to both sales representatives and merchandisers covering absent representatives’ routes, but not to merchandisers acting solely in their merchandising capacity.

In a related collective action under the FLSA, plaintiffs are seeking to certify a group consisting of all full-time Kehe Food Distributors employees who worked as merchandisers or sales representatives servicing Albertsons stores from May 22, 2006, to the present. They argue these employees were improperly denied overtime pay, claiming they do not qualify for exemptions under the FLSA. Kehe counters that these employees are exempt under either the FLSA "outside sales" exemption or the Motor Carrier Act exemption.

Under the Fair Labor Standards Act (FLSA), plaintiffs can initiate collective actions against employers for overtime violations on behalf of themselves and similarly situated employees (29 U.S.C. 216(b)). Unlike class actions under Federal Rule of Civil Procedure 23, where members must opt-out to avoid judgment, FLSA collective actions require similarly situated employees to opt-in. The requirements for collective actions are less stringent; plaintiffs need only demonstrate that they are "similarly situated" to the proposed class without needing to meet numerosity, commonality, or typicality standards.

Certification occurs in two stages: an initial notice stage and a subsequent stage post-discovery. In the first stage, courts analyze whether plaintiffs are similarly situated based on substantial allegations that they were victims of a single decision, policy, or plan. The second stage applies a stricter standard, considering employment conditions, individual defenses, fairness, and procedural matters, though it remains less stringent than the Rule 23(b)(3) requirement for predominance of common questions.

In this case, despite no first-stage conditional certification, the parties agree to apply the stricter second-stage analysis due to completed discovery. The court concludes that the plaintiffs have demonstrated they are "similarly situated" to the proposed class, as the evidence shows that their job duties and employment conditions align closely with those of other class members, as confirmed by testimonies from the employer’s managers.

Plaintiffs have demonstrated substantial overlap in duties between merchandisers and sales representatives servicing Albertsons, as both roles engage in similar "merchandising activities" such as setting up and stocking shelves according to store planograms. When merchandisers cover for sales representatives, they perform nearly identical tasks, supporting the conclusion that Plaintiffs are similarly situated to the proposed class members.

In addressing defenses claimed by the defendant, Kehe argues that class members are exempt from overtime under the FLSA’s “outside sales” exemption and the Motor Carrier Act exemption, asserting that applicability of these exemptions varies by individual employee. The court disagrees, noting that Kehe sales representatives operate in a controlled environment with predefined tasks, indicating that the determination of exemption status will focus on the nature of the tasks assigned to class members. Regarding the Motor Carrier Act exemption, it is acknowledged that all class members, including Plaintiffs, use personal vehicles, raising the legal issue of whether this qualifies them for the exemption. The court finds that class members are similarly situated concerning this exemption as well.

Finally, in terms of fairness and procedural considerations, Plaintiffs argue that certifying the FLSA collective action would streamline the resolution of common legal and factual issues and alleviate individual burdens by pooling resources. The defendant does not contest that a collective action would be unfair. Consequently, this factor also favors the finding that Plaintiffs are similarly situated to the proposed class members.

Dukes does not hinder the case's progression as a collective action, contrary to Kehe's argument referencing Wal-Mart Stores, Inc. v. Dukes. The court highlights that the Fair Labor Standards Act's (FLSA) "similarly situated" requirement is less stringent than the Rule 23 commonality requirement addressed in Dukes. Previous cases cited by Kehe, which denied collective action certification based on Dukes, involved individual supervisory discretion regarding employees' hours, which is not at issue here. Thus, Dukes does not support Kehe's position against collective action certification. The court grants the Plaintiffs' motion for certification of an FLSA collective action, finding that the Thiessen factors confirm Plaintiffs' similarity to the proposed class under 29 U.S.C. 216(b).

Additionally, Plaintiffs seek to certify a class for their Washington Minimum Wage Act (MWA) claim, encompassing all full-time Washington-based employees of Kehe who worked as merchandisers or sales representatives from May 22, 2006, to the present. During this period, Washington sales representatives serviced only Albertsons stores. Class certification requires meeting four criteria under Federal Rule of Civil Procedure 23(a): numerosity, commonality, typicality, and adequate representation. The court must conduct a thorough analysis to ensure these prerequisites are met. Furthermore, Plaintiffs aim for certification under Rule 23(b)(3), asserting that common legal or factual questions dominate over individual issues, making a class action the most efficient and fair method for resolving the controversy.

A party seeking class certification must prove compliance with Rule 23, demonstrating sufficient numbers of parties and common legal or factual questions (Dukes, 131 S.Ct. at 2551). Courts may need to examine details beyond the pleadings before deciding on certification (Id.; Falcon, 457 U.S. at 160). Class determination intertwines with factual and legal issues of the plaintiffs' claims (Id.). If the court is not convinced that the requirements of Rules 23(a) and (b) are met, certification should be denied (Falcon, 457 U.S. at 161). Even if criteria are satisfied, courts retain discretion over certification (Yokoyama v. Midland Nat. Life Ins. Co., 594 F.3d 1087, 1090).

1. **Rule 23(a) Requirements**:
   - **Numerosity** (Rule 23(a)(1)): The class must be so numerous that joinder of all members is impracticable, with no strict numerical limit (Fed. R.Civ. P. 23(a)(1); Gen. Tel. Co. of the Nw. Inc. v. EEOC, 446 U.S. 318, 330). In this case, the plaintiffs claim a minimum of 43 to 54 workers employed by Kehe in Washington, arguing that joinder is impractical due to small individual claims and geographic dispersion. Kehe argues against numerosity, suggesting that the class improperly combines distinct employee types and that a separate class for merchandisers is needed. The court finds that the two roles can be combined into one class, satisfying the numerosity requirement.
   
   - **Commonality** (Rule 23(a)(2)): The court must find common questions of law or fact among class members (Fed. R. Civ. P. 23(a)(2)). Commonality requires that class members have suffered the same injury, with claims depending on a common contention capable of classwide resolution (Dukes, 131 S.Ct. at 2551).

Class certification hinges on the ability of a classwide proceeding to produce common answers that can resolve the litigation, rather than merely presenting numerous common questions. Dissimilarities within the proposed class could obstruct this goal. Plaintiffs have identified several common factual and legal issues, including interpretations of "making sales" under WAC 296-128-540, the applicability of the outside sales exemption, whether Kehe’s failure to pay overtime was willful under the MWA, the potential for class members to recover exemplary damages, and the applicability of the MWA to work performed in other states. All class members have experienced the same injury of unpaid overtime, and Kehe has acknowledged uniform job duties for merchandisers and sales representatives in Washington. The court finds that Plaintiffs have demonstrated commonality, supported by Kehe’s Rule 30(b)(6) deponent testimony affirming the similarity of duties across these roles. The court also notes that there is no evidence presented by Kehe indicating any employee qualifies for the MWA’s outside sales exemption. Regarding the willfulness of Kehe’s overtime payment practices, a classwide determination is feasible, as it does not necessitate individualized inquiries into each employee's circumstances.

Plaintiffs seek to determine if they can receive exemplary damages for willful wage withholding under chapter 49.52 RCW alongside liquidated damages under the FLSA collective action, which is a legal question applicable to the entire class. Additionally, Kehe questions whether the Minimum Wage Act (MWA) applies to hours worked outside Washington, arguing that such application would infringe upon interstate commerce rights under the Commerce Clause. This, too, is a common legal issue that the court can resolve for the class. The court finds that the Dukes case does not impact this matter, as the Supreme Court's ruling was centered on the subjective nature of employment discrimination claims, which differs from the objective classification issue faced here regarding Washington employees’ exemption status under the MWA.

Regarding typicality, which ensures representative parties have claims aligned with the class, the court concludes that Plaintiffs meet this requirement. They assert their injuries, stemming from being classified as exempt and not receiving overtime, are typical of the class. Kehe challenges typicality based on credibility, citing a sworn statement from Ms. Cobb in a workers’ compensation case where she claimed not to work overtime. Kehe argues this undermines her standing as a class representative. However, the court agrees with Plaintiffs that their claims and injuries are indeed representative of the class, despite Kehe's challenges.

Ms. Cobb's statements regarding her work hours have been challenged by Kehe, who argues that her later declarations contradict her earlier sworn testimony, raising credibility issues that might render her atypical of the proposed class. In response, Ms. Cobb clarified that her intention was to convey her status as a full-time employee in the context of a worker’s compensation claim, rather than the specific hours worked. The court finds that her declarations do not create sufficient contradictions to undermine her typicality.

Similarly, Kehe questions Ms. Troy's credibility based on her past statements about her job responsibilities. Ms. Troy explained that her earlier self-evaluation, which emphasized sales, was intended to highlight her past experiences with other food distributors, not her actual job duties. The court concludes this does not affect her typicality within the proposed class.

The court also addresses the adequacy of the plaintiffs as class representatives under Rule 23(a)(4). The plaintiffs assert they have no conflicts of interest and will vigorously pursue the case on behalf of the class. Kehe does not contest this adequacy beyond the previously mentioned credibility issues. The court determines that both Ms. Cobb and Ms. Troy are adequate representatives. 

Regarding legal representation, the plaintiffs presented qualifications for their attorneys, which Kehe did not challenge. The court concludes that the attorneys are adequately qualified to represent the class. Ultimately, the court finds that the plaintiffs have met the requirements of numerosity, commonality, typicality, and adequacy under Rule 23(a) and will further evaluate the criteria under Rule 23(b)(3).

A court can certify a class action if it meets the requirements of Rule 23(a) and finds that common questions of law or fact among class members predominate over individual questions, and that a class action is the superior method for adjudication (Fed. R. Civ. P. 23(b)(3)). The predominance and superiority requirements aim to enhance efficiency in adjudication and ensure uniformity for similarly situated individuals without compromising procedural fairness. These requirements are more stringent than the commonality requirement under Rule 23(a)(2).

Predominance assesses whether proposed class actions are cohesive enough for representation. The key focus is the balance between individual and common issues. In wage-and-hour class actions under California law, it is deemed an abuse of discretion to rely solely on an employer's uniform internal policies regarding exemptions without considering other relevant factors.

Plaintiffs argue that multiple common issues warrant classwide determination, while Kehe contends that individualized issues, particularly regarding the applicability of the MWA's outside sales exemption, predominate. Specifically, Kehe claims that determining this exemption requires individual assessments of each employee's daily activities. Conversely, Plaintiffs assert that the burden of proof regarding the exemption can be addressed on a classwide basis. The court agrees with the Plaintiffs, indicating that questions about whether tasks performed by sales representatives and merchandisers constitute "making sales" and whether they meet specific criteria can be resolved collectively based on managerial testimony and records.

Kehe further argues that the Dukes decision undermines Ninth Circuit precedent by disallowing class certification when damages require formulaic calculations. However, Plaintiffs reference a Ninth Circuit ruling post-Dukes, which states that differences in damage calculations alone do not preclude class certification, as the calculation of damages is typically an individual issue that does not defeat class action status.

The excerpt clarifies that the discussion in Dukes, which Kehe references, is not applicable to the current case. Dukes addresses the certification of a class under Rule 23(b)(2) when the class seeks backpay for discrimination under Title VII, stating that such a certification is inappropriate if class members are entitled to individualized monetary damages. The Supreme Court emphasized that Rule 23(b)(2) permits class certification only when an injunction or declaratory judgment provides relief to all members simultaneously, while Rule 23(b)(3) includes necessary procedural protections like notice and the right to opt-out, which are absent in (b)(2).

The Court rejected the plaintiffs' argument that incidental monetary relief could allow for (b)(2) certification, asserting that individualized assessments for backpay claims precluded such a classification. Consequently, Dukes does not hinder the plaintiffs from seeking certification under Rule 23(b)(3), where damages require individualized analysis. The court concluded that despite potential individualized damage questions, common issues—such as the applicability of the MWA exemption and the entitlement to exemplary damages—predominate, supporting class certification. The court's findings are reinforced by testimonies indicating consistent job duties among the class members, aligning with precedents like In re Wells Fargo and Vinole v. Countrywide Home Loans, Inc.

District courts have recognized the employer's consistent application of an exemption to employees while assessing the presence of centralized control through standardized policies, procedures, and training. The court finds that Plaintiffs have fulfilled the predominance requirement under Rule 23(b)(3). Regarding superiority, Plaintiffs argue that a class action is preferable due to the small size of individual claims, which discourages individual lawsuits, especially since many class members are still employed by Kehe. They assert that a single action is more efficient than approximately 60 separate lawsuits and that liability can be established mainly through representative evidence and testimony from Kehe’s managers. Plaintiffs also highlight their counsel's experience with similar MWA class actions.

In contrast, Kehe contends that the class action lacks superiority because each member would need to address substantial individual issues for recovery. The court finds this argument insufficient, noting that common, classwide questions prevail over individual ones. Kehe further argues against the superiority of a class action, citing the Washington State Department of Labor and Industries' administrative process for overtime claims. However, the court asserts that the existence of this process does not eliminate the option for class relief.

Ultimately, the court concludes that Plaintiffs have adequately demonstrated the appropriateness of a class action under both Rule 23(a) and Rule 23(b)(3), granting their motion for class certification. The court orders the following: approval of the collective action under FLSA, certification of state-law claims, appointment of class counsel and representatives, and a directive for the parties to schedule a status conference within 10 days, including submission of a proposed class notice and joint status report with a case schedule.

Counsel must prepare to discuss a stipulation and proposed order for bifurcating liability and damages issues for trial. Mike Ignash, Kehe’s executive director of business development, Scott Leannais, Kehe’s senior vice president of sales, and Michael DiPiero, senior director of sales operations for the Intermountain Region, are designated Rule 30(b)(6) witnesses. The plaintiffs have submitted declarations from 17 merchandisers and several sales representatives in support of their motion and reply. Kehe concedes that the FLSA’s "outside sales" exemption does not apply to merchandisers in their merchandising roles. Additionally, Kehe questions the appropriateness of certifying both an FLSA collective action and an MWA class, noting that the Ninth Circuit has not resolved whether these can coexist, although other circuits, like the Seventh, have confirmed their compatibility.