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Schilling v. PGA Inc.

United States District Court, W.D. Wisconsin

March 14, 2018

ERIC SCHILLING, BLAINE KROHN, and ERIK SINCLAIR, Plaintiffs,
v.
PGA INC., Defendant.

          OPINION AND ORDER

          WILLIAM M. CONLEY District Judge

         Plaintiffs Eric Schilling, Blaine Krohn and Erik Sinclair assert claims against their employer, PGA Inc., a company specializing in air comfort systems in central Wisconsin, for allegedly calculating overtime wages in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and Wisconsin state labor laws. Specifically, plaintiffs allege that: (1) PGA's policy of not including the “cash fringe rate” in calculating overtime violates both the FLSA and state law; and (2) PGA's policy of paying overtime based on the rate for the work performed during overtime hours, rather than on a “straight-time hourly rate, ” violates state law.[1]

         The first theory is based on PGA's alleged miscalculation of overtime pay for prevailing wage work. Plaintiff contends that PGA violated state law and the FLSA by failing to pay its employees overtime based on the hourly basic rate plus the cash fringe rate. Instead, plaintiffs claim, PGA calculated overtime for prevailing wage work using only the hourly base rate, and then adding the cash fringe rate to that overtime hourly rate.[2]The second theory is based on plaintiffs' PGA's allegedly miscalculating overtime using the rate of pay for the work completed during overtime hours, rather than the average straight time hourly rate earned during the workweek.

         Consistent with its usual two-step procedure, this court previously certified a conditional FLSA collective action based on the “cash fringe rate” claim. (11/2/2016 Order (dkt. #24).) Before the court is plaintiffs' motion to certify a Rule 23 class covering both state law claims or two subclasses (dkt. #45), as well as defendant's motion to decertify the FLSA collective action (dkt. #53). For the reasons that follow, the court will grant plaintiffs' motion for class certification, certifying a single Rule 23 class covering both overtime claims. For the same reasons, the court will deny defendant's motion to decertify the FLSA collective action.

         Finally, before the court are the parties' cross-motions for summary judgment. (Dkt. ##85, 90.) In light of the parties' reliance on competing Wisconsin administrative code provisions and other administrative documents, and the limited case law as to plaintiffs' specific legal claims, the court believes that oral argument would be worthwhile. Accordingly, the court will hold oral argument at 10:00 a.m. on April 26, 2018.[3]Depending on the oral argument and the outcome of summary judgment, the court will reset pre-trial deadlines and a trial date, as necessary.

         OPINION

         I. Motion for Class Certification

         A two-step analysis governs certification of a class action under Rule 23. See Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 811 (7th Cir. 2012). First, a class must satisfy the four threshold requirements of Rule 23(a): numerosity, commonality, typicality and adequacy of representation. Id. Second, the party seeking certification must satisfy one of the three alternatives under Rule 23(b). Id. The proponent of the class bears the burden of demonstrating that the class meets all of these requirements by a preponderance of the evidence. Id.

         The trial court must itself engage in a “rigorous analysis” to determine that the requirements of Rule 23 have been satisfied. CE Design, Ltd. v. King Architectural Metals, Inc., 637 F.3d 721, 723 (7th Cir. 2011). As a result, Rule 23 considerations may overlap with the merits of the case. Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011). Where they do, “the judge must make a preliminary inquiry into the merits.” Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001). If material factual disputes exist, the court must even receive evidence and resolve those disputes before determining whether to certify the class, but “should not turn the class certification proceedings into a dress rehearsal for the merits.” Messner, 669 F.3d at 811.

         Here, plaintiffs seek certification of a single class that covers both theories of recovery, or in the alternative, two subclasses that respectively address the two theories. While both theories here concern overtime pay calculations, the claims rest on different facts and questions of law. Still, there appears to be no conflict of interest. In other words, the interests of class members asserting a cash fringe rate claim are not at odds with the interest of class members asserting a straight-time hourly rate claim. Specifically, these claims are not mutually exclusive -- a class member could have been subject to either or both alleged overtime miscalculations. As such, two subclasses are not required. See generally 3 William B. Rubenstein et al., Newberg on Class Actions § 7:29 at pp.149-50 (5th ed. 2013) (“Because there is no conflict of interest at issue, there is no necessity that each subclass have different representation and independently comply with all of the requirements of Rule 23(a), (b), and (g).”). At some point, subclasses may be helpful from a management perspective, but the court will consider plaintiff's motion as seeking to certify a single class concerning both overtime challenges, which would also cover both FLSA collective action claims. See Id. (explaining the difference between compulsory subclasses to cure conflicts and permissive subclasses for management purposes).

         A. Rule 23(a) Requirements

         i. Numerosity

         The numerosity requirement is satisfied when “the class is so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). Plaintiffs represent, and defendants stipulate, that at least 40 employees were paid overtime without accounting for the cash fringe rate, and at least 22 employees were paid overtime based on the rate for the work performed during overtime hours. (Pl.'s Br. (dkt. #46) 7 (citing Ho Decl., Ex. 2 (dkt. #20-2) (defendant's stipulation).) Because the court is considering plaintiff's motion as to certifying a single class, there are a minimum of 40 members, and perhaps more, if some of the 22 employees asserting straight time hourly rate claims are not counted in that 40. “The Seventh Circuit has indicated that a group as small as forty may satisfy the numerosity requirement.” Armes v. Sogro, Inc., No. 08-C-0244, 2011 WL 1197537, at *2 (E.D. Wis. Mar. 29, 2011) (citing Swanson v. Am. Consumer Indus., Inc., 415 F.2d 1326, 1333 n.9 (7th Cir. 1969)). This is consistent with “[t]he rule of thumb adopted in most courts . . . that proposed classes in excess of 40 generally satisfy the numerosity requirement.” 1 Joseph M. McLaughlin, McLaughlin on Class Actions § 4:5 (8th ed. 2011) (collecting cases). Accordingly, the numerosity appears to be satisfied, if barely.

         ii. Commonality

         To satisfy the commonality requirement of Rule 23, plaintiffs must demonstrate there are “questions of law or fact common to the class.” Fed.R.Civ.P. 23(a)(2). A single, common issue will do, if it is “capable of classwide resolution -- which means that determination of its truth or falsity will resolve an issue that is central to the validity of each of the claims in one stroke.” Dukes, 131 S.Ct. at 2551, 2556. Furthermore, the commonality standard requires that plaintiffs do more than “merely” demonstrate “that they have all suffered a violation of the same provision of law.” Id. (internal quotation marks omitted). Plaintiff must show that “the class members have suffered the same injury.” Id.

         Here, plaintiffs' have put forth sufficient evidence for a reasonable trier of fact to find that PGA has policies of (1) not including cash fringe in the overtime calculation and (2) calculating overtime based on the rate of pay for the work completed during overtime hours, rather than the average straight time hourly rate earned during the workweek. Defendant's challenge primarily concerns the latter claim, directing the court to purported evidence that employees, at times, were paid overtime calculated using the average wage rate. (Def.'s Opp'n (dkt. #78) 12-13.) In its analysis, however, defendant relies on an unsupported assumption that “PGA rounds employees' time to the nearest half hour.” (Id. at 13.)

         Comparing defendant's math to that of plaintiffs', a key takeaway would appear to be that there is very little money at stake with respect to this claim. The examples provided by the parties demonstrate that the difference in pay (at least on a weekly basis) between overtime calculated based on the average straight time hourly rate and the rate for the overtime work is a matter of cents. (See, e.g., Def.'s Opp'n (dkt. #78) 12-14; Pl.'s Reply (dkt. #82) 14-18.) Nonetheless, defendant's analysis does not undermine plaintiffs' evidence that defendants' have a policy of calculating overtime based on the rate of pay for the work completed during overtime hours.

         Satisfied that plaintiffs have put forth sufficient evidence to support a finding that defendants have adopted the two challenged policies, the common issues are whether these policies violate state law. In response, defendant simply challenges whether its calculation of overtime based on the rate of pay for the overtime hours worked violates state law, at least for some employees. (Def.'s Opp'n (dkt. #78) 16-19). This response, however, addresses the merits of plaintiffs' cash fringe claim, not whether the claim is amenable to classwide proof. Regardless, the court finds that whether PGA's overtime policies violate state law are capable of classwide resolution, thus easily satisfying the commonality requirement of Rule 23(a)(2).

         iii. Typicality

         Typicality for Rule 23(a) purposes requires that a named plaintiff's claim “arises from the same event or practice or course of conduct that gives rise to the claims of other class members and his or her claims are based on the same legal theory.” Keele v. Wexler, 149 F.3d 589, 595 (7th Cir. 1998) (quoting De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983)). For this reason, typicality will often overlap with the commonality requirement. See Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 157 n.13 (1982). Applied with care, however, the former standard should ensure that “a plaintiff with typical claims will pursue his or her own self-interest in the litigation and in so doing will advance the interests of the class members, which are aligned with . . . those of the representative.” Insolia v. Phillip Morris, Inc., 186 F.R.D. 535, 544 (W.D. Wis. 1998) (quoting 1 Newberg & Conte, Newberg on Class Actions § 3.13 (3d ed. 1992)).

         Named plaintiffs and proposed class representatives Schilling, Krohn and Sinclair were all subject to the same policies excluding cash fringe from the overtime pay calculation and calculating overtime based on the rate of pay for the work completed during overtime hours as the putative class members. Moreover, defendant offers no reason why plaintiffs' claims are not typical of the other class members, or how their self-interest would diverge from the interest of the class more broadly. Instead, defendant's opposition regurgitates the same commonality arguments, which the court already rejected above. ...


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