Plaintiffs' motion for class certification denied

In Diaz, et al. v. Electronics Boutique of America, Inc., the plaintiffs sought class certification for their state claims in which they alleged their former employer intentionally failed to pay its store employees overtime pay.

The U.S. District Court for the Western District of New York denied the plaintiffs' motion for class certification based on its finding that the plaintiffs were not adequate representatives of the class. The court also denied the plaintiffs' motion for conditional certification of their claims under the Fair Labor Standards Act (FLSA), as well as the employer's motion to dismiss the plaintiffs' claims.

Plaintiffs' Claims

In October 2004, the plaintiff, Milton Diaz, filed a lawsuit against his former employer, Electronics Boutique of America, Inc. and Electronics Boutique Holding Corp. (EB). The following month, the plaintiff, Tim Ostrander, filed a consent to become a party plaintiff and proposed to be a named representative for a subclass of EB store managers. Diaz also filed a consent to become a party plaintiff and proposed to be a named representative for a subclass of EB assistant store managers.

Both Diaz and Ostrander worked at the EB store in Blasdell, NY. EB is a retail chain that specializes in the sale of video game hardware and software, as well as personal computer entertainment software and accessories. Diaz and Ostrander alleged EB violated the FLSA and the New York Labor Law by intentionally failing to pay its store employees overtime pay.

Specifically, Ostrander claimed that even though he and other store managers received a flat annual salary, they were misclassified as exempt from overtime pay based on his claim that store managers: (1) have little, if any significant discretion in operating the store; (2) their primary function is not managing the store; and (3) they spend nearly 80 percent of their time selling merchandise. Ostrander asserted he was entitled to overtime pay since he should have been classified as a nonexempt employee and because he typically worked between 60 and 70 hours a week.

As an assistant store manager, Diaz was classified as a nonexempt employee and was eligible to receive overtime pay. He alleged, however, that he was not compensated for the overtime hours he had worked, which averaged between 10 to 12 hours per week.

Overall, Ostrander and Diaz alleged it was EB's practice to understaff the Blasdell store by allocating insufficient payroll hours, which required them to work more than 40 hours a week. They further claimed EB insisted that all employees clock-out prior to cleaning and closing the store, and required its employees to enter payroll early on Saturdays to ensure that employees were paid only the pre-determined number of scheduled work hours.

Parties' Motions

In December 2004, Diaz and Ostrander moved for conditional certification and facilitation of notice of their federal claims under FLSA. They also later moved for class certification on their state claims.

On March 11, EB filed a motion to dismiss the state claims against it.

FLSA Claims

In reviewing Ostrander's and Diaz's motion for conditional certification of their federal claims, the court referred to the FLSA which requires that employees be paid at least the minimum wage and overtime wages, at the rate of time and one-half, for hours in excess of 40 hours worked in a single week, 29 USC Section 207. Those individuals who are exempt from FLSA's overtime requirements are employees who are employed in a bona fide executive, administrative, or professional capacity.

An employee in a bona fide executive capacity is defined as one, [w]hose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof and [w]ho customarily and regularly directs the work of two or more other employees, 29 CFR Section 541.100.

Ostrander claimed EB avoided paying him overtime wages by intentionally misclassifying him as exempt even though his duties allegedly consisted primarily of nonexempt tasks.

To determine if Ostrander fit the classification of a nonexempt or exempt employee, the court reasoned an analysis had to be conducted of his daily duties and the amount of time spent on each. Moreover, the court found every EB store manager's exempt or nonexempt status needed to be determined since the responsibilities of store managers varied depending on the number of employees at each store, sales volume and where the store was located in the country.

Although store managers share the same job description, their responsibilities, in fact, may differ and thus a highly fact- specific and detailed analysis of each store manager's duties is required, making class treatment inappropriate, see 29 CFR Section 541.2, explained Judge John T. Elfvin in his decision for the court.

Similar to Ostrander, the claims of Diaz and other assistant store managers would have to be individually analyzed and would involve an examination of hours worked, payroll records and EB's knowledge of the alleged overtime hours worked.

Taking plaintiffs' allegations as true, altering Diaz's timesheets may have been the Blasdell store's method of dealing with overtime issues, but such may not have been the case at other stores, explained the judge. All assistant store managers, therefore, have not been shown to be similarly situated and plaintiffs' speculative allegations do not rescue their claims from being 'insufficiently specific beyond their own [respective] circumstances,' see Levinson v. Primedia, Inc., 2003 WL 22533428, at *1-*2 (SDNY 2003).

Based on Judge Elfvin's finding that Ostrander and Diaz failed to show they were similarly situated to one another and that they were similarly situated to other store managers or assistant store managers at EB stores around the country, the judge denied their motion for conditional certification on their federal claims.

State Claims

The court also held that the motion for class certification on the state claims must be denied.

In order to maintain a class action under Rule 23 of the Federal Rules of Civil Procedure, a party must show that the putative class has: (1) sufficient numerosity to make individual joinder impracticable, (2) commonality of questions of law or fact, (3) typicality of claims and (4) representatives who fairly and adequately protect the interests of the class.

Based on this standard, the court first found Ostrander and Diaz failed to meet the commonality requirement.

[P]laintiffs' factual allegations are specific to only Ostrander and Diaz and an individual factual determination is necessary to distinguish between exempt and nonexempt employees, to determine if a store manager should be exempt or nonexempt and to determine if an assistant store manager worked off-the-clock - plaintiffs fail to meet the commonality requirement of FRCvP 23(a), explained the district court.

The court also found that Ostrander's and Diaz's legal arguments and claims were not typical of each other or of those of the proposed class.

Ostrander's misclassification claim is factually and legally different from Diaz's off-the-clock claim and warrant different defenses from EB, wrote Judge Elfvin.

With regard to the final requirement of Rule 23, the judge found Ostrander and Diaz would not be adequate representatives of the proposed class members.

As the claims of each individual store manager and assistant store manager also vary, Ostrander and Diaz are not adequate representatives of a class, or classes, with such highly individualized claims, determined Judge Elfvin.

EB's Motion To Dismiss

Lastly, the district court denied EB's motion to dismiss the state claims against it.

EB claimed there were no overtime laws in the state of New York. The court disagreed, referring to Ballard v. Cmty. Home Care Referral Serv., Inc., 695 NYS2d 130 (Second Dept. 1999).

The court in Ballard ... explained that, although '[t]here are no provisions governing overtime compensation in the New York State Labor Law[,] *** the Commissioner of Labor has the power to *** appoint a wage board *** [who] may recommend such regulations as it deems appropriate with respect to, inter alia, overtime rates ***,' 695 NYS2d at 131, wrote Judge Elfvin.

In addition, the U.S. Court of Appeals for the Second Circuit and other New York district courts have verified that overtime claims may be brought pursuant to NYLL Section 650 et seq. and that implementing regulation 12 NYCCRR 142-2.2 carries the force of the law, see Zheng v. Liberty Apparel Co., Inc., 355 F3d 61, 78 (Second Cir. 2003).

Court's Ruling

[I]t is hereby ordered that plaintiffs' motion for conditional certification of their federal claims is denied, that plaintiffs' motion for class certification of their state claims is denied and that EB's motion to dismiss is denied, ruled the district court.

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